RE-ENGINEERING YOUR INSTITUTION’S FOUNDATION CAN ENHANCE LONG-TERM GROWTH
By Ron Jennings, Executive Vice President
Needless to say, today’s business environment for financial institutions provides its share of opportunities and challenges. On the one hand, new technologies provide innovative service options that can improve or increase your touch points with account holders. However, on-going concerns regarding shrinking margins, potential interest rate risk, restrictions on non-interest income generation and compliance issues surrounding mortgage lending, cybersecurity, consumer fraud, BSA/AML, UDAAP and third-party relationships can leave an institution on unstable ground … especially if organizational and strategic foundations are weak or outdated.
In a recent Deloitte report on trends for global human capital, 92 percent of companies believe that redesigning their organization is important to their on-going success. For financial institutions, this is especially critical as consumer interest in mobile banking continues to increase and competition from alternative financial services providers is on the rise.
Is it time for an organizational makeover?
You may think your institution is running efficiently and providing account holders with the services they need. But when was the last time you took a thorough assessment of your existing services, processes, workflow, personnel, and income and expenditures to determine if:
• your product offerings are profitable and match account holder needs;
• your staffing plan provides the skillset necessary to meet your service goals;
• your existing processes allow employees to work efficiently and effectively;
• your products meet compliance expectations; and
• your vendor contracts are providing the best value and service possible?
To be effective, an organizational review should include a line-by-line examination of every department – from the executive suite to the back office and every branch location – to identify the myriad ways to utilize your resources more efficiently. And while that may seem overwhelming, the results can help to uncover any structural weaknesses, identify ways to substantially improve your efficiency ratio, and update and streamline processes that will lead to increased employee performance that can give you a competitive boost.
Begin with a thorough review and analysis
An assessment of your existing product mix, transaction volume and patterns can identify where your account holders are spending their time – online or in your branches – and help to clarify where you should be spending your resources to best meet their needs. This review will look at such issues as product and account profitability, and relationship pricing. Plus, a compliance review can help to insure that your current overdraft program is in line with all regulatory expectations and providing your account holders with a reliable tool for maintaining their financial stability.
A competitive analysis will reveal how your products and fees compare with other institutions in the marketplace. With this information in hand, you can determine if there is a need to provide value-added services or make adjustments to your fees in order to optimize non-interest income and remain competitive.
Revisit your organizational structure
Do your operational practices support your employees’ ability to do their jobs well? If your institution is still operating under a management structure that requires individuals or small groups to report up through specific managers in silos throughout the organization, you are missing out on the value of collective knowledge and expertise. When employees work in more flattened, cross-functional action teams, they can address problems by seeing the whole organizational picture, instead of just from one department’s perspective. This allows employees to share information and combine their skills to propel the institution toward mutually-shared goals.
A staffing study can help you determine how to utilize your staff resources most effectively to provide excellent service and maintain an efficient, enjoyable work environment.
Take another look at your expenses
While you may have been focused on trimming all of the extras out of the budget during the economic downturn, you could still be paying too much for your monthly service contracts. For example, as the industry’s reliance on technology expands, spending on systems and software to enhance mobile services and data security is expected to increase. However, there are economies of scale – as well as savings and incentives – that you might be missing if you allow vendor contracts to automatically renew without renegotiating the terms. Remember, your vendors are not required or likely to offer you a better deal if you don’t ask for it.
A review of your existing contracts – and renegotiation with your vendors – can result in better pricing and/or contract terms on services you use every day. In many cases, results include immediate savings – thanks to retroactive cost reductions from your providers – plus improved service and better vendor relationships.
Develop a blueprint to support long-term growth
In today’s uncertain environment, growth is essential for long-term success. An on-going commitment to process improvement can provide your institution with maximum productivity and business efficiencies while increasing revenue and lowering operating costs. If you don’t have the time to lead the process, or possess the internal expertise or objectivity to identify and implement the changes necessary, an expert in process re-engineering can identify areas where change is necessary and help position the institution in the right direction to grow.
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