Workforce Utilization Part II

Calculate Your Scheduling ROI

Workforce utilization analysis helps CUs find opportunities to rein in labor costs.

February 24, 2012

For many credit unions, new regulations and the slow economy are further squeezing already tight margins.

As discussed in the first article of this series and the FMSI Teller Workforce Utilization Study, failing to optimize workforce productivity is a prime source of profit loss.

Yet, Celent reports an estimated 97% of North American financial institutions do not implement a dedicated branch staffing reporting and scheduling system.

Key roadblocks to achieving better performance include deeply ingrained habits, confusion over how the process works, and concern over the upfront financial expenditure involved with implementing a permanent solution.

Fortunately, you or your staff can run calculations using sample data to illustrate the potential benefits reaped by optimal scheduling.

Mine the data

To perform the test, you'll need to estimate your gross teller payroll expense per hour. Your human resources and accounting departments may know this number, but if not, you can use an estimate for this sample exercise.

Workforce Utilization Terminology

Terms you will encounter in this and subsequent articles:

• Workforce utilization (WFU): A percentage achieved by dividing the total number of teller processing hours by their payroll hours.

• Processing hours: The time in which a teller performs at least one member-facing transaction, measured in 15-minute increments rather than payroll hours. If a teller performs a transaction at 8:09, for example, and then does not process another transaction until 9:57, only .5 hours would qualify as processing hours, even though two payroll hours passed.

• Excess waiting for work time: Those periods when too many tellers are scheduled to work for the transaction flow coming through the branch (also referred as nonvolume time and idle time).

• Transactions per hour: Total transaction volume as reported by the core processor, divided by total number of processing hours.

• Labor cost per transaction: Average labor expense per transaction. This metric does not include overhead and other nonpayroll expenses in its calculation.

Industry wisdom says that benefits, taxes, paid time off, and other payroll-related expenses add approximately 35% to the cost of each payroll hour. So assuming you pay your tellers, on average, $12 an hour, their hourly gross payroll cost might be around $16.20.

The next step is to calculate transactions per hour (TPH) based on core processor data. This requires you to either build a reporting engine or contract with a third-party workforce optimization business intelligence provider.

For the purposes of this exercise, we recommend you use the “before” TPH (15.7) of First Financial, the real-world example in FMSI’s Teller Workforce Utilization Study.

Calculate ROI
Now, divide your estimated payroll cost per transaction processing hour by the sample TPH (15.7) to obtain the teller labor cost per transaction. Using our example ($16.20) and First Financial’s TPH of 15.7, your teller labor cost per transaction is $1.03.

If you implement workforce utilization scheduling and efficiency improvements that brought First Financial’s TPH to 21.9, your teller labor cost per transaction would drop to 74 cents.

If you bumped your branches into the “FMSI top performer” group (TPH of 24 or above) the numbers are even more impressive (in this example, a labor cost per transaction of 68 cents for a TPH of 24).

If your labor cost per transaction decreased from $1.03 to $0.74 like First Financial’s, using the average number of monthly teller transactions for a 10-branch credit union (65,000 based on FMSI’s client data), you can calculate a total savings of $226,200 per year for your institution: 65,000 transactions per month x 12 months x $0.29 per transaction labor cost saving.

Next steps

Estimating your institution’s current workforce utilization could be a complicated process that’s beyond the scope of this simple exercise.

However, unless you have built an in-house core processor analysis engine and other systems or have contracted with a third-party teller efficiency analysis firm, you most certainly fit into the 97% who are not reaping the full benefits of an optimized branch workforce.

In the next article, we'll reveal how to identify when and why teller transaction volume (processing) and nonvolume (nontransaction processing or other activities) time occurs, and other impediments to efficiency that can set you on the road to improving your workforce utilization percentage.

W. MICHAEL SCOTT is president of Financial Management Solutions Inc. in Atlanta. Contact him at 877-887-3022.