Building an ROI Case for Branch Workforce & Productivity Solutions

Many retail-bankers are working to finalize 2020 budgets and build business cases for investments and projects for the coming year. As banks reshape and restructure their distribution networks for their customers, upgrading and streamlining workforce management and productivity for the branch becomes a key element in a successful branch transformation strategy.

But, it can be an uphill battle.  Many C-Suite bank executives view branch investments as an unnecessary or, at minimum, tertiary to digital transformation projects.   However, its obvious the branch is not dead and is still a key element for industry leaders like JP Morgan Chase.  Chase is among a few banks that are still expanding their branch network as a key component of a diverse omnichannel strategy to better serve their customers.  As someone who has led these types of projects, I want to share my perspective about the types of compelling cases I’ve seen—both on the bank and vendor side—and the strategies for getting business cases approved.

Define the Scope of Your Business Case

How do you create a compelling business case for branch workforce management and productivity tools? There are three key business cases we have seen in the market recently.

Burning Platform Case – This is the most immediate and basic case. Your requirements have outpaced manual, home-grown or outdated vendor solutions’ capabilities for things like demand forecasting and branch scheduling. These legacy applications typically lack several key capabilities needed for today’s smart-branch environments. Essentially, the case is the current software is so outdated or lacking, by not replacing it you are creating a significant risk to the growth or profitability of the bank. Unfortunately, these cases have limited revenue or cost savings associated with them, focusing instead on the need to replace the “burning platform” and addressing the risk of not replacing them.

Optimized Labor Case – The next type of business case focuses on technology that allows the bank to forecast a “right-sized” or “optimized” branch network staffing model. These business cases, while positive from an ROI perspective, are essentially cost-save exercise and do not address how to leverage the branch for additional sales growth. Also, many times they can be preceded by a costly labor study or analysis project which almost always will make the case for the tool the same vendor is selling.

Branch Transformation Case – The most comprehensive type of case is built on the premise of preparing branches to be an asset to the bank’s future success. To modernize branch labor management and power intelligent more efficient operations, these types of cases often feature several key elements:

• Improving forecasting accuracy with machine learning to optimize staffing in the face of local anomalies or events.
• Simplifying scheduling processes with mobile scheduling tools for managers and employees to increase engagement and allow more scheduling automation for fill-ins and pool staff needed to support the thinner staff levels in today’s branches.
• Mobilizing branch inspections and automating issue resolution to ensure brand, security, and other compliance with standards and expectations.
• Managing non-customer facing activities in a much more structured, scheduled, and prioritized way to ensure these tasks are streamlined and completed at the optimal time leaving more time for sales and service interactions.
• Managing branch communications and non-customer facing work to ensure that colleagues are not spending time reading endless communications and creating visibility for leadership on which communications/activities have been completed or read.

Building The Transformation Case:
Given the broadest case can not only drive cost saves but sales growth as well, let’s take a look at how you could go about putting everything together for a more compelling case to secure the needed capital investment.

Gather Your Data

How do you identify case financials for your proforma case? While not an exhaustive list nor universally applicable, here are some ideas of what should be considered or included based on how Reflexis approaches building an ROI model when working with our clients.

Typically, we start with the baseline data elements our model will be built from, including items like:

• Estimated Retail Operations Annual Revenues (2019)
• Number of Branches
• Number of Branch Managers
• Fully Loaded Branch Manager Annual Salary/Hourly Rate
• Number of Branch Associates
• Fully Loaded Branch Associate Hourly Rate (by role or average)
• Estimated Associate Attrition (by role or overall)
• Estimated Cost to Rehire
• Industry Customer Churn Rate
• Number of Consumer Customers
• Number of Small Business Customers – Retail
• Estimated Average Deposits/Credit- Consumers
• Estimated Average Deposit/Credit- Business Retail (if your retail branch team originates small business lending/credit)
• Estimated Average Customer Acquisition Costs – Consumers
• Estimated Average Customer Acquisition Costs – Business

Then we begin to look at the savings, or revenue elements that would be part of the cash flow statement. These typically fall into several main groups:

Estimated Labor Savings      

• Optimized branch staffing labor savings—from leveraging market-level forecasting and scheduling (i.e. sharing employees or managers across local branches) or by ensuring branch staffing more closely fits the demand
• Reduced Non-Value Work—from managing the non-customer facing branch activities and tasks in more detail and streamlining them
• Improved Schedule Adherence—determined by reviewing schedules with actuals
• Improved Schedule Management—making the process more efficient and reducing the time managers and employees spend on it

Estimated Revenues

• Reduced Customer Churn—from having the correct staff in the right place at the right time, as well as more guided customer engagement activities
• Increased Sales—from more scheduled or directed activities and reduced non-customer facing activities, which provides more time for and focus on prospecting

Other Expense Savings

• Reduced Cost to Hire through Employee Engagement—from the reduction in employee turnover driven by feeling in control of their schedule and feeling like they are working in a modern company
• Reduced Customer Acquisition Costs—from reduced customer churn/attrition and maximized time for sales, reducing overall acquisition costs

Calculate the Potential ROI

Once you’ve defined the relevant data elements, there are a few ways to run the calculations and estimates needed to build your ROI model. Without being too self-service, one option is to get a free operational walk-through and ROI assessment case from Reflexis.  This would take the form of several short onsite discussions and assessments and then the creation of a version 1 of the business case to get you started.  There is also a myriad of consulting firms who would certainly write you a statement of work for the same work although, not for free.  Aside from that, you can do this internally. To be clear, getting this started is really about collaboration with your internal stakeholders, reasonable estimates, and creating likely scenarios/models to evaluate together.

Further, it’s easy to find many benchmarks in banking that can be used to validate or contrast with any internal estimates you are getting for acquisition costs, turnover, churn, etc.  These can also be used in the business case narrative to help your leadership team understand how your data compares to the industry. When it comes to estimating savings or increased revenue, in my experience, those are best done as a workshop exercise with the key stakeholders.

For example, if you are estimating thinner staffing, have you talked to branch managers or regional managers about any issues or exceptions?  Have you confirmed your estimates with the forecasting teams? Have you documented any assumptions you are using for the team to review and comment on? Conversely, if you are predicting higher sales, have you confirmed with sales coaches and analytics teams if those projections are reasonable? Have you checked with the product team about any pricing exceptions, products, or processes that would impact the increase?

One of the easiest ways to go through this process is to go line by line with key stakeholders who will be accountable for the proposed changes. During that line-by-line assessment, have a very conservative estimate, median estimate, and high estimate with the documented assumptions underlying each one. This gives the reviewers an idea of what the is bounding the estimates and under what circumstances they are most likely. It’s key to be realistic about what you can deliver, rather than inflating estimates to get funded. Then once you get a commitment from those team members on the best case, that becomes the basis for your ROI/NPV of the project which also has the benefit of having more buy-in given the way it was developed in collaboration.

If all of this is resonating and you would like to understand the details of creating an ROI case for investment in branch workforce management and productivity tools, and you would like additional information contact Reflexis at banking@reflexisinc.com