Achieving operational excellence is becoming an increasingly pressing item on the agendas of retail-banking CEOs worldwide. Yet while banks generally acknowledge that their processes and productivity could be vastly improved, relatively few have a firm grip on the steps they must take to raise their operations to a level of true excellence.
In order to explore operational performance in depth, The Boston Consulting Group recently conducted a benchmarking survey of 12 of the top 30 retail banks across North America, Europe, and Asia-Pacific—a group that we sometimes refer to as the “premier league” of retail banks. The 12 institutions that we surveyed account for roughly 430 million customers, 51,000 branches, and more than $13.5 trillion in assets. Unlike typical operational benchmarking surveys, which focus solely on back-office processes and metrics, our effort encompassed both operational and client-facing activities, taking a holistic end-to-end perspective on banks’ processes and productivity drivers.
Every bank is, of course, unique—a product of its own history and the nature of its principal markets. But a number of important insights can be drawn from the ways in which these institutions approach processes and productivity, and how these approaches influence their overall performance, their strategies, and the experience of their customers.
Our benchmarking identified top performers along a number of key metrics. It also revealed a wide range of operational performance among retail banks. (See Exhibit 1.) For example, cost-to-income ratios ranged from 40 percent to more than 70 percent, and customers per full-time equivalent (FTE) ranged from 310 all the way up to 1,270.
Such variation indicates that most banks—even those in the premier league—can make significant improvements in operational performance. Moreover, our benchmarking and client work have enabled us to identify four key levers that the best premier-league banks are applying in their quest to break away from the pack and become all-stars—or true process and productivity leaders. These levers are improving end-to-end performance, developing efficient and effective processes, streamlining the organization, and establishing underlying capabilities that create winning conditions.
Below, we examine the profile of a true operational all-star—in particular, how such a bank applies the four key levers. We then examine two specific banks that have used a highly focused set of sublevers to push the boundaries of excellence, allowing them to create and export strategic differentiation.