Bank growth does not automatically result in economies of scale.
Nowhere is this truer than in the lending front office and back office operations. The benefits of loan growth are significant, but realizing these benefits requires a bank to address the inherent challenges with becoming a larger organization.
Growth inherently comes with increased organizational complexity, higher volumes, additional problems that need to be solved, greater risks, more people to manage and heavier regulatory burdens. These factors are evident in bank operations. As the COO of a Chicago-based bank that grew from $1 billion to over $10 billion over a decade observed: “Each time we doubled in size, regulatory issues and scrutiny did not just double; they grew exponentially.”
Banks may also encounter significant challenges in deploying new technology as potential solutions. Acquiring new technology, garnering the required resources, deploying them and managing the risks of failure, are all significant topics that have been raised by bankers. The options are endless: enterprise or best-in-class point solutions; utilize high-end build-your-own tools or deploy something out of the box. Each has pros and cons; there is no panacea.
However, to leverage growth and achieve the benefits of scale, executives should first consider and evaluate their strategy with an eye toward the potential impact of communication on operations and the ability to scale. Executives should start by asking “How do we simplify this?” A clear understanding of how they can simplify communications will inform the appropriate solution selection.
Communication technologies have changed the world. The number of channels for communication —phone, email, messaging, text, chat, internet and intranet — provide many options for communication. Technology has enabled instantaneous access and the ability for rapid response, but it can create greater complexity and operational difficulties if not properly used.
Besides conversing, communication is also about sharing information. Information about loan statuses, particulars, backlogs, open items and documents are essential parts of any operational environment. How many different channels does a bank have for this? Most have multiple channels including, shared drives, SharePoint, PDF documents, shared calendars, Excel Sheets, their core system, customer relationship management and document management solutions.
Best-in-class point solutions can also contribute to greater communication complexity. Many offer data integration, but that’s not the same as communication integration. And, many point solutions including loan origination solutions, document management and CRM offer workflow tools to manage their domains. How many workflow solutions does the bank have? How many checklists, workarounds and additional procedures has the bank created to ensure that siloed workflows are linked?
Communication volume has an impact on employees. What is the volume of communication that occurs through various channels? How many emails come through on a daily basis and what is the impact? High volumes and multiple channels invite missteps, miscues and a potentially reduced capacity to deliver on a better customer experience.
As a bank grows and its volume increases, its need for clear, consistent and reliable communication grows. The number of multiple channels, methods and tools, individuals involved and point solutions creates an increasing and overwhelming amount of volume that leads to great complexity. Complexity itself increases as firms add extra — often manual — systems to provide assurances that communication has been delivered and the process has been completed. Just like the regulatory issues and scrutiny that can grow exponentially, doubling a bank’s size does not just double the communication issues — it exponentially grows them.
Understanding the importance of addressing a growing bank’s increasing communication needs, should drive the discussion when selecting new technology. The need to scale and deploy solutions that provide a competitive advantage, impact the efficiency ratio and enable growth, must be top of mind for bank executives. Selecting a solution is not an easy task and has many pitfalls; however, achieving scale as a bank grows is possible. Simplifying communication is the key.