Benchmarks for Excellence in Retail Banking Study Overview by wae10607

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									Benchmarks for Excellence in
     Retail Banking –
     Study Overview




            Study Jointly Funded by
           The Productivity Council
                    and the
      Inter-American Development Bank
                   July 2005
AGENDA
§   Study Overview & Key Findings
§   About the Benchmark Class
§   Organizational Performance
§   Staffing and Budget Allocations
§   Marketing Metrics
§   Customer Service Metrics and Ratings
§   Human Resources and Employee Effectiveness




                            2
Purpose of the effort & Approach
§   Development of a “Pilot” benchmarking effort to demonstrate a “proof of
    concept”
§   Incorporate training of local Barbados resources on benchmarking
    methodology – develop long-term local capabilities
§   Approach
     1. Identified goals and expectations for this project in terms of underlying
        need/problems to be addressed
     2. Articulated segments of the value chain that will address these needs
        for each industry
     3. Developed metrics to measure productivity and impact for people,
        process, technology and organization factors in each segment of the
        value chain
     4. Gathered metrics and operational insights through surveys and onsite
        interviews
     5. Synthesized data and findings into benchmarking report
                                       3
 Framework for this Project
 The benchmarking study probed the following value chain for financial
 service organizations:

                                      Overall Value Chain

Segments                                     Service                    Internal
               Marketing/Sales
                                            Excellence                 Operations

             • Price                 • Order Entry                • Human Resources
             • Product               • Front-line customer        • Finance
             • Promotion               support                    • Procurement
Components   • Positioning           • Ongoing customer needs     • Information Technology
                                       management
             • Sales Force                                        • Back Office Operations
                                     • Customer Complaint
             • Sales process           Resolution

Dimensions               People, Process,       Technology, Organization




                                            4
Participating Organizations List
Managers and executives representing the following banks and credit
unions participated in this benchmarking study. All banks are either
regional or international. All banks and credit unions reported statistics
specifically for Barbados.

                       Benchmark Partners




                                    5
Growth in Customers/Members : ’03- ‘04
Customer growth across the benchmark class was strong. While a few
partners had fairly flat revenue growth rates, three grew by over 20%,
bringing the weighted average up to 18%. With total customer growth at
13%, this signals overall productive growth with more revenue per
customer.
Percentage Change in Customers (’03




                                      60%
                                                                        50%                                              30%
                                      50%                                                                                                  26%




                                                                                            Percentage Change in Gross
                                                                                                                         25%




                                                                                                Revenue (’03 to ’04)
                                      40%                         37%
                                                                                                                         20%         18%
              to ’04)




                                                                                  Minimum
                                      30%                                         Average
                                                                                                                         15%
                                                       20%                        Maximum
                                      20%
                                                 13%                                                                     10%
                                            8%
                                      10%                                                                                5%
                                                             0%
                                      0%                                                                                 0%
                                                 Current            New                                                        -2%
                                                                                                                         -5%
N=4                                                                           6
Growth in Asset Base: ’03-’04
While the two largest benchmark partners did not grow much or at all in
asset size in 2004, overall asset growth was modest at 5%. One
organization with one of the strongest new customer growth rates grew
assets by 19%. The growth in assets is one-third as high as the growth
in revenue, suggesting that companies are getting more effective in
generating revenues with a given asset base.
                                                   25%
                                                                                                               $2,000
                                                                    19%
                         Asset Base (’03 to ’04)




                                                   20%
  Percentage Change in




                                                                                        Assets (in millions)
                                                   15%
                                                                                                                         2
                                                                                                                        R = 0.721
                                                   10%                                                         $1,000
                                                               5%
                                                   5%

                                                   0%
                                                                          Minimum
                                                                                                                  $0
                                                         -2%
                                                   -5%                    Average                                       Budget
                                                                          Maximum
                                                                                    7
Revenue vs. Assets (in millions)
Most of the benchmark partners have a ratio of about 12:1 in assets to
revenue, suggesting that strategies which focus on asset growth and
customer retention, have a high likelihood of generating long-term
revenue.

                       $1,800                                                                       80




                                                                         Revenue per Customer (in
                                       y = 12.039x + 11.177                                         70          y = 18.563x + 31.816
                       $1,600
                                              2                                                                       2
                       $1,400               R = 0.9994                                              60               R = 0.9497
Assets (in millions)




                                                                               thousands)
                       $1,200                                                                       50
                       $1,000                                                                       40
                        $800                                                                        30             Average > $1,000 per
                        $600                                                                        20                    customer
                        $400
                                                                                                    10
                        $200
                                                                                                     0
                           $0
                                                                                                     $0.00 $0.50 $1.00 $1.50 $2.00 $2.50
                                $0    $50          $100       $150
                                                                                                        Number of Customers (in thousands)
                                     Revenue (in millions)

                                                                     8
Impact of Technology
Given that labor costs are the highest component of current budgets,
the benchmark clearly shows that as technology spend increases, the
amount of labor spend is impacted. This finding suggests that
Technology can allow companies to reduce spend – especially in light
of the fact that it is so low across the benchmark class, while reducing
transaction times through automation.
                                          Technology Impact on Labor Costs
                               60%
         Labor Spend % Total




                               50%
                               40%
                                                      y = -0.9623x + 0.5518
                               30%                         R2 = 0.6215
                               20%
                               10%
                               0%
                                     0%      5%       10%         15%         20%   25%
                                                Technology Spend % Total
                                                        9
   Usage of Technology
    The most widely used technology is a fully integrated single back office
    processing system and in-branch kiosks. Among the benchmark
    partners, four technologies will be deployed in the next six months.
                                                                                                      Deployment Plans
     Balance-only                                                                                        NA/No Plans
       telephony
                       17%       33%      50%                ATMs                 100%
                                                                                                         > 1 Year
     Transactional
                       17%        50%         33%                                                        6 Mos. - 1 Year
       telephony
                                                      Debit cards    17%    33%           50%            < 6 Mos.
    Balance-only
                       17%       33%    33%     17%                                                      In Use
  Internet banking
                                                     Cash-
Fully-transactional                                                  17%    33%          33%    17%
 Internet banking          33%    17% 17% 17% 17% dispensing
                                                   machines

         Electronic
                                  83%           17%    In-Branch
           checks                                                          50%      17% 17% 17%
                                                         kiosks

                      0%   20% 40% 60% 80% 100%
                                                                    0%   20% 40%    60% 80% 100%




  N=6                                                   10
FTE Allocation by Function
The overall pattern of FTE allocation is to give customer service to
most staff followed by back office. benchmark partners have nearly
equal proportions of staff in customer service and back office
operations. Only 5% of all staff are devoted to marketing.

                              Other Marketing
                               4%      5%
           Back Office                            Customer
              31%                                  Service
                                                    37%



                         Corporate
                           23%


        Among all partners, best-in-class companies devoted the
           highest % of FTE’s to marketing @ greater 12%


N=6                                  11
FTE Allocation by Staff Level
Clerical employees represent nearly half of the benchmark class
average FTE allocation. Non-supervisory professionals are among one
in five employees. Manual processes and low spans of control are
clearly a Barbadian financial services industry-wide issue.
        Mid-
  management     Management/
                  supervisors                   Non-
        10%
                                            supervisory
                     11%                   professionals
Executive                                      20%
   6%
                                                           The average span
     Other                                                  of control (non-
        8%                                                   supervisory:
                                                            supervisory) is
                                                                2.8 : 1
                                Clerical
                            Employees                      The best-in-class
 N=6                                                          was 3.9 : 1
                                 45%

                                     12
  Marketing Resource Allocations
  Organizations vary considerably in how they spend their limited
  marketing dollars, but most concentrate their efforts primarily on print
  and radio marketing. No benchmark partner does e-marketing.
            How effective are the following methods of evaluating
                new customer/ new product opportunities?
                 Other    TV
                  9%      9%                    Radio
                                                 33%

 Internet
Advertising 1%



            Direct Mail
            Marketing                                        Best-in-class
                6%                                      partners use TV more
                                   Print                    than the other
                                   42%                         partners


 N=6                                       13
Best Practices in Sales and Marketing:
Adopting a Customer Focus Strategy
 § Leverage a depth-based marketing approach, focusing on relationships
   not products, focusing on the entire customer lifecycle, e.g., cradle to
   grave
 § Build relationships around the most significant products to raise
   customer-switching costs and make it easier to cross-sell
 § Utilize formal account management processes
 § Ensure that market positioning is clearly defined both internally and
   externally
 § Employ marketing campaigns that are both offensive and defensive in
   nature
 § Train the tellers and other frontline staff to identify sales opportunities
   with existing customers and make referrals to sales

       “You can make more friends in two months by becoming really
      interested in other people than you than you can in two years by
                trying to get other people interested in you.”

                                       14
Transaction Times
The quickest transaction is a balance inquiry, while the slowest
transaction by far is the loan desk. Applying for a loan in person –
which varied among benchmark partners between 13 and 30 minutes.
Counter visits take about twice as long as counter transactions.

                                                                                                                      16
                                                                        30         30                                                        14.0
 Wait Time in Minutes




                        30




                                                                                                       Wait Time in Days
                                                                                                                      14
                                                                                                                      12
                        25
                                                                              19             Minimum                  10
                        20
                                                                                             Average                       8
                        15                                                   13
                                                                                             Maximum                                   5.4
                                                                                                                           6
                                                           10
                        10                                          8                                                      4
                                   5           6       5
                                           4                                                                                     1.5                        1.0
                        5                                                                                                  2                        0.5 0.9
                              12       2           2            1
                        0                                                                                                  0
                              Balance Counter Counter Trans- Loan                                                              Loan application     Loan inquiry
                             inquiries trans- visits actions desk
                                                     inquiries                                                                    approval
N=5                                    actions




                                                                                        15
Best Practices in Customer Excellence:
§ Incent customers to use alternative transactions rather than tellers, as
  they open accounts
§ Create an intentional and consistent customer experience as part of your
  branding strategy to retain more customers
§ Use specific language among the staff to reinforce the intended brand
§ Create a memorable experience by providing a personalized service
§ Assign an employee or several employees who can assist customers as
  they wait
§ Organize your teller lines by types of services and level of customers
§ Redirect customer calls from the local branches to a central call center to
  speed up the in-person transactions
§ Incorporate regular team meetings among the branch office staff to
  reinforce the attitude and motivate the team

      “It is not really about just getting your money. It is more
      about the experience you get – it’s about looking forward to
      coming into the branch” -- Operations manager
                                      16
  Effectiveness of Hiring Factors
  Benchmark partners view “softer” skills like the ability to communicate
  and be customer-oriented as the most effective of all hiring criteria for
  front-office/customer-facing staff (e.g., tellers, loan officers). Factors
  like experience and conflict resolution skills matter far less.

     Ability to communicate 17%                  83%

Customer service orientation 17%                 83%
                                                                 NA
                                                                 1 (Least Effective)
   Friendliness/personality        33%               67%
                                                                  2
Fit with “profile” employees 17% 17%                              3
                                               33%         33%
                                                                  4
Experience in similar places 17%                                 5 (Most Effective)
                                         33%     17%       33%

    Conflict resolution skills 17%         50%         17% 17%

                              0%   20% 40% 60% 80% 100%
 N=6                                      17
Effectiveness of Training Topics
The most effective training topics for all retail financial services
employees are customer service, technical, supervisory and product
training. Independent study was rated the least effective.

  Customer service       33%       17%         50%
                                                           Effectiveness
       Supervisory       33%       17%         50%
                                                           NA
          Technical    17%         50%              33%
                                                           1 (Least Effective)
           Product     17%         50%              33%    2

        Orientation    17% 17%      33%             33%    3
                                                           4
      Cross training         50%              33%    17%
                                                           5 (Most Effective)
Team/Inter-personal     17%         33%             17%

 Independent study 17% 17%                    67%

                       0% 20% 40% 60% 80% 100%
N=6                                      18
Effectiveness of Motivational Tactics I
Work culture or environmental factors such as a person’s relationship
with their supervisor and frequency of communications are viewed as the
most effective factors in motivating employees – even more effective than
development factors like career progression & mentoring.

Frequent communication       17%       33%          50%
                                                                Effectiveness
 Supervisor relationship         33%    17%         50%
                                                                NA
          Vision clarity     20%             60%          20%
                                                                1 (Least Effective)
   Progression potential     20%             60%          20%   2
       Extensive training              67%          17% 17%     3
     Rotation programs       20% 20% 20%             40%        4

       Formal mentoring                                          5 (Most Effective)
                                 40%         20%   20% 20%
     Exposure to clients         33%          50%         17%

                            0%   20% 40% 60% 80% 100%
 N=6                                     19
External & Internal Staff Turnover Rates
The average external staff turnover rate is lower than the internal staff
turnover rate. Front office staff are much more likely to turn over,
particularly as they move on to different jobs within the organization.
                  25%
                                                      20%
                  20%
 Turnover Rates




                             17%

                  15%                                                      Minimum
                                                    10%                    Average
                  10%                                                      Maximum
                         7%                                          7%
                                          5%
                  5%                                                       Best-in-class
                                                                  2%       partners had
                        1%              1%      1%
                                   0%                        0%             the higher
                  0%
                                                                             internal
                         Front      Back            Front      Back       turnover rates
                         Office     Office          Office     Office       and lower
                                                                             external
                         External Staff             Internal Staff
N=5                                                                       turnover rates
                                               20
Best Practices in Human Resources:
§ Leverage both technical and behavioral competencies in
§ Employ job rotation programs to allow staff to experience different
  roles and a means to keep them engaged and retained
§ Leverage alternate career paths to reduce costs and maximize
  employee contributions
§ Tightly link compensation to individual performance to incent higher
  performance
§ Tie employee and customer satisfaction directly into manager
  performance management processes
§ Employ motivational approaches to customer-facing employees
§ Leverage Computer-Based Training and shared services to improve
  training effectiveness and reduce training costs.

        “Competencies provide a standardized way for managers to
          consistently gauge candidates on a broad spectrum of
                        measures.” -- HR Manager

                                    21
Any Questions?




             22

								
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