A BANK STAFFING PLAN: A TELLING SITUATION

Abstract No. 002-0019

Joseph G. Ormsby, StephenF. Austin State University, Box 9070 SFA Station, Nacogdoches, TX 75962, , (936) 468-4103, FAX (936) 468-1600

Joyce M. Hoffman, StephenF. Austin State University, Box 9070 SFA Station, Nacogdoches, TX 75962, , (936) 468-4103, FAX (936) 468-1600

.

Do not consider for special issues __X__

Consider for IJOPM only _____

Consider for IJPE only _____

Consider for both IJOPM and IJPE _____

A BANK STAFFING PLAN: A TELLING SITUATION

Joseph G. Ormsby, StephenF.AustinStateUniversity

Joyce M. Hoffman, StephenF.AustinStateUniversity

Abstract

The national economy has forced many financial institutions into bankruptcy, others have significantly downsized while others have merged to avoid bankruptcy. These changes in financial institution leadership create problems in day to day operations, the focus of this paper. A small rural bank has been recently acquired by a large financial institution requiring a different teller staffing arrangement. This paper investigates customer demand patterns in order to construct a cost efficient work schedule for tellers who are involved in several different types of bank transactions throughout the day.

Introduction

Bank X is located in a small rural Texas town and Bank Y is located in a large metropolis located in a different state. Bank Y has purchased banks in various southern states in an effort to increase its market share. Bank X has been acquired by Bank Ybut an inherent problem with the acquisition is that Bank X uses a different teller staffing arrangement that currently exists in Bank Y. Both banks have been in business independent of each other for 101 years and each has been effective in delivering customer oriented services using different staffing arrangements. The merged bank has to develop a staffing planthat will be effective for each bank as they strive to achieve their customer service objectives. A bank typically has various customer service centers. Customer service representatives sit in the main lobby of the bank and assist customers with day-to-day questions concerning loans, checking accounts, and ATM (automated teller machine) cards. Tellers also perform duties in the lobby of the bank and have secondary responsibilities

that could be characterized as customer service. It is very important to have a friendly, self-initiating, and responsive teller staff to greet people because time is of the essence. While the teller staff needs to be courteous, they must also maintain a level of efficiency that is conducive to profitability for the bank. Studies have shown that customer should not have to wait longer than five minutes for a teller transaction. Additionally, a teller transaction should be completed within three minutes. Consequently, the balancing act between customer service and efficiency is very difficult to maintain. In the banking industry, a bank's non-interest expense items are deemed very important. These expense items include marketing plans and operations that make the bank efficient. The bank's biggest non-interest expense items are its employees’ salaries and benefits. A bank is much like a manufacturing plant in that it carries a lot of overhead to handle a large volume of transactions. At the same time, a bank is similar to a retail store where customer service and pricing are very important. Therefore, a teller staffing plan must handle customer volume, effectively evaluate staffing and scheduling, and utilize hours in the day.

Generally, lobby tellers are responsible for the following transactions: night deposits, ATM processing, ATM envelopes, large commercial walk-in customers, drawer balancing, and vault/shipments. Additionally, one employee is positioned as a supervisor over the other tellers. A second area of responsibility for tellers is the motor bank. These tellers assist with drive-thru customers, and their duties include balancing and handling transactions. With this general information in mind, Bank X must prepare an analysis illustrating the total time required for bank tellers to complete transactions, current cost of Bank X's present staffing arrangement, along with a cost efficient work schedule for the tellers working in the lobby and the motor bank Ideally, a staffing plan should improve customer service, increase productivity, and improve flexibility. This research study investigated the customer demand at Bank X in order to construct a cost efficient work schedule for tellers involved in different banktransactions throughout the day. As the result of the research a cost benefit analysis was performed to determine the efficacy of the new staffing plan. Constraints facing Bank X are the number of transactions completed by each teller, the time it takes to complete a transaction, the wait time per customer, as well as staff vacations and sick leave.

Profile of Teller Transactions

Lobby Transactions include customer transactions, such as deposits or withdrawals from an account, processed by tellers at their workstations and processed through the bank's system. The volume is measured by total number of transactions processed by the branch and time of day the transaction took place.

Large Commercial Transactions include commercial customers who bring large cash deposits to the branch during business hours and wait while there transactions are processed in the lobby. The volume is measured by the average number ofcommercial customers with transactions requiring an average processing time of fifteen minutes per bag.

Night deposits are considered non-customer transactions because they are not face-to-face processes. Volume is measured by the average number of bags processed with two minutes allotted per bag.

ATM Processingincludes the daily time required to balance one or more ATM machines and to replenish the supply of cash in the machine. Volume is determined by the number of minutes needed for balancing and replenishing cash, based on the number of ATMs serviced. Average time considered is eighteen minutes per ATM machine.

Balancing: includes the time required for tellers to balance cash drawers at the end of a business day. Industry average for this task is six minutes per person.

Vault Activity involves the time required to balance the vault each day plus the time required to prepare and verify cash shipments during the week. Volume is concentrated in the number of minutes needed for balancing and verifying the cash shipments concerning the average dollars shipped. Industry benchmark for this activity is 12 minutes per transaction.

Supervision: includes the time that a teller uses to be the administrative authority and perform supervisory functions. Since teller positions vary during the week, time allotted for this responsibility should range from four to ten hours per week.

Current Staffing and Workload

Currently,there are twelve full time tellers who each work a total time of 40 hours per week. Benefits and the hourly rate for a full time teller average $12 per hour. Under ATM processing, the bank has been notified that two tellers, accompanied by a security guard, should go to each machine, collect deposits, and replenish cash supply. Also, each teller was responsible for balancing their own drawer and checking it against the vault teller's calculations. Additionally, balancing occurred on the workers own time and was not considered in the staffing plan. Tables 1 and 2 below show a daily summary of transactions for Monday-Thursday and Friday. These data were collected over a one year time span and represent average daily work-loads for Monday – Thursday and Friday. Friday was separated from the weekly volume report because it is considered the busiest day of the week.

Table 1 – Volume Summary for Monday-Thursday

Activities / 8 am / 9 am / 10 am / 11am / 12pm / 1pm / 2pm / 3pm / 4pm / 5pm
Lobby transactions / 12 / 32 / 26 / 36 / 38 / 25 / 23 / 24 / 0 / 0
Large Commercial / 0 / 1 / 1 / 0 / 2 / 1 / 0 / 1 / 0 / 1
Night Deposit / 21
ATM Processing / 3 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 3 / 0
Vault / 3 / 2 / 2 / 0 / 2 / 0 / 2 / 3 / 3 / 2

Table 2 – Volume Summary for Friday

Activities / 8 am / 9 am / 10 am / 11am / 12pm / 1pm / 2pm / 3pm / 4pm / 5pm
Lobby transactions / 15 / 38 / 42 / 48 / 52 / 47 / 47 / 44 / 42 / 32
Large Commercial / 0 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 0 / 1
Night Deposit / 31
ATM Processing / 3 / 0 / 0 / 0 / 3 / 0 / 0 / 0 / 3 / 0
Vault / 5 / 4 / 4 / 5 / 4 / 5 / 4 / 5 / 5 / 3

Requiredand Available Staffing Hours

Lobby transaction standard is 3 minutes per transaction and an average of 5 minutes of wait time for a total of 8 min/transaction. By multiplying the number of transactions by the time standard resulted in the daily amount of time required for lobby transactions.

Large Commercial Transaction standard is 15 minutes per bag. By multiplying the time standard by the number of Large Commercial transactions resulted in the time required for large commercial transactions.

Night Depositsrequire 2 minutes per bag. Multiplying the time standard gives the number of minutes to complete night deposits and these calculations are presented for both Monday-Thursday and Friday.

M-TH: 2 minutes x 21 night deposit bags = 42 minutes

Friday: 2 minutes x 31 night deposit bags = 62 minutes

ATM Processing requires 18 minutes. If 3 machines are processed each time then the total amount of time required is 3 x 18min/machine or 54 minutes. Since two tellers will be used for these transactions a total of 108 minutes of the teller time will be required.

Vault Transactions require 12 minutes each. The number of minutes required for vault transactions was found by multiplying the number of vault transactions by the time standard.

The weekly time requirements for the days M-TH are given below in Table 3 and the total time required for Friday is given in Table 4.

Table 3 – Time (min) Required for Monday-Thursday

Activities / 8 am / 9am / 10 am / 11 am / 12 pm / 1 pm / 2 pm / 3 pm / 4 pm / 5 pm / Total
Lobby transactions / 96 / 256 / 208 / 288 / 304 / 200 / 184 / 192 / 0 / 0 / 1728
Large Commercial / 0 / 15 / 15 / 0 / 30 / 15 / 0 / 15 / 0 / 15 / 105
Night Deposits / 42 / 42
ATM Processing / 108 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 108 / 0 / 216
Vault / 36 / 24 / 24 / 0 / 24 / 0 / 24 / 36 / 36 / 24 / 228
Total: / 282 / 295 / 247 / 288 / 358 / 215 / 208 / 243 / 144 / 39 / 2319

Table 4 – Time Required for Friday

Activities / 8 am / 9am / 10 am / 11 am / 12 pm / 1 pm / 2 pm / 3 pm / 4 pm / 5 pm / Total
Lobby transactions / 120 / 304 / 336 / 384 / 416 / 376 / 376 / 352 / 336 / 256 / 3256
Large Commercial / 0 / 15 / 15 / 15 / 15 / 15 / 15 / 15 / 0 / 15 / 120
Night Deposits / 62 / 62
ATM Processing / 108 / 0 / 0 / 0 / 108 / 0 / 0 / 0 / 108 / 0 / 324
Vault / 60 / 48 / 48 / 60 / 48 / 60 / 48 / 60 / 60 / 36 / 528
Total: / 350 / 367 / 399 / 459 / 587 / 451 / 439 / 427 / 504 / 307 / 4290

Available time for a teller can be calculated in the following manner. From bank records, it was found that the bank works approximately 52 weeks per year. Each teller works 8 hours a day 5 days a week. Each teller has a total of one week paid vacation per year and the bank celebrates 10 national holidays and each worker has 12 personal days off a year with no more than 3 personal days off on Fridays. Additionally, each teller gets one hour off for lunch each day.

The number of Monday-Thursdays in a year’s time is calculated by the following expression:

(52 weeks/yr x 4 days/wk) - 10 holidays = 198 days. This calculation assumes that most holidays will occur on Monday – Thursday.

Similarly, the number of Fridays in a year’s time is calculated by the following expression:

(52 weeks/yr x 1 day/wk) = 52 Fridays

The total amount of required time for Monday-Thursday for a year and Fridays for a year are shown in the following expressions:

198 days x 2, 319 min = 459, 162 min/yr. Teller time (mins) required for M-TH in a year

52 days x 4, 290 min = 223, 080 min/yr. Teller time (mins) required for Friday’s in a year

Available time for one teller on Monday-Thursday is found by the following calculation:

[198 days (see above) – (4 days paid vacation/yr) –9 personal days] x 7.0 hrs/day x 60 min/hr =

[185] x 7.0 hrs/day x 60 min/hr = 77,700 min/yr available time for M-TH for one teller

Likewise, available time for one teller on Fridays is found by the following calculation:

[52 days (see above) – (1 day paid vacation/yr) – 3 personal days] x 7.0 hrs/day x 60 min/hr =

[48] x 7.0 hrs/day x 60 min/hr = 20,160 min/yr available time for Fridays for one teller.

The number of tellers required for M-TH is found by dividing the required hours by the available hours per teller and rounding up. The calculation for M-TH is 459,162/77,700 = 5.909 rounded to 6 tellers. The Bank should use six tellers during the day on Monday through Thursday. Similarly, the number of tellers for Friday is found by the formula 223,080/20,160 = 11.06 rounded to 12. The Bank should use 12 tellers on Friday. A rough check on the calculations is to visually inspect the number of required hours on Friday versus any other day of the week. Notice that the amount of required time is almost twice the amount of time required on Monday through Thursday.

The cost savings for M-TH is found from the following formula assuming 12 workers currently work each day.

[(12 tellers/day) x (32 hrs/wk) x ($12/ hr)] – [(6 tellers/day) x (32 hrs/wk) x ($12/hr)] =

[$4,608] – [$2,304] = $2,304 cost savings.

The cost savings for Friday’s will be zero ($0) since the number of tellers required will remain at 12.

Conclusion

This research study demonstrated how a small rural bank modified its teller staffing plans and significantly reduced it personnel costs without effectively diminishing customer service. If we take the weekly savings of $2,304 and multiply it by 52 weeks we find that the new staffing plan will save the organization $119,808 per year. There were some obvious caveats for this research study. First, the researchers did not assume there would be any required days for teller sickness beyond the 12 personal days, and that would not necessarily be accurate if one considers a catastrophic illness for a worker. However, this must be tempered by the fact that if a catastrophic illness affected a worker, then the bank would obviously have to hire a temporary worker to fill in until the stricken worker returned to the bank. Additionally, it was assumed that the banks legal holidays did not fall on Friday, which is feasible for most of the time. However, when a legal holiday falls on Friday, it may be necessary to adjust down the number of employees required on Fridays.

Second World Conference on POM and 15th POM Conference, Cancun, Mexico,

April 30 – May 3, 2004