When it comes to operational efficiency, credit unions have room for growth. According to a McKinsey & Company study, credit unions are repeatedly more inefficient when compared to similarly sized banks. The causes of this operational efficiency variance can range, but it almost always boils down to certain processes draining valuable resources. Ask yourself:
- What activities are the biggest drain on your employees' time?
- What activities have the largest impact on your bottom line?
With this in mind, let's take a closer look at a few tips and best practices you can use to create and/or bolster operational efficiency.
Research, Benchmark, and Report
Undoubtedly, the first step in improving operational efficiency for your credit union is to research, benchmark, and report. Whether it's from the macro level (entire credit union metrics) or micro level (individual tellers), the first step is to collect information. For example, consider tracking the amount of time it takes employees to complete certain tasks, such as providing account information, processing deposits, collecting loan payments, etc.
Make sure to conduct this analysis over at least a few weeks and across multiple employees to validate your findings. Armed with this information, you can list out your top 10 or 20 findings. Next, you should review the costs on your financial statements. Select the processes that are most expensive and list them out in order of the percentage of your operational cost.
Why is this important? Because many financial institutions go through the process of digital transformation with the hopes of gaining cost savings. However, they find out that the process improvements targeted are only a tiny part of the operational costs. By completing this simple practice, you can clearly identify the biggest drainers of time and resources to target them specifically.
Reduce Process Costs
It should come as no surprise that the path to improved operational efficiency runs through processes. And you can lower overall operational costs by reducing the unit cost-to-value ratio of each transaction or activity. Whether it's creating a certain type of loan document, opening a member account, or handling a transaction, the goal would be to first address the efficiency drains identified in the previous step.
To do so, you must continually monitor performance to inform analyzation, mapping, benchmarking, and the rethinking of back office processes. While there are a number of ways to reduce process costs, one of the easiest is to turn to technology, automation, and digital transformation.
Automation and Technology
Unlocking automation and technology through digital transformation can completely transform your operational efficiency. In either case, it's imperative to implement automation and technology for the right reasons:
- Increase self-service functions for members without requiring effort or assistance from employees.
- Utilize technology to reduce the time required for finding information and performing inefficient processes.
- Employ automated business rules and decision models to efficiently move work through various processes.
And when you deploy the right technology, you can increase the number of members you serve without actually hiring more employees. Here are a few more tangible ways credit unions can leverage technology to improve operational efficiency:
- Automated reporting
- Marketing automation
- Set-it-and-forget-it functions
- e-Signatures
- 360-degree member services
- Automated compliance checks
Improving Operational Efficiency Starts at the Core
When it comes to improving operational efficiency, it truly starts at the core. In fact, when your core is in shape, every other auxiliary arm or leg of your credit union will function more effectively and with less effort. And FLEX's core technology is designed to help credit unions do just that. Learn more about the power of a dynamic core processing system through our eBook!
