Four Myths About Bank Productivity

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Last year, I stopped in at the retail branch of a large North American bank. I saw three tellers—and no customers.

This misallocation of resources is not unusual. It is a well-intentioned example of one of the four biggest myths and miscalculations prevailing in today’s bank operating practices. These myths lead to needless downtime, duplicative work and overservice—all of which are equally costly, whether they occur at a bank or on a factory floor.

The first myth is that there are negligible gains in efficiency or savings to be achieved in the retail branch network. Salaries there are already low, the theory goes, and staffing models are already in place. Many banks are eager to emphasize their customer service by promising virtually zero wait time.

But the reality is that while overservicing customers may generate a brief feeling of goodwill, it won’t produce a competitive advantage.  Most bank customers have a better grasp of the value of a bank’s financial products than executives realize.  Consequently, customers are willing to wait patiently for service, at least for a relatively short period of time, if they can get a better product. Adding 30 seconds of average wait time might easily go unnoticed—and, depending on the size of the branch network, could save banks tens of millions of dollars in staffing costs.

Banks should undertake a wall-to-wall analysis of nontechnology work activities at their branches. This analysis will reveal a beehive of wasteful activities. Applications for new accounts and loans are often processed inconsistently and incompletely, adding up to 10% to branch staffing levels and even more in the back office. Customers often receive incorrect information regarding everything from documentation requirements and product features to branch operating hours.  If these inefficiencies are addressed and reduced, there will be substantial gains in productivity and more satisfying customer experiences.

The second myth is that process improvements cannot and should not be attempted in the front office. It is widely believed that bank marketing and sales executives are heavily invested in running this sector and will resist even minor changes to revenue production operations, fearing that such tampering will produce a sales decline.

In reality, the front office houses some of a bank’s most durable and robust business procedures. When viewed as production processes, numerous improvements are available.

For example, front-office executives frequently resist partnering with the back office to jointly develop standard product and service offerings. Sales producers are then tempted to improvise, unnecessarily squandering countless hours on customized one-off solutions. Another common issue is that a bank's most effective revenue generators frequently fail to realize or explain the tactics they have employed to become successful. As a consequence, best practices are hopelessly diverse, subjective and unsupported by facts.

A third misconception is the belief that an investment in new technology for the back office is the best way to make a big dent in the amount of waste that occurs there. However, the truth is that nontechnology improvements matter just as much. In fact, small, barely detectable examples of inefficiencies, left unaddressed, are liable to consume far more productive time than can be made up for by technology.

The final myth is the belief that it’s more trouble than it’s worth to try and improve all of these small, troublesome tasks. It’s easier to simply write them off as the routine cost of doing business.

Actually, it’s not that difficult. The problems are hiding in plain sight. Once banks are willing to analyze work at a granular level of activity, as manufacturers have done for over a hundred years, they will be able to reap the benefits of standardization and simplification.

And that’s no myth.

William Heitman is managing partner of The Lab Consulting.

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