Wharton School research examining the connection between value and process in retail banking channels is yielding significant insights into the relationship between technology and human resource management.

This research - which covers branch, call center, and electronic channels of distribution - shows that retail strategies and processes need to be aligned with technology and human resource practices. By doing so, firms can improve channel productivity substantially. Furthermore, the research finds that banks with more consistent process performance tend to develop more consistent human resource policies and deploy technology more effectively.

These insights stem from research led by Dean Patrick Harker of Wharton, Lorin Hitt of the school's operations and information management department, and Larry "Chip" Hunter of the management department.

Delivery-Channel Management: Wharton research found that process consistency within and across service channels is paramount in customer service delivery. In fact, one study demonstrated that process consistency was a more definitive predictor of improved performance than the quality of any particular step in the process. As a result, we advise banks to resist best-in-class process solutions. It is more productive to improve consistency along the entire transaction process chain and then across channels.

When seeking to optimize a particular delivery channel, keep in mind the impact on other channels. Bank customers tend to use myriad channels, so banks must rigorously manage interactions among channels.

In addition, as banks shift to stronger sales cultures, they must carefully manage the balance between sales and service. Too great an emphasis on sales can lead to poorer service and loss of customers. Wharton's work with call centers suggests that separating the sales and service functions can produce a better balance.

Another key consideration relates to assigning individual responsibility for process consistency. Though most banks organize along business lines, customer needs often cut across business units. So it is important to give customers seamless banking across channels.

As top banks seek to align strategy and process with technology and human resources, they invest in organizational architects to integrate these elements into a coherent structure. Getting these processes right can pay dividends in both efficiency and customer satisfaction.

The Branch: As banks look to improve branch channel performance, they should take a broad look at branch processes, including consistency in human resource practices and technology applications. At one bank, for example, customers were frustrated by HR practices that limited employee discretion to solve problems and interrupted process flow.

Delivering clarity and consistency does not require adherence to a particular model. In fact, Wharton research suggests a number of routes to improve customer service and sales in branches. One approach is to give employees broad discretion - but in relatively narrow areas of specialty. Alternatively, you can broaden jobs to create internal flexibility but use technology and management policies to limit discretion. But what banks cannot do effectively is to pursue both flexibility and high levels of discretion simultaneously.

Research also suggests that the way branches deploy technology has important implications for managing human resources. For example, sophisticated sales-support systems require higher skill levels. What is more, automating front-office processes can either simplify jobs or free employees for higher-value work.

As banks optimize branch delivery, they must also consider the interaction of call center and other service delivery capabilities in defining the customer experience. One bank, for example, gave branch employees introductory call center training to boost their confidence in handing off customers to the phone channel.

The Call Center: These centers now consume enormous resources and represent a fast-growing segment of bank employment. As a result, call centers are increasingly expected to contribute to retail profitability. But the shift from cost center to profit center raises new challenges.

Wharton research suggests that customer perceptions of call center quality are driven primarily by a customer sales representatives' ability to meet requests and solve problems. Balancing these demands, while remaining courteous and responsive, is difficult, especially when management systems focus solely on production metrics. Thus it's not surprising that call centers often experience high absenteeism and turnover.

Adding sales to call center activities further complicates matters because the two activities require separate and distinct skill sets and management practices. Evidence suggests that firms that offer career path opportunities for call center employees are more effective in developing skills and managing turnover.

PC and Internet Banking: PC banking also is contributing to an increase in delivery channel costs while failing to produce predicted cost savings and revenues. One study demonstrated that PC banking customers are more valuable than other customers with similar demographics, yet there is little evidence that PC banking alone makes them more valuable. The unanticipated conclusion is that retention and targeted cross-selling strategies offer the real payoff for this high-value customer segment. Research also finds that banks that made the effort to analyze their experiences with PC banking customers were better prepared to migrate to the next level of Internet applications.

Finally, the move toward Internet banking increases the need for a holistic approach to channel and process management, especially when integrating new channels into existing frameworks. Though the Internet will not replace other channels, it offers increased flexibility and the opportunity for improved service.

Conclusion: Better understanding the link between value and process in retail banking channels lets banks achieve better cross-channel productivity and performance, even as many institutions struggle with escalating channel costs. The key is to focus on the entire channel network rather than specific processes in order to ensure that all customer interactions are consistent and satisfactory. Firms that fail to make this link will continue to have difficulty meeting both channel demand and profitability goals. Mr. Burns is managing director of the Financial Institutions Center at the Wharton School of the University of Pennsylvania.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.