Financial institutions want it all: high growth, high profitability and high efficiency. Achieving strategic growth and expense control, while satisfying key stakeholders, is a delicate balance. Yet, high-performing financial institutions successfully walk that tightrope.
To see what drives their success, we studied high-performing Fiserv clients – organizations we know well, including their challenges, opportunities and best practices. Every organization can learn from top performers, including understanding where and why they win and what drives their profitability.
What do top performers do better to balance growth with efficiency? It's not magic. Instead, the high-performing clients Fiserv studied share five differentiating attributes.
1. Forward-Looking Management
Organizations that perform better have forward-looking management. So many economic variables can affect a financial institution's future, and high-performing banks successfully assess those factors, run multiple future scenarios and manage to those possibilities. If things change, they can more quickly understand the effect and make appropriate adjustments. Assumptions about the future underpin predicted strategies, including long-range plans and budgets. Instead of simply taking a historical view – or looking at what's happening right now – high-performing financial institutions constantly review forecasts and future scenarios to better assess their environment, customers, market and competition.
2. Strategic Planning Discipline
A good strategic process relies on data analytics and scenario creation – a forward-looking management discipline that runs multiple scenarios and analyzes the underlying drivers of success. High-performing financial institutions don't just look at superficial numbers and metrics. Rather, they consider the drivers of success and underlying assumptions and then actively measure against those assumptions. Unfortunately, many organizations employ the wrong metrics to determine if a strategy is working. Using data analytics can help financial institutions understand the market and how to measure success.
3. Effective Information Management
Data analytics provides a wealth of insights, but organizations must determine what they really need to know. High-performing financial institutions effectively manage data and link business decisions to that information. They focus on forward-looking, prescriptive data versus information about what has happened already, constantly asking, "How can we do this better?" Just as importantly, they ensure key information is widely distributed into the organization.
4. Effective Control Structure
High-performing financial institutions have implemented proper control structures to effectively measure and manage activities that generate the desired results. Are we achieving what we set out to achieve? Are we measuring and driving the right results? Establishing appropriate control structures helps ensure the desired results are achieved without destroying another aspect of performance. For example, a financial institution could meet its profitability goal, but do it in a way that doesn't best meet the needs of its customers, and in the process, damage trust, reputation and relationships.
5. Adaptable Risk Management Frameworks
Financial institutions are in the business of balancing reward – especially credit risk – and reward. The risk environment can change quickly due to macroeconomic factors, such as changing interest rates, unemployment and home values, as well as an organization's policies and appetite for risk. Effective risk management at a financial institution is closely tied to profitability. To support high-growth initiatives, high-performing banks' risk management frameworks and accompanying strategies are particularly adaptable to change.
Lessons From High Performers
Behind each of the five attributes that helps define and differentiate high performers are two factors: data analytics and the discipline to execute on key strategies.
If someone asked you to name your organization's best customers, could you? Maybe you'd list those with the most money in the bank, but those may not be the accounts that are the greatest contributors to your financial institution's profitability. It's very difficult to establish a good strategy – and execute on that strategy – if an organization doesn't understand what drives its profitability. High-performing financial institutions get it. They see the link between information, strategic thinking and the actions needed to achieve their goals.