Reduce liability for losses on commercial accounts by adhering to four requirements.
During the past two decades, even as branch transaction volumes have declined, branch personnel salaries have increased. According to the Financial Management Solutions Inc. Incentive Pay & Branch Culture white paper, branch transaction volumes decreased 41.9 percent from 1992 to 2011. During the same period, the study data (which analyzed as many as 17 million actual teller transactions per month) reveals salary and benefit rates for transaction processors increased 76.7 percent. The end result of these shifts is transaction labor costs increased substantially, with community banks being the most affected. In the period from 2007 to 2011, according to FMSI’s Annual Teller Line Study, teller processing labor costs per transaction in community banks rose 17.7 percent from 85 cents to $1 per transaction.
Some financial institutions responded by reducing their teller pools, but this action can lead to staffing shortages and diminished customer service. Many simply did nothing, uncertain how to respond to the volume decreases — and in some cases not even fully aware of them.
With decreasing transaction volumes and increasing salaries, the only way institutions can thrive is by increasing the number of teller-processed transactions per hour without compromising customer service. The key to achieving this objective lies in a combination of data collection and analysis, priority realignment and proactive forecasted scheduling. While some banks achieve these goals without deploying new technologies, most implement performance information systems, which provide real-world metrics.
FIs that do not use performance information technologies achieve between 10 and 14 transactions per hour. Those that do use them, and that follow through with the adjustments necessary to effect change, achieve an average TPH between 19 and 26. Such a dramatic productivity increase can turn underperforming branches into profit centers.
Performance Management Information Technology
Although other performance measurement techniques exist, FMSI recommends core-processor capture and analysis. A branch’s core processor retains all the details on exactly when transactions occur and which teller performs them. This information-rich — but often overlooked — resource is the foundation upon which FIs can build three key improvements:
- Identifying and eliminating non-volume time — time spent on non-customer facing, non-processing activities.
- Utilizing forecasted teller scheduling to align with high-volume and low-volume periods, including the use of part-time tellers for peak volume times.
- Implementing a metrics-based incentive pay program for additional teller productivity increases.
Identifying Non-Volume Time
Non-volume time can be anything from literally waiting idle at the teller window for customers to arrive to busy work, such as cleaning the teller area, and answering and forwarding phone calls. Many banks attempt to minimize overstaffing by giving tellers busy work when they are not processing, but this is counterproductive to any attempts to improve productivity and efficiency. Not only does non-volume work separate tellers from their most important concern — the customer — but tellers also waste time transitioning between volume (processing) and non-volume activities. If they are truly idle or conducting non-bank business, the waste factor is 100 percent.
Capture and analysis of core processor technology enables management to pinpoint non-volume time per teller and branch, and then to determine exactly what tellers are doing when they are not processing.
Scheduling More Efficiently
As mentioned earlier, core-processor data capture and analysis provides information, not only on when processing takes place, but also on who performs it. This information, combined with non-volume activity analysis, will help the branch schedule more efficiently.
For example, users will be able to see if a branch manager or other team leader is helping with processing during busy times. Using higher-paid staff for processing is a common means of handling “crunch time” business, but it is not a financially sound strategy. With more efficient scheduling, the bank should be able to avoid it almost entirely.
Other opportunities for change include reassigning administrative tasks to non-processing positions and scheduling fewer tellers during low-volume periods. The analysis will also identify tellers whose TPH is below an acceptable threshold, indicating a need for additional training.
Overall, the data analysis will provide the insight to adjust schedules confidently without reducing customer service. Most banks find that hiring part-time tellers to cover high-volume periods and reducing the number of full-time tellers affords the greatest efficiencies.
Implement Technology-Based Incentive Pay Systems
A final benefit that can be achieved through core-processor capture and analysis is the productivity boost of a metrics-based incentive pay system. Once a branch’s average TPH is known, it can set minimum TPH standards and improvement goals and then tie performance incentives to them. Goals can be set for teams, individuals or both. To create a more balanced approach, many FIs also require the achievement of other important metric thresholds — such as service, accuracy and referrals — to receive incentives tied to productivity goals.
Productivity increases reaped through teller productivity incentives can be considerable. FIs with an incentive pay program averaged 17.6 transactions per hour — a 12.8 percent productivity increase over those without such programs.
Detailed observation can provide enough information to begin implementing some of these improvements. However, to root out all the inefficiencies that inflate labor cost per transaction and reduce profitability, you need hard data. Performance management information technologies can provide it.
Century National Bank Bank Profile:
Century National Bank, with 15 locations in Ohio and $1 billion in assets, is one example of how performance measurement techniques can improve a bank's bottom line.
Details of Its Incentive Plan
- Individuals and teams must achieve 80 percent of bank transactions-per-hour goal before incentives are triggered; pay is on a sliding scale from 1 cent (at 80–100 percent) to 3 cents (at 120 percent or more) per transaction.
- Teller workforce utilization (teller processing hours divided by payroll hours) must be more than 75 percent.
- Tellers must balance cash drawer within $50 (net difference).
- Employees who prepare schedules receive a $50 bonus for schedules in line with productivity goals.
- Tellers who participate in the floater teller program earn $10 per day.
By the Numbers
- Tellers typically earn $40–$50 extra per month in incentive dollars.
- On average, Century’s incentive plan pays out $1,500–$1,900 per month (institution-wide).
- Seventy-five percent of tellers earn some sort of incentive every month.
- December 2011 productivity numbers: TPH was 16.8 (ranked #53 out of 104 on FMSI Monthly Ranking Report); Labor cost per transaction was 67 cents (ranked #9 out of 104 on FMSI Monthly Ranking Report).
W. Michael Scott is president/CEO of Financial Management Solutions Inc. For more information, visit www.fmsi.com or call 877-887-3022.
Copyright (c) August 2012 by BankNews Media