The Crowe consulting business unit includes a performance improvement team that focuses on the banking industry. In part one of this three-part interview, Tom Grottke, who has been helping banks achieve greater efficiency for 35 years, talked about the challenges faced by banks and the value of an outside perspective.
In part two, Tom, now a managing director at Crowe, recalls a few of the many projects in which he and the Crowe performance improvement team successfully helped banks deal with change, streamline processes, and move forward.
Ryan: Tell me about a project or two that stand out in your mind as a success.
Tom: We worked with two banks with less than 30 offices apiece and provided a complete office-by-office evaluation that included a market study, customer usage analysis, and strategic evaluation. The market studies considered area competitors, demographics, businesses, location condition, visibility, and traffic flows, and the economics of the office and market. The customer analyses identified which customers used each branch and whether the customers used multiple locations vs. their branch of origin. The strategic evaluations included a gap analysis of the office locations and considered past performance, expected future performance, and the strategy and direction of the franchise.
These evaluations allowed for a triangulation of key factors that identified and prioritized offices to improve and clearly identified several branches that made sense to close. In both of those projects, the banks closed a few offices relatively quickly. For the offices that likely would continue to operate, our team looked at ways to improve execution by evaluating the people, processes, products, pricing, and promotions in order to recommend and implement performance improvement plans.
Many banks have been moving toward a universal banker operating model for their branches. In those situations, the starting questions should be, “What are we really trying to do in our offices, and what are we trying to be? What products do we want to sell? How do we want to staff the offices? And how do we want to position each office in the market?” In the two client projects, some offices could be improved while others closed. In both cases, the banks saved a substantial amount of money. These banks refined their branch operations, created a new market entry strategy, and used their updated business model to guide human resources, technology, marketing, and the lending lines of business to improve overall performance.
Ryan: Can you tell me about another project where the bank received quantifiable benefits?
Tom: Overdraft protection remains a topic of interest in retail banking due to its relationship to fee income, direct impact on customer service, and the high level of regulatory scrutiny of the service. A $2 billion-plus bank set up a new process that required an additional full-time employee to preapprove overdraft protection and monitor overdraft decisions to help protect itself from regulatory risk. Our team reviewed the entire process, which involved operations, the branches, transaction processing, and the back office. It became readily apparent that the new risk mitigation practices were redundant, didn't reduce risk, and didn't change the expected end result of the transaction. Based on the recommendations of the combined Crowe and bank project team, the bank reduced a business process from three pages to one page, eliminated a thankless role, and streamlined the process while still managing the regulatory risk and providing the desired customer service. It was a change management win-win.
Ryan: How do you help people to deal with change?
Tom: We recognize and understand that nearly everyone is concerned about change. We start each job recognizing the importance of having respect for everybody. If somebody has been doing a job for 35 years, we can't just wave a wand, eliminate that job, and expect everything is going to be fine. First, we identify longtime positions that follow inefficient workflows. Then we coordinate with HR, management, and department leaders to review the people and positions that are going to be impacted. Together, we can make the tough decisions. Many of our clients are community banks that prefer to avoid layoffs. Most of the time, they choose to make job changes. It’s important to communicate carefully, manage the changes, and retrain the people in their new jobs.
Ryan: Why is it hard for banks to make these changes on their own?
Tom: Change is difficult – especially when many people have been using the same basic processes for years. Experience and a fresh perspective are the value of the consultant. We are, in effect, hired as change agents. We have a blended team of new hires out of college on up to former bankers with over 40 years of experience. Our seasoned professionals have extensive industry knowledge, understand the importance of change, and have worked through a lot of battles, conversions, changes, and mergers. Our junior staff members offer a fresh perspective on automation and consumer expectations. Of course, today, technology plays a large role in any of the plans we roll out.
Ryan: Thank you, Tom.
In the third and final part of our interview, Tom will share his insights on today's banking technology.