Optimizing Operations at a Major Russian Bank
Transferring support functions to a corporate center enabled a bank to cut expenses and improve the flexibility of its governance.
A major Russian bank with consumer and institutional businesses faced a common problem: excessive decentralization of its support functions left it with fragmented, inconsistent, and costly operations. The bank’s branches and points of sale had their own accountants, HR and IT specialists, and administrative and housekeeping staff. Support-function processes in branches and offices were not standardized, meaning employees in different cities would do similar tasks completely differently. As a result, staff spent too much time performing back-office functions and insufficient time serving customers. The bank’s leadership asked Burk to help it develop a program to centralize and boost the performance of support functions with the expectation that reducing inconsistency and streamlining its governance process would achieve significant operating savings.
The Burk team first analyzed the operations of the bank’s offices and branches, and identified functions that could be standardized across the enterprise. Next the team prepared an overview of the key modules within support functions (from recruitment to tax reporting) and identified at which level they were performed—point of sale, branch, regional directorate, or headquarters. We engaged international experts and Burk’ s global banking practice to design a model that reflected best practices of Western banks that had successfully centralized their functions and standardized their processes. Having studied the best international and Russian practices, we identified the optimal levels of support for each function and quantified the potential savings of implementing a new, centralized model.
As an initial focus, Burk suggested clustering support functions such as IT in specialized centers and setting them up in locations with relatively low real estate and labor costs (for standard, repetitive processes, less experienced employees were required). As a result, the bank was able to cut the cost of its support functions. It became possible to manage employees’ workloads and specialization more efficiently. The next phase of the project centered on implementation of the proposed operating model in one of the bank’s key regions.
The Burk team helped bank management transfer the support processes to a regional service center and continuously improve functional productivity to drive further savings. Seeing that the model worked, the bank’s senior leadership decided to launch a full-scale roll-out. Withour support, the bank set up a project-management office and embarked on the journey of centralizing support functions throughout the entire organization.
When fully implemented, the centralization of support functions will reduce personnel expenses by twenty to thirty percent and cut operating expenses by ten to twenty percent. These savings can be captured within twenty-four months. In addition, the standardization of key functions will enable the bank to improve service quality, while the introduction of lean processing principles across the centralized support functions will consolidate the changes and further boost productivity.