Symptoms of low banking efficiency and profitability

Thomas W. Grottke, Tim Reimink, Steven Wolk
Symptoms of low banking efficiency and profitability

Banks are comprised of complex, interconnected parts that can’t execute effectively when key components lag. But when it comes to bank efficiency, there isn’t an obvious breaking point. Rather, bank efficiency breaks down across the organization over time.

Addressing lagging performance and fixing the underlying causes doesn’t happen immediately, either. It takes time and a holistic approach to close the gap between reality and potential. Identifying the symptoms of low performance is a critical first step in improving bank efficiency and profitability.

Stagnating customer base

Stagnating customer base

Your bank’s customers are loyal. After all, they’ve been banking with you for years. But when your organization struggles to attract a meaningful level of new customers, it might be time to rethink strategies.

Customers – both established and potential – want easy ways to satisfy their financial needs. When products aren’t appealing, processes aren’t streamlined, and branding doesn’t resonate, it’s easy to understand why sales might be down. But even if your bank hits its stride in these areas, new customer numbers could still lag.

Resistance to change

Making changes that positively affect customers and employees isn’t easy, and changing internal operations can be daunting. However difficult, the process of rethinking business models and modernizing systems is becoming the new norm.

If an organization constantly runs into roadblocks to fresh approaches, it can become nearly impossible to realign around high-performance business practices. Your bank might be sacrificing performance if it shies away from experimenting with new ideas, investing in new areas, or rethinking its risk tolerance or business model.

Resistance to change

Projects that don’t deliver

Projects that don’t deliver

When your organization does make decisions, big and small, what’s the likely outcome? The following symptoms of underlying problems can surface when projects don’t meet expectations before, during, and after launch:

  • Unfinished development. If the organization devotes time, effort, and resources to goals that consistently become nonstarters, that failure to move forward can be costly.
  • Unsupported implementation. How the organization integrates new ideas with current systems, trains and supports employees, and goes to market can make all the difference. When these vital areas lack an effective implementation process, effects can be felt across the business.
  • Lackluster returns. Adopting new methods is an investment that must yield returns. If changing processes does not result in lower costs per unit, faster response times, improved quality, and greater market share, then progress might be impeded.

Low employee engagement

Employees are essential to day-to-day operations. They keep things running, and they deliver for customers. But if the organization isn’t inspiring employees with the decisions management makes, the products and services it offers, or the overall direction of the bank, then it might not matter how much your bank invests in new technology and operations or how strong its marketing efforts are.

A lack of employee engagement can translate to long-term challenges. When employees don’t believe they have a voice or aren’t confident about the direction of the organization, problems with turnover and succession result.

Lack of operational analysis

Lack of operational analysis

It might seem like all these symptoms would be obvious, but if processes and outcomes aren’t analyzed, organizations can’t get a true picture of what might really be going on.

For example, spotting shortfalls and charting improvements in closing loan times and employee productivity are all critical metrics. If your bank isn’t keeping track of specific performance metrics, then how can it improve? One thing is sure: Trying to estimate unrealized potential without understanding performance trends is a useless exercise.

Performing against competitors in the market

Analyzing your organization’s data and improvement in a bubble can result in an illusion of success. Perhaps the organization is doing better than last year and much better than the years before that. But is it keeping pace in the market? If the competition is leaving your bank in the dust, small improvements might not be enough.

If you notice symptoms of low banking efficiency and profitability, Crowe can help

If you notice symptoms, Crowe can help

Your organization’s channels, markets, structures, technology, business applications, staffing, operation practices, and risk management are all pillars to a successful organization. Noticing cracks in these pillars – the symptoms of lagging performance that hamstring your bank’s potential – is the first step to a grand transformation. By reinforcing its pillars, your organization can achieve its overall profitability goals.

Crowe has studied high-performing banks and the business practices that contribute to their success. Learning how your organization compares to their standard can provide an idea of where to position your bank for future success.

Read our quarterly report on what contributes to these banks’ high performance, or reach out for a 90-day assessment.

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Crowe knows what factors help make a high-performing bank. We can help position your bank for profitability and efficiency.
Thomas Grottke
Thomas W. Grottke
Managing Director, Financial Services Consulting
Tim Reimink - social
Tim Reimink
Managing Director, Financial Services Consulting
Steven Wolk