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Four Corners of the Main Office – Part 2 | Detail-minded

For a bank or credit union, the decision to relocate and build a new main office is not taken lightly. While in most situations, the combined wisdom of the C-Suite can be counted upon, the chances anyone on the team has been a part of this process previously is unlikely. And it’s not as if a masterclass on the subject is offered on Lynda.com. (Although we may add these Four Corners’ lessons to the curriculum soon.)

The previous article in our Main Office series, The Big Picture addressed the first corner, Begin With The End In Mind. This is about the vision needed by the C-Suite to plan for things like the site for the project, future expansion, contingencies, and other big picture items.

In this article, we’ll speak to more of the detail sides of the move: Space Planning, Environment, and Costs. The other three corners.

Corner 2: Space Planning

When we think of the ideal place for employees to work, it’s easy to be caught up in emotional or technology aspects. But, the functional needs of the workplace must be addressed, first (just like the branch). The best way to approach space planning is to break them down into three components: job function, department needs and organization needs. While not as fun as choosing wall graphics, color combinations, furniture or lighting solutions, it’s the dirty work that must be done.

By breaking down space planning to individual job functions, space needs for each job can be established. For example, what does new space mean for someone in the call center? What does it look like for collections, marketing, and sales? Each job function then can be amassed into department needs. So, in addition to each job requirement, the needs of the department are also included. For example, is there a need to foster collaboration? Furthermore, what about storage and conference rooms? As department needs are quantified and measured then they can stack together like Legos or Tetris (for all you Gen X’ers) to fit the needs of the organization.

Using smaller units, building into departments, and then amassing organizational components too, allows the space planning to be methodical, definitive and, well, ruthless. Ruthless in that the space planners are fanatical about sticking to the needs of the business as guiding principles for amassing space for the short-term, mid-term and long-term needs of the organization.

Corner 3: Environment

Now, onto the fun stuff. If the space plan solidifies the functional components of planning (call it the “left brain”), then the environment is the emotional piece (or “right brain.”).

Of course, few things in life (or main office planning) are simply functional or entirely emotional. When we speak of emotion, we want to address how each departmental environment (materials, selections, furniture and essential branded elements) serves the business. For example, what does the building and space say about the business’s brand? Said differently, what is the message needed to communicate to the community, the employees and the consumers of services through the building and space?

For many, the environment will also address the culture of the business. Is the space somewhere people want to work, spend time and promote the business? Will it help retain staff? And, can it be a key difference in attracting talent that will grow the business?

The aesthetic of the building (inside and out) does matter and matters a great deal. Any in many ways, the aesthetic is what brings the physical space to life. It activates the space and sets the tone for many desired outcomes for the individual worker, collaboration between teams, large meetings, and privacy to get stuff done.

Corner 4: Costs

No plan is complete without a firm grasp of costs. Two key axioms to remember:

Axiom 1: Everything is possible, it only takes money.

Axiom 2: Everything is on the table until budget sits down

But that’s the reality, right? At this point in the process, the selection of the correct partner to plan and implement the facility is crucial. Hopefully that partner doesn’t play games and actually listens. There are two key “Project Delivery Methods” in a partner selection. (We’ll help you debunk those choice in the next article. If you want to get a head start check out this Fox Article. )

The key centers of gravity for the cost of any building are three-fold:

  1. The Roof
  2. The Paving
  3. The Walls

All the other concerns in scoping a main office are secondary to these inputs. This is why the aforementioned ruthless space plan is a key driver to arrive at an accurate square footage. What’s more, stacking the floors efficiently will determine building configuration and materials. Material selections flow from aesthetic choices and will impact the cost of the interiors, work spaces and technology.

In total, the cost estimate cannot sink the titanic and should be based on:

  1. National Cost Databases – What does the industry tell us?
  2. Historical Cost Data – What does history tell us?
  3. Market Pricing – What is the local market telling us?

In Summary

These first 2 posts in our Four Corners of the Main Office series walk a bank or credit union through the planning for the facility. In the construction world, these are all pre-construction activities. A key element of a strong pre-construction team is gathering cost input from the local market to infuse predictability in the project. Pre-construction is where the business case for the project is won or lost. The entire process is about determining what the bank or credit union is willing to spend, and then aligning it with the design and supply chain. Once the plan is in place, it’s time to implement.

Now that you are better armed with the pre-construction process. The next article in this series will debunk “How to Procure” the Design and Construction Services you’ll need.

If you still haven’t read Part 1, then now is the time:

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Four Corners of the Main Office – Part 1 | Big Picture

Opening a new Main Office is once in a generation

Amazon sent shock waves throughout America with a 2017 announcement they’d be opening a second headquarters outside their home base of Seattle. City after city took part in the pitch to incentivize the company to choose their town. The fanfare involved in the search was such that Saturday Night Live spoofed it. Plenty impressive.

While banks and credit unions may not cause a similar hullabaloo when announcing plans for a new main office, it is a very big deal in its own right. The opening of a new main office may happen only once in a generation. In fact, it’s such a rare occurrence that if anyone on the bank or credit union’s team has experience in this, they are likely the exception.

Main Office vs. a Branch opening

Opening a new branch, and justifying that decision, is territory we’ve covered before here and here. The main office, however, is a journey all its own.

The time to plan and implement a facility solution tens of thousands of square feet, involving multiple floors, and technology upgrades, can be daunting. What’s more, decisions on how to optimize your workplace floor plan, to help attract new talent and efficiency can be overwhelming for a C-suite that hasn’t done this before.

That very inexperience leads many financial institutions to develop too much space, or too little. Because businesses are fueled primarily by people (and banking businesses even more so), lack of forecasting an accurate headcount can cause real headaches.

What’s your timeline?

So, what’s truly needed to help guide a team through 6-8 months of planning and 10-12 months building a new main office? Let’s walk through it together in our Main Office series, “The Four Corners of the Main Office.”

Corner 1: Begin with the End in Mind

Sound familiar: Habit #1 from Stephen Covey’s 7 Habits of Highly Successful People states that private victory comes before public victory. What he means is, you must internalize what you offer before you can offer your services to others. What works for humans also works for financial institutions: planning the main office starts with thinking long-term and putting things in the right order.

Most financial institutions will end up with a solution that addresses the next 5 to 10 years, but they must plan for even longer term. What will the business need for the next 10 to 20 years? Is a crystal ball required? It sounds like a lot to ask, but break it down into a few key areas and it’s not quite so daunting.

  1. Planning for Future Growth – few financial institutions have the ability to build for 20 years, but the next wave is coming, so it must be planned for. Site considerations for expansion are key in this step. (Site Selection article.) The site must have the ability to accommodate future additions, building expansion, and flexibility when growth does occur.
  2. Planning for Flexibility – even when planning long-term, a built-in contingency plan should be considered. What if a better facility presents itself in the future? If the bank is sold, will the building be liquidated? What if the business has to move? What if the bank or credit union is acquired by someone else? Flexible, long-term solutions provide the business options for the future that maximizes the value of the investments made today.
  3. Business Case – much of the above is about future possibilities. However, the need for short-to-mid-term solutions are the likely pieces that will be implemented first. So, if first things are first, then the institution has to understand and quantify the business case for the solution. They must say to themselves, “if we grow from here to there, what do we need and how much is it going to cost?”

Now that you understand the first corner, you are probably ready for the other three. This is the first post in a four part series that will roll out over the next few weeks. As you wait, we’ve written other articles about main office in our blog, so check it out.

We also have main office videos of other banks and credit unions who have walked in your shoes.

Video Story

Guaranty Bank | Main Office Transformation

LEVEL5  Creates ‘Bank of the Future’ for Missouri’s Guaranty Bank

In 2017, Guaranty Bank chose LEVEL5 to design-build the Bank’s new main office and retail banking center in Springfield, MO. The Bank occupied 25,000 square-feet of space in the fifth, and final building of Farmers Park.

“Farmers Park is a vibrant, contemporary destination with an average of 8,000 weekly visitors and a lot of amenities that fit nicely with our image of the Guaranty Bank of the future,” said Shaun Burke, President & CEO of Guaranty Bank. “We were confident that LEVEL5 could design and build a facility that would enable us to maximize our investment and realize the full potential of this location.”

Video Story

The Bank’s new main office implements a new customer experience, attracts new employees, and serves it shareholders with maximum value. Some say a picture is worth a thousand words, well this video says even more of what Guaranty Bank and LEVEL5 accomplished – together. 

 

Ready, Fire, Aim! | Branch & Main Office Transformation

Expansion and loan growth lead to transformation.

The number one question we hear about branch and main office transformation is “What’s in it for us?

This is an indirect way of asking about Return on Investment (ROI) for transforming their business. Discussions about loan growth, market expansion and the future of banking are about transforming the business to allow it to flourish and grow. All CEOs want to know what’s in it for their company if they invest in growth.

Question #1 – How do you calculate returns for transformation?

To solve ROI for transformation, we divide the Return by the Investment. So, the first variable to solve for is return that is the opportunity. Opportunity is what we get from a market for the investment. Therefore, return is defined by the loans and deposits (i.e. opportunity) resulting from a project. Historically, our consulting team can quantify loans and deposits with 92% accuracy. How do they do it? Well, read more about it here:

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Question #2 – How do you define the investment? 

So with the opportunity quantified, the cost to acquire the business is a major variable yet to be solved. The white paper linked below addresses the investment portion of the equation. This article is quick page-turner that will help you lower the risk of developing your next branch or main office. We all want the return, so maximizing the investment can be a reality.

Click on the target below to download the white paper…you won’t regret it.


Bulls Eye


Branch Cost and Change Orders. Please, stop the Madness!

The battle to lower branch costs begins earlier than you think.

There is probably no more despised phrase in all of construction than “change order”. The phrase elicits thoughts of pain and suffering beyond measure. Imagine Dante’s Inferno, Nails on a Chalkboard, or Crying Babies on an all-day flight to nowhere! Maybe I went over the edge a little there, but for an owner (who is paying the bills), change orders can be more than a little unpleasant.

What few owners know, or realize is that the battle lines against higher branch costs and change orders are NOT established after the design is produced, and the project is being bid. The fight for lower cost is won much earlier in selecting your project delivery method.

Getting Low = Change Orders

Most Banks or Credit Unions are accustomed to hiring an architect to design their branches or main office, and then bidding that project amongst qualified general contractors (GCs). Though this method is familiar, it is far from the most effective, and wrought with competing voices.

  • Architects design without a clear understanding of costs.
  • Furthermore, GCs only bid what they see in drawings.

In the fight to get low (to win the work), GCs are forced to forget what they know. The strategy is to win the work, and then manage change to make a profit.

Another option is available

There is an upgrade available to this methodology – hiring both the designer and GC, simultaneously (under one contract) i.e. design-build. A large study completed by Penn State University compared different methods to deliver construction across the US. Their research uncovered projects using design-build had lower cost (over 6% in savings) and were completed 33% faster. Furthermore, projects using design-build (hiring one firm to design and construct) were also much less likely to incur cost growth (5% less) and schedule growth (11% less) – FEWER CHANGE ORDERS!

Faster. Lower Costs. Fewer Surprises.

Design-build was created to deliver projects faster by overlapping phases of design and construction. So speed to market deals with opportunity cost. The other key benefit is getting constructability input on the front end to nail down costs, schedule, and reduce as many surprises as possible. When we created our company 13 years ago, we had several options available to us. However, we chose design-build because we understood how important cost, quality and schedule are to banks and credit unions.

In fact, over our last $100 million in construction projects – encompassing 25 states – our change orders average less than 2.45%.

Design-build delivery allows us to partner with our clients, not compete with them on costs. And that partnership is producing greater certainty and predictability to their business.

Banking today is very different than in the past. Risk is everywhere.

But you can quantify the ROI for Branching.

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Peoples Trust | Main Office – Houston, TX

Peoples Trust New Main Office in Downtown Houston Positions the Credit Union for the Future

Peoples Trust Federal Credit Union is a $500 Million credit union in Houston, TX. The Credit Union’s beginnings are with Shell Oil. However, they expanded their charter to the City of Houston over a decade ago. As the oil and gas industry continues to change, and the Credit Union continued to flourish its lease was coming due. With the proposed rate increases and need for more space, the Credit Union faced large operating cost increases well above their current costs. The Credit Union’s headcount growth, and the rate increases required they seek the best long-term solution for the Credit Union. Ultimately, the Credit Union chose to relocate their main office to a new site in Downtown Houston.

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The selected site for the freestanding building is in an underserved area of the city, and required environmental site work to make it suitable for the building requirement. The LEVEL5 team worked through the permitting and containment of those materials to develop the new main office. The move to this facility not only gives the Credit Union a giant billboard, but also allows the Credit Union to substantially lower cost from rising rental rates and provide better community access. Furthermore, through our proven design-build process we were able to shorten the construction duration by over a month from the contract date!

The facility focuses on efficiency and embracing the Credit Union’s legacy to its membership and community. But, there is so much more to this design-build story, so listen to what their team had to say how this new facility took shape!

Southern Bank | New Main Office

Southern Bank Looks to the Future in its New Main Office

Only 15 years ago, Southern Bank was a small community bank with less than $150 million in assets. Today, the Poplar Bluff, MO bank is approaching $1.5 billion via 35 branches across two states. Growth puts pressure on the main office, as discussed in previous articles. And that pressure calls for leadership to decide how they will position the Bank as it moves into the future.

For Southern Bank, it became clear that they were outgrowing their current main office operations. Additional space was needed that not only met their needs today, but also tomorrow. Our team has partnered with the Bank for nearly seven years on the design-build of freestanding branches, micro branches and renovations, so when the opportunity arose to develop the Bank’s new 40,000 square foot main office, the team was already in place.

A team that understood and resonated with the Bank’s brand message and skew toward technology and relationship building. A team that understood the Bank’s bias toward cost and schedule. The design-build of a main office is not a frequent event for most financial institutions, so having our LEVEL5 experts partnering with the Bank throughout the process truly resonated with the management team.

The video story below tells the entire journey from the lips of the two bankers driving the process – Greg Steffens (President and CEO) and Kim Capps (COO).

Branch and Main Office Transformation | Landmark Bank

The Branch of the Future is Here, Today at Landmark Bank

LEVELhas completed the design-build of Landmark Bank’s Branch Transformation at their Corporate Headquarters in Columbia, MO. The project included transforming the retail lobby as well as remodeling the Bank’s private banking and commercial banking departments.

“We are very excited to be able to transform this space for the Bank,” said Mike Colvin, Executive Vice President/Principal for LEVEL5. “The team at Landmark Bank is completely changing the way they serve their community and customers through this effort. It truly has been a pleasure to work with the Bank’s team throughout this process.”

The project began in the retail lobby transforming the space from a traditional teller line to banking hubs (or teller pods). This shift allows the Bank’s employees to spend more time with their customers, further embracing the universal banker model. The entire first floor’s look and feel matches the Bank’s move toward a more engaging environment. The renovation included new essential brand elements to tell the Bank’s story through graphics, signage, digital messaging and merchandising. Furthermore, the private banking and commercial banking departments were also transformed to promote collaboration and flexibility with the ever-changing needs of the Bank’s customers.

“The Branch of the Future is here, today,” says Shon Aguero, Executive Vice President of Retail Banking at Landmark Bank. “Customers have more options than ever for doing their banking. Yet, the branch still serves an important function, facilitating relationships and presenting our brand. We chose LEVEL5 for our branch transformation because they understand the role of the universal banker, advanced retail banking strategies, and are experts in bringing together all of the components in the design-build of financial facilities.”

The Bank recently unveiled the transformed space and plans to use this model for future transformations within the Bank’s footprint.

Interest Rates, Loans & Earnings Oh My…My Headcount is Growing!


Headcount increase on the horizon for growing banks and credit unions

Over the last 18 months both the FDIC and NCUA are reporting that loan growth for banks and credit unions are at levels only known before the great recession. Furthermore, thanks to the recent moves by the Federal Reserve, interest rates are increasing for the first time in nearly a decade. Naturally the next shoe to drop is an increase in net income. In fact, the FDIC reported earnings for the nation’s 6,000 banks soared in 2016 – 13% higher than in the previous year.

It would appear that banking is once again growing in favor across America. Pent up demand, a stabilizing economy, interest rate increases and expense moderation are paying great dividends for the stakeholders of banks and credit unions. As written in previous articles, this growth creates 7 Ripples through a Bank or Credit Union’s Main Office. Growth puts pressure on headcount and many financial institutions (FIs) will be faced with expanding their operation’s footprint. Expansion at this scale can be costly, and if not done correctly, will hamstring the organization’s ability to grow, serve their consumers and develop their employees.

Planning the Main Office to a Predictable Outcome

When it comes to planning a Main Office, many FIs jump right over the science to design aesthetic, color pallets, furniture selections and branding. These components of art are certainly important to resonate with the community and your most valuable asset, your people. But before the first pen is lifted to draw or design, a comprehensive personnel forecast is critical…if the goal is a predictable outcome.

Personnel forecast is a look into the future. A personnel forecast is the end result of analyzing the FI’s operational back office. The analysis calibrates and benchmarks the FIs growth to understand the needs of the company. A well-developed personnel forecast, based on peer group analysis and seasoned experience, will help the FI plan for the next 10 to 15 years. This process often includes staff interviews, online surveys and data requests to shine up the crystal ball to gaze into the future.

 

Do your homework, before you design. Without this work, designers are making guesses on the needs of your business, which can lead to insufficient space or too much. However, with an expert analysis, designers can start allocating space to each job function with a holistic view in mind.

 

Job functions, adjacencies and business practice. The continuation of the design team’s work, then groups job functions by department and establishes adjacencies based on how the bank or credit union communicates and manages its team. The facility is stacked or layered based on the interdepartmental communications to create the mass needed to optimize land and establish the right presence in the community.

 

 

Science, Art and Cost. Planning a main office is a dance between science and art during the Preconstruction phase of the project. Preconstruction begins with programming, and that effort starts with the marriage between the science of studying the organization, establishing headcount, and weaving in the art to the designed outcome.

One big question we haven’t touched on yet is Cost…and Cost is King. If cost isn’t a stated priority of the project, then it is implied as import…kinda like oxygen. However, many don’t understand that cost is won or lost in the Preconstruction process – not when the project is bid. But that’s another story…

Until then, here’s a short clip of one FI’s experience driving their main office to a predictable outcome. Planning, corporate vision and process certainly made their project seamless…and predictable.

No Shortcuts to Transformation

Re-thinking the branch, re-training the banker for transformation

Change is inevitable. The world we live in and the people we know change constantly. Businesses are changing as competition intensifies, technology accelerates and information moves at the speed of light. The world has transformed into a global economy, no longer bound by walls, geography or time. We are in an age where busyness is the norm, and we dictate our own realities by the choices we make…daily.

Who needs a branch anymore? For the community-based financial institution (FI), “the times” have changed them too. No longer can FIs rely on just branches, or just service to meet consumer demands. Today, we live in a world where consumers demand an Omni-Channel approach. Consumers demand automated channels, virtual channels and physical branches to meet their needs.

Branches are no longer one-size-fits-all. Branches today are still about convenience and market density, but each branch can and does fit a different purpose. Starting with the largest of all facilities, the cornerstone branch, which includes main offices, these large format facilities play a different role than others.

Where Community meets Technology. Today’s main office sets the tone for the company’s culture and identity. Furthermore, the rapid loan growth being enjoyed by FI’s across the country is causing ripple effects throughout the main office.  Call centers in these facilities are changing. With the advent of Interactive Teller Machines (ITMs), community-FIs can serve their consumers 24-7-365, which means the call center is in the midst of transformation, now staffed with Universal Bankers who can be a one-stop-shop for the customer’s needs.

Engaging consumers. After all, building relationships are at the heartbeat of the Universal Banker model. Surveys show that 65% of sales occur in a physical branch, so the days of relying on a relationship built across three feet of mahogany are over. Today, banks are challenged with differentiating themselves and some are more aggressive than others in their use of technology, retail concepts and design to facilitate a more engaged consumer experience.

Consumer Channel Preference

The people have spoken. Market research, customer concentrations and analytics now dictate how FIs should design their branches to relate to their markets.  If the model is best supported by a teller line, then stick to that plan. If a more engaging environment, powered by technology is indicated, boldly adopt that plan. In all cases, the transformation of the branch is crucial to reach consumers.

When a big branch doesn’t make sense. The cost and time to implement branches has also given rise to the Micro Branch. Micro branches today still include storefronts and in-store branches, but can now also include mobile branches, freestanding facilities, and “pop-up” branches. The key component of Micro Branches are their size and flexibility as well as their cost.

How best to serve? In the end, banks and credit unions are faced constantly with decisions on how to serve their consumers, communities, and employees. Change is inevitable just for relevancy, but the FIs that are changing with a plan achieve specific results.

Proof that change can work. Based on FDIC data, one Southeast Bank grew organically from $1 Billion to over $3.5 Billion in the last five years by making branching decisions around a business case. Another FI grew its assets by 37% in the Carolinas over a seven-year period embracing technology and universal bankers.  Still another near the Great Lakes moved its loan to deposit ratio from 88% to 92% in less than two years by implementing a more engaged branch culture.

The bottom line is the bottom line – transformation, driven by a well-devised plan and business case, succeed.

Improving your performance. In today’s ever-changing environment, financial institutions are faced with two opportunities for performance improvement:

  1. Their existing footprint
  2. Moving into new markets

The FIs that flourish, marry business planning and execution into a seamless model driven by a business case to maximize their investment and gain optimal returns for their stakeholders. Predictability, timing, risk management and engagement can all be folded together so the business, consumers and community win!

So, as you face the future, start making decisions and then take bold action. Over time, those actions lead to transformation…there are no shortcuts.

Financial institutions who do their homework are the ones best positioned to succeed in a brand new playing field.


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