Three Simple Ways Banks Can Reduce Branch Operations Costs with Benchmarking

www.StrategicFacilityGuide.com800.362.3708

3 SIMPLE WAYS BANKS & CREDIT UNIONS CAN REDUCE BRANCH OPERATIONS COSTS

A bank or credit union of any size can be confident of their spending on their branch buildings with facility cost benchmarking.


Branches Are Changing...

There is a lot of industry discussion about the size, design, location, and value of traditional branches.

Some organizations have even decided there is no longer a need for the physical branch.

A majority of financial executives prefer customers use phone, ATM and internet for services.

Costs of digital transactions aremuch lower.


...But They Are Still Important

The Branch-ATM-Online combinationstill defines the core of day-to-day banking.

46% of customers have used all three of these channels for their banking over the past six months.*

Many banks and credit unions consider branches to be an important part of their business.

A large percentage of new product sales occur in branches.

* http://www.slideshare.net/kennethjjkwan/the-new-banking-channel-network

http://www.slideshare.net/kennethjjkwan/the-new-banking-channel-network


Branch Buildings Are a Sizable Investment

Real estate and buildings are a major capital asset whether owned or leased.

This will be even be true for smaller high-tech branches and other new design variations

Operating costs for property are often dispersed among different budgets making them difficult to see.

Branches are typically small and geographically dispersed, further disguising these costs.


It is Important to Manage Branch Costs

Managing branch building operating expenses can reduce the channel cost and provide recurring overhead savings.

It is more important than ever to manage ongoing controllable costs.

This cost management does not mean lower quality or comfort.

These efforts can be part of making buildings more environmentally sustainable.


Benchmarking can Help

The objectives of benchmarking are (1) to determine what and where improvements are called for, (2) to analyze how other organizations achieve their high performance levels, and (3) to use this information to improve performance.

— businessdictionary.com


Benchmarking is Simple & Inexpensive

Organizations in other industries have used facility cost benchmarking for significant savings.

Our utility group saved an average of $16 million per participant over 10 years.

Some benefits of benchmarking:

Uses available information.

Low cost

Has low demand of busy staff time.

Provides useful metrics.

Surfaces hidden problems and opportunities.


Step 1: Assemble Your Branch Building Costs

The first step is to assemble all of the building-related operating costs for each branch.

Start with the last full year of actual costs

Readily available.

No concerns about seasonality.

Find the costs in various budgets and categories

Organize them in an industry standard way.

Use a template provided.

Itemize parts of leases to the degree possible.


Savings Opportunity #1

Review the costs and identify items that are unknown, unexpected, or undesirable.

Investigate if these items can be eliminated.

Some examples:

A water bill for a building you no longer own.

Repair payments for equipment under warrantee.

Service charges paid at one branch but not another.


Step 2: Compare Your Branches to Each Other

Compare the costs by branch to identify building-specific opportunities.

Use $/square foot, $/operating hour, or other ratio to normalize data to allow comparison among different size branches.

Identify and review outliers (high and low):

Is the data correct?

What do better performing branches do that results in lower costs?

What cost areas seem excessive at worse performing branches?



Identify specific actions based on your best and worst performing branch buildings

Take immediate action to reduce costs at higher-cost branches where cause is known.

Accurately define opportunities to reduce costs at higher-cost branches where cause/solution are not clear.

Identify the practices that seem to contribute to better performance at lower-cost branches.

Apply these practices where applicable at other branches and monitor results.


Step 3: Compare Yourself to the Industry

Compare your results with others in the industry to identify system-wide opportunities.

Participate in an established program with data quality control

Identify how you stand:

Identify areas of better and worse performance than peers

Verify reasonable costs ranges to expect.

Network with others willing to share lessons learned, especially on current issues of concern.



Identify specific actions based on comparisons with benchmark group

Focus on areas with potential opportunity:

Larger potential benefit.

Better defined course of action.

Issues of more importance to your organization.

Learn about the practices used by better performing organizations.

Test applicable practices and monitor results.


3 Opportunities Provided by Benchmarking

Participating in a benchmarking program provides three simple savings opportunities

1. Know your costs to be able to identify questionable spending.

2. Identify your worst performing buildings to address and your best performing buildings to copy.

3. Discover and adopt best practices to reduce costs, improve quality, or both.


Bonus Value of Ongoing Benchmarking

As your organization transitions to new style branches, benchmarking will help you measure changes in branch building costs.

Track your progress.

Identify and understand how cost profiles are different for different style branches.

Fine-tune and adjust your branch design and operations based on lessons learned.


Start Today!

Want to learn more?

Read more about how to get started,see examples and other resources:

StrategicFacilityGuide.com/banks/

Want help getting started?

Schedule a complimentary 15 minute consultation to see if benchmarking is a suitable approach for your organization and how to best start:

[email protected]

https://www.linkedin.com/in/lambe

http://strategicfacilityguide.com/banks/

mailto:[email protected]






Business

Three Simple Ways Banks Can Reduce Branch Operations Costs with Benchmarking