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Self-Funding Your Way to Improved Efficiency


I recently took a phone call from a bank executive bemoaning the fact that it took about an hour to open an account at his bank. “Something is very, very wrong with our account opening process, and I think the fact that our Compliance area has gone mad has something to do with it,” he said.

Right before the holidays, I spoke with the president of a mid-size bank. “Our commercial loan process is so messed up. Our organization is completely dysfunctional, front and back office can’t communicate at all. We have 40-page write-ups for $5 million deals and 35-page write-ups for $500,000 deals. Can you help?”

During a break at a strategic planning session I facilitated recently, the chief operating officer (COO), who was responsible for a variety of operational areas, pulled me aside and said she really liked Tammy, who had been running deposit operations for more than 15 years, but Tammy had increased her staff by nearly 30% in the past several years while account volumes were relatively flat. Sure there was a higher regulatory burden, but “could you come in and poke around to see what opportunities you might find for improved efficiency.”

Organizational Dysfunction

It seems like everywhere I turn, banks are having major issues with process, policy, workflow and the organizational dysfunction that naturally came along for the ride. While this is not a “new” development, I would venture to say this has been a major issue since the financial world imploded in 2008 and banks suddenly got interested in efficiency and process in the face of an antagonistic political and regulatory environment that believes banks shouldn’t be able to make a buck. Five years later I am still scratching my head wondering why banks appear so reluctant to take on entrenched managers, broken processes, business units that are “too busy producing loans” to look at how they operate and executives passively aggressively pointing fingers at each other in the never ending blame game of why “things take too long at our bank.” Are bankers just too nice to hold people accountable? Worse yet, are they just too lazy?

Come on, folks. This is not like working at Apple trying to dream up the next great consumer electronic or at Boeing trying to design the first-ever carbon composite jumbo jet. Ninety percent of these issues are eminently fixable without a lot of creativity and imagination because 7,500 other banks are doing the same things as you in the front and back office.

One last anecdote. At a bank for which we were performing a benchmarking engagement, I was introduced to the Process Improvement Department, which would be responsible for coordinating the surveys that needed to be completed so we could compare the bank to peers. The “department” was a young woman who had about three years’ experience at one of the large, faceless consulting companies as a Business Analyst who had decided that 80% travel was not for her anymore. Her job at the bank was to dig, ask the dumb questions, challenge the status quo, stay out of office politics and create simple project plans and transparent status reports that shined a bright and impartial light on holding executives accountable for improvement. Our benchmarks were one tool the bank used to help measure progress. Her all-in cost with benefits: about $82,000 a year.

As a consultant, I of course love to get calls from bank execs asking for help like the three mentioned at the start of this article. But to be honest, rare is the bank our firm has worked with that doesn’t have literally dozens and dozens of projects, both large and small, that are true “do-it-yourselfers” – the proverbial low hanging fruit.

This article isn’t a lengthy “How To” on process and workflow improvement to achieve efficiency. The point to be made is a simple one that comes down to dollars and cents. The industry, and certainly Wall Street, often measures efficiency improvement by reducing the number of full-time equivalent (FTE) employees a bank needs to get the job done. I am not advocating that every process improvement project should be about reducing headcount. In fact, in many of our firm’s projects, the goal is to improve process and policy so the bank can grow volumes without having to add to headcount. But the fact remains that savings in FTE is a simple and objective way to determine if a project produced results. A bank is certainly welcome to include “soft” metrics like improved turnaround times, higher customer satisfaction, etc., in measuring the results of an initiative.

Using the Business Analyst that became the Process Improvement Department as an example, it doesn’t take much to self-fund your own initiatives. At her compensation, that analyst, to be self-funding, had to find efficiency improvements each year that equated to:

  • 1.5 lower level FTE; or
  • 1 mid-level FTE; or
  • 0.5 higher level FTE.

The average $1 billion bank probably has between 200 and 250 employees, based on my very unscientific scan of about a dozen $1 billion banks on the FDIC Website. I can tell you with a straight face after our firm’s work with so many banks on process improvement projects over the years that those self-funding numbers are a no brainer for banks to hit. Yet the vast majority of banks that have $600 million to even $10 billion and more in assets don’t have a function, let alone an individual, whose sole focus is to tackle process and efficiency opportunities. Come on, bank execs. Wake up, smell the coffee and self-fund your way to better efficiency.

Mr. Sommer is president and chief executive officer of Cornerstone Advisors, Inc., a Scottsdale, Ariz.-based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at [email protected].