ST. LOUIS-Slow economic growth means branches will continue to underperform and demand that credit unions make smart and hard decisions about the retail distribution network, one person is emphasizing.
Projecting that the economy will not show any real signs of recovery until late 2011 or 2012, Kevin Blair, president of NewGround, said credit unions should evaluate the performance of each branch, and then create plans for maximizing locations that offer growth opportunities and cut loose those that are weak. He shared that advice after pointing out 50% of bank and CU branches are not profitable today, a figure 30% higher than before the recession.
"It's amazing that credit unions typically do not measure branch performance, that's a major concern," Blair said. "The number-one job now is determining how to make the current branch network profitable, and certainly not adding any more burden to it (with new locations)."
What's called for is revitalizing older, "worn out" branches and "reenergizing" other locations to get more out of them. In short, "Really optimizing your existing branch network," Blair said.
While Blair conceded that all financial institutions struggle with closing offices, they need to dispose of underperforming branches and invest in those with greater potential. "Credit unions struggle with what members, and the local market, will perceive of shuttering a branch. But in the end eliminating a branch that is not performing makes for a more efficient and optimized retail distribution network."
After evaluating each branch's performance, the credit union needs to rank offices by their profitability, Blair said. "They also need to understand the growth potential of that part of the market where each branch is so that if they spend money fixing the location up, they know they can show a return on the investment."
Looking ahead to 2011, once the credit union has determined an office is a good location, what's generally done, according to Blair, is a cosmetic facelift to make sure the brand is properly communicated, that the strength and stability of the financial institution is part of the marketing and retail communications within the branch, and some new technologies are introduced to enhance the member experience, such as digital signage. "It is a relatively inexpensive way to make the branch feel fresh and new," he said.
With any branch remake, staff can't be overlooked. "The training/culture piece is very important," Blair said. "The industry has been through tremendous challenges in the last couple years and the front-line staff have been somewhat neglected in terms of their training, motivation, and preparation to help them serve the member in these difficult times. Spend more focused attention on the front line so they can be more successful in their conversations with members, which will give branch performance a lift."
For info: www.newground.com
