How to Evaluate Underperforming Branches and Develop Your Strategic Branch Network Plan

by. Heather Horrocks and Mark Alguard

With a number of underperforming branches being closed at an unprecedented rate by big banks, one wonders if the same approach is applicable to credit unions.

According to Celent, a Boston-based financial research and consulting firm, is that “when it comes to the number of branches around 5 years down the road, banks and credit unions don’t see eye to eye. Over 35% of banks say there will be a 5% to 10% reduction in overall branches, around 30% of credit unions think there will be an increase in that range”.

How can you evaluate the effectiveness of your current branch network?  First, your management team must determine the market potential and current operating status of each branch. 

Extensive discussions should be held with your senior management regarding the perceived challenges and opportunities presented within the network and future growth strategies.  This self-awareness is critical in the formation of a plan that is relevant and relatable to the broader mission of the organization.

Out of those discussions come two important tools for gaining market and operational clarity:  the Market Analysis and Strategic Branch Network Plan.

The Market Analysis is an in-depth study of a market area to determine demographic, economic, retail, and financial product demand trends.  This analysis provides detailed insight into the long- term viability of a market for a financial institution.

The Market Analysis should consider the following:

• Factors such as market growth, demographics, competition, traffic and visibility, and network synergy

• The creation of a new branch or if an existing branch should be relocated, resized, or closed

• The profitability potential of the branch
• Target member demographics

Building on the Market Analysis, the Strategic Branch Network Plan identifies specific locations within markets that represent the greatest opportunity for branch success and weighs them against your existing branch network. 

The Strategic Branch Network Plan should consider the following:

• Location characteristics
• Competitive intensity
• Potential gaps in service in the current network
• Physical condition of the facilities
• Brand presentation and consistency
• Operational patterns and goals
• Member interactions

By capturing these assessments and discussions into a global narrative, branch-by-branch recommendations can be made in relation to the long-term delivery strategy.

Additionally, these recommendations can inform:

How prototypical branch elements can be adopted network-wide

•  Ways to improve the delivery of a clear and consistent message to members

• Strategies to enhance operational goals within the branch

• Potential investments in facilities and merchandising and a priority timeline for adoption

Credit unions need to have a clear roadmap and delivery strategy for their branch networks in order to ensure the long-term financial viability.  These findings not only support the overall strategy of better serving current members, but improves the credit union’s ability to increase membership while supporting their mission, culture, and values.

Ask yourself this question:  Where do you see your branch network in the next 5 years?