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 / Summer 2004 / Issue 35(originally published by Booz & Company)


The Right Way to Make Branch Banking Pay

Further, branches must be the hub of a multichannel offering. Call centers and the Web are fine for routine transactions, but the branch is the best place for customers to get personalized information and attention and conduct complex banking activities. It is also the best channel for encouraging customers to en-trust more assets to the bank as their needs change.

For many large banks, the pursuit of scale has come at a huge price — loss of control over local capabilities and costs. Booz Allen’s federation model strives for more efficient centralized management and greater responsiveness to micromarkets. Central controls at corporate headquarters help the bank exploit product, infrastructure, and administrative scale, but the branch manager, who knows the local market, is empowered to make resource, incentive, and pricing decisions locally.

Applying Booz Allen’s federation model is not merely a matter of making organizational adjustments. Nor is it franchising. By giving each branch responsibility for managing its own P&L and retaining some centralized management, branch managers can run their own businesses, and they can leverage the brand and infrastructure power of the institution. If branch managers are offered the right incentives through performance-based compensation and perquisites, we believe they will work harder and smarter to make their branch more competitive.

To implement the federation business model, action is required along four dimensions:

  • People. Hiring, training, and certification of frontline employees; significantly improving branch management; making major modifications to incentives.
  • Internal Benchmarking. Understanding branch performance; aligning to micromarkets; increasing readiness for change.
  • Geographic Specialization. Determining local resource needs and basing the sales focus on demographics, purchasing behavior, and the local growth trajectory.
  • Structure. Setting up mechanisms to coordinate local versus central decision rights; refining roles and responsibilities within the branch network.

The days of the branch bank as we’ve known it are over. But something better is emerging in the
multiproduct, multichannel bank federation.

Author Profiles:

Paul Kocourek ([email protected]) is a senior vice president with Booz Allen Hamilton in New York. He focuses on strategic transformation of companies facing changes in the competitive landscape or the regulatory environment.

Aditya Bhasin ([email protected]) is a principal with Booz Allen Hamilton in New York. He focuses on the retail financial-services sector, most notably the retail banking, brokerage, and mortgage industries.

Paul Hyde ([email protected]) is a vice president with Booz Allen Hamilton in New York. He has worked extensively in the financial-services and health-care sectors.
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