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Three Simple Ways Banks Can Reduce Branch Operations Costs with Benchmarking

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Three Simple Ways Banks Can Reduce Branch Operations Costs with Benchmarking

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Branch facilities are important for many intermediate banks and credit unions. However, these buildings can be expensive to operate. Many organizations do not have someone dedicated to track, analyze, or manage these operating costs and may be spending more than they need to on their branches. There are three simple ways that an bank or credit union of any size can use facility cost benchmarking to reduce their branch operation costs and be confident they have the appropriate level of spending on these important assets.

Branch facilities are important for many intermediate banks and credit unions. However, these buildings can be expensive to operate. Many organizations do not have someone dedicated to track, analyze, or manage these operating costs and may be spending more than they need to on their branches. There are three simple ways that an bank or credit union of any size can use facility cost benchmarking to reduce their branch operation costs and be confident they have the appropriate level of spending on these important assets.

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Three Simple Ways Banks Can Reduce Branch Operations Costs with Benchmarking

  1. 1. www.StrategicFacilityGuide.com 800.362.3708 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.
  2. 2. www.StrategicFacilityGuide.com 800.362.3708 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 are much lower.
  3. 3. www.StrategicFacilityGuide.com 800.362.3708 ...But They Are Still Important  The Branch-ATM-Online combination still 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
  4. 4. www.StrategicFacilityGuide.com 800.362.3708 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.
  5. 5. www.StrategicFacilityGuide.com 800.362.3708 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.
  6. 6. www.StrategicFacilityGuide.com 800.362.3708 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
  7. 7. www.StrategicFacilityGuide.com 800.362.3708 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.
  8. 8. www.StrategicFacilityGuide.com 800.362.3708 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.
  9. 9. www.StrategicFacilityGuide.com 800.362.3708 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.
  10. 10. www.StrategicFacilityGuide.com 800.362.3708 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?
  11. 11. www.StrategicFacilityGuide.com 800.362.3708 Savings Opportunity #2  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.
  12. 12. www.StrategicFacilityGuide.com 800.362.3708 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.
  13. 13. www.StrategicFacilityGuide.com 800.362.3708 Savings Opportunity #3  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.
  14. 14. www.StrategicFacilityGuide.com 800.362.3708 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.
  15. 15. www.StrategicFacilityGuide.com 800.362.3708 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.
  16. 16. www.StrategicFacilityGuide.com 800.362.3708 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: Rlambe@RALStrategies.com https://www.linkedin.com/in/lambe

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