Designing the Future of Banking: Lessons Learned from the Trenches

This case study in retail banking reviews the work of a Wharton School research team which has been tracking the process of change at one of the larger American commercial banks. The bank is referred to by the pseudonym "National Bank." The team's research focuses on how a bank chooses what changes to make and how to implement changes as new technologies, increasing competition, and more demanding customers force it to rethink product offerings and distribution channel design. In the case of "National," these forces resulted in a massive re-engineering effort designed to restructure the branch delivery system. The goal of the redesign was to streamline branch processes and relocate many administrative tasks and routine servicing of accounts to centralized locations. The physical layout of branches was changed so customers would be encouraged to use ATMs and call centers rather than consult with branch employees. Branch employees' efforts were to be directed toward sales rather than service and information systems and call centers were expanded. As pilot experiments developed and the project matured, the bank's initial focus on changes in physical layout of branches, information systems, and design of key business processes gave way to focus on changes in key jobs in the branch systems, human resource practices that supported these jobs, and on employees' reactions to the changes. As these changes were implemented, several problems arose and were addressed. First, rural branches in the early pilots felt that the new changes were inappropriate for their market, leading to a decision to abandon the original model of standardization across the entire system. Second, implementation of new technology proved a slower process than had been expected. Third, branch employees often found it difficult to successfully refocus on sales rather than service. Fourth, some customers were unhappy with changes that routed all their calls to a centralized location rather than to the their local branch. Finally, it was difficult to implement the human resource practices necessary to support the new organization. New position levels changed employee expectations of moving up in the hierarchy and caused some internal dissatisfaction and confusion. Employees feared layoffs. In dealing with these problems, a second pilot redesign was tested in urban and suburban markets, incorporating a number of process modifications to address these issues. New challenges have arisen, including introducing the changes to branches that have been acquired recently through mergers and acquisitions and introducing standardized innovations within a decentralized management system. These and a range of human resource issues continue to be addressed by the team. Despite the many challenges to implementing an effective new delivery paradigm at National, a number of the early pilots have demonstrated success in moving routine transactions to more official channels, while achieving the goals of increased sales and customer satisfaction. As a result of their ongoing analysis of National's redesign process, the authors have identified six key factors for success: Have a good phone center in place early and believe in it as a critical component of retail service delivery; Acknowledge the importance of human resource issues; Not only acknowledge but address the human resource issues early and clearly; Clarify employees' roles and develop new skills when needed; Not all employees need the same kinds of commitment; Be ready and willing to adapt your model, but be confident to resist attempts to maintain the status quo for the wrong reasons.