Benchmarking can help optimize a key resource: personnel

A version of this article first appeared in the February BAI Executive Report: How banks best measure performance. Read more within to discover how data, especially peer-based benchmarking, increasingly helps a dynamic financial services industry understand the marketplace and act.

When banking leaders were polled in recent months about the topics driving their strategy sessions, deposit growth and customer acquisition remained their leading challenges. But another concern cracked the top three for the first time in recent memory: operational efficiency.

Surveyed financial institutions, knowing the funding environment will likely remain difficult, were looking across their organizations for areas to reduce costs while not abandoning growth aspirations, especially given expected investment in platform migration, digital customer experience (CX) and more, says Mark Riddle, research intelligence expert at BAI.

As Riddle details in the on-demand webinar ProSight Banking Outlook: 2025 Trends, efficiency audits thus turned to reassessing how branches and other operational functions could be staffed most effectively.

For banks and credit unions, these human-centric decisions are challenging and emotional. They risk straining company morale, and they could undermine the goal of efficiency or derail strategy if staff changes miss the mark because they relied on weak data, or worse, no data at all.

In fact, making such decisions in a vacuum is unadvised. Some of the clearest insights toward improving a bank or credit union’s internal operations are through an external lens. And that is where benchmarking can elevate data’s usefulness.

As examined in our benchmarking strategy feature in this Executive Report, the benefit of benchmarking is to see where comparable institutions are falling short or exceeding at performance areas relative to your own bank or credit union.

The analysis would be lacking if it didn’t consider the performance of what many institutions argue is among their top competitive differentiators and certainly a leading operational consideration: their employees.

Key questions that talent-focused benchmarking aims to answer often include:

• Are talent management costs in line with peers, including salaries, benefits and training costs?
• Are talent acquisition costs, including recruiting, in line?
• How effective is talent acquisition compared to the talent pools others are attracting?
• Once hired, how is our institution’s retention rate, especially for high performers? After all, turnover costs can be especially alarming in a cost-sensitive climate.
• How does the geographic concentration of our talent compare to others with similar client profiles?

Sometimes, human resource-related metrics can be layered into data studies, including benchmarking, initiated by other business units. For instance, a study showing that a single branch that is lagging its local competitors in market share could benefit from adding employee and branch manager performance metrics.

Fortunately, “it seems like there are a million HR-related metrics,” says Silvia Dimma, chief human resources officer of the $8.1 billion Michigan State University Federal Credit Union (MSUFCU) in East Lansing, emphasizing her reliance on data-driven decisioning.

Dimma shares that her team subscribes to metrics like branch-wide employee turnover rates and total headcount per training FTE. Training hours per FTE is a measure of the amount of time a full-time equivalent employee spends training during a period.

Like other business areas, HR typically conducts studies “that align with our core corporate strategy,” says Dimma. So, for instance, if boosting employee productivity is a current emphasis, MSUFCU might seek a benchmark to compare its training efforts with peers, and then internally by tracking an employee’s productivity after completion of training.

Brian Hughes, president and CEO of the $440 million HRCU credit union, in Rochester, New Hampshire, also relies on benchmarking to help him complete the operational snapshot of his organization. Often, there are broader industry comparisons that help him fill the gaps.For instance, studying industry metrics like ROA, operating expenses to gross income, fee income to average assets, and salary and benefits to full-time employees, from the quarterly call reports issued by the National Credit Union Administration (NCUA) has been a priority, Hughes says. NCUA metrics — especially those on HRCU’s peer credit unions — offer such a valuable guide that Hughes says, “It’s like Christmas to me when the report comes out.”

“In January of 2023, we set a goal for a net operating expense ratio of 75%. We were then at 83.72% and are now down to 75.59%,” he relates.  Charting NCUA stats, as well as metrics from another provider that HRCU subscribes to, spurs continued—but realistic — goals.  “Without benchmarking … we could hold an overly optimistic or pessimistic view of our results.”

Armed with those targets, he could act. After polling managers, Hughes found efficiency gains from automating time-consuming internal reports that had been produced manually. Another aim was to establish minimal viable staffing levels for branches, he said.

Moreover, HRCU recently opened its fourth full-service location, the first outside the same market it’s been in for 65 years, says Hughes. The organization will rely on staff-focused and bigger-picture benchmarking to meet a breakeven projection in two and a half years for the new space.

Talent-focused benchmarking results serve as motivation for employee productivity as well.

David Tuyo II, president and CEO of the $1.2 billion University Credit Union in Los Angeles, juggles staffing to align with membership across a large higher-ed system.

“We have to make sure we’re benchmarking against peers,” says Tuyo.

Instead of using typical market penetration data, for example, UCU found it would be more accurate to measure the numbers of employees in its various units against product volumes in a determined market. Besides learning where UCU might improve this team-to-product ratio, finding areas of stellar performance has a side benefit in motivating employees. “If I say ‘thank you, good job’ it feels good for five seconds. But when you can say, ‘Your team really hit it out of the park’ by outperforming market peers it means a lot more,” Tuyo adds.

Tapping data, including benchmarking, for the smartest personnel moves are meant to be ledger-friendly but they also speak to creating improved hiring practices, an attractive culture and adaptable attributes that are up to date with industry standards. As banks and credit unions target 2025’s biggest challenges and goals, operational efficiency can be handled with the long-run health of the organization in mind.

Marilyn Kennedy Melia is a contributor to BAI.