Community banks today find themselves under mounting pressure: The battle for deposits shows no signs of ceasing, new entrants to the space introduce unprecedented competition, customer expectations climb sky-high and technology continues to evolve at a dizzying rate. All the while, these institutions know they must effectively manage regulatory requirements, maintain security protocols and grow their portfolios—all within set budgets.
Community banks realize that to effectively scale and compete in this environment, they must operate as efficiently and productively as possible. These institutions simply do not have the resources to keep up with the expansive budgets of large national banks, so they must be able to spend less time on cumbersome, manual processes and more time on strengthening customer relationships. While many community banks are abuzz with talk about “efficiency,” the fact remains that many of them struggle with how to actually achieve meaningful efficiencies that contribute to their bottom lines — and they often make the same mistakes.
Although change can be daunting, the benefits of reengineering processes can significantly outweigh the temporary pain points. These tips and best practices can guide community banks to better outcomes when trying to find more efficient ways to operate.
Leverage new or younger associates
View your processes through the eyes of newer or younger employees. These team members likely won’t be resistant to change because they haven’t been at the bank long enough to become overly comfortable with ingrained processes and procedures. Tap into their perspective and view the landscape of your institution through a fresh pair of eyes — think of it as an easy and cost-effective audit that can illuminate redundancies or inefficiencies that haven’t been noticed before, and give you a chance to improve accountability.
For example, have a new employee shadow different positions across various departments of the institution and ask him or her to observe how employees conduct tasks. Then, have the new associate meet with a more senior-level employee or two to discuss findings, observations and even ideas for process tweaks or improvements. This small-group scenario may allow everyone to feel more comfortable and freely share ideas and suggestions. Younger or newer employees often have a wealth of ideas and untapped potential, and this scenario allows their voices to be heard.
Proactively identify red flags
Look for the warning signs that point to underlying inefficiencies. For example, while a department’s request for an additional full-time employee is often a legitimate, it can often surface as a telltale sign of needed process improvements. Before pursuing a new hire, the bank’s leadership team should take a step back to see if they can re-engineer processes or remove bottlenecks before bringing another person onto the team. Simply onboarding and training another employee within an inefficient department or project will only compound the problems.
Issues surrounding the storage of physical files can be another red flag. Handling paper is cumbersome and inefficient, and it introduces unnecessary risk. To boost efficiencies and make the employee experience more seamless and productive, community banks should digitize traditionally paper-heavy processes, such as loan review, portfolio management and exceptions tracking.
Perhaps the largest red flag of all? The phrase, “We’ve always done it this way.” A resistance to change and an unwillingness to embrace new ways of doing things can cause real damage to banks, especially community institutions. The competitive technology and business landscape will never stop evolving, and so banks’ processes and methods must evolve concurrently or risk becoming irrelevant. Those banks that show an openness to new ideas are most likely to thrive.
Implement automation in new areas — but carefully
Community banks stand to benefit when they implement automation into new areas of the institution. Automating previously manual and paper-based processes can reduce the time it takes to complete certain tasks such as account balancing from hours to a matter of minutes. Plus, automation can also improve accuracy and remove the risk of human error when reviewing, moving and indexing documents and sensitive customer information. Overall, leveraging automation throughout the organization, if done correctly, can allow community banks to boost productivity, save time and optimize profits.
However, institutions must strike a delicate balance between man and machine. Community banks’ primary differentiator has always been their commitment to exceptional personal service. Too much automation poses the risk of erasing the human factor and commoditizing the banking experience. Banks must find a way to leverage automation that enhances — not replaces — the human connection.
Those banks that dedicate themselves to effectively improving their efficiency ratios will find themselves well-positioned to grow and compete. With economists predicting a slowdown next year, it’s crucial that community banks take steps and implement strategies now to streamline processes and operations across their various lines of business, including lending, deposits and treasury management. The more efficiently an institution can operate, the more time its employees will have to focus on customer service, the most important aspect of community banking.
Joe Ehrhardt is CEO and founder of Teslar Software, a Springdale, Arkansas-based technology company that focuses on software solutions for financial institutions.