• Dale Johnson
  • Darryl Demos
May 6, 2016

Reconfiguring branch staffing for sales

As consumer digital migration drains ever more branch traffic, banks have been working through a delicate transition with branch staffing.

Amid all the pressing questions, sales, service, headcount and skills, executives have drawn comfort from the assumption that they at least had a rough idea of how consumer branch usage would shake out. Ultimately, it has been thought, branch servicing would decline but not disappear. Branches primarily would become sales centers, a place where the majority of customers will continue to go to originate checking and savings accounts and apply for loans.

Building on this assumption, it seemed logical to reorganize branch staffing around “universal bankers,” who both serve and sell. The goal was to improve efficiency by reducing the full time employee (FTE) commitment to teller activities while preserving sales capacity. Based on a recent Novantas study of 12,000 U.S. branches, roughly one of eight units across the industry now make prominent use of universal bankers. At least 50% use some form of flexible staffing. Yet, even as more banks (and advisors) jump on, this train is increasingly at risk of running off the track.

Not Enough Sales
For starters, our analysis shows that universal bankers mostly help with transaction and low-end sales productivity. The more important metric, overall financial return on branch sales staff, continues to deteriorate. Today, roughly two-thirds of all branches fail to generate sales returns sufficient enough to cover their fully loaded staffing costs.

The problem goes from bad to worse when considering the future focus of sales: digital vs. branch. For years, it was thought that consumers would never trust ATMs with deposits, let alone mobile phones. Today, digital deposits are the norm across both ATM and mobile. What guarantee is there that branch account origination will stay the norm, simply because 90% of accounts open in branches today? Counting on branches to remain the focal point for sales is naïve at best.

In a not-so-distant future scenario, branch sales volume may be cut in half. Most banks will be fighting for segment, geographic or product niches, often using multiple strategies within a network. The use of specialists will become critical in tapping high-value opportunities for customer acquisition and cross-sell.

The upshot is that the branch staffing challenge is much more profound than many bankers realize. To meet evolving customer preferences and boost the critical metric of return on the sales force, banks will need a new retail sales strategy and structure. For many, universal bankers are an interim step on a longer path.

Skillful use of local market analytics will be essential in managing this chaotic transition. Each bank must be able to delve within its network to understand the scope and shape of the sales potential in each locale. This knowledge becomes the foundation for a potentially extensive suite of market-tailored sales staffing configurations.

In a post-recession era of low consumer demand and digital disruption, banks have had two main branch priorities. One is to deepen relationships and sell more to each customer, supporting growth by capturing “share of wallet.” The other is to tightly economize distribution in tandem with declining transaction activity.

The universal banker concept never cleanly fit the bill. But it seemed like a way forward for banks looking to preserve sales capability while aggressively reducing branch headcount. Roughly five years into the trend, adoption has been substantial, with even more in the offing. But there also is enough data to evaluate progress so far.

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War
ning signs have emerged, as revealed by Novantas research:

  • When tellers assume additional sales responsibilities, they mostly succeed with low-value checking and savings accounts. The needle barely moves with business deposits and loans, consumer loans and mortgages. Meanwhile credit card origination, the low-hanging fruit for tellers, visibly declines amid all the other distractions. Overall, there is little or no improvement in sales returns relative to staffing expense.
  •  When experienced branch sales staff is asked to assume teller responsibilities, the pros are distracted from the critical priority of high-value customer acquisition and relationship expansion. Transaction productivity is improved, but again, sales returns relative to staffing expense are not.

Rather than trying to perfect what now appears to be an inherently limited arrangement, banks already employing the universal banker model should view it as a transition step. Others still on the sidelines should probably skip it. Even bigger productivity challenges are in store and the time to prepare is now.

Radical changes are coming in account origination. Coping measures will not suffice. While 85% to 90% of retail products are sold on-site today, this ratio could be cut in half over the next five to seven years, matching the recent rate of decline in teller transactions. In turn, the coming digital erosion of the branch sales foundation will cannibalize the fundamental benefit of the universal banker.

This hollowing out of branch sales points to role chaos ahead. In the not-so-distant future, specialists may have to carry most of the load in high-value sales conducted face-to-face. They will have to generate business across broader territories, encompassing multiple branches, with branch sales generalists becoming a backstop.

Market-led Transition
All retail banks have serious work to do in preparing for a digitally-eroded environment for local branch sales. But many compound the difficulty by clinging to traditional practices and metrics instead of looking ahead. Scheduling-led staffing tools are prevalent in the industry and still have a place, but are wholly inadequate to the task of staffing transformation in a chaotic setting.

The number one priority is to establish a market-led transition. Historical performance, service benchmarks and back office productivity metrics will not suffice.

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Each local market plan should start with a clean sheet of paper, with the top entry being sales opportunity. How much? What type? What is the likely range of scenarios two years from now, five years from now? What sales staffing configuration (generalist, specialist, etc.) will best capitalize on this emerging opportunity, and what is the organization’s migratory path?

There are important management implications in this transition:

  • Staffing and performance management are not separate activities and need to be interlinked. New strategic staffing analytics consider both opportunity-based goals and local team performance in setting optimal staffing targets. New data sources and analytical tools will be needed to reach this level of detailed planning.
  •  Opportunity analytics need to be driven from the bottom up. The bank needs a statistical understanding of market characteristics, network presence and branch-specific format and customer composition and how these elements contribute to sales of specific products.
  • Links are needed between the analytics that drive network planning and those now needed for staff planning. Too often these analytics are driven by people in different silos and not connected. We are seeing more of a trend in combining these two teams, but that is not enough. The bank needs a clear set of analytics that can be used across these domains. While site selection and staffing decisions will diverge at points, the analytics should source from the same resource.

  • Nothing is more valuable than data on actual sales performance in a market, by segment, to plan the future transition. Old-school benchmarks calculated at the bank level do not help to pinpoint local strengths and deficiencies, nor the corresponding granular changes needed to better manage this transition. The appropriate calibration of targets will need to be understood branch-by-branch.

Role chaos in the branches is just starting and the universal banker role is not the end game. A shift in mindset and investment, from efficiency to effective customer interaction and economic returns on the sales force, will be required as banks transition through evolving staffing models over the next five years.

Mr. Demos and Mr. Johnson are managing directors in the New York office of Novantas Inc. They can be reached at ddemos@novantas.com and djohnson@novantas.com, respectively.

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