Succeeding in Today’s Business Environment May Require a Makeover
A commitment to process improvement leads to a stronger bottom line and better service
As competition continues to surge from non-traditional service providers and technologies that give consumers new options for conducting financial transactions, banks and credit unions are faced with a dilemma. How do they continue to provide consumers with the highest level of service by combining legacy products with new technologies; maintain efficient staffing amidst ever-changing consumer habits; and remain profitable with fewer revenue-generating options?
For one $300M asset financial institution in the Northeastern U.S., the transition to new leadership set the wheels in motion to initiate an operational review in order to meet its performance goals and remain competitive. The focus of the study included:
• improving asset quality,
• increasing non-interest income, and
• updating the existing fee structure.
Selecting a proven advisor is key to overall success
As the leadership considered how to approach this challenge, a board member suggested making contact with John M. Floyd & Associates – based on the results he had observed when he brought the company in to implement a process improvement study at a nearby public service provider. Based on his recommendation, members of the leadership team met with JMFA CEO & Chairman John M. Floyd, along with company consultants.
Following that meeting, extensive due diligence was in order to determine how satisfied other JMFA clients were with the results of the company’s recommendations and the level of service its consultants had provided. Due to the increased regulatory focus on third-party providers, they also did their homework to learn about the extent of JMFA’s knowledge and expertise in all compliance matters.
“JMFA provided a list of referrals and we contacted about three-quarters of the names to learn about the quality of their process and to inquire about how the results compared to the potential outcomes JMFA had initially projected,” the institution’s president explained. Once they felt comfortable that JMFA had the expertise and track record of getting results, the leadership team spent time with its internal staff to make sure everyone was committed to the process.
“We took the possibility of engaging in this type of project very seriously,” the president said. “We wanted to make sure that if we decided to invest in the up-front costs, that everyone was on board – from the boardroom and senior management to the operations and branch staff – to do what it would take to implement all of the necessary changes.”
Initial analysis determines recommendations for improvement
Once the project was underway, JMFA’s consultants completed an initial analysis that included a review of the organization’s existing internal processes and product offerings. Based on that review, they presented a list of recommendations that would lead to potential monetary and efficiency improvements in the following areas:
• staffing levels,
• service fee realignment and
• increased non-interest income.
Re-adjusting staffing levels leads to improved efficiency
The staffing capacity study analyzed all personnel to determine ways to improve efficiencies and reduce expenses by reallocating employees, as appropriate – based on lobby traffic, increased technology use and changing service expectations. This allowed the organization to realize areas where efforts were being duplicated or where certain duties required less staff time or were no longer necessary.
“While some financial institutions may shy away from implementing a staffing study due to concerns that it will just lead to layoffs, the fact of the matter is this type of review can uncover ways to re-allocate staff to reach greater efficiencies during peak and non-peak business hours,” explained Ron Jennings, JMFA executive vice president. “Results may uncover the need to reduce overtime, shore up under time, or determine where FTEs might need to be increased or where part-time staff can be hired to handle specialized services and projects.”
Proper fee structure reflects service value and improves revenue streams
In reviewing the client’s fee structure, JMFA recommended that deposit service charge fees be brought in line with other financial institutions in the marketplace. This included incorporating charges that incentivize account holders to utilize technology – such as online banking and e-statements – that had been put into place but were not widely used.
Initially, there was some push back from account holders who were opposed to paying fees for services that had historically been offered for free. However, comparisons from before JMFA’s recommendations to after changes were implemented show that deposit accounts are at higher balances than before. What’s more, their account holder base continues to grow. This also has resulted in a more efficient, lower cost process from a statement production and account holder mailing perspective.
Implementing overdraft program generates healthy boost in revenue
In addition to getting its fee structure in line with other institutions in the area, the client was looking for an additional revenue source to balance the current low interest rate environment. As part of the study recommendations, JMFA’s consultants proposed implementation of a fully disclosed overdraft solution—JMFA OVERDRAFT PRIVILEGE®.
Since implementing the program in 2014, the institution has seen a significant increase in its non-interest income. What’s more, the program has been widely accepted by account holders. “We didn’t have an overdraft program in place so initially we were concerned about how account holders would react to this type of service,” the president explained. “But there was no need for concern. It has been a widely accepted program and continues to be a good tool for us.”
He went on to explain that one of the keys to making the implementation and management of the program successful was the employee training that JMFA provided. “The staff training was excellent,” he said. “The trainer held six or seven sessions for different employee groups and his message was very consistent throughout each one. In today’s regulatory environment, it is so important for front-line employees to accurately describe products to our account holders. I really give JMFA high marks for the quality training they provided.”
“What’s more,” he continued. “The overdraft privilege implementation team provided 24/7 support in case our staff needed anything – regarding procedures or questions about regulations – during implementation as well as through follow-up. Along with personal interaction with our staff, they provided a user’s binder that has helped to ensure there are no misinterpretations by any of our employees. All of this has been very valuable.”
Open communication throughout the process leads to greater overall success
According to the client, one of the key components of a successful process improvement study is the on-going buy in and involvement of personnel throughout the different levels of the organization. To ensure the process was successful in this particular case, leadership maintained communication with staff to support them through the challenges and successes.
“Employees were very excited about the process initially – fostered in part by the internal interviews that JMFA conducted to get input from staff,” the president explained. “Everyone was thrilled to be included and to have the opportunity to see their ideas for improvement considered and possibly implemented.”
He went on to explain that as the process continued, everyone realized that to make the changes necessary to reach their goals, a lot of work needed to be done – in addition to staying focused on their daily functions and other important issues. “As legacy processes started changing and new information had to be absorbed, the stress level within the organization began to rise and employees started to question whether or not we should have taken on such a challenge,” he said.
But when staff members started to see the improvements that resulted in the changes they had made and the monetary rewards for the bank increase, the excitement level returned to a high point. “There were times during the implementation process when the staff felt like they were on a rollercoaster,” the president described. “Then at the end when we began to see a nice increase in income, improved work efficiencies and the ability to provide better account holder service, it was worth all of the hard work.”
Professional expertise and experience make the difference
Looking back on the process, leadership considers one of the benefits of having JMFA come in and review the situation was the affirmation of the ideas that they had been contemplating for years but had not implemented. “Having the experts reaffirm what we had been thinking gave us the incentive to take action on things that we might not have done on our own,” the president said. “Not without expert guidance.”
That guidance included the commitment from experts who have implemented several hundred process improvement studies over the past 40 years in institutions of all sizes and situations. “The staff quickly realized that JMFA’s consultants knew what they were doing, which made an impact on them from the start,” said the president. “While there were a few individuals who struggled to accept change, JMFA’s personnel worked with them and gained their trust early on in the process. They took the time to explain their intentions so no one was threatened about what was happening.”
Successful results – helping clients realize their goals
The goal of any JMFA process improvement study is to help clients realize and reach their full potential. With this particular process complete, the leadership team is very satisfied with the professional way in which JMFA handled the initial process improvement study and implementation. Among the results:
• more efficient service and less waiting time in branch facilities;
• increased account holder awareness of online banking services;
• restructured loan department that is better equipped to serve account holders more efficiently and maintain regulatory requirements; and
• increased revenue from re-evaluating product and service fees, and implementing a fully compliant overdraft program.
“We spent a great deal of time evaluating whether or not this type of study was something we wanted to commit our time and money to complete,” the president said. “We expected an increase in our non-interest income, improved operational efficiencies and service delivery – and JMFA met our expectations.”
He went on to explain that he would advise any institution considering this type of study to first make sure they had broad-based buy in from the entire organization. “You can’t communicate enough the need for everyone – from the board, senior management and on down through the ranks – to be on board and ready to change. It can be uncomfortable at times but JMFA will give you the tools you need to realize that what they initially estimated can be accomplished. Then it is up to you and your team to accept or decline to implement the changes. If you don’t go into the process with this mindset or lack the will to see it through, you are wasting your resources.”
JMFA’s Jennings complimented the client’s leadership for their efforts to maintain this level of focus throughout the process. “The effort put forth to improve an organization’s processes can pay off in overall benefits that greatly outweigh the costs,” he said. This includes immediate improvements in workflow and customer service quality, as well as the ability to maintain long-term initiatives that increase performance and profitability.”
In this case, about 75 percent of the 300 to 400 recommendations that JMFA made were implemented. And, according to this satisfied client, “In the end it was absolutely worth it!”