Sometimes it pays to keep things simple. Over 30 years in the industry I have had the opportunity to be involved in many think tanks working on KPIs, reporting, scorecards and dashboards. Throughout it all, some fundamental metrics consistently emerge as essential, since they describe manageable dimensions of the business in simple yet effective terms.
They may sound too simple (and they certainly are not new), but simple works... and if these metrics aren't working in your shop, your bank isn't operating optimally. Of course there are lots of other metrics that add value to management - I do not suggest abandoning these insights - but if I could only look at one page of one dashboard every day this is what I'd want to see. I'd also like to hear what your favorites are... this could get interesting if you participate in the conversation.
Without further ado, here they are, my top 5 KPIs for a Retail Banking Sales & Service organization:
1. Average balance per product .
Market positioning. All other things being equal, if you have higher balances per account than your competitor you will have a lower efficiency ratio since 2/3 of costs in the business are fixed.
2. Average total margin% per product.
Price positioning. The margin / volume tradeoff is captured by monitoring this in conjunction with average balances. Successful positioning optimizes price / volume tradeoff which can be achieved with price optimization analytics.
3. Number of (active) products per customer.
Sales effectiveness. Penetrating the existing customer base is imperative. This is a barometer of relationship depth and is highly correlated to share of wallet and retention. All other things being equal more products per customer will drive higher lifetime value per customer.
4. Number of customers per front line FTE.
Case load. It is often revealing to see how many hours per customer staff have... an RM with 2000 customers is going to spend less than 10 minutes a quarter with each of them. Depending on your positioning in hte classic 2x2 strategy matrix (high volume, low margin v. low volume, high margin etc.) maybe that is okay ... or not.
5. Cost per front line FTE.
Staff mix. How you align staff to customers is crucial to profitability and customer experience. High touch, high dollars here must be justified by high balances, prices and penetration.
Now the fun begins... these five simple metrics combine into the single most important ratio in the Financial Services sales and service business - revenue per staff dollar. The proof is simple:
Balances per product
X Margin per product
= Product Net Interest Margin (add fees if relevant)
X Products per customer
= Revenue per customer
X Customers per FTE
X 1/(cost per FTE)
= Revenue per staff dollar
If you are maximizing revenue per staff dollar on the front line you are running a good sales & service organization, in my view. The beauty of these five little KPIs lies in their ability to reveal the levers you can pull to make a difference. It's nice some things in life really are simple. Agree ?
- Dave McNab
