1.

Introduction
1.1 Background
1.2 Rationale
1.3 Objective
2. Methodology
2.1 Method of data collection
2.2 Method of data analysis
3. Branch performance Analysis
3.1 Performance Management system
3.2 Indicator of the PMS
3.3 Target of setting System
3.4 KPIs and performance relationship
4.
Branch Performance Evaluation framework
1. Introduction
1.1 Importance of Bank branch performance

Measuring a bank branch performance is best indicator for overall bank institutional
development and active monitoring of the institution. In retail banking practice branch is the first
channel contact face of the customer and its important in selling of the bank product its
customer. Based on this, the goals for a branch should include providing excellent, efficient, and
effective customer service; growing its market share; increasing profitability; and ensuring that
the branch is providing value to the institution. Though, holistic view of branch performance
measurement and id4entifying best indicator to measure branch performance is a bottlenecks for
the development of the corporate bank.

Continuously measuring bank branch performance is maintaining the momentum for improved
branch performance in retail banking. It follows that effectively and efficiently evaluating branch
performance in today’s challenging environment and critical in banking sector. Traditionally, the
importance of measuring and evaluating branch performance focused on branch profitability.
However, profitability is only one component of branch performance. As consumer preferences
change and branch strategies evolve, it becomes abundantly clear that concentrating solely on a
branch's profitability provides an incomplete, and even misleading, view for decision-makers.
It’s time to move beyond profitability and use other metrics to evaluate branch performance.

1.2 Why branch performance measured

Bank branch performance is measured for several reasons, primarily to evaluate the effectiveness
and efficiency of individual branches within a bank's network. Measuring branch performance
helps bank management make data-driven decisions, identify areas for improvement, and ensure
that branches are meeting their objectives

Evaluate the of the effectiveness branch: Branch performance measurement helps evaluate the
effectiveness of the branch in the sales and revenue generation activities. It tracks metrics such as
new accounts opened, loan disbursements, cross-selling success, and revenue generated through
various products and services. By analyzing these metrics, banks can identify high-performing
branches and share best practices across the network, as well as identify branches that may need
additional support or training. In addition to this, it helps to enhance customer experience. This
mean that, measuring branch performance allows banks to assess customer satisfaction levels.
Metrics such as wait times, customer complaints, service quality, and customer feedback surveys
help gauge how well branches are serving their customers. By monitoring these indicators, banks
can identify areas where customer service can be improved and take appropriate actions to
enhance the overall customer experience.

Operational Efficiency of the branch: Measuring branch performance allows banks to assess
operational efficiency in areas such as transaction processing, cash management, staff
productivity, and cost management. By monitoring metrics like transaction volumes, average
transaction times, staff-to-customer ratios, and operational expenses, banks can identify branches
that may be underperforming and take steps to improve efficiency and reduce costs.

Improvement and Strategic Planning: Measuring branch performance provides valuable data
for strategic planning and resource allocation. It helps banks identify growth opportunities,
evaluate the viability of opening new branches or closing underperforming ones, and allocate
resources effectively across the branch network. By analyzing performance metrics, banks can
make informed decisions about branch expansion, market penetration, and resource optimization.

1.3 How to measure branch performance?

As with any other channel, the goals for a branch should include providing excellent, efficient,
and effective customer service; growing market share; increasing profitability; and ensuring that
the branch is providing value to the institution. With these goals in mind, consider the following
analyses to enable a more holistic view of branch performance.

Growth

One of the primary goals of the branch network is to provide and support growth, including the
overall growth of the institution, its customers/members, balances, and ultimately earnings. As
such, financial institutions should assess various growth metrics related to their branches as part
of the branch performance evaluation, tracking both loan and deposit growth; increases in the
number of customers/members, cross sales, and new accounts opened.

Activity/Usage

Branch activity is an important indicator of branch performance and strategy. Tracking metrics
such as foot traffic, transaction counts, and number of transactions per employee provides insight
into the amount and types of services that customers rely on within an individual branch, and
within the overall branch network. These metrics also help leaders assess the best services to
provide in the branches, analyze optimal staffing levels, and develop targeted marketing
campaigns. Activity/usage should also be a consideration in branch closure decisions.

Customer Satisfaction

Branches provide one of the only opportunities to interact directly with customers and to develop
and enhance these relationships. The costs related to this interaction are high, so it is paramount
to meet the needs of customers/members. Gathering and analyzing satisfaction information is a
key component in assessing whether the institution (or more importantly, its customers) are
getting value from the branch network.

External Factor

In assessing the performance and viability of your branches, it is imperative to understand the
markets in which they operate. Consider whether performance expectations should be the same
for a branch located in a busy, highly populated urban location compared to a branch located in a
sparsely populated, rural location. Beyond population density metrics, it is important to capture
and analyze information specific to the branch location that pertains to average household
income, ratio of customers to deposit volume, age and demographics of the customers, and the
number and types of businesses. These data help set performance expectations, but also should
reveal growth opportunities, influence product strategies and the types of services offered, and
even impact branch design considerations. In addition, capturing information about competitor
branches, products, and rate offerings provides insights into growth and pricing expectations and
strategies.

Technology/Digital

Whether technology and digital channels continue to lead to branch closures or branches
continue to be the primary channel for developing customer relationships and loyalty, measuring
and understanding branch performance remains critical to the success of most financial
institutions. Given the continued usage and significant expense of the branch network, the ability
to fully evaluate branch performance to support strategic and tactical decisions is vital.

Financial Performance Metrics

In determining the full value of a branch, the following financial performance based metrics can
and should be measured and evaluated:

Fee revenue and the amount of high-value transactions: An assessment of these factors provides
insight into the importance of fee-based products and services within a branch and whether the
branch could better optimize revenue from fees.

Efficiency ratio, expense ratio and revenues, expenses, and assets per employee: An assessment
of these items can help determine whether branches are staffed at appropriate levels and whether
additional efficiencies in branch processing should be pursued.

Accounts, loans, and deposits per customer/member: Assessment of these data can reveal growth
opportunities related to wallet and mind share of the branch customer base. Many of these
metrics are most likely already calculated at the institution level. By analyzing them at the
branch level, they can support specific branch, product, marketing, and pricing strategies for the
organization.

2. Standard to measure branch performance

2.1 Profitability of the branch
Profitability remains a vital metric for evaluating and comparing bank branch performance.
Through robust profitability measurement and analysis, banks can:

 Determine whether branches are generating enough revenues to cover costs

 Align branch manager performance with organizational goals
 Identify and optimize branch and staff efficiency
 Determine whether the branch network should be expanded or contracted
 Use the results to inform decisions around whether to open or close specific branches
 Ensure current branches are achieving profitability goals before expanding

By measuring, analyzing, and using branch profitability data, leadership can hold regional and
branch managers accountable for achieving desired levels of profitability. The goal is to incent
positive behaviors and decisions that will elevate the performance of both individual branches
and the institution as a whole. Despite its importance, static profitability analysis has its own
limitations. To truly understand the drivers of profitability and how strategic and tactical
decisions might impact that profitability, the following six profitability elements and best
practices should be considered.

1. Relative Profitability

A static view of profitability in a single branch provides limited value. Because profitability
measurement is as much art as it is science, getting buy-in to single-period numbers can also be
challenging. Profitability really should be used as a relative metric, allowing comparisons
between branches and between and across time periods. By taking a relative view of profitability,
leaders can consistently compare performance across branches. If assumptions are consistently
applied over time, trend results can provide additional insights that fuel decisions resulting in
performance improvement.

2. Recent Profitability

Traditional branch profitability analysis often rewards branches for past successes. Consider not
only evaluating total profitability, but also measuring and analyzing profitability based on recent
production and activity. For example, if a branch has a large loan portfolio that generates
significant revenue, that branch may be a top-performing branch from a total profitability
perspective. However, also measuring the profitability of recent loan production may reveal that
this branch has not produced many loans over the past year and may in fact be trailing other
branches in loan production. In this case, traditional profitability analysis rewards the branch for
loan production from years ago. Measuring profitability based on recent production in addition to
traditional profitability helps identify such trends, revealing opportunities to realign behaviors
and resources to support institution goals.

3. Profitability Per Square Foot

The concept of profitability per square foot is a common performance metric for the retail
industry. As branches adopt more of a retail store approach, this profitability metric is certainly
one to consider. By leveraging technology to shrink back-office spaces in branches, financial
institutions can either reduce the overall branch footprint (and cost) and/or provide more space
for richer and more complex customer interactions. As this trend continues, the ability to
evaluate overall profitability on a per-square-foot basis will level the comparative playing field
and ensure the optimal use of space in each branch location.

4. Product/Channel Profitability

The integration and use of both branch profitability analysis and product profitability analysis
can lead to better insights and help shape decisions and strategies for each branch. Product
profitability measurement reveals the products used most and least by the customers of each
branch and indicates what actually drives branch profitability. For example, if a concentration of
customers at a particular branch uses an unprofitable product, there may be an opportunity to
shift customers to more profitable products or to change processes, pricing, or fee structures for
those products to help improve overall profitability. Likewise, identifying usage patterns for the
most profitable products can help shape branch promotions and cross-sell strategies within the
branch and across the branch network.

5. Customer/Member Profitability

Taking that concept to the next level, measuring customer profitability to help drive individual
branch and branch network decisions can also prove beneficial. Knowing the profitability of each
customer that steps into a branch can help branch staff tailor their interaction with that customer.
Given that the top of customers generate the majority of profitability for a financial institution, it
is critically important to identify and retain these customers. For instance, if one of the most
profitable customers of the bank frequently visits a particular branch, the branch staff should
know this information and be able to proactively offer special deals, products, and pricing/fees
for this customer. While staff should treat every customer well, understanding the profitability of
each customer can help ensure retention of the highest-value customers.

2.2 Target setting and Achieving

Target Setting

Setting target across a branch network in a bank can be a challenge. Historically, banks have
taken various approaches to setting performance targets for branches, each of which has some
shortcomings. Data-driven analytics opens the door to overcome those deficiencies with a new
approach called “opportunity-based target setting.”

Almost everyone is familiar with the scenario in which annual targets are driven primarily by a
percentage increase over the prior year’s performance. This is referred to as the “historical”
approach to goal setting. It tends to be challenging for top performers, who must constantly build
upon last year’s high levels of achievement to reach even higher numbers. At the same time, it
discounts the potential upside to be found among a low-performing branch network.

Consider an alternative, in which goals are uniformly or proportionally allocated across all
branches within an organization. For managers that operate a busy branch and dynamic market,
that tends to make life easier; whereas branches in highly stable markets are challenged to keep
meeting their targets.

There are other organizations that allocate corporate goals to a branch network based on the
calculated size of the market opportunity for the areas that they serve. This is getting closer to the
mark, but it tends to be challenging for branches located in highly competitive markets, and it
results in artificially low targets in markets with little competition.

A better approach to Target setting

At precisely, we believe there is a better approach to setting performance target for branches and
it is called “opportunity-based” target setting, and it’s driven by a more sophisticated view of the
branch, its location, its potential customers, and even current events such as the adverse effects
of the location like drought, peace and security. This is a data-driven analytics approach that
incorporates historical performance data, branch characteristics, detailed demographic data,
information about competitor locations, and more.

High-performance data analytics

Data enrichment

The combination of internal corporate data with externally sourced information creates a
situation in which the whole is more valuable than the sum of its parts. Data enrichment provides
opportunities to understand a specific business domain with greater depth and nuance. It adds
new dimensions to business leaders’ understanding of customers, branches, products, and
services.

Location intelligence

Location intelligence helps banks to better understand competitors’ locations, traffic, and nearby
ATM, POS and other. Location intelligence brings context of the demographics of the areas they
serve, including information like household income, home ownership, lifestyle, purchasing
power, and financial stress.

Turning data into business performance

More data means that financial institutions have an opportunity to set branch targets with greater
precision, that is, to set smarter target setting. With help of financial services customers to model
branch performance and to set minimum, maximum, and mean benchmarks for individual
branches derived from a rich array of data.

With that information in hand, it becomes possible to evaluate branch performance in a new way.
Instead of comparing achievements to last year’s numbers (which might have been low to begin
with) or to other branches (which might have very different characteristics), managers are able to
evaluate each branch’s performance relative to a benchmark indicating how they should be
performing.

A new era in marketing effectiveness

Opportunity-based goal setting is a critically important first step, but this data-driven, data-
enriched, location aware approach opens the door to vastly more effective marketing practices.
By leveraging high-value location data, a branch network institution can derive insights into the
behavior and preferences of customers and prospects. With that information in hand, banks can
build high-performing marketing programs that deliver tangible results.

By looking at geographic, demographic, and behavioral data, we can predict customer intent with
a high degree of accuracy. If we have identified a group of consumers who may be in the market
for a mortgage, for example, we can present them with mobile or social media advertising. Some
financial institutions are even using ATMs as a means of delivering targeted ads to individual
customers.

Data-driven digital marketing is easily measurable. In the not-too-distant past, it could take days
or weeks to learn whether or not a marketing campaign was effective. In the new era, we can
know within hours whether or not a campaign is working, and we can make adjustments as
necessary.

Data integrity is strategic for financial services firms. Maintaining accurate, consistent, and
contextual data helps with offensive and defensive strategies.

2.3 Performance Indicator Metrics

A bank branch performance metric is a quantifiable measurement that assesses and tracks a specific
process that occurs in the branch. Metrics can measure everything from how long it takes tellers to
complete transactions to how long customers wait in the lobby. These metrics are crucial in keeping bank
executives, branch managers, operations teams, marketing and sales, finance, and other stakeholders
informed in how both individual employees, individual branches, and the entire branch network are
performing.

Types of Bank Branch Performance Metrics

Bank branch performance metrics can span many different areas of measurement. However, banks should
not look at metrics in isolation. The objective of the focuses on reducing the amount of time it takes
tellers to complete a transaction may find that its customer relationships suffer because tellers are rushing
through transactions. Instead, banks should take a more balanced approach to implementing bank
performance metrics by using a variety of metrics to meet its overall long-term business objectives.
There are four types of bank branch performance metrics:

1. Productivity: Examines the effectiveness of a bank branch process, these key performance
metrics for banks are usually measured in output in relation to input.

2. Quality: These metrics focus on how efficiently certain processes are being performed.

3. Service: These bank branch performance metrics focus mainly on customer satisfaction, bridging
customer needs to internal processes.

4. Cost; Keeping costs low is integral to any bank branch location, making these metrics very
important to track, but not at the expense of other metric types.

How Banks Can Use Branch Performance Metrics

Bank branch performance metrics enable banks to identify the strengths and challenges of its branch
network and improve performance by tweaking staffing, hours of operation, and even recalibrating its
branch footprint. Metrics can also inform changes in branch employee roles and responsibilities to drive
greater efficiency. The metrics that are important for one bank may not be appropriate for the branch
down the street. Branch performance metrics should always be closely aligned with the bank’s overall
business strategy and brand.

Benefits of Branch Performance Metrics

Banks can use branch performance metrics to build awareness and insights into what measurements are
most important for the business and how those metrics can support the overall bank strategy. The most
critical metrics rise to the top based on the banks’ goals and long-term objectives. And since the
performance metrics can be applied uniformly across the entire branch network, banks have a way to
more accurately and consistently analyze individual branch performance. Having quantifiable
performance metrics also gives the bank’s stakeholders a common ground for discussing critical issues
impacting branch performance and developing a plan for improvement.

2.4 Key Consideration to measure branch performance

It’s no longer enough to examine a branch’s balance sheet at the end of the month and call that
performance measurement. In today’s marketplace, the cost of not effectively measuring bank
branch performance far exceeds the costs of actually doing it. There are a five keys to effectively
assessing branch performance at any banks:

1. Track the right metrics

To create a customized menu of metrics or work off a corporate-level list of benchmarks, every
metric should speak to the three growth drivers of branches: acquisition of new accounts, cross-
selling to existing customers, and customer retention. The weight of each of these drivers will
not necessarily be equally split into thirds. While factors outside the branch’s control (such as its
location or a depressed local economy) will play a role in how the metrics play out, the most
valuable measurements will track factors that are within the branch’s control like customer
satisfaction.

2. All branches are not identical

Every bank branch has its own unique strengths, challenges and circumstances realities that may
mean metrics that work for branch to branch. Some branches may have stronger value as
instruments of customer retention, while others will excel at acquiring new accounts. And it’s
important to measure a branch’s performance not only against other branches or the industry as a
whole, but against the areas of performance in which it has historically excelled.

3. Master data

Effective performance measurement depends on accurate and timely data. With the volume of
data banks deal with today, manually collecting and tabulating spreadsheets is an exercise in
futility. What’s more, measurement methodologies can slow down the entire process when left
completely in human hands. Employing technologies exist to help banks more effectively
process and analyze data in many ways.

4. Study top performers

Many banks struggle with sales productivity and performance that can vary immensely between
high and low performers, even in the same markets. It’s not enough to know how the branches
are performing; it need to use this data to drive change and improvement across all branches and
employees. Identify a top-performing branches and employees. Then study them to uncover the
drivers of their productivity.

5. Drive new behaviors

Understand what a high-performing branch should look like and scale it across all branch
networks network. Build a training program to raise the levels of laggard employees and
branches, or create an incentive program to drive the behaviors and metrics looking to improve.
So, understanding branch and employee performance, driving new behaviors becomes much
easier and more effective.

3.

4.1 Low performer indicators

4.2 Top performer indicators
4.3 ways to close gap
5. KPI Development and Implementation
5.1 KPI
5.2 Implementation of the KPI