3 Ideas to Reduce Branch Overhead

Apr 23, 2019

Financial institutions spend enormous effort analyzing interest rates, spreads, yields, cost of funds and related metrics, because they understand that how these things operate together directly impacts profitability. When it comes to interest income, cost of funds and credit standards, financial institutions sweat the small stuff.

Profitability can be improved two ways: generate more revenue or reduce expenses. A dollar of reduced expense has the same effect on profitability that a dollar of increased revenue does. For most banks and credit unions, one of the largest categories of expense is associated with the branch network.

Branch expenses are a combination of payroll, physical plant and operational expenses. Most financial institutions put attention on the big picture aspects of branch operations. These include the number and size of branches, total branch staff levels, branch software, automation such as ATMs and increasingly cash recyclers or ITS devices. In recent years attention has been given to new branch layouts, and alternative staffing models such as universal staff or multi-branch employees.

What tends to get much less visibility are the smaller, more mundane, aspects of operational overhead. That is understandable as no one item carries enough benefit to justify significant effort, plus the inertia of, “that is how we have always done it”. Branch operations have a multiplier effect built in. Any extra overhead is multiplied by the number of branches and frequency, but any improvement is also multiplied an equal amount. Below are three ideas that serve as examples of optimizing less obvious tasks.

Idea 1 – Spreadsheets (but not how you think). Spreadsheets are a wonderful tool, but they are primarily designed for individual use. That means that when a spreadsheet is used for a task that requires sharing or consolidating information, additional overhead is added. The finished spreadsheet must be saved, printed or emailed, reopened or read by the receiving person, and frequently data transferred or reentered with increased risk of error. All that overhead is related to the process, not the objective the spreadsheet was created to address in the first place.

Idea 2 – Where did the Time Go? All financial institution branches have tasks that do not have an electronic footprint that is readily captured. There may be an electronic component such as looking up a GL balance, or loan information, or a CTR suspect, but what is done with the information may not generate something that can be captured or tracked. Examples are reconciling GL accounts, problem loan updates, verifying CTRs, inventory of controlled documents, etc. The result is that most institutions do not actually know how often these kinds of tasks are done, who is doing them, when, or how long they take. In total it may add up to a surprisingly large amount of time.

Idea 3 – Cross-branch Activity. I recently conducted two unrelated non-cash transactions at branches of two different institutions. In both cases, the activity took place with a customer service employee who then took forms to the teller line to complete the transactions. The tellers had the software application needed to enter the transaction and provide a receipt. The customer service employee had to go across the branch, wait for a teller (one by going behind the line and one by waiting with customers), then return to me. If customer service had a simple form to generate a receipt, they could have sent me on my way then given tellers a batch of items to enter during slack time at their discretion. Preferably the “form” would have an electronic record that could be matched back to a teller transaction if needed later.

What these ideas have in common, is that improving them requires thinking about not the task itself, but the process surrounding it. Some opportunities for improvement may require little or no new technology. Some may be addressable by using existing software differently or enhancing it slightly. In other instances your institution may already have systems with process automation capability that just is not being utilized, such as Microsoft SharePoint or StaffPro Branch Resource Management. Regardless, sweating the small stuff in branch operations can add up to a significant improvement in efficiency.