• Identify opportunities for efficiency gains. Efficiencies can be gained in many places in an institution’s operations. For example: o Workflows: Using automation and artificial intelligence (AI) to streamline workflows and free up employees for higher-level tasks saves money and time. The PRI article “Harnessing AI and Automation: Practical Use Cases for Community Banks” highlights high-impact, low-lift opportunities to make workflows more efficient. o Use of technology: It’s important for the institution to know how they can optimize their technology stack to be sure they have a good framework in place for growing after they shrink. • Design or re-design products that provide a value exchange. Although you may lose customers or a segment of customers who are unwilling or unable to participate in the value exchange, if the overall result is growth, then you must be willing to meet the moment. Redesigning products and designing new products can open space for a greater focus on digital banking improvement and expansion and can provide the opportunity to eliminate grandfathered products that are dragging your profitability down. • Clean up data. Because good data is needed to make good decisions, banks need to control their own data and have confidence that it’s not flawed. Use the “shrink to grow” mentality to identify and correct the root causes of data errors and anomalies. Knowing and Managing the Risks The “shrink to grow” strategy is not without risks, but if leaders are aware of them, they can work to mitigate any negative outcomes. For example, shrinking to grow can lead to losses that include: • Loss of scale advantages: For example, service items such as courier contracts, which are based on the size of the customer, could get more expensive if a bank closes several branches. • Loss of talent: Closing branches could lead to the loss of some great team members. However, if leaders exercise forethought and planning, they may be able to “reshuffle the deck” and find other slots for their stars that, in turn, help with attrition at other branches. • Loss of customers: Institutions should give plenty of thought to which customers they may be losing during “shrink to grow” transitions, and even if they decide these are losses that make sense now, treat those customers with respect and plenty of communication. “Don’t burn bridges unnecessarily,” Boardman said. Shrink to Grow Strategy: The Keys to Success The keys to success in implementing a “shrink to grow” strategy hinge ultimately on whether it fits the institution’s growth plan — specifically, if it fits how you want to grow. For example, if your strategic plan says focus on growing loans, then don’t dilute your team’s actions by focusing on deposit growth also. Prioritize clear and timely communication, even with customers who you are likely to lose. To protect the institution’s reputation, minimize the perceived negative impacts and give plenty of advance notice of changes in strategy and products. Finally, reinvest the dollars you’re saving by shrinking into digital banking and other appropriate technology, your employees and your long-term partners. The result will be the growth you’re aiming for, in the way you have determined most valuable to your institution. Brian Boardman has over 40 years of experience in retail and business banking, credit cards, cash management, operations and capital management. His expertise working with a diverse range of financial institutions has helped drive strategic revenue growth and operational efficiency throughout organizations. PRI specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes and effective use of technology. Contact us at profitresources.com to learn more about our personalized approach to propel growth and improve profitability. Resources How Banks Can Boost Productivity Through Simplification at Scale — McKinsey & Co. Balancing Innovation & Cost Control: A Community Banker’s Guide — Independent Banker Preparing for a Focus on Process and Efficiency — PRI The Rise of Niche Banking: What Can Your Bank Learn from the Specialists? — PRI Harnessing AI and Automation: Practical Use Cases for Community Banks — PRI The Show-Me Banker Magazine | 27
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