Banking Cost Cutting Measures For Shared Services Groups
Our most recent blog post was about a major Canadian bank and their efforts to improve productivity in just six months or less. That was a case study about how The Lab Consulting was able to help them achieve their productivity-improvement goals.
This article tells the story of another true case study. And it probes a seemingly perpetual and nagging cost drain on banks: Human resources.
Big banks require big-banking cost-cutting measures
The bank in this case study is one of the oldest financial-services institutions in the United States. It’s also highly HR-dependent. That’s because it manages 18,000 employees, scattered across 11 different states.
There was a lot at stake here. The bank’s online, telephone, and mobile banking platforms generated $840 million in net income, reaching 30 million households and over 3 million businesses.
But all was not right in this bank’s 400-person HR department. The EVP of their Human Resources organization (our sponsor on this project) sought banking cost reduction across a wide scope of the HR function, while improving effectiveness and efficiency, and delivering better service and operational benefits. Affected areas included:
- Strategic communications
- HR business partners
- The Chief Administrative office
- Rewards and compensation
- Training and development
How do you tackle banking cost reduction? Start by searching for opportunities
Over the course of a six-week Analysis and Design phase of our engagement, The Lab identified 170 different individual improvement opportunities. Amazingly, 92 percent of these required no new technology to implement. (This was more amazing to the bank than it was to The Lab, since we find non-technology improvement opportunities all the time.)
Implementation was achieved over the course of 26 weeks. The three biggest challenges included:
- Cumbersome, non-standard processes. Cost cutting measures in banks begin with standardization and simplification. This bank’s processes lacked both standards and consistency, so redundant and low-value activities were everywhere. This was a ripe opportunity for improvement. The Lab teamed with the bank’s leadership to eliminate the redundancy, improve productivity, and increase service levels for internal customers. This work alone recovered 300 hours of productive capacity every single year. Not surprisingly, this newfound capacity was earmarked for strategic priorities.
If you had to analyze all of the processes in your bank’s HR department, how much redundancy would you find? How much do you think you could recoup?
- Subpar performance management. Surprisingly, this bank’s HR teams lacked effective management routines and even standard tools for gauging daily performance. It was thus impossible for managers to establish challenging yet attainable goals; they were too busy “fighting fires.” The Lab helped the bank to implement lean management concepts; this reduced rework and waste, while boosting productivity more than 20 percent in several functional groups. Coaching sessions were held to help employees learn the new tools and techniques.
Banking cost reduction predicates on effective performance management. Do your bank’s people have the tools and techniques in place to set goals and monitor performance?
- Misalignment to strategic objectives impaired banking cost reduction. At this bank, there was no standard process to prioritize initiatives. This prevented HR’s workflows from focusing on the bank’s strategic objectives. The Lab worked with the bank’s HR leadership to create an initiative-ranking system and universal criteria for quality. Activity-based capacity models and management operating reports gave leadership visibility into performance in real-time. This empowered them to not only gauge their teams’ effectiveness, but to deploy their limited resources appropriately.
Cost cutting strategies for banks only work if their shared services groups—like HR—are in alignment with strategic priorities. Is your HR group properly equipped to keep in sync with the enterprise’s goals? Remember, this is not a problem that requires new technology to be solved. It’s about proper processes.
Banking cost reduction: Savings achieved
This was certainly a standout engagement. The numbers speak volumes:
- Overall productivity increased 12 percent.
- The project broke even in just six months.
- Twelve-month ROI stood at 3.2x.
- Annual savings reached $5.9 million.
What’s great about this story is that the bank was able to do so much without investing in any new hardware or software. With the help of The Lab Consulting, it was able to “industrialize” its knowledge-worker processes, and thus make the kinds of cost and efficiency gains that most people only associate with a factory floor. How are we able to do this? Find out by checking The Lab’s unique (and hard-to-resist) offering: We provide non-technology improvements via a self-funding engagement model and money-back guarantee. Learn more here.
For 2021: We have updated our bank client offering. Much of these findings and implementation results can be reviewed in the 3-part-series of “Big Rocks for Banks” below. Find out how to strategically lower costs, increase operating leverage, improve customer experience, and automate what previously wasn’t automatable in your bank.
Find them all here: