Some community banks are using HR analytics to find links between their human resources departments and their operational and financial systems to improve performance and profits.
By Carol Patton
Can human resources (HR) professionals at your community bank identify the best recruitment channels for employees? Do they know why retention is higher at some branches than others, or which competencies enable employees to close deals or boost customer service ratings?
To answer these questions and address key challenges, some community banks are turning to analytical processes, which search for links between HR and operational and financial systems. The goal is to help HR build a better strategy by gaining more insight into employee recruitment and performance, which, in turn, improves a community bank’s return on investment.
While large banks have benefited from HR analytics for more than a decade, community banks have only recently started to explore this form of data mining and application. HR professionals are discovering that they can change their image as a cost center to that of a valued partner that makes data-driven decisions that have positive effects on their bank’s balance sheet.
“Our research found that those things that are human capital-related have a really strong tie to the bottom line,” says Matt Stevenson, leader, workforce analytics and strategy group at Mercer, a global consulting firm in Washington, D.C. “Every week, in every branch, you might have slightly different variations of how people are paid and managed, how often they show up late, or how long they’ve worked there. You can measure that running record of everything that goes on in the branch during the week. It’s just sitting there in your administrative system.”
He says community banks are now approaching his firm and inquiring about HR analytics. One bank client parsed the differences between its 10 branches involving the people, policies and practices, and how they drove profits and losses at each branch.
The truth of the matter
The process can also uncover unconscious biases that could lead to certain employees being undervalued. Consider a branch that credits a high performer for his or her success as compared with the bank’s other branch locations. In reality, the success of this employee and of the branch more widely may simply be the result of geography; the branch might sit in a wealthy neighborhood and naturally bring in higher-value deposits and loan applications.
“We find this all the time,” Stevenson says, explaining that HR analytics help bankers separate fact from gut-level opinion. “You send high potentials to the best places, and magically they do well. High-potential programs are notorious for this.”
HR analytics can help the fortunes of any community bank, regardless of size, especially if it’s targeting a specific market or population.
“This is one area where [analytics] can certainly level the playing field,” says Rob Dicks, principal at Deloitte Consulting, a global consultancy based in New York. “It’s a real opportunity for community banks to compete in specialized markets in areas focused on specific customer or employee segments to improve the service delivery or employee experience.”
He adds that analytics is also useful when developing succession plans and compensation programs, understanding learning targets or identifying needed workforce skills. Community banks can start the process by asking leaders to identify business issues that need to be addressed and then develop hypotheses about contributing factors, Dicks says.
For example, one problem may be that a branch experiences higher staff turnover than other branches. One approach would be to raise salaries in hopes of reducing turnover. But with analytics, Dicks says your hypotheses would focus on the differences between branches, such as their locations, hiring practices or branch management experience. Analytics can identify specific themes, like managers at the high-turnover branch lacking supervisory skills.
With that information, HR now has a roadmap and can offer training or coaching to resolve the issue.
The human component
Although community banks generally employ financial experts who are skilled at gathering and interpreting data, they still need to partner with HR professionals when conducting analytics “to bring back the human component,” explains Jeri George, director of HR consulting at San Antonio-based Analytic Focus, which provides analytic and consulting services primarily to financial institutions, including community banks.
“Sometimes there’s too much emphasis put on numbers, results, figures and the bottom line,” she says. “You have to pause and put back in that human component and blend those together to achieve and maximize your results.”
She encourages community banks to start small by working on a handful of challenges in the areas of recruitment avenues, employee performance, staff turnover or workplace culture.
But don’t assume that it’s a one-and-done process. Since the key trait shared by employees, customers and community banks is change, this process is ongoing. Analytics simply reveals the real causes behind existing and new challenges so HR can strategically and effectively tackle them.
“Take a chance and try analytics,” George says. “Don’t be scared by anything the data might reveal. Embrace it. … It’s an opportunity to be proactive and make positive changes in your bank.”
Carol Patton is a writer in Nevada.