CUES Complete Guide to Credit Union Facilities

Transcription

About the Authors
Paul Seibert, CMC,
VP/Financial Services,
EHS Design Inc.
http://www.ehs-design.com/interactive/
content.html
Paul has for a fourth time been responsible for
the creation and organization of this manual and
wrote most of the chapters. He has over 36 years
of experience working in the financial services
industry, providing member and market analysis,
strategic branch planning, branch business
modeling, development of high performance
branded branch prototypes, location and site
analysis and due diligence, site and building
acquisition, operations strategic planning and
facility design, budgeting, and scheduling.
Additionally, Paul is a founding partner of CEO
Advisory Group, helping credit union CEOs
navigate through our fast changing industry.
As AVP, VP, and manager of design and
construction for Seafirst Bank (now Bank of
America) in Seattle and MCORP in Dallas, his
responsibilities included managing the strategic
planning for and implementation of delivery
systems and operations facilities, as well as
managing more than 250 branches and 2.5 million
square feet of space with annual budgets of over
$30 million.
Paul contributes articles to national financialand building-related publications in the United
States, as well as financial publications in South
America. He speaks at national conventions
throughout the country and in Canada.
About the Authors
Additionally, he sits on the advisory board of
the degreed program in facility management
offered by the department of architecture at the
University of Washington.
In the last five years Paul and his team have
focused on the credit union industry. With CUES,
they completed the 2009 facility survey; they were
chosen as a the 2007 CUES Supplier of the Year.
In 2006 Paul started working with Larry Carr
of the FBI in the development of SafeCatch and
SafeCatch Architecture. This program is reducing
robberies up to 70 percent at some institutions
and was recently on the cover of The Chief of
Police Magazine. Every year Paul and Mark
Weber (see below) complete 10 to 15 strategic
branching plans and a similar number of branch
prototypes for best practice credit unions across
the United States and Canada.
For the past 23 years, Paul’s firm, CUES
Supplier member Emick Howard & Seibert
has provided strategic planning, retail design,
merchandising coordination, architectural
design for branches and headquarters, and site
acquisition and due diligence assistance for
numerous banks and credit unions, including a
recent 45,000-square-foot headquarters facility
in Guam. They have completed over 1,600 branch
facilities, 35 million square feet of headquarters
space, and operations planning for financial
institutions with assets ranging from $15 million to
$250 billion. The EH&S client list includes banks
and credit unions from coast to coast.
Paul is a certified management consultant
with national credentials. He is a member of the
International Association of Police and lives in
Seattle with his wife of 22 years and their 10-yearold son, Pauly.
Paul and his team provide all of the services
discussed in this book. He is always available to
discuss any issue and help locate resources with
no obligation. He feels that by being generous
with his experiences and knowledge he can
help credit union executives enhance their credit
unions’ performance and their personal success
and may create opportunities to be of service in
the future.
Paul can be reached at 206.223.4999 or
[email protected].
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About the Authors
Mark Weber,
President,
Weber Marketing Group
http://www.webermarketing.com
Mark Weber is president of Weber Marketing
Group, Seattle, a national branding and marketing
agency specializing in financial institutions.
Weber Marketing Group was named a 2006
CUES Supplier of the Year. The company has
renamed or created over 30 credit union, bank
and corporate names. It has created rebranding
programs for many financial institutions and
corporations, and designed and produced
merchandising for over 1,200 branded retail
branches. Weber Marketing Group also has
built Web environments and over 180 national
award-winning marketing, advertising and sales
campaigns.
Weber Marketing Group has worked on the
brands of some of the nation’s largest credit
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unions, including BECU, OnPoint Community
Credit Union, Red Canoe Credit Union, Lockheed
Federal Credit Union, First Tech Credit Union,
Veridian Credit Union, Mission Federal Credit
Union, Navigant Credit Union, Purdue Employees
Federal Credit Union, USA Federal Credit Union,
North Island Credit Union, Stanford Federal
Credit Union, Campus Federal Credit Union,
TruWest Credit Union, Fort Worth Community
Credit Union and Via Credit Union). The company
has also worked with banks and technology
companies (Vu1, AT&T Wireless, Vantus Bank
and Canas Feast Winery) in reshaping their
brands, online environments and marketing
communication programs over the past 20 years.
Mark consults with CEOs, boards and
management teams across the United States
in developing high-performance marketing,
branding and community growth strategies to
accelerate member growth and profitable product
growth. He is an advisor to Microsoft’s banking
division and serves on the board of Agros
International (http://www.agros.org), a non-profit
firm building villages and providing micro-credit
lending in Latin America.
Mark has spoken nationally for CUES, CUNA,
NAFCU, MAC and many state and regional
conferences and written countless articles and
white papers on consumer trends, branding and
naming, branch merchandising, generational
marketing, and consumer marketing strategies.
Mark can be found somewhere buried on the ski
slopes in winter with his wife and three children.
Mark can be reached at 206.340.6111 or
[email protected].
Credit Union Facility Strategies Planning and Management
About the Authors
Brett Conway, AlA,
NCARB, LEEDAP,
VP/Architecture and
Chief Operating Officer,
EHS Design Inc.
http://www.ehs-design.com/interactive/
content.html
Brett is VP/architecture and chief operating
officer at EHS Design, Inc. A highly detailoriented, licensed architect, Brett is responsible
for all architectural projects produced by the firm.
Brett has developed significant experience in
commercial and institutional design, renovations,
and project management over the past 25 years.
His expertise lies in acquiring and managing the
About the Authors
large amount of detailed information required
to effectively develop complex office buildings,
corporate interiors, financial operations centers,
and retail branches. As a designer, Brett
integrates his command of the details into
the development of appropriate and creative
solutions to fit each client’s needs. Brett also
guides clients and the firm in developing strategic
approaches and tactical measures to integrate
sustainable building practices, in the context of
sound business decisions. He has worked with
a number of credit unions in the integration of
green into their facilities, including helping to lead
executive team and board level discussions about
what being green means to financial institutions
and how to gain the most green impact at the
most reasonable cost.
Brett has drawn his experience from
many regions, client types, and jurisdictions,
including San Francisco, New Haven, Austin
and Seattle. He holds a bachelor of science
degree and a master’s degree in architecture
from the University of Michigan, holds an NCARB
certificate and is licensed in numerous states
across the country. He is a team partner in the
development of advanced credit union branch
business models and prototypes, and leads the
implementation teams for branch roll-outs and
headquarters development and renovations.
Brett can be reached at 206.223.4999 or
[email protected].
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About the Authors
6
Jim Haack,
CEO/President,
Momentum Inc.
Glenn Christensen,
Managing Director,
CEO Advisory Group
http://www.momentumbuilds.com/index.html
http://www.ceoadvisory.com
Jim Haack received degrees in fine arts
and earned a master’s degree in architecture
from Washington University in St. Louis. Upon
relocating to Seattle, Jim served for 12 years as
lead designer and principal with EHS Design,
focusing on financial facilities strategy and
design. Working closely with Paul Seibert, Jim
pioneered the application of retail financial
design, prototype business development for
financial facilities, and operations facility design.
In 2004 Jim founded Momentum, a national
award-winning design-build company specializing
in integrated financial facilities strategy, design
and construction. Jim lives in a rural river valley
east of Seattle with his wife and two sons.
Glenn is managing director of CEO Advisory
Group, a merger advisory and strategic growth
planning firm.
Previously, Glenn was senior vice president
of the Washington Credit Union League. He
launched innovative new technologies while at
Microsoft. Glenn served as the VP/finance and
marketing for a credit union and was on the
management team of $8 billion Pacific First Bank.
Glenn has been a strategic planning consultant
and senior advisor to credit union boards,
management teams and CEOs for over 25
years. He has focused on strategic planning,
merger advice and management, asset liability
management, and branch financial analysis.
Glenn has led a number of organizations
through strategic growth planning, as well as
successful merger and acquisitions at the board
and management planning level all the way
through implementation.
Glenn holds an MBA and a bachelor’s degree
in business administration from the University of
Washington.
Acknowledgements
CUES has supported the development and evolution of this book
since 1993. Through three previous editions the association
has provided research resources, editing and industry advice
without which this book could not have been created or delivered
to the credit union industry. I must first thank Mary Arnold, VP/
publications, for helping get the first edition of the book created
and published; Karin Weiss, VP/sales for taking over the
coordination of the CUES/EHS 2009 Credit Union Design Facility
Survey and organizing and managing the editing and publication
process; Ron Jooss, editor for many opportunities to share what
we continually learn about applying our trade to the ever-evolving
credit union industry through articles and interviews; Laura Egan,
executive services coordinator for setting up, managing and
hosting a number of CUES Webinars. CUES has been a significant
contributor to the success of this publication and I greatly
appreciate the partnership for these many years.
Acknowledgements
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Acknowledgements
One of the most effective ways to learn
is by doing. We have been fortunate to have
worked with a number of successful credit union
executives over the years through good and bad
economic times. Each of these executives has
provided opportunities to partner in the creation
of effective growth, branching, headquarters and
branding strategies, tactics and facilities across
North America, including Alaska, Hawaii and
Guam. I am honored by the trust they have placed
in me and our team to help them understand how
to best serve their members and communities and
create the revenue needed to operate a relevant,
growing and financially sound credit union. We
know that millions in capital and operating costs
are spent based on our recommendations.
These fine people include; Bob Kane, past
CEO, Red Canoe CU; Dave Spaulding, CEO,
Red Canoe CU; Dave Doss, CEO, Arizona State
CU; Parker Kane, past CEO, Columbia CU;
Steve Kenny, executive vice president, Columbia
CU; Roger Michaelis, CEO, IQ CU; Ron Barrick,
CEO, Advantis CU; Bob Harvey, CEO, Seattle
Metropolitan CU; Larry Hoff, CEO, Fibre CU;
Kathleen Romane, CEO, Lacamas CU; Terri
McKee, CEO, Industrial CU; Chris Catliff, CEO,
North Shore CU; Fred Cook, executive vice
president, North Shore CU; Marshall Ellison, CEO,
TwinStar CU; Bob Newcomb, CEO, Selco CU;
Charla Zeltvay, CEO, SOFCU; Larry Kelly, CEO,
Apple CU; Henry Prior, past CEO, Power One CU;
Steve Dahlstrom, CEO, Spokane Teachers CU;
Jeff Adams, CEO, Horizon CU; Paul Regimbal,
CEO, Catholic CU; Earl Weatherman, past CEO,
Yakima Valley CU; Dave Schulz, CEO, HAPO CU;
Steve Anderson executive vice president, HAPO
CU; Joe Robertson, CEO, Our Community
CU; Teresa Freeborn, CEO, XCEED CU; Kevin
Pendergraft, CEO, Pacific Community CU;
Gretchen Koester, CEO, Cascade Community CU;
John Parsons, CEO, First City CU; Tim Benecke,
CEO, Communications CU; Roger Heacock, CEO,
Black Hills CU; Dennis Cutter, CEO, Numerica
CU; Al Strawn, CEO, Matanuska Valley CU; Wally
Watanabe, CEO, Aloha Pacific CU; John Arroyo,
CEO, Government of Guam Employees CU;
Sundie Seefried, CEO, Eagle Legacy CU; Ron
Martin, CEO, Mission Federal CU; Debbie Matz,
former NCUA Board Member; Judy McCartney,
past CEO, Orange County’s CU; Stewart Fuller,
CEO, Monterey CU; Michael Sordelli, CEO, Police
CU; Patsy Van Ouwerkerk, CEO, Travis CU;
William Dokas, CEO, American Eagle CU; Dean
Marchessault, executive vice president, American
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Eagle CU; and Richard Bransma, CEO, Sound CU.
Four chapters of the book where contributed
by long-term business partners. All of these
individuals are extremely busy and made a
significant effort to develop highly informative
chapters based on their experience and
expertise. Mark Weber, president of Weber
Marketing Group, has been a key strategic
partner for over 15 years. He is considered the
top credit union branding and market expert,
strategist and tactician in the country, and we are
very fortunate that Mark was willing to share his
extensive background in this writing.
Jim Haack is president of Momentum,
Inc., a design/build firm that is helping credit
unions develop highly productive branch and
headquarters facilities across the nation. Jim
agreed to share what he has learned leading one
of the fastest growing design/build firms in the
country. His information provides a solid base
for making million dollar design and contracting
decisions that ensure projects will be highly
productive, delivered ahead of schedule and
under budget. His ideas help the CEO and board
reduce risk while being rewarded with a strong
positive outcome.
Glenn Christensen, managing partner of CEO
Advisory Group, is helping CEOs make critical
decisions that enhance the performance of their
credit unions and their personal careers. His
expertise includes merger representation and
coordination, financial and break-even analysis,
executive compensation, and strategic business
and growth planning. Glenn was willing to
share his work in developing individual branch
and branch network break-even analysis that
provides realistic evaluation of potential branch
performance. Plus, he provided a good deal
of the content for the chapter on credit union
mergers and growth alternatives.
“Going Green” has evolved as an important
issue for many credit unions over the past
five years. Brett Conway, AIA, VP/architecture
and Chief Operating Officer, and director of
sustainable design at EHS Design, has been
integrating sustainable design in headquarters
and branch projects for many years. He offered
to share his expertise in LEED certification and
how credit unions can understand the costs and
benefits of going green.
Acknowledgements
As our work has grown and evolved, we
have been able to work with other industry
professionals that have provided significant
support and partnerships. I met Larry Carr, FBI
Special Agent in Charge, Bank Robbery Division,
Seattle, in early 2007. We found a common goal
that drove us to create a highly-effective solution
to reducing bank robberies and fraud, increasing
apprehension while substantially enhancing
member development, the member and staff
experience and branch productivity: SafeCatch
and SafeCatch Architecture. Larry has trained
thousands of tellers and the results are proving to
drive down the number of robberies and increase
the apprehension of robbers as promised. Larry
has been willing to partner in the development of
a security solution that is starting to sweep the
banking and credit union industry. He is providing
an extraordinary benefit to banks and credit
unions everywhere.
In addition to CUES there are a few
organizations that have provided support to
further our knowledge. Certified Management
Consultants has provided constant elevation and
guidance of the consulting profession for years,
bringing a high level of ethics and peer support
to me and consultants across the country. The
Association of Chiefs of Police has supported
the dissemination of SafeCatch through their
publication and resources for ongoing work.
The American Institute of Architecture provides
a solid professional foundation for our staff and
helps lead the way in delivering and maintaining
ethical practices.
The writing of this book required hundreds of
hours to complete, which takes significant time
away from our firm’s primary business and my
family. I must thank Jack Emick, CEO at EHS
Design, for his assumption of many additional
tasks over the six months it took to write this
book. Brett Conway also performed added
work at EHS Design, in addition to the chapter
he wrote. A good deal of research, formatting
and editing was provided by Fiona Hope and
Jean Geiger of EHS Design. Ben Stangland of
Weber Marketing has supported our strategic
growth and branching analysis for many years.
Ben provided a number of charts and maps that
helped to enrich the text.
Acknowledgements
Contributions to the book in the form of
research and photographs were provided by
Diebold Inc., Steelcase Inc., and Herman Miller
Inc. I have worked with these fine firms for over
35 years and am continually impressed by their
products and representatives.
Sharing ideas in writing demands constant
awareness of how our work can contribute to the
evolving industry and its relevance and it requires
someone who will listen. Frank Diekmann,
managing editor of Credit Union Journal, Sara
Snell-Cook, editor in chief of Credit Union Times,
and again Mary Arnold and her team at CUES’
Credit Union Management ™ have always been
willing to listen, provide feedback and allow me a
public voice on many occasions.
My 10-year-old son Pauly, had to forgo a
number of father/son outings and always greeted
my regrets with “It’s OK, dad, I understand” and
a hug. And, finally I must again acknowledge
my wonderful wife of 22 years. She has edited
this and previous books four times, reviewed
hundreds of presentations, completed project
research across the country, coordinated
meetings and taken care of the home front while I
travel. There is no way this book could have been
completed without her help.
I am a fortunate man to have these wonderful
people in my professional and personal life.
Thank you all for you support, sense of humor
and friendship.
aul Seibert, CMC
P
206.223.4999
[email protected]
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Acknowledgements
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Table of Contents
About The Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction – What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Chapter 1: Results of the CUES/EHS Design 2009 Credit Union Facilities Survey. . . . . . . . . . . 21
Chapter 2: Strategic Growth Planning—A 360-Degree View. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Chapter 3: Strategic Branch Planning—Member, Market and Opportunity Analysis. . . . . . . . . . . 45
Chapter 4: Retail Branch Planning, Business Modeling and Prototype Development. . . . . . . . . . . 69
Chapter 5: Building Transformational Brand Experiences—and Generating Big Results. . . . . . . . . 99
Chapter 6: Strategic Operations Occupancy Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Chapter 7: Headquarters Planning and Design. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Chapter 8: Going Green . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Chapter 9: Site Planning and Design. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Chapter 10: Site Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Chapter 11: Mergers: Market Expansion, Branching and Headquarters. . . . . . . . . . . . . . . . . . . 219
Chapter 12: Security Planning and the Rise of SafeCatch . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Chapter 13: Construction Delivery Methods and Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Chapter 14: Evaluating the Financial Side of a Branch Investment . . . . . . . . . . . . . . . . . . . . . . 257
Chapter 15: Case Studies in Retail Branch and Operations Facilities Solutions . . . . . . . . . . . . . . 267
Glossary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291
Resources
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Table of Contents
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Table of Contents
12
Introduction – What’s New
This fourth edition of CUES’ facilities manual comes at a time
of significant change in terms of surviving vs. thriving for many
CUs and in the role facilities play in credit unions’ strategies for
the next five years. Most credit unions were building branches
every year and expanding their headquarters as new membership
opportunities rose amid strong deposit and loan growth. As
the lending and stock markets dropped in late 2008, so did
the expectations of the future of many, but not all, credit union
executives. Some management teams see the next five years as an
opportunity to find new ways of doing business and meeting their
growth objectives.
Today there are many problems impacting management and board
facility decisions. Thoughts like these come up: “We must wait to
pursue growth until the economy gets better—no more branches
and no operations expansion.” “We should hold off pursuing
mergers, as they are costly.” “We should sell our facilities to a
real estate investment trust and lease back to use the capital for
survival.” “We must wait this out and hunker down.”
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Introduction
While there are many problems in the financial
industry, there are also many opportunities. The
banking crisis has caused many consumers
to switch from big banks that don’t know their
names to local or state credit unions where they
have an affinity. Some credit unions are taking
advantage of the mortgage refinance market
and hiring new employees. Small business
banking relationships offer a huge opportunity
for growth when the right people are on board.
The cost of commercial property is dropping
and retailers in some prime retail locations are
giving up their leases, providing an opportunity
to get exceptionally good market positions in
preparation for the turnaround. Technology is
driving down the size of branches. Most credit
unions have untapped ROI and growth potential
in their existing markets and branches. And,
efficiencies can be gained in operations planning
to increase productivity while reducing operating
costs. Much can be done during the downturn
and recovery to increase productivity and reduce
operating costs.
The economic situation has overshadowed
a number of growth trends and correlations to
facilities that were developing and continue to
develop in the industry. CEO Advisory Group’s
(www.ceoadvisory.com) 2008 National Credit Union
Growth Study looked at the factors most strongly
driving successful performance—the strategies
being pursued by the nation’s CEOs—and
discussed vital strategies that may not be getting
enough priority for long-term growth and success.
• The trend of declining credit union
membership, coupled with an aging
population, is a dire warning sign for the
long-term growth and health of the industry.
There are signs our industry could be in
a downward spiral. Response: We must
understand how to attract and retain
younger members through expert cultural
and demographic analysis and the place
branches have in the formula.
• When the growth of indirect lending members
(who are not necessarily “real” members
because of their generally much lower product
use) is separated from total member growth,
the results are even more dismal. Recent
member gains in 2007 are highest among a
smaller handful of large and medium-sized
credit unions with some anomalies driven by
mergers. Response: Is the correct member
and market data being used to drive branch
placement and market and marketing
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investment? Why are large credit unions
growing faster than small credit unions? The
two primary correlations with member and
asset growth are rates and branch expansion.
• Community charter expansion, still thought
to be a panacea for fast new member growth
by many CEOs and boards, is not providing
most CUs the results they had hoped for. In
fact, the data suggests it is not yet proving
a viable growth strategy for the majority
of credit unions, because many fail to fully
capitalize on it. Response: Pursuing charter
expansion can be an effective growth option
for credit unions in the right markets but
counterproductive for credit unions in highly
competitive markets and where remote
operations are required. What data should
be analyzed and which strategies and tactics
should be employed to maximize branch
and market efficiency and performance from
existing opportunities before geographic
expansion? Is a community charter the right
thing to do in an economic downturn?
• Massive bank and nonbank competition,
aggressive deposit pricing, a robust bank
branch building renaissance, and strong
investments in marketing, branding and
technology are a few of the factors impacting
either positive or negative growth results
for many CUs today. These factors will only
increase in the years ahead. Response: What
appears to be surfacing is the need for a strong
and well-articulated brand—the willingness of
credit unions to express a strong differentiating
personality beyond “the best service” in both
a down and a rebuilding economy. Going
forward credit unions must create a convergent
brand image through all delivery channels to
realize the full potential of their brand and to
successfully compete in the marketplace.
• To turbo charge membership growth, credit
unions must successfully grow the bottom
line with existing member relationships
while carefully managing expenses, but
also allocate adequate resources to growth
strategies that truly make a difference.
Response: This suggests a double-edged
sword must be used to be successful in
these times. Inefficiencies and waste must
be removed to lower operating cost. At the
same time investment must be made in
branding, the delivery network, technologies,
staff training and marketing to win market
share, share of wallet, and profitable growth.
CEO Advisory Group’s study offers significant
insights into what drives real growth and
suggests how facilities play a role in each credit
union’s success.
What is the importance of
facilities in our future?
Technology continues to provide opportunities
to reduce staffing and bricks and mortar. Remote
capture will allow businesses, and eventually
consumers, to deposit checks on line, reducing
the need to visit a branch; remote teller systems
can cut teller staffing in half; phone banking
makes it easy for members to bank anywhere by
phone; call centers are proving to be a productive
delivery compromise of technology and people;
enterprise software is reducing processing time
and staffing; and video conferencing is reducing
the need for centralized staff training. Is the end
result of all this technological advancement the
total replacement of staff and facilities?
In the mid 1990s, Bill Gates predicted bank
branches would be dead in 10 years. In 2002 he
reversed his opinion and started to discuss the
need for an integration of technologies and physical
banking environments. And, in late 2008 Microsoft’s
Banking Division started offering its Microsoft
Surfaces software for information gathering by
tellers and members in branches. The evolution
of Bill Gate’s opinion appears to be aligning with
the real world as the number of branches has not
declined over the past 10 years, but grown. And,
as mentioned earlier in this introduction, the 2008
National Credit Union Growth Study showed a
direct correlation between growth in branches and
growth in assets and members.
Branch use was projected to steeply decline
between 1998 and 2008. The actual experience
was a decline from 46 percent of members visiting
a branch every month in 1998 to 43 percent in
2002 and then an increase to 45 percent in 2008.
While visits have remained stable, the number
of transactions per month at older branches has
declined as members use alternative delivery
methods. This is changing branch design and
placement from big mega-branches of the ’70s,
’80s and ’90s to smaller branches, and large
regional branches to community, neighborhood
and in-store branches that are efficient in terms of
transactions and staffing, and add convenience.
While there continue to be big changes in
branch design, size, configuration and market
placement, branches remain important to nearly
every credit union’s growth and success. A 2008
study by Tower Group (http://www.towergroup.
com) indicated that 33 percent of preferred financial
institution customers are located within two miles
of a branch and 38 percent at three miles. This is a
significant reduction from the old five-mile standard.
This suggests that maximizing the ROI of a credit
union’s branch network takes more than just more
marketing; it requires re-engineering to understand
the perfect array of branches and alternative
delivery systems to gain the highest return and how
to achieve that configuration.
Since the 1970s the financial industry has been
talking about the potential of reducing operations
staff and facilities with telecommuting. It has been
tried by many companies and generally failed.
It is very hard to manage operations staff at a
distance other than in such large or independent
groups as call centers. Staff needs to communicate
directly with each other, be motivated by common
goals, and to share a common culture. The
need for operations staff and facilities will not go
away soon, particularly in view of the growing
number of products and services offered and the
increasing number of remote services delivered
from centralized locations. The only ways for
most medium and large credit unions to reduce
operations staff and facility square feet-to-assets
ratios is through the use of time-saving software,
outsourcing or increasing in size to gain the
resulting economies of scale.
The importance of branches and operations
centers to a credit union’s success is significant
for many reasons.
• Facilities are the second highest after staffing
and least flexible cost for most credit unions.
• Branches are required to deliver a high level
of member service.
• Branches and the staff within are the
face and brand of a credit union, and key
to generating positive perceptions of an
institution’s connection to members’ values,
interests and life-cycle needs.
• Operations centers are necessary for
efficient and productive delivery of products
and services.
• Most credit unions own the majority of their
facilities, representing a very large asset that
must be properly managed.
15
Introduction
The decisions surrounding facilities are
significant for every credit union, particularly with
regard to operations centers, as the size and cost of
an operations center typically follows the asset size.
The cost of facilities is high. In terms of branching,
retail land in many locations across the country has
risen from $8 to $30 a foot in the past five years,
and the cost of construction has risen between 7
percent and 10 percent a year. A 3,500-squarefoot free-standing branch with drive through costs
between $1.5 and $2 million today, plus land. A strip
mall branch of 2,500 square feet can range between
$450,000 and $750,000. And an in-store branch
can cost between $250,000 and $450,000.
Operations center building costs have
increased as well. It is not unreasonable for a
mid-size credit union to be looking at spending
$15 million to $30 million for its headquarters.
Operating costs have also increased. Many credit
unions are experiencing operating costs ranging
between $5.50 and $7 a square foot per year.
In addition to the cost of construction and
operations, credit unions must consider the effect
these facilities have on productivity, efficiency,
acquiring and retaining members, and growth. How
would an increase of 25 percent in market efficiency
and productivity improve ROI? What is the value
of a strong, positive member and staff branch
experience on acquisition, retention and account
relationships? Is the location and productivity of
branches important to a merger candidate? How
does the quality of the work environment influence
retention of the best staff? A 5 percent improvement
in the efficiency of a 20,000-square-foot operations
facility would return over $900,000 in 20 years. Is
this of significant value?
These are very big decisions that impact the
bottom line for years to come and CEO careers.
Since the first writing of this manual in 1994,
we have repeatedly asked CEOs “What are the
biggest decisions that impact your success?”
The answer continues to be facilities and
systems conversions with one new addition:
mergers. Branches and operations centers are
big economic, brand image, cultural evolution
and member service events. To help guide credit
union CEOs and management teams to the best
facility decisions, we wrote this manual.
I have worked with CEOs, senior executive
teams and boards of financial institutions for
over 30 years in the development of strategic
growth plans, market and member analysis,
strategic branching and operations occupancy
16
plans, as well as on the implementation of the
resulting facility initiatives. I have been fortunate
to see what works and what fails. Our ongoing
work with credit unions and banks across North
America and in Hawaii and Guam provides us
opportunities to constantly learn and share
through articles, white papers, Webinars,
seminars and this manual.
The discussion of facilities must go beyond
one person’s experience. This manual is
not just about how to make branches and
operations centers attractive. It is about fully
addressing the key facilities issues that drive
credit union success. It takes an integrated
and holistic view. For this reason we have
assembled a select group of contributors with
proven backgrounds in the industry. Each of
their bios is included in the “About the Authors”
section. The following list summarizes the
authors’ areas of expertise and experience:
• Strategic growth planning
• Branch network efficiency analysis
• Member and market analysis
• Member surveys
• Branch auditing and performance
recommendations
• Merger partner recognition and acquisition,
due diligence, executive compensation
negotiations, and implementation
• Branding and brand image development
• Renaming and logo design
• Architecture
• Retail branch planning
• Ergonomic and Americans With Disabilities
Act analysis
• LEED certification—“going green”
• Location analysis
• Site analysis and due diligence studies
• Break-even analysis
• Branch profitability analysis
• Branch business modeling and prototype
development
• Management and board meeting and retreat
facilitation
• Operations occupancy analysis
• Facility management
• Security planning and SafeCatch integration
• Site development assistance
• National contract negotiations
• Purchasing and leasing negotiations
• Web design
• Design/build
• Project management
What’s New?
The last version of the book was over 650 pages
long and came in three volumes. The length was
necessary to provide space for many detailed
process lists, but made the manual somewhat
cumbersome. The 2009 edition has been reduced
to just under 300 pages in one volume. The process
detail is provided by reference to online resources.
The manual is available in two formats, hard and
electronic copy. The advantage of the electronic
copy is lower cost to you, less use of precious
paper, and no potential loss of a paper copy.
We know that some readers will select individual
chapters to gain information on specific topics
and may not read other supporting chapters. For
this reason we include reference to information in
other chapters and/or brief recaps of supporting
information necessary to provide a complete
explanation of the primary topic.
Working with many credit unions and banks
over the past five years has given us a wide range
of opportunities to build on our experience, learn
what is working and not, observe the work of
others, test our own theories, processes and
designs, and share. To date we have completed
over 1,600 branches and 35 million square feet
of operations center planning. Additionally, we
are fortunate to work with a number of forwardthinking clients, consultants and professional
organizations that give us an enlightened picture
of the future. As a result we have made many
changes to the previous manual in form and
content. The following is a summary of each
chapter in the current manual, and the changes
and enhancements we have made.
Chapter 1, Results of the CUES/EHS Design
2009 Credit Union Facilities Survey (New). In
January 2009 CUES and EHS Design completed
a credit union facility survey with 109 respondents
from credit unions ranging from $35 million to $5.5
billion in assets. This survey provides insights into
how credit unions feel about the performance of
their facilities, how they are planning for growth,
the importance of specific market and branching
strategies, and their utilization of facilities. The data
can be correlated to understand average ratios
for such factors as members, staff and assets per
branch and operations square feet. We have even
learned respondents’ favored methods of planning
and designing facilities. This data is used as
reference throughout the book and can be used by
individual credit unions to inform their
decision process.
Chapter 2, Strategic Growth Planning—A
360-Degree View (New). In the CUES/EHS
Design survey, 83 percent of CEO respondents
said that growth is very important to their credit
unions’ future. We have found that branch planning
alone is not sufficient to maximize branch and
branch network productivity or generate the
highest market efficiency in terms of consumer
and business penetration or share of wallet.
Strategic business plans are not typically founded
on sufficient information to direct a branching
plan. Enter the strategic growth plan. This plan
takes a 360-degree look at a credit union’s current
situation and opportunities. It considers brand
positioning, competitors, product and service
offerings, reporting systems, use of technology and
other issues to discover untapped opportunities
to increase efficiency and enhance real growth.
This chapter will explain the planning process,
integration of specific skill sets and the benefits that
can be gained from the work.
Chapter 3, Strategic Branch Planning—
Member, Market and Opportunity Analysis
(Enhanced). Forty-six percent of the
respondents to the CUES/EHS study said they
do not employ a strategic branching plan. A
strategic branching plan, designed to support
the growth objectives, is key to enhancing
performance. As this manual is being written,
the economy is worsening and credit unions are
trying to find ways to survive. If an up-to-date
and well conceived branch plan is in place, a
credit union should be able to thrive by mining
existing branches and markets for hidden ROI,
re-engineering the network to increase efficiency
and productivity well into the future. Since
the writing of the last book, there have been
significant advancements in the quality and
quantity of data available for market analysis.
This, coupled with advances in member and
branch analysis, provides the data needed to
create a powerful branch network. This new level
of data and analysis will be shared.
Strategic branch planning also includes the
application of the right branch and alternative
delivery systems to markets, including shared
branching. We will share our experience with
a variety of delivery types and how to evolve a
network over time.
17
Introduction
Chapter 4, Retail Branch Planning,
Business Modeling and Prototype
Development(Enhanced). The retail side of
operating a financial institution has seen much
change. Banks like Umpqua (http://www.
umpquabank.com), one of the nation’s leaders in
branch innovation have gone through significant
evolution in terms of style and alignment with
business units. Credit unions like $1.98 billion
(Canadian) North Shore Credit Union (http://
www.nscu.com) in Vancouver, British Columbia,
have increased their desire to create strong brand
expression and reap the benefits. And savvy
institutions of both types are looking at how
branches can enhance the customer and staff
experience to increase product and service usage
and advocacy scores. We will share our work with
some of the most advanced credit unions in the
country and our observation of the work of others to
help you create a vision of how you would like your
branches to be perceived by members, staff and the
community and how you would like them to perform.
18
Chapter 7, Headquarters Planning and
Design (Enhanced). Constructing, leasing and
operating a headquarters is very expensive. To
compete today, headquarters facilities must be
more than just back-office operations centers.
They are the head and heart of an organization.
They must provide highly productive and satisfying
work environments to attract and retain the best
staff, promote the credit union’s culture and brand,
be efficient in terms of occupancy costs, and
support the operations and delivery of a wide array
of remote services. We will share our experience
working on hundreds of projects ranging in size
from 15,000 to 1.5 million square feet. We have
included what credit unions typically include in each
department, the key planning issues and specific
recommendations for office vs. workstation, and
office/workstation sizes.
Chapter 5, Building Transformational Brand
Experiences—and Generating Big Results
(Enhanced)—Mark Weber. Mark and his team
have completed more name changes for credit
unions than any other firm in the country. He has
helped credit union CEOs and boards gain a clear
understanding of credit union perceptions held by
members, staffs and their communities. He has
helped credit unions reengineer their brand images
and expression through the media and all delivery
channels. Additionally, his firm, Weber Marketing
Group, creates comprehensive merchandising
programs for small to large credit unions, delivering
state-of-the-art branch messaging systems proven
to increase cross-selling and share of wallet. Mark
shares his learnings over the past five years and
insights for the future in this chapter.
Chapter 8, Going Green (New)—
Brett Conway. Leadership in Energy and
Environmental Design certification of branches
and facilities has risen from something just elite
public agencies mandate for their projects to
an initiative for many financial institutions. Many
credit unions want to embrace LEED certification,
but the task seems daunting and very expensive.
Brett has been integrating sustainable materials
and systems in all of EHS Design’s work for many
years and has completed a number of LEEDcertified buildings in the United States and Guam.
He has worked with management teams, boards
and agencies to deliver on the sustainability
promise and gain recognition for the credit unions
that do so. Brett will explain how to complete a
cost-benefit analysis for both the tangible and
intangible aspects of the work. Examples will be
shown for both branch and operations facilities
in this informative chapter. The objective is to
remove any reservations about going green.
Chapter 6, Strategic Operations Occupancy
Planning (Enhanced). From completing
dozens of operations occupancy plans for
credit unions ranging in size from $45 million
to $6 billion, we have collected a great deal of
experience in programming staffing and space
needs, completing peer and scenario analysis,
assessing best locations, providing alternative
occupancy solutions, and preparing comparative
budgets for short- and long-range analysis. In
this chapter we will share our most recent work,
including the development of workstation and
space standards, trends in operations design,
operations centers and the brand experience,
and selecting the right consultant and contractor
structure to help ensure success.
Chapter 9, Site Planning and Design
(Enhanced). The criteria for site selection is
often a 35,000- to 40,000-square-foot piece of
property with high visibility, easy ingress and
egress, and support of three lanes of drivethrough, but most of these sites have been taken.
Often credit unions wait until a developer has
purchased a large site for a shopping mall and
carved out a pad site, which, while ready to build
on, costs four times the original cost per square
foot. There are many opportunities for a credit
union to acquire the right piece of property if they
are willing to think like an entrepreneur and look
at all site options whether .5 acres or 10 acres.
This chapter will present a few ideas about how
to think outside the traditional real estate box.
Chapter 10, Site Acquisition (Enhanced).
Finding sites has not gotten any easier and the
condition of available sites has not become
simpler. Competition for great sites is even
stronger than five years ago. In this chapter we
will present a proven process for establishing
site search criteria, developing the team, going
to market, finding the hidden opportunities,
evaluating sites and buildings, completing due
diligence, leasing, and negotiating the best deals.
We will also present strategies for working with
boards to reduce pressure on the management
team and acquire the best sites.
Chapter 11, Mergers: Market Expansion,
Branching and Headquarters (New)—Glenn
Christensen. In our strategic growth and
branch planning work, merger opportunities
are factored into the potential growth and
expansion scenarios. Mergers can have a
profound impact on growth and new member
acquisition efficiency. Callahan & Associates
(www.creditunions.com) recently released a
study finding that acquisition of one new member
costs about $731. If a large credit union merges
in a small credit union with 5,000 members, it
can save $3.7 million on member acquisition
costs—and gain skilled staff and facilities as well.
Mergers have impact on facilities. Operations
redundancies may need to be resolved as a
result of a merger, and the combined branching
array may suffer market overlaps and inefficiency
that require reengineering. Glenn Christensen,
president of CEO Advisory Group, will share his
substantial experience representing acquiring
and merging credit unions with combined assets
ranging from $140 million to $1.5 billion. This
chapter will present our joint work and findings.
Chapter 12, Security Planning and the Rise
of SafeCatch (Enhanced & New). Effective
security measures have been integrated into
EHS Design’s branch and operations design for
many years. This chapter will update security
planning and share our work with the FBI in the
development of SafeCatch. For the past three
years, EHS Design has been working with the
Seattle Office of the Bank Robbery Division of
the FBI to create SafeCatch, a new and more
effective way to reduce robbery and fraud and, as
result, increase staff safety and enhance member
service. The impact of this work has been above
expectations. Bank of America was one of the
early adopters of SafeCatch in Washington State
and saw robberies drop by 70 percent. North
Shore CU has employed SafeCatch principles
to enhance security and deliver a Ritz-Carlton
level of member service with exceptionally good
results. In this chapter we share our work with the
FBI and North Shore CU, as well as how you can
get the same results at your credit union.
Chapter 13, Construction Delivery Methods
and Strategies (New)—Jim Haack. Jim has
worked as an architect in developing advanced
retail branch designs and operations centers for a
number of credit unions and managed both small
and large projects through completion.. He is now
president of Momentum Inc., a design/build firm.
Jim will be presenting an array of construction
management options for both operations centers
branch facilities with pros and cons. He will discuss
what you should expect from your contractor,
construction management firm, or design/build
partner, along with some dos and don’ts.
19
Introduction
Chapter 14, Evaluating the Financial Side of
a Branch Investment (Enhanced and New)—
Glenn Christensen. Glenn has a background
in finance, has served as a credit union CFO,
worked in mergers and acquisitions for a regional
bank, directed league services and the mortgage
division for the Washington Credit Union League,
and provided financial analysis and merger
services as a consultant. Glenn will share his
budgeting experience inside and outside of
credit unions. Additionally, Glenn will discuss the
need for break-even analysis before developing
branches, and the key elements of analysis. The
numbers can be manipulated to tell any story.
Glenn will show you the numbers you should
expect from your consultants or that you should
generate to gain a realistic perspective of each
branching and market entry opportunity.
Chapter 15, Case Studies in Retail Branch
and Operations Facilities Solutions. See
samples of EHS Design work that reflects the
thinking presented in this manual.
While this manual continues to be the only
comprehensive strategic planning, design, and
management guide for credit union branches and
operations facilities in the world, there are many
resources that contributed to its making. In many
sections of this publication we provide or refer to an
outline of specific functional requirements of a task
or responsibility. For more detailed information, we
recommend references and suggested reading in
the bibliography at the end of this book.
Our goal as contributors is to provide you with
our experiences applied to opportunities and
situations you may encounter. No matter how many
pages we write we cannot cover every possibility.
Please know that each of the authors is willing to
discuss your situation at any level with no obligation.
Our success comes from your success and the
success of the credit union movement.
20
Paul Seibert, CMC
206.223.4999, ext. 1222
206.285.8694
[email protected]
01
Results of the CUES/EHS Design
2009 Credit Union Facilities Survey
The purpose of this manual is to address the most pressing
branch and operations facility questions. To help ensure we
recognize and address the most important issues, EHS Design
and CUES conducted the 2009 Credit Union Facilities Survey.
The results of this survey of over 109 credit union managers
reveals both common and credit union-specific facility concerns for
organizations between $35 million and $5.5 billion in assets.
The survey provides two levels of information. First, we asked a
series of questions to determine if there are consistent correlations
between assets, staff and members, and facilities. Secondly, at the
end of the questionnaire, we asked each respondent to name their
most pressing concerns so that we were certain to cover these
topics in the manual.
A summation of the findings is provided below with text about
our assumptions about why we received these responses. At
the end of the survey, we list the questions credit union CEOs
most want addressed by this book and where in the book to
find the information.
Chapter 1 • Results of the CUES/EHS Design 2009 Credit Union Facilities Survey
21
The survey responses are organized by asset
size, as our historical experience is that as credit
unions grow in assets they improve in terms of
efficiencies. While these credit unions vary by
charter type, geographic region, market size
and characteristics, and local economies, there
is value in analyzing the data by historically
significant groupings. These groupings were
selected based on our observation of general
industry efficiency thresholds.
Data on Branches
Percentage of CUs That Have Developed and
Use a Strategic Branching Plan by Asset Size
< $100 million
35%
$100 million - $250 million
54%
56%
$500 million - $1.2 billion
83%
> $1.2 billion
100%
Understandably, large credit unions employ
strategic branch planning more than small
institutions because they have more occasions
to add branches, have more invested in facilities,
and need to understand how to create efficient
and productive networks over large geographic
areas. It is surprising, however, to see that only
54 percent and 56 percent of credit unions
between $100 million and $500 million develop
and use strategic branching plans. Lack of a
strategic plan or road map to future branch
network efficiency means they are making million
dollar decisions that may not enhance overall
productivity, causing them to lose significant
market penetrations and income potential.
There is also a correlation between the
development and use of strategic branching plans
and credit union growth and efficiency. Over the
last five years, large credit unions have grown much
faster than small credit unions. A big factor in this
higher growth is the development of strategic plans
to help credit unions enhance market productivity
and be competitive through efficiency.
A strategic branch plan is most beneficial
when developed for overall branch networks
so it guides the development and operations of
branches and ATMs on multiple levels. Plans can
also be developed when a new market or site
is being investigated. Going beyond the typical
myopic real estate evaluation and general market
data that inform most plans, taking a deep look at
22
member and market characteristics, the market’s
propensity to use certain types of products and
services, competitor analysis, and other branch
locations can deliver an effective strategy.
When you are thinking about making a $1.5
million to $3.5 million branching decision, it is
well worth the cost of 0.2 percent to 0.5 percent
of the decision cost to ensure you get the right
answer, particularly when you consider that the
right answer could increase branch performance
by 20 percent to 40 percent. In this book we will
present our 30 years of strategic branch planning
work and share information about the latest in
advanced data analysis, market scoring, mapping
and strategies.
Average Number of Members per Branch by
Asset Size
< $100 million
3,082
3,976
5,094
6,029
> $1.2 billion
5,966
While branches vary in size, history in market,
and retail efficiency, it is interesting to note
that as credit unions get larger, the number of
members per branch doubles. This suggests
that larger credit unions are more efficient in
terms of their ability to serve more members
through the same branches. It also suggests that
larger credit unions typically enjoy higher market
penetration, use more processing and transaction
technologies, offer a larger array of remote
delivery channels, have a higher ratio of accounts
per household, offer more products and services,
have larger marketing budgets per member, grow
new members at a faster rate, and run more
efficient branch networks due to their ability to
position multiple branches in target markets.
Number of Branches Planned Per Year Over
Next Five Years by Asset Size
< $100 million
1
1
2
2
> $1.2 billion
3
Ninety-five percent of the respondents said
they would be adding at least one branch per
year over the next five years. This corresponds
to the over 90 percent of respondents who said
branches were moderately to very important to
their growth.
A branch could cost as little as $250,000
for a small in-store branch or as much as $3.5
million for a free-standing regional branch.
Each branch is a significant initial and ongoing
investment. Adding to the financial side is the
fact that free-standing branches often are owned
and operated by credit unions for up to 40 years.
Investing in making the right decisions is key to
maximizing ROI. We will discuss how to select
the best market locations in Chapter 3, Strategic
Branch Planning and Chapter 11, Mergers, Market
Expansion and Branching, and how to select the
right site in Chapter 10, Site Acquisition.
Does this then mean that credit unions will lose
members if they close branches? The answer
is maybe, depending on how it is done. Credit
unions that complete detailed analysis of each
branch’s performance and its future potential
within the context of the full branch network have
been able to reengineer their networks to reduce
underperforming branches and relocate the
resources to more productive locations, resulting
in an actual increase in member development.
When credit unions calculate the cost of
acquiring each new member, they typically do
not include the cost of adding branching or
expanding alternative delivery methods. This cost
should be included in the acquisition cost.
The implication of the 5300 analysis and the
answers to this question is that if credit unions
want to grow they need to include branching
and reengineering their branch networks in their
growth strategies.
Importance of Branches to Growth by Asset Size
Average Deposits per Branch by Asset Size
Not very important
< $100 million
$21 million
9%
$32 million
14%
$48 million
0%
$68 million
> $1.2 billion
0%
> $1.2 billion
$102 million
< $100 million
18%
Moderately important
< $100 million
46%
26%
22%
25%
> $1.2 billion
60%
Very important
< $100 million
36%
65%
64%
75%
> $1.2 billion
40%
Our analysis of medium to large credit unions’
5300 reports indicated a direct correlation
between adding branches and growth. The
survey respondents confirmed this finding as the
vast majority felt branching was moderately to
very important to their growth.
Efficiencies of scale are suggested by these
assets-per-branch numbers with a five-fold
difference between the statistics reported by
small and very large credit unions. The reasons
for the significant improvement are similar to
those noted above, including higher market
penetration and more members per branch, using
more sophisticated processing and transaction
technologies, offering more remote delivery
channels, having a higher ratio of accounts per
household, offering more products and services,
growing new members at a faster rate, and
running more efficient branch networks due to
their ability to position multiple branches in target
markets. As a result, larger credit unions typically
report higher average deposits per member.
23
Productivity and Market Efficiency of Current
Branch Network
Underperforming
< $100 million
16%
13%
6%
24%
> $1.2 billion
0%
Moderate to good performance
< $100 million
63%
58%
63%
47%
> $1.2 billion
75%
Very good performance
< $100 million
21%
29%
31%
29%
> $1.2 billion
25%
These responses suggest there is a good
deal of potential for improvement in the credit
union industry in terms of maximizing branch and
market productivity. The vast majority of CEOs
feel the performance of their branch networks is
moderate to good.
Over the past 10 years, credit unions have
been focusing on growth. The current banking
situation provides significant opportunities while
the economy suggests we also need to be very
careful. Credit unions need to take strategic growth
planning to the next level by focusing on effective
service, profitability and risk management.
Many positive and negative forces are at play in
today’s branch decision-making. Banks are losing
customers to credit unions over issues of trust and
familiarity, opening a window of opportunity for
growth. Land and construction costs are dropping,
making it less expensive to develop branches. At
this writing, credit union capital just took a 56-basispoint hit with corporate stabilization, reducing
available funds. And merger opportunities are
increasing, which offers an inexpensive way to grow
membership. Further, regulations are increasing,
making it more complicated to operate and
increasing the cost of serving each member. Today
there is great opportunity and great risk.
24
In the past credit unions could take advantage
of opportunities by building multiple branches,
hoping for the best results and accepting modest
performance for some time. Today and into the
future, credit unions can no longer afford non- or
low-performing branches or networks, or long
payback periods on new branches. At the same
time, credit unions must not make short-range
branching decisions based on the current economic
situation that will negatively impact them in the
future. There is a need to balance bold vision with
profitability and risk management.
This book includes specific tactics that can be
used to significantly enhance branch network and
market performance. Imagine the impact on your
bottom line of increasing your branch network
efficiency by just 15 percent. It is also about
ensuring you survive and thrive in the future.
Through this work you can grow target members,
increase profitability, reduce risk, and improve
member rates and your competitive position.
Untapped Market Potential in Terms of
Household Penetration
< $100 million
65%
60%
60%
58%
> $1.2 billion
38%
When we asked about untapped market
potential, we were surprised by this result—that
credit unions in the various asset-size categories
report fairly similar amounts of untapped market
potential. As we would expect, very large credit
unions enjoy higher household penetration than
smaller credit unions. This may be because
larger credit unions typically offer greater branch
convenience, more alternative delivery systems,
operate their own ATMs, offer more products and
services, and spend more money per household
on advertising.
But there is significant opportunity for most
credit unions of all sizes in the above numbers,
particularly in today’s banking environment.
Rather than pulling back marketing dollars,
credit union executives should be investing in
target market growth. By doing so, they can take
advantage of today’s unique economic situation
through additional promotion of their credit
unions’ benefits, safety and community focus.
The percentages of untapped market potential
reported suggest there is a great deal of market
efficiency to be had. One of the main reasons
there is so much opportunity is that many
branch networks are inefficient in attracting
and serving target markets. By reengineering
these networks, credit unions can create a much
more powerful delivery array or net, that can
increase both market and household productivity
and profitability. We will present methods to
enhance market productivity and tap market
potential in Chapters 2, 3 and 5, Strategic Growth
Planning, Strategic Branch Planning, and Building
Transformational Brand Experiences.
Productivity of CU Branch Business Model
Low
< $100 million
21%
16%
6%
18%
> $1.2 billion
0%
Acceptable
< $100 million
53%
48%
63%
35%
> $1.2 billion
72%
Good
< $100 million
26%
36%
31%
47%
> $1.2 billion
18%
Branches remain the most effective method of
communicating with members. Today 45 percent
of all members visit a branch at least once a
month. During these visits they are physically
connecting with your credit union, branch
facility, technologies and, most importantly,
staff. While technology pundits say that online
banking, remote deposit, phone banking and the
like will diminish the need for branches, CUs’
physical locations continue to attract, retain and
develop members. Why? It is simple. Many of
us want to know and be known by the people
handling our money. It is an opportunity in life
to feel important and recognized. It is part of
our social network. Branches are here to stay.
Even Bill Gates, who said branches would be
dead by 2005, is now promoting Microsoft
Surface (http://www.microsoft.com/surface/),
as a transaction and information format for bank
and credit union branches. Surface employs
a camera-based vision system that lets users
grab digital content with their hands and move
information between objects with simple
gestures and touches.
The productivity of every existing branch can
be increased through a variety of methods. The
first step is to analyze the performance of each
branch based on a set of performance standards.
These performance standards typically include
deposit and loan growth, net new member
development, cross-sell ratios, profitability,
advocacy scores, and other business indicators.
Additionally, evaluating branch performance
should include retail measurements that gauge
the relationship of space to current and potential
business. This can be done by looking at
branch square footage compared to members,
households, transactions, deposit and loan
growth, and new member development. These
ratios can then be used to drive right-sizing of
existing branches and to predict the amount of
square footage needed for future branches in
new markets. This same technique is used by
successful retailers to ensure they match facility
size to the financial opportunity.
We are often asked for a simple way to
measure an increase in branch performance
after a rebranding and remodeling of branches,
or adding a new branch merchandising program.
One of the simplest ways is to conduct exit
surveys as members leave a branch. We often
see 50 percent to 150 percent increases in
product and service awareness, as well as
improved perception scores. We know that
increased awareness of products and services
often translates into use, which can also be
measured internally. The result is more products
and services sold from the same branch with the
same or fewer staff.
When a clear understanding of each branch’s
condition, potential and performance is
known through member and market analysis
and branch auditing, measures to increase
productivity can be pursued. We will cover how
to enhance branch productivity in Chapter 4,
Retail Branch Planning, Business Modeling
and Prototype Development, and Chapter 5,
Building Transformational Brand Experiences.
25
Use of Merchandising Standards
Participation in Shared Branching
Limited use
42%
< $100 million
39%
48%
16%
56%
19%
67%
22%
> $1.2 billion
57%
> $1.2 billion
29%
Moderate use
< $100 million
45%
44%
44%
17%
> $1.2 billion
29%
High use
< $100 million
16%
40%
37%
61%
> $1.2 billion
42%
The survey responses confirm our experience.
Large credit unions employ merchandising
standards to a greater degree than small credit
unions. This is due in part to the assumed cost of
standards, but the reality is that all credit unions
can afford merchandising standards to some
degree. It is true that large credit unions enjoy the
efficiency of scale to spread the cost of developing
a sophisticated merchandising system among
many branches. Small credit unions can also
enjoy standards of a simpler nature by limiting the
complexity and working with suppliers that can
create effective messaging at a modest cost.
Every credit union with multiple branches should
be employing merchandising standards if it wants to
get the most out of its branches in terms of member
awareness of products and services, cross-selling,
and staff success. Merchandising in its many forms
is the icing on the branch cake. Done well, it can
provide visual interest that can replace artwork,
provide low-cost change, and promote the brand.
Additionally, the right merchandising can be used
to enhance the performance of existing branches
at a very low cost. It also can bring real branch
consistency to the branch experience as well as
to all other delivery channels. The development of
powerful merchandising and messaging systems is
addressed in Chapter 5, Building Transformational
Brand Experiences.
26
< $100 million
A little over half of the responding credit unions
participate in shared branching. This is consistent
with the national average and suggests that while
it has been highly promoted over the past 10
years, pros and cons remain.
Shared branching seems the right thing to
do as a competitive tactic against large banks
with big branching networks. It is a way to offer
service to members in markets where you do not
have a branch. You may be able to acquire new
members as these shared branching members
likely find your branch more convenient. And, it
can help support a new branch as it grows.
While there are advantages, issues can cause
credit unions to turn down the opportunity or
remove branches from the shared branching
network. The cost of providing services to
members through shared branching often
exceeds the income garnered. Non-members
can clog lobbies, making members angry and
reducing the ability to focus specifically on the
needs of members. Branches can become
overcrowded, driving the need for expensive
expansion or relocation to satisfy member needs.
Likewise, parking lots can get crowded. Members
of your credit union that visit other credit unions’
branches repeatedly may find them more
convenient. They are motivated to switch to this
more convenient credit union and are enticed with
their products, services and staff.
Shared branching is the right answer for some
credit unions and the wrong answer for others. We
will talk more about the pros and cons of shared
branch in Chapter 3, Strategic Branch Planning.
Use of Break-Even Analysis for Branches
< $100 million
78%
76%
56%
94%
> $1.2 billion
72%
We were pleased to learn that the majority
of credit unions in our survey use break-even
analysis to understand the potential and payback
of their branch investments. While this is a good
sign, a concern remains that the method and data
used to drive break-even analysis may be flawed,
predicting that some branch projects will perform
better than they actually will. This may convince
the board to approve a project, but down the
road it may mean low or negative ROI, or even the
need to close an underperforming branch.
Efficiencies of scale are apparent in the finding
above. The averages within an asset grouping
may range significantly. For example, a credit
union may need 500 square feet per staff person
when a facility is occupied if such infrastructure
space as lunch rooms, conference rooms, training
areas, storage areas, and lobbies of sufficient
size and number to support the credit union at full
occupancy in five or 10 years are considered. At
full occupancy the average square feet per staff
may drop to 400 or even 300 square feet.
Read Chapter 14, Evaluating the Financial Side
of a Branch Investment for more on how potential
free-standing, owned and leased branches will
perform before they are built. This chapter also
covers how to analyze full branch networks to
understand the impact of adding or relocating
branches.
We were a little surprised by the high average
square footage in each category. We know that
the respondees likely measured their space
differently, with some measuring usable space
(the square footage within your space that more or
less excludes all vertical penetrations through your
floor, such as elevator shafts and space outside the
boundary of your lease, such as hallways, stairs,
and common access areas), others measuring
rentable space [basically usable space plus
common areas (plus 10-15 percent)], and others
considering gross space (all the floor area including
the exterior walls of the building and enclosed by
a roof). These three measurements can vary by 30
percent. Even factoring that consideration into the
averages, they are very high.
Data on Headquarters
Average Square Feet of Headquarters
< $100 million
6,078
15,543
25,865
49,214
> $1.2 billion
85,429
A question always comes up during the
strategic headquarters planning process: Do
we really need more staff and square footage to
grow members and assets? While technology
is streamlining processes and allowing many
“process workers” to evolve to “exception
workers,” more staff is definitely needed for real
growth. The only real way to grow assets without
more staff and facilities is to increase deposit and
loan balances while not increasing the number of
products and services offered, a difficult task.
Average Square Feet per Staff Person
< $100 million
505
476
457
446
> $1.2 billion
415
In our work, we use gross building averages so
that in the strategic planning phase we capture
the amount of space needed for the construction
or purchase of a building. If the best solution is
leasing, we can reduce the requirements by 10
percent to 20 percent depending on building
occupancy efficiency. We plan between 500,000
and a million square feet of headquarters and
corporate office space per year. We find that
the gross building space per staff person at full
occupancy ranges from 270 to 400 square feet
and averages 325 square feet.
The importance of working with highly
experienced planners can be easily seen when you
consider the savings that can be gained with a 25
percent reduction in operations space. For instance,
a 40,000-square-foot building would cost about
$25 million to build and operate over 20 years.
A 30,000-square-foot building would cost about
$18.75 million over the same period. The savings
through good planning could save over $6.2 million.
Is this really possible? Here’s a large example:
In 2008 EHS Design was contracted to re-plan
the headquarters of the city of Seattle. Our
planning work reduced occupancy and costs by
23 percent, a savings of many millions per year.
27
In this book we will share our headquarters
planning techniques and how to create highly
productive and efficient work environments.
Average Assets per Square Foot
< $100 million
$8,956
$10,768
$13,478
$17,120
> $1.2 billion
$20,067
Here again efficiencies of scale tell us why, in
part, large credit unions are operationally different
than small credit unions. Credit unions with over
$1.2 billion in assets have over 100 percent more
in assets per square foot than do the smallest
group in the survey. The consistency of the data
slope suggests a fairly constant increase in assetto-square-foot efficiency, and the incremental
advantage of larger asset size for headquarters
occupancy efficiency. If the cost of occupancy
is constant, large credit unions have a distinct
advantage in terms of occupancy cost to size, as
they are more efficient in terms of staff to assets,
and larger floor plates offer more flexible planning.
CU-Owned Headquarters
< $100 million
65%
83%
86%
100%
> $1.2 billion
100%
The vast majority of credit unions own their
headquarters. We provide strategic operations
occupancy planning for 15 to 20 credit unions
every year. In nearly every case, the credit
unions prefer owning their facilities over leasing.
This is the opposite of many bank institutions
because leasing headquarters and branches
can bring tax advantages that exceed the value
of asset appreciation.
Owning headquarters facilities is always the
best option for credit unions if occupancy is
going to exceed six or seven years. Before six
or seven years, threshold lease costs are less.
After six or seven years, occupancy cost for
headquarters are more expensive in a lease than
ownership. When you calculate the difference in
occupancy cost for a 40,000-square-foot facility
28
over 20 years, the difference is many million
dollars in savings through ownership even with
the opportunity cost included. When you add
the pay-off of the facility to the appreciation, the
difference can be $10 million to $20 million added
to the bottom line.
We will discuss owning vs. leasing in more
detail in Chapter 10, Site Acquisition.
Plan to Expand Headquarters Over Next
Three Years
< $100 million
35%
30%
36%
56%
> $1.2 billion
20%
One-third to one-half of credit unions under
$1.2 billion plan to expand their headquarters
over the next three years. By extension this
suggests that a similar fraction expect to grow
rather than just relocate—a positive industry
trend. The cost of headquarters facilities is the
second most expensive and least flexible cost
for most credit unions. The planning that drives
this high level of spending must be accurately
tied to each credit union’s business plan and
potential improvements in efficiency. This
analysis may project the need for significantly
more space or it may suggest that little or no
additional space is needed.
We recently completed a headquarters
occupancy analysis for a $2 billion credit union
that was projecting asset growth over the next
10 years at the rate of 15 percent per year, but
only an increase of less than 3 percent per
year in staffing needs. There are many reasons
for this low projection, including evolving from
“process workers” to “exception workers” and
growing member account levels rather than
more members. Projecting too much space
may take unnecessary capital out of the credit
union, while too little space is costly in terms of
short-term expansion, relocation and business
disruption. The planning must be accurate and
the occupancy solutions must offer options that
can respond to change.
General Facility Questions
Going Green
Own vs. Lease
Not important
< $100 million
68%
< $100 million
16%
84%
24%
88%
25%
67%
17%
> $1.2 billion
71%
> $1.2 billion
29%
We asked if credit unions would prefer to own
or lease their facilities and received a different
answer than we did to the previous questions.
This is because the answer must blend both
headquarters and branch facilities. Most credit
unions want to own their headquarters and
branches, but understand that branching requires
more flexibility to get the desired retail location to
be successful.
In most strong retail markets today, it is very
difficult to find land to build on. Often there is
a pad, but it is a ground lease. Sites can be
purchased, but at a very high cost. Purchasing
a site might be the right answer even if 0.6 acres
cost $2.2 million because the cost is being
amortized over 30 or 40 years and purchasing is
actually less expensive than a ground lease on
the books.
The branching strategy may tell a credit
union it needs to add five branches to a market
within three years to create market convenience
saturation sufficient to grow quickly and compete.
The cost of five free-standing branches could
be $10 million, while the cost of leased facilities
could be $3.5 million plus lease costs. This lower
cost could accelerate market placement and
allow free-standing branches to be developed at
the end of the leases.
important
< $100 million
63%
52%
56%
56%
> $1.2 billion
14%
very important
< $100 million
21%
24%
19%
27%
> $1.2 billion
57%
Five years ago the term “going green” was on
the minds of very few credit union CEOs, as there
was little in the news about it and none of their
peers were engaged in greening their facilities.
There has been a huge change in credit unions’
interest in developing and operating sustainable
facilities. It is hard to open a magazine today and
not find a reference to sustainability in building
design, products and services, brand integration,
and community service.
A window opened in about 2006 for credit
unions to consider the value of going green in
terms of their brands. How would the addition
of green initiatives help to differentiate a credit
union from other financial institutions, make its
staff proud, increase member use of its products
and services, decrease long-term operating
costs, make it a great corporate citizen, and
increase its growth and revenue? The window
of differentiation is closing as more and more
institutions are going green and municipalities are
adopting green building and operating standards
to force change. In the near future going green
will be a requirement rather than an option for
business owners.
29
The big question for most credit unions is
how they should best integrate green. What are
the costs and benefits? How much more does
it take to create a green facility? Is it worth it
in terms of lifecycle costing? If we go to LEED
certification, what is the cost and what is the
brand enhancement return?
Read more on this in Chapter 8, Going Green.
General Growth Questions
Asset Size Needed to Survive and Thrive in
Five and 10 Years
Current average asset size
< $100 million
$54 million
$167 million
$349 million
$843 million
> $1.2 billion
$1.7 billion
Assets needed in five years – 2013
< $100 million
As we see the economy change and many credit
unions find themselves in difficulties, the option to
grow quickly through mergers and even mergers
of equals is becoming more attractive and even a
necessity for some. Read more about how credit
unions can realize their growth objectives through
mergers in Chapter 11, Mergers: Market Expansion,
Branching and Headquarters.
How Important is Growth to Your Credit
Union’s Future?
Low importance
$126 million
$254 million
< $100 million
$593 million
4%
$1.1 billion
7%
> $1.2 billion
$2.6 billion
0%
> $1.2 billion
0%
Required five-year growth
< $100 million
131%
3%
52%
< $100 million
70%
22%
27%
0%
> $1.2 billion
52%
13%
> $1.2 billion
0%
Assets needed in 10 years – 2018
< $100 million
15%
Very important
$313 million
$424 million
< $100 million
$944 million
74%
$1.6 billion
93%
> $1.2 billion
$7.5 billion
87%
> $1.2 billion
100%
Required 10-year growth
30
Last year at a CUES conference, we asked 65
CEOs and board chairs of credit unions with $500
million or more in assets how big they need to be
in five years to be viable and competitive in their
markets. The average response was $1.5 billion.
The reasons for this high number included the
expectation of efficiencies of scale, the need for
wide market coverage, and the cost of resources to
compete. This need to grow motivated a few of the
attendees to consider and consummate mergers of
equals, propelling them toward their goals.
< $100 million
475%
154%
171%
86%
> $1.2 billion
338%
82%
Few credit unions feel that growth is not
important to their future and most see no growth
as actually a decline. Growth can take two forms,
including members, assets, loans, and share
of wallet. For instance Orange County’s Credit
Union (http://www.orangecountyscu.org), Santa
Ana, Calif., grew from half a billion in assets
to nearly a billion by reengineering its branch
network, adding branches and growing members.
North Shore Credit Union in British Columbia, on
the other hand, grew assets from three quarters
of a billion to two billion in four years and only
added 500 members.
We have seen the impact of efficiencies of
scale in the above tables. We know that adding
branches is one of the main drivers of growth. We
also know that branch networks and branches
must be highly productive and efficient to
maximize both asset growth and ROI. Our work in
this book is to help each credit union create and
operate branches and operations facilities that
support strong growth and ROI.
Member Growth Expectations Over Next
Five Years
0 percent – 2 percent
< $100 million
12%
5%
0%
0%
> $1.2 billion
0%
majority of these are credit unions with more than
$500 million in assets. These are credit unions
that did not get involved in troubled lending
markets and are continuing to add branches
and pursue growth. For instance, $646 million
Advantis Credit Union (http://www.advantiscu.
org), Portland, Ore., grew 30 percent in 2008
through the enhancement of deposit and lending
products and a shift in focus from workplace to
community convenience.
Even with the poor economy, all the credit
unions surveyed felt they would grow to some
degree. It may be that the most optimistic and
well-positioned credit unions responded, or that
there remains a strong positive feeling about how
well credit unions can compete in the future.
Based on the above growth projections, many of
these credit unions will need to build branches and
headquarters facilities. Planning to enhance existing
branch network performance starts today to ensure
these credit unions build on a solid foundation.
Importance of Mergers to Growth
Low importance
< $100 million
26%
< $100 million
46%
27%
43%
29%
36%
20%
60%
> $1.2 billion
0%
> $1.2 billion
60%
< $100 million
44%
< $100 million
30%
36%
43%
42%
57%
40%
40%
> $1.2 billion
40%
> $1.2 billion
20%
More than 10 percent
Very important
< $100 million
30%
< $100 million
12%
37%
9%
29%
7%
40%
0%
> $1.2 billion
60%
> $1.2 billion
20%
The 2009 economy has much to do with these
responses, which are less optimistic than growth
expectations over the last five years. While the
economy may be down, some credit unions are
continuing to experience good growth. The vast
The vast majority of credit unions feel that
mergers are moderately to very important to their
growth. If we had asked the same question five
years ago, the trend would likely have placed
a lower importance on growth. In our strategic
branch planning work, we include mergers as
31
one credit union branch expansion strategy. Five
years ago many of the boards felt this was not
necessary. Today, nearly every credit union board
we work with wants to understand how mergers
can help them grow, what merger partners might
be available, how the process of approaching,
negotiating and merging should be handled, and
the cost of such an undertaking.
Read more about finding the right merger
partners to enhance service, enjoy efficiencies of
scale, and grow in Chapter 11, Mergers: Market
Expansion, Branching and Headquarters.
Importance of Small Business Banking
Not very important
< $100 million
44%
28%
31%
22%
> $1.2 billion
43%
Important
< $100 million
30%
36%
44%
28%
> $1.2 billion
43%
Very important
< $100 million
36%
36%
25%
50%
> $1.2 billion
14%
Small-business lending is still in its infancy
within the credit union industry. Some credit
unions have done well, others have seen great
failure in terms of loan losses, while others,
observing the risks, are moving very cautiously or
just saying no. Small-business banking is a way
credit unions can increase market and branch
performance by tapping new opportunities often
within the same market. It is another method of
fueling growth with the same physical resources.
The addition of small-business banking has
an impact on facilities. In branching, it may mean
the addition of a business banking office or a
merchant banking window with extra security.
It could be the addition of a coin counter. In
32
operations, it may mean the addition of staff to
facilitate remote capture and process courier
deliveries from businesses.
Small-business banking has an impact on
branching strategies as well. Where should
branches be located to serve both consumers
and businesses? Does a different type of branch
need to be developed for business banking?
Can you initially lead into a new market with
small-business-banking from a leased office like
business bankers do, and then build a branch
around it? Should a business-focused branch be
developed downtown? Should business services
be centralized or decentralized? Should business
processes be located with the headquarters or
with a remote business office?
There will be more to come on this in Chapters
2, 3 and 4, Strategic Growth Planning, Strategic
Branch Planning—Member, Market and
Opportunity Analysis, and Retail Branch Planning,
Business Modeling and Prototype Development.
CEOs’ Facility Questions
At the end of the survey we asked the
responding CEOs to tell us the questions they
would like addressed by this book. Following is a
list of these questions with the location where we
address each.
Questions about determining locations:
• How do you pick the best locations?
• How do we ensure the location we select will
fuel growth?
• What demographics should be considered in
determining a viable site?
• Is it more important to locate a branch where
people work or reside?
• How important is accessibility to a branch?
What are the concerns?
• What is the best way to gather data for
selecting a branch site? What are the pitfalls?
• How do you predict the real success of a
new facility?
Answers to these questions can be found
in Chapter 2, Strategic Growth Planning—A
360-Degree View, and Chapter 3, Strategic
Opportunity Analysis.
Questions about automation:
• How can we get more members to accept
automation in existing and new branches?
• ATMs seem to be left out of facilities
strategies. How do we develop and deploy
an ATM strategy?
• How do we know where to place ATMs?
• Are remote teller systems of real value
outside the drive-through?
• What self service will members actually use
in a branch?
• What is the best way to use cash dispensers?
• Is it better to have private loan offices or loan
closing rooms?
• How can we anticipate ATM transaction volume?
• Which are better, traditional teller lines or
teller pods/dialogue stations?
• Are automated branches out?
Answers to these questions can be found in
Chapter 4, Retail Branch Planning, Business
Modeling and Prototype Development.
Questions about branch marketing:
• How should we market a new location for
best results?
• What is the best way to market a new facility?
in Chapter 5, Building Transformational Brand
Experiences—and Generating Big Results.
Questions about break-even analysis:
• How can we calculate accurate break-even
projections?
• How can we trust break-even projections
from facility vendors?
• How does break-even analysis differ between
in-line, in-store and stand-alone branches?
• How can we project ongoing facilities costs?
• How can we accurately calculate branch
profitability?
• What should we expect to be average
break-even times?
Chapter 14, Evaluating the Financial Side of a
Branch Investment.
Questions about facilities costs:
• What should branches cost per square foot?
• How can we manage costs for building out
existing space?
• How can we manage costs for
new construction?
Questions about branch productivity:
• How can we ensure high branch productivity?
• What traditional and non-traditional methods
can we use to measure branch efficiency
and use this information to predict the sizes
of future branches?
in Chapter 3, Strategic Branch Planning—
Member, Market and Opportunity Analysis,
Modeling and Prototype Development,
Chapter 5, Building Transformational Brand
Experiences—and Generating Big Results, and
Branch Investment.
Questions about “going green”:
• What are some green sustainability ideas?
• What are some of the most common energysaving and monitoring tools?
• What have others done to go green?
• What are the benefits of going green?
Chapter 8, Going Green.
Questions about membership:
• How can we estimate member growth potential?
• How do we know who will use our branches
(seniors, Gen X or Y)?
• What do these members want to see in
a branch?
• How do we create a memorable
member experience?
• How important is mapping your members’
residential locations?
• How do we balance the convenience needs
of consumer and small business members?
• We have an aging member base, what
methods can we use to bring in young
members and bring down the average age?
• What methods can we use to retain members
if our branches are not geographically
convenient or they move away?
Chapter 3, Strategic Branch Planning—Member,
Market and Opportunity Analysis, Chapter 4,
Retail Branch Planning, Business Modeling and
Prototype Development, and Chapter 5, Building
Transformational Brand Experiences—and
Generating Big Results.
Branch Investment.
33
Questions about staffing:
• How do we determine how many staff we will
need at branches and operations centers?
• How can we evolve our retail branch
staffing model?
• Should branch managers’ responsibilities
be evolving?
• Is working from home a viable option to
reduce operations space?
• Is a designated greeter a plus in branches?
How can this be afforded in small branches?
• How can we increase staff brand knowledge
and ensure they deliver a strong brand
experience to our members?
Prototype Development, Chapter 6, Strategic
Operations Occupancy Planning, and Chapter 7,
Headquarters Planning and Design.
Questions about security:
• What are the options for creating secure
branch environments?
• What is SafeCatch?
• What are the security options in
headquarters facilities?
Modeling and Prototype Development, Chapter 7,
Headquarters Planning and Design, and Chapter
12, Security Planning and the Rise of SafeCatch.
Questions about branch design and
merchandising:
• What are the latest innovations in
branch design?
• What are the options for developing
merchandising standards for small and large
credit unions?
• What is the best way to develop and deploy
branching standards?
• What is the advantage of branching standards?
• How should branches be planned to create a
powerful member experience?
• How can branch planning increase sales?
• How can branch merchandising increase sales?
• Can small branches be highly efficient
member development centers?
• Are there effective non-traditional
merchandising strategies?
• How can I get a merchandising standard on
a shoestring budget?
• Are drive-through facilities essential?
• What makes a drive-through successful?
• What does retail efficiency mean?
• What is the return on creating a high-end
retail member experience?
• Should community rooms be included
in branches?
in Chapter 4, Retail Branch Planning, Business
Modeling and Prototype Development and Chapter
5, Building Transformational Brand Experiences—
and Generating Big Results.
Questions about headquarters facilities:
• How can I accurately project staffing and
space needs for 10 years?
• What are the occupancy options?
• Is it better to lease or own my headquarters?
• How do I mitigate the risk of expanding our
facilities or building a new facility?
• Should I use a local architect or a credit
union specialist for our new building? What if
the local architect is cheaper?
• What are the tangible benefits of
consolidating operations?
in Chapter 7, Headquarters Planning
and Design.
34
Questions about space usage and sizing:
• How many members can a teller support?
• What is the minimum size of a branch to
be effective?
• What factors should be taken into account
when sizing a branch?
• How can we design efficiency into our branches?
• What should be the space standards based
on full-time equivalent staff size?
• What non-traditional ratios should be used to
measure space?
Prototype Development, Chapter 6, Strategic
Operations Occupancy Planning, and Chapter 7,
Headquarters Planning and Design.
Questions about technology:
• What enhancements should I consider for
our branches?
• What is the impact of technology on
facility planning?
• How can technology be used to reduce
branch staffing?
• What is your prediction about how
technology will impact the need for bricks
and mortar?
• What space should be provided for IT in
new facilities?
• What role should IT play in the development
of facilities solutions?
in Chapter 4, Retail Branch Planning, Business
Modeling and Prototype Development, and Chapter
7, Headquarters Planning and Design.
Questions about owning vs. leasing:
• What is better, to own or lease?
• What is more effective, a leased inline branch
or a stand-alone branch?
• Is it better to buy an existing building or build
a new facility?
• What is the relative impact of leasing vs.
buying facilities?
Strategic Operations Occupancy Planning, and
Branch Investment.
Questions about shared branching:
• What are the pros and cons of
shared branching?
• Do shared branch facilities work?
Answers located in Chapter 3, Strategic
Opportunity Analysis.
Questions about strategic branch planning:
• Is it necessary to offer expanded branch hours?
• When should we close or relocate branches?
• How can we create a strategic branch plan
we know will be productive?
• What are the hidden pitfalls in branch planning?
• Do branches matter anymore?
Market and Opportunity Analysis.
Questions about working with facilities
vendors:
• Is design/build the best answer? What are the
viable opportunities that can remove risk?
• What type of contracts should be used?
• What should be expected from a design/
build contractor?
• How do shared savings work?
• How can I trust that I am getting the best
price if I do not bid?
• My board wants to bid. I want to negotiate the
contract. How do I convince them I am right?
in Chapter 13, Construction Delivery Methods
and Strategies.
Questions about mergers:
• Do credit unions need to merge to survive in
the future?
• What are the pros and cons of merging into
a larger credit union, a merger of equals and
acquiring small credit unions?
• How can I be certain the interests of my credit
union, its members, my board of directors
as well as my interests as CEO are protected
through the merger process?
• What are the danger points in mergers?
• What are the alternatives to mergers?
• What are my board’s responsibilities
concerning mergers?
• How big do credit unions need to be in the
future to thrive?
in Chapter 11, Mergers: Market Expansion,
Branching and Headquarters.
35
36
02
Strategic Growth Planning—
A 360-Degree View
Eighty-three percent of the CEOs who responded to the CUES/
EHS Design 2009 CU Facility Study said that growth is very
important to their credit unions’ futures. We know from our many
conversations with medium-size to large credit unions that only
about 20 percent employ a strategic growth plan, and about
50 percent employ a strategic branching plan. While both are
important in the development of a highly productive branching
network, developing strategic branching strategies and tactics
without savvy, clear and rational growth strategies weakens the
potential ROI and lessens the potential return on a very high cost
delivery system. Image the difference just a 10 percent increase
in market penetration and relationship efficiency would do to your
bottom line. These strategic plans can help you get there.
Chapter 2 • Strategic Growth Planning —A 360-Degree View
37
In this chapter we will explain the planning
process, including the integration of specific skill
sets and the benefits credit unions can gain through
strategic growth planning. This work can answer
many questions that should enhance overall credit
union performance and improve the ability of the
branch network and operations facilities to be highly
productive and help drive growth.
• What is the capacity of our existing market
to support our growth objectives? What are
realistic growth objectives?
• Do we enjoy a strong brand image that is
delivered through our culture and all delivery
channels?
• Do our products and services align with our
target markets? Should we add or remove
any?
• Do we need to add products and services
or expand our network to meet our growth
objectives?
• Is our existing branching and ATM network
highly efficient and productive?
• What role should mergers play in the growth
strategy?
• Are we using the right data to drive our
decision processes?
• Do we have the right measurement systems
in place to evaluate our current situation and
test ongoing performance?
This chapter is placed before the strategic
branch planning chapter because branching
strategies always underperform when they are
not in support of a clear, rational and unbiased
strategic growth plan. This has been confirmed
through observation of many credit unions and
banks and can be illustrated by a specific credit
union example.
38
Strategy Is Not Enough
The CEO of a $690 million credit union in
Pleasanton, Calif., wondered the following: “Is
a good old-fashioned strategic plan in today’s
highly competitive environment enough to help
your credit union truly thrive?” The answer, found
CUES member Victor Quint, CCE, CEO of United
Services Credit Union (http://www.1stuscu.org), is
“no.” To quantify real growth from market share,
member loyalty and efficiency, the traditional
strategic plan must be enhanced with a balance
of ongoing growth measures that board and
management agree on and measure.
“We have an excellent five-year strategic
plan,” says Quint. “We use a balanced scorecard,
measure branch and member profitability, have
clearly defined goals and an excellent market for
growth in California. Despite all that, we’re still
not growing or achieving the level of growth and
success we know we are capable of, and we’ve
been unable to answer, ‘Why not?’”
Quint adds: “We had diverse measures of
what growth we really wanted and we needed
someone to connect the dots in our branch plans
and locations, and our marketing programs, our
SEG business development, indirect lending,
member services, and our brand to see why
it’s not all working at peak performance. We
especially needed a well-defined set of growth
strategies and performance measures the board
and management all agreed would help us reach
our vision of being No.1 in our market. We felt that
average growth was just not good enough for us;
we want to be great.”
Strategic planning and even growth goals
provide an incomplete definition of a “thriving
credit union.” Is a 3 percent new member growth
rate good or bad if it includes indirect members
who only have a loan with your credit union?
Does 3 percent to 5 percent asset growth
indicate success, or is that just survival? As
consultants, we know something is missing when
we find banks growing in certain markets at twice
that rate. It’s our job to uncover those missing
puzzle pieces and help the credit union focus
its resources and energies where they are not
performing to their fullest capability.
Faced with the increasing challenge of a record
low new member growth rate of 1.5 percent
since 2002, credit unions are struggling to find
new core deposits (beyond bringing in CDs with
costly above-market rates.) In consideration of
these issues, combined with low brand and name
awareness in their markets, how can credit unions
proactively manage and leverage their growth
and performance against aggressive banks
and increasing competition from other growing
community and TIP-chartered credit unions? For
a while credit unions and community banks will
enjoy some level of added member growth due
to the bad publicity surrounding bank failures.
When the economy comes back, big banks will
be leveraging their scale to again fight for new
customer growth.
In early 2008 the CEO Advisory Group
completed its National Credit Union CEO Survey,
gathering key strategy input from 116 CEOs
throughout the United States. In early 2009
EHS Design and CUES completed a facility
and growth survey of 109 credit unions across
the nation, which provided some trend data
and responses based on the downturn in the
economy coupled with the growth opportunities
presented by the demise of many big banks.
The surveys uncovered some interesting and
disturbing trends:
• While generating membership growth has
become a significant industry issue this
decade, credit unions continue to focus on
wallet share as their primary growth strategy,
with 72 percent of CEOs considering this
“very important.”
• Surprisingly, only 15 percent of credit unions
reported mergers as very important to their
growth strategy at the beginning of 2008,
while in 2009 this figure jumped to over
70 percent, reflecting the realization that it
will become increasingly hard to compete
without substantial resources and economies
of scale to enhance efficiency.
The 2008 growth survey found that 50 percent
of responding credit unions did not have or
employ either market and member analysis
or a strategic branching plan to support their
most expensive capital decisions. Despite this
lack of guiding strategy, over 68 percent of the
CEOs responded that they plan to add one to six
branches over the next few years.
In our 2009 survey we asked the same
question by asset size and found that, as you
would expect, the bigger the credit union the
more likely they were to employ a strategic
branching plan. While it seems logical for a bigger
credit union to use a strategic plan, the cost to
develop and operate a single branch is nearly
the same whether you have assets of $80 million
or $5 billion. You can see one reason why large
credit unions often are more successful.
Getting to the tough assessments of growth
performance requires the best thinking of a credit
union’s leadership and may require an outside
consultant with the right diagnostic skills. The
core questions remain constant: Does your
board and management team define and manage
growth metrics that are reliable and actionable
yet realistic?
Your answer should consider these thinking
points:
• Net member growth should also reflect
depth of member relationship and be tracked
accordingly through time. Growth by its very
nature is not static.
• Is adding 2,500 new members a year
profitable or beneficial growth in itself? What
if 60 percent of those new members are
single-service indirect loan members who
leave on average in 18 to 24 months?
• When you reach that next asset
milestone—$100 million or $350 million
or $1 billion, will your worries be over and
economies of scale rain down?
• A quarter of the respondents to the CEO
Advisory Group survey were considering
changing their field of membership charter in
the next three years.
• Fifty percent of the participants regarded
their branch structure as “important” or
“very important” in driving new member
growth in the 2008 survey. One year later,
over 60 percent of respondents rated branch
structure that high as a driver of growth.
39
New Charter, New Strategy
Simply landing a community charter or
changing names without a strong brand program,
solid demographic based media planning,
coordinated staff brand, service and sales
training, and targeted marketing efforts does
not usually yield the kind of growth that sets
organizations on a solid growth path in their
target markets.
A few of the most common failings we find
that steer planning and branching strategies the
wrong direction are:
• Indirect lending strategies that do not include
retention and branch service and target
member household growth tactics;
• Market growth strategies that do not take
into consideration the tactics needed
to create true market efficiency and
productivity;
• Tactical moves that lack assigned personal
responsibility;
• Strategic planning that does not clearly
link processes and objectives to maximize
benefits;
• Lack of multiple growth scenarios that can
be pursued simultaneously;
• Lack of ‘fall-back” strategies; and
• Strategic growth plans that do not include a
mutual definition of what growth means or
an agreed-to success measurement matrix
between the board and management team.
Strategic plans aren’t sacred stone tablets.
Rather they are meant to be a guide for focusing
resources around common goals. But when those
objectives aren’t working, or an organization lacks
certain experience, skills or marketing savvy to
perform to its highest potential, a realistic and
objective outside assessment of performance,
trends and problems can help steer a credit union
onto a new track and supercharge them back into
the race, not just to play, but to win.
Growth planning preparation starts with an
objective 360-degree assessment of a credit
union’s situation, followed by active positioning,
and creating core strengths.
Every credit union must develop and diligently
employ savvy growth and defensive strategies
to ensure a bright future and prosperity for the
institution. Some of these strategies include
organic growth and maximizing current market
potential instead of cherry picking new locations
40
in new remote markets; not pursuing mergers
without consideration of the net gain in terms of
efficiency; and strategically enhancing member
service and growth.
By helping credit unions agree on a new
set of key performance indicators, the board
and management can enhance their monthly
meetings with clearly defined progress reports on
performance and re-align targets for growth to
more easily defined impact measures.
These could include monitoring Net Promoter ®
Score instead of simply measuring member
service satisfaction to identify the value of
referrals and propensity to purchase. Net
Promoter Score, in its simplest form, is the
percentage of your members who promote your
credit union minus the percentage of detractors.
Glenn Christensen of the CEO Advisory
Group, Kent, Wash., says: “We regularly shift the
measurement of net new members to net growth
of target consumer markets, average balances
and share of wallet.” Many credit union managers
can tell you their share of market and customer
retention ratios, but they should have more.
Credit unions employing enhanced measurement
techniques are seeing market share increases
that are making branches more efficient, reaching
break-even and profitability more quickly, and
penetrating their regional markets with targeted
convenience radius overlaps and economies of
scale.
The key to a successful growth plan is creating
linkages to the credit union’s strategic business
plan with clear targets for measuring constant
performance and both good and bad results as
they occur.
For most credit unions growth is a function
of three basic components, collectively called
“organic growth.” These include:
1.Retaining members
2.Generating new members
3.Growing deeper relationships with existing
members
A fourth, and increasingly popular and costeffective growth strategy, is growth through
proactive mergers and acquisitions. This strategy
for growth can set a faster and smarter pace of
leveraging an organization’s systems and people
to create “wins” for all parties.
Looking at the drivers of organic growth, the
science of growth becomes more complex.
Credit unions must synthesize data and analysis
from a multitude of sources to craft a plan that
effectively generates sales leads, converts these
leads into sales, and fosters member retention.
The 2008 National Credit Union CEO Survey
(available for free at ceoadvisory.com; choose
“Articles” and then “learn more” in the right-hand
column) found these top four strategies credit
unions are currently undertaking to generate
organic growth:
1.Improving internal sales culture,
2.Increasing brand awareness,
3.Marketing and advertising, and
4.Expanding Web and online banking services.
While these are all important strategies, we
often find credit unions lack clearly defined
measures to evaluate how effective they are in
executing them.
With the ups and downs of the economy, credit
unions must find new avenues for expansion to be
relevant and survive and prosper in the future. One
of the survey participants noted that in the future
credit union growth will come from “penetration of
small businesses for loans, deposit services, and
their consumer needs as well.”
Why do some growth planning strategies
succeed while others fail? Often it’s the failure
of one or more strategic or measurement
characteristics.
Unrealistic or unachievable goals.
Occasionally boards have unrealistic goals for the
management team and aggressive targets for new
member growth or return on investment or new
branch paybacks they heard someone else reach.
Management, trying to show they are capable and
open, can destroy their credit unions and careers
at the same time by striving for the unattainable.
For example: We received a call from the CEO
of a $500 million credit union who wanted some
advice about measuring growth. In the first two of
the past five years, his credit union had grown the
membership by 10 percent and 12 percent. For the
past three years growth had declined to 7 percent,
3 percent and 5 percent while ROI had ranged
between .95 and 1.2. The board of directors was
very unhappy with the “underperformance.”
We analyzed past performance and market
opportunities against the current and projected
environment, products and services, competition
and other factors. The result of this analysis
was the realization that with the current array
of products and services and board restriction
on small-business lending, field of membership
modifications, and a brand with decreasing
relevance to new members, the board’s
expectations where unreasonable. We suggested
goals that matched the opportunities: 2 percent
to 3 percent growth per year with no changes in
board policies, 4 percent to 6 percent with an FOM
enhancement, 5 percent to 8 percent with the
addition of small-business banking and 7 percent
to 11 percent after rebranding. Additionally we
found that the board had cut back on marketing by
40 percent. The marketing budget had to align with
growth goals and was increased by 50 percent.
The result after three years: growth at the board’s
desired rate and success for the management
team.
Another common example of boards being
unrealistic about potential growth is market size.
Can a credit union realistically grow at the rate
of 15 percent per year and double in size in four
to five years? In some markets where a credit
union has a small market share, is competitive,
and willing to market heavily, the answer is yes.
But in some markets growth cannot continue at
a high rate because there is a point at which a
credit union approaches market saturation and
hits a ceiling. Boards must realize that just doing
the same thing in terms of FOM and products
and services may not be enough to attain a
specific growth goal. They need to understand
the correlation between products and services,
brand, culture, marketing, FOM and growth so
they do not set unreasonable expectations for
their management team.
Measurable with a timeline. The difficulty
for many management teams and boards is
that measurement systems are not integrated
with clarity of how measurements may affect
real productivity, efficiency or profitability.
For instance, are members with low checking
balances considered non-productive when they
hold a mortgage and car loan? Is a branch really
not performing if members are not properly
assigned based on recent activity vs. historic
association at the main branch? Member growth
and member relationships must be assessed over
the long term, not in a short-term, annual context.
Credit unions must also be realistic about
how long it can take to benefit from specific
actions and set realistic goals. For example, the
return on marketing cost varies depending on
the type of market. Rate marketing can provide
quick return as rates are one of the two highest
drivers of new member development. But the
relationship created by a rate special is shallow,
41
and must be reinforced with deeper relationship
development if the new members gained by such
a promotion are to be retained. General marketing
of products generally has a much deeper impact
on relationship building and a higher long-term
payback. But it takes longer to realize the benefits
from this approach. Our 2008 analysis of 5300
reports over five years indicated that the return
on general marketing took between 18 and 24
months to realize. But, if marketing was reduced,
credit unions went into decline.
to generate target growth and create a thriving
credit union that could better afford a new
headquarters in three years.
Clear tactics. Prioritized growth initiatives,
markets and marketing must be established and
measured. There are always many things that can
be done to enhance growth and ROI, typically
more than any credit union can afford. What is the
value of a new operating system compared to a
new headquarters? Is it more important to build
three branches than to purchase a mortgage
company? Should we spend our money
developing a new brand and culture or should we
expand our ATM network?
Fall-back strategies. It is difficult to think of
failure when pursuing growth opportunities, but
what if a strategy fails? What if the economy
fails? In growth, the game is about winning more
than you lose. Think in terms of best- and worstcase scenarios and constantly expand your
knowledge base.
The board has no choice but to prioritize, as
there are limited funds. It is essential that boards
and the management team have a common
understanding of the relative value of these needs
in helping them reach their goals.
Last year we were asked to help a credit union
develop its strategic operations occupancy
plan and design and build a new headquarters
facility. Our first step was to discuss the credit
union’s key issues and goals. Their desire was
to consolidate operations, enhance operations
efficiency and have a much nicer facility for the
staff. The credit union’s overriding goal was to
increase membership within a tight target market
group, enhance relationships, and increase ROI
over the next three years.
Our presentation evolved into a facilitated
discussion about priorities and what was most
important to the credit union. The result was a
shifting in priorities. The credit union’s leadership
realized that without focusing their resources on
new member development, products and service
and cultural enhancement, they could not reach
their growth goals, particularly in consideration of
the narrowing window of opportunity. The credit
union’s leaders realized that with some modest
modifications to the existing headquarters
facilities, they could retain functional occupancy
for two to three years and dedicate their time,
energy and money to building members, assets
and capital. The next meeting was about how
42
Parallel strategies. When possible, more than
one strategy should be pursued at the same time
to enhance the potential for measurable success.
A good example is branch expansion. Is it best
to go into new or contiguous markets with new
branches and staff, or pursue merger partners?
We think it is best to pursue both, unless there
are no realistic merger opportunities.
Most boards do not like the idea of their credit
union being merged into another. It seems like it
is giving up after so much work has been done.
It is the loss of an entity, a place of friendly
association, even an extended family. But, what if
the strategies do not work, plants close, there is a
recession, huge loan losses, something happens
to the CEO? What is best for the members and
the community?
In planning, even in the best of times, it is
important to understand how a credit union will
respond in the worst of times. Most credit unions
develop three to five long-range scenarios based
on their environmental conditions assessment
and projections. For example, “If our credit union
expands its FOM to a community charter, we will
likely grow at 10 percent a year, increase average
accounts per household to 3.2, and enjoy an ROI
of 1.60 within five years.”
For many small credit unions in large markets,
community charters are not turning out to be the
expected panacea for success. If the strategy
does not work and the credit union begins to
decline, when should drastic measures be taken?
When should a credit union consider a merger—
when it drops in capital from 11 percent to 8
percent and is still healthy and able to negotiate
on behalf of the members and management
team, or when capital drops to 6 percent?
Fallback plans are a safety net that can be raised
or lowered depending on the level of risk.
A Brave New World
Credit unions have thrived because they
have kept members first. With that in mind,
we must be willing to champion change based
on objective analysis and realistic goals. Most
growth strategies are too short sighted. A
three- to five-year business plan is appropriate
for tactical application of a strategy, but growth
strategies must look more long term. Most viable
credit unions will be operating in five, 10, 15 and
20 years; thus the strategies should look at the
same period. If the perspective is not long term,
short-term decisions may be less effective and
even damaging in terms of long-term growth and
creating a thriving credit union for the future.
Growth planning is a fundamental and
exciting process for credit unions. It is the time
to set a vision for the future and understand
the deep mission of the organization, as
well as its potential for success. Growth
planning generates the strategies, tactics
and measurement systems that will help the
organization reach its projected potential.
43
44
03
Strategic Branch Planning—
Member, Market and Opportunity Analysis
Less than half of the respondents in the 2009 Credit Union Facility
Survey indicated they employed strategic branching plans to
locate, size and operate new branches. This is a troubling figure
when you consider that over 70 percent of the respondents said
branches were important to the growth of their credit unions
and over 65 percent said they would be building one or multiple
branches over the next five years.
Due to the economic situation, some credit unions are telling us
they are not concerned about the long term right now. Instead
they want to understand what tactical actions they can take today
and next month to reduce operating cost. The heightened risk
of operating an inefficient branch network and the need to make
critical decisions about which branches to close, retain, relocate,
downsize, expand or remodel makes strategic planning even more
important. While many credit unions must find ways to cut costs,
they must also make the right decisions—decisions that will not
negatively impact the credit union over the long term. Otherwise,
short-term emergency moves may lead to long-term poor
performance and the continuing decline of the credit union.
Chapter 3 • Strategic Branch Planning—Member, Market and Opportunity Analysis
45
Without a strategic branching plan and the
resulting tactical initiatives, how does a credit union
answer key questions before making a decision?
• Does the existing or new branching network
support the growth plan?
• Is there a clear understanding of the target
market and are their realistic performance
expectations?
• Can you meet your growth objectives
within the existing market and competitive
environment? What are the alternatives?
• What is the current market efficiency and
productivity and what are the projections for
the next five to seven years?
• Should philanthropy and business objectives
be combined to drive location decisions?
• Should changes be made to the existing
network to improve market performance and
long-range competitive positioning before
the next new branch is added?
• Do the existing branches perform at the
highest level and what needs to be changed
before we spend $500,000, $1 million or $2
million on a new branch?
• Have alternative delivery systems been
integrated into the branching program?
• Should resources from remote branches
be consolidated to increase performance
through market efficiency? What level of
income can be generated?
• What would be the impact of mergers?
• How should the ATM strategy be integrated
into the branch plan?
• What are the delivery and budget
correlations between the branch and
operations objectives?
• Has “break even” been considered in the
existing and new branch evaluations?
• Do you have the right staff culture to deliver
on your service promise going forward?
• Are the right tools in place to measure
performance?
• Do the branches deliver a strong and
differentiating brand experience for members
and staff?
These and many other credit union-specific
questions must be answered by the strategic
branching plan. To place a new branch without
a clear understanding of how it will impact the
existing network and perform over the long term
is a poor use of member funds.
• What are the priorities in terms of siting
new branches, and relocating, closing, and
remodeling existing branches, based on
getting the biggest bang for the buck?
Strategic Growth Plan
vs. Strategic Branch Plan
• What is the impact on branch placement
of adding new products and services,
expanding the credit union’s field of
membership, or adding business banking?
• Is the branch business model based on old
ways of doing business or does it support
new business objectives and take advantage
of technologies and processes that can
reduce staff and space?
• Do the existing branches match each
market opportunity in terms of capital and
operating cost?
• Is the property that was purchased three
years ago in the right location for today
and tomorrow?
• Is the branching network efficient in terms of
marketing reach?
46
• Should you join a shared branching network
or pull out?
A strategic growth plan takes a 360-degree
view of a credit union’s current market
situation, product and service development
and deployment, capital, ROA and economic
environment, competition, advancements in
technology, cultural evolution, philanthropic
objectives, regulations and charter types,
performance, and management to understand
what is working and what is not and how to drive
change to reach the credit union’s goals.
Strategic branch planning must be developed in
support of the growth objectives or it can be a waste
of time and create a significant risk of spending large
sums of money on the wrong branching and ATM
solutions. As an example, a few years ago we worked
with a large credit union that wanted to expand into
some new markets as soon as possible with three
new branches. It had a goal to grow membership
and increase assets. We suggested that before
studying markets and recommending locations in
strategic branch planning, we needed to do strategic
growth planning.
The result of this growth planning work was the
realization that the credit union could first reach its
asset growth goals by increasing existing market
share. This required the addition of a few in-fill
branches, but saved significantly in near-term
construction and staffing costs and saved $500,000
a year in marketing costs in the new market. As
growth continued in the existing market, the credit
union placed three branches in the new market,
creating market efficiency in both the old and new
market areas and prospering as a result.
Growth planning and strategic branch planning
can be done in quick succession to keep growth
initiatives on track. With a clear understanding of
a credit union’s growth goals and the best way to
get there, strategic branch planning becomes an
even more effective tool.
Sound Credit Union (http://www.soundcu.
com), Tacoma, Wash., accelerates growth
with strategic branching plan.
KeyPoint Credit Union (http://www.
keypointfcu.com), Santa Clara, Calif.,
builds on strategic branching plan.
The Success of Strategic
Branching Plans
It is easy to say that strategic branching plans
really work, but where is the proof? Through
our 20 years of work, we have observed a large
number of credit unions that have branched for
growth—some with great success and others
with modest success or no success at all.
Unfortunately, the act of developing a strategic
branching plan alone does not guarantee
success. The plan must be based on proven
principles, drill down to accurate member and
market data, and provide a holistic and rational
set of branching strategies that support the
growth objectives. Let’s look at a few examples
of how strategic planning helped drive growth
at credit unions. The charts below show 10-year
asset growth and the point at which strategic
branching plans were created.
Black Hills Federal Credit Union (http://
www.blackhillsfcu.org), Rapid City, S.D.,
reenergizes and grows with strategic
branch plan in hand.
47
The process of savvy strategic branch planning
can do more than just help drive branching. It
also can discover errors in strategy caused by
bad input. Last year we worked with a $900
million credit union that said it was “doing OK, but
needed to find ways to enhance performance.”
During the strategic growth planning effort,
we found that three new branches were not
performing as expected. The CU was planning to
add five new branches in three years and wanted
to understand why these were under-performing
when it had based the $5 million decision on what
leaders thought was a well-crafted plan.
When we analyzed the strategic branch
planning process used to select markets and
branch types, we discovered a serious flaw in
some of the key data. The three under-performing
branches had been located based on the markets
showing the greatest new member growth over the
previous three years. This would be an important
indicator. Unfortunately, the vast majority of new
members had come through indirect lending.
Most of these indirect lending members lived in
markets that did not exhibit market characteristics
in line with the credit union’s product and service
competencies or initiatives.
Poor weighting of desired market
characteristics also can cause a credit union
to improperly locate a branch. Recently we
completed a strategic plan for a $650 million
credit union with a state charter. We analyzed
new markets to determine priorities for expansion.
We also took a look at existing markets to
enhance market efficiency and growth. This
resulted in the recommendations to close,
relocate and enhance certain branches.
In one market, the credit union had just
completed construction of a $3.5 million branch.
It was located near the financial district, but
not close to high employment or repetitive
shopping that would have matched target market
characteristics. Based on detailed analysis, it
would be seven to 10 years until this branch
would break even if everything went perfectly.
The reality was that this branch was located in
a market area that existing and potential new
members rarely visited. The branch would likely
never be successful based on the investment.
The credit union put the branch up for sale and
is planning to relocate to two smaller locations
that will be four to five times more productive at a
lower total cost.
48
Benefits of
Strategic Branch Planning
Since the early 1980s, credit unions have
been building their branching networks. As
credit unions’ service focus has expanded and
grown, with the attendant economies of scale
and operating efficiencies, branch networks have
become key initiatives for success. Many credit
unions have already increased their fields of
membership through the addition of community
charters, small business banking, insurance
services, investment counseling, lending centers,
and mergers with other credit unions.
Our study of 5300 reports tells us that
branches, along with rates, are one of the two
key drivers of member growth. Rates are very
flexible. You can change them in minutes and
the obligation is typically short. Facilities, on
the other hand, are much less flexible. They are
hard assets, typically long-term obligations.
And they are expensive both in terms of capital
and operating cost, whether you own or lease.
Of the two key drivers of growth, facilities carry
the greater long-term risk. Facilities risk is in the
millions, while the cost of creating a well-crafted
and rational strategic branch plan is small.
A $750 million credit union with eight branches
may have upwards of $15 million to $20 million
invested in branches. This credit union may be
planning to add two additional branches over the
next five years at a cost of $3.5 million. When
you consider the cost of facilities and operations
and potential loss due to branch and market
inefficiency, developing a strategic branch plan
at a cost of 0.3 percent to 0.4 percent of that
figure seems very low. Something to consider is
what a 10 percent increase in branch and market
efficiency would deliver to your bottom line.
Market and branch growth opportunities may
vary in size. Many of our strategic planning clients
have received large community charters that
include 1.5 to 3.5 million people and thousands
of small businesses. Some serve a specific
employment group in multiple states, even around
the world. Others need to commit to a branch
location before they can get a charter expansion
or underserved community designation in a new
county or parish. In a growing number of cases,
credit unions want to understand how they can
branch and grow in markets where they have
a charter, but only a small percentage of the
households are eligible. Every credit union is
unique in its situation and opportunities.
Many of these opportunities are
“whoppertunities,” as aptly stated by Judy
McCartney, past CEO of Orange County’s CU and
a CUES retired member. Whether the opportunities
are whoppers in terms of new markets or fiscally
critical in terms of branch network efficiency, one
of the most important challenges is prioritizing the
opportunities so that every dollar spent yields the
highest possible ROI in terms of member service,
development and growth, and income generation.
The branching strategies and tactics must also align
existing target member services with real estate
conditions, best market locations, and philanthropic
objectives to be successful.
Creating branching priorities requires the
factual data to drive cost-effective market
decisions. The data must be sufficient to
objectively support each branching decision,
including existing and new locations. A step-bystep process is required to ensure each credit
union dollar will be spent in the right way and to
assure the board that the recommendations are
savvy, prudent, and will positively impact the
bottom line.
Later in this chapter, we will look at a streamlined
example of the step-by-step process we use in the
development of strategic branching plans.
Strategic Planning
for One-Branch CUs
If you are just adding one branch, do you need a
strategic branch plan? The answer is “it depends.”
If the branch is being placed in a small market area
not contiguous to other existing markets, a full
strategic plan is not necessary to understand the
market or locating the right type of branch on the
right site. A single market can be analyzed for its
potential at a much lower cost than a system-wide
analysis. But a full network study may be the right
path if strategic decisions must be made. Is this the
right next branching step for our credit union? Are
there other markets that would be more productive
including existing markets? If the market will require
more than one branch to maximize efficiency, how
will these investments impact our opportunities in
other markets? How do we get the biggest bang for
our buck?
We conduct analysis of single markets and oneoff in-fill branches for many credit unions each year.
Even though the scope is smaller than studying a
full branch network, the importance of employing
an effective process and accurate data remains. We
still need to understand the market using the most
up-to-date, accurate and rich geo-demographic
data sets, coupled with member analysis, product
focus, competitor analysis, competitive positioning
and real estate opportunities in support of the
goals. The cost of single location analysis is
surprisingly low, particularly when compared to
the cost of a new branch facility. The cost is often
less than 0.5 percent of branch cost, not including
operating expenses.
Strategic Branch Planning
and Non-Traditional Delivery
What is an ATM for?
• To serve members at select employee
groups and enhance the relationship with the
employer?
• To serve members in the general community
or communities too small for a branch?
• To gain income from foreign transactions?
• To entice non-members using your ATMs to
join?
• To reduce the need for branches?
• To move non-members out of the teller line
for shared branching transactions?
• To provide cash dispensing and reduce teller
line pressure?
• To replace tellers in high risk markets?
• To lead into a new market that will later have
a branch?
• To provide a big sign that helps extend your
brand into target markets?
ATMs have many uses, but many credit unions
do not include them in their strategic branch
planning. They are often seen as just a costly
service to members. Added to this is the decline
in ATM transaction volume due to members
getting cash back in debit transactions to avoid
surcharges, thereby reducing foreign transactions
and income. But ATMs owned by credit unions
can be much more than just a costly service for
members.
Credit unions that have included ATMs in
their branching strategies have seen them
enhance their market growth and performance
while generating income. Like a shared branch,
if your ATM is more convenient than that of
another financial institution, you will likely get
high non-member use. ATMs are a physical
49
point of contact that gives you the opportunity
to express your brand in signage, messaging
and communications, and the ability to sell the
attributes of becoming a member.
Member transactions at your ATMs and at
machines owned by other financial institutions
can give you important information about your
member convenience preferences and support
the kind of market analysis that leads to proper
branch placement. In the strategic branch
planning example that follows, we will illustrate a
consolidated analysis and set of recommendations.
Developing a
Strategic Branching Plan
Every one of the over 100 strategic branching
plans we have developed for large to small credit
unions is substantially different. While founded
on a proven structure, the methodology used to
create a plan is significantly customized to match
the variables and desired support of the strategic
business and growth plans of a particular institution.
In the following pages we present our observations
and work in strategic branch planning. We hope
this helps guide your credit union in the creation of
savvy branching plans or assists it in selecting a
consultant partner that can provide both the shortand long-range expertise to ensure you maximize
the productivity and efficiency of each branch and
the entire network.
Situation Assessment
Before we can develop strategies for the future,
we need to know where and who we are and
what we want. This is true whether we are trying
to figure out what we want for our personal future
or what we want for our credit union. Before
we develop a plan that will cost tens of millions
of dollars in terms of facilities, staff, marketing
and operations over time, we need a clear
understanding of where we are today.
A number of factors should be vetted before
developing a strategic branching plan.
• What are the characteristics of our members
today and what do we want them to be in the
future? – To determine markets with the right
characteristics to pursue and serve.
• What truly differentiates us from our
competitors? (It must be more than just great
service, as everyone says they provide great
service.) What will compel a bank customer
to move his account to our credit union or
cause a member with a single loan to expand
her relationship into multiple accounts? – To
understand how you will compete with banks
and other credit unions in the market.
• What are our growth goals in terms of members,
assets, deposits, loans, account relationships,
and geographic area? – To determine if goals
are realistic in view of market characteristics.
• What is the anticipated budget for branch
expansion? – To partially guide the
recommended speed of deployment within a
set of budget parameters.
• Do we have or are we planning to have the
infrastructure in place to support branch
expansion? – To understand how branch
expansion will be supported.
• How do our products compare and
compete in the market? – To understand
competitive positioning.
• What are the new products and services that
will likely be added over the next five to seven
years? – To match target market characteristics
to product and service offerings to understand
potential market utilization and profitability.
• What is the productivity and efficiency of
our current branches and branch network?
– To provide a baseline upon which to build
projections for future growth and efficiency
improvement. The answers may need to
be developed through the branch planning
process using advanced measurement tools.
50
• Do we have a strong name and brand that
will attract members in new and existing
markets? – To understand if a name change
and brand development may be required to
enhance market performance.
• What is the importance of working with small
businesses? – To understand whether and how
branches should be deployed to serve both
consumers and small businesses in the future.
• Are there any planned changes in the field
of membership? And, would the board
possibly consider modifications to the FOM,
such as SEG to community, associational,
underserved communities and so on? – To
understand how to enhance penetration of
existing market opportunities.
• Is our database clean, accurate and up to
date? – To know if the member and branch
performance data going in will help drive
rational observations and conclusions.
• Are we willing to look at a variety of branch
types or delivery models? – To clarify if we
are open to other ways of doing business
or are fixed on specific delivery models that
will drive market-size requirements. (I.e. a
free-standing branch may cost $2.5 million
and require a five-mile convenience radius
to support, while a $650,000 in-line branch
may only require a two-mile radius and enjoy
higher market penetration.)
• What is the motivation of the consultants we
are considering? Is it to rationalize the need
for more branches or how to create a highly
efficient branch network that may or may
not require any additional branches? – To
ensure you do not waste millions on the wrong
solutions at the wrong time in the wrong place.
• Are the management team and board open to
mergers? – To understand how specific mergers
could impact growth in specific markets.
Often credit unions need help to gain objective
answers to these questions. This can be done
before starting strategic branch planning through
growth planning and facilitated SWOT analysis,
discussions, and goal setting with the board
and management team. Employing a seasoned
outside consultant to help guide this process
can help ensure the work done is not biased
or inappropriately motivated. The work can
effectively be accomplished as the first step in
the branch planning process.
Key Don’ts
We have read hundreds of strategic branch
plans over the years and observed what works
and what does not before, during and after the
branch planning process. Here is a brief review of
actions to avoid:
Don’t start the strategic branch planning
process without first answering the questions
noted above or you will likely find that your
branching solutions and the spending of millions
of dollars are based on a weak foundation.
Don’t use the services of a consulting group
that just looks at new branch locations and does
not carefully consider how to enhance the existing
market, how new branches will impact existing
branches, and alternative delivery systems.
Don’t base market and branch selection
on simple demographic information available
from a Realtor. It may offer general demographic
characteristics, but is typically insufficient to
determine how your products and services will be
accepted and compete.
Don’t let your Realtor lead you astray from
your strategic plan. Your branch deployment
tactics must be based on a set of well-defined
and prioritized strategies to maximize overall
performance over time. By nature a Realtor wants
to control the relationship. Strategic planners
seem to get in the way for some Realtors, who
want to find you a real estate solution as fast as
possible. You may be tempted by their advice
to lease or purchase facilities that do not fit your
established strategy. For instance, we often find
that a Realtor will suggest a community branch
location when we need to first place a regional
branch with wide market convenience. In this
case, a community branch is an expensive pad
site for construction when a 1,500-square-foot
leased facility is the right early market evolution
answer. Always consult your plan and be certain
the opportunity matches the strategy.
Don’t use bad data as the basis for analysis.
This may seem obvious, but bad data can cause
huge problems in member and market analysis,
resulting in credit unions making bad branching
decisions. It may be that members are assigned
to the branch of origin rather than the branch of
use. This means that as the branches are analyzed
for deposits and loans, an older branch with lower
traffic may show higher performance than a highvolume, well-located newer branch. The inclusion
of indirect lending in net new member acquisition
51
figures may cause markets with unfavorable
characteristics to appear perfect for a new branch.
Member household data may not include number
of products or their profitability, potentially making
good markets look unfavorable.
Don’t accept a branching plan that does
not include an ATM strategy. ATMs are an
important delivery system. Whether you want to
add more or not, it is important to understand if
ATMs can help you grow.
Don’t follow a single-branch strategic
plan that does not address benefits from and
impact on existing branches. Otherwise, the
addition of a branch may make an existing wellperforming branch unsuccessful.
Don’t move forward with a plan that doesn’t
include an assessment of your current branch
business model and make recommendations
for improvements. Branches are the engine
that drives productivity. Is your branch model
efficient in terms of the ratio of retail space (for
member service and sales) to operations space?
Is there too much staff for the need? Does the
branch provide a well-branded member and staff
experience that enhances member relationship
development and staff success? Is the branch
a safe environment? Is it flexible so that it can
evolve over time at a low cost?
Don’t present a strategic plan to the board
without understanding the total budget
consequences. What is the “all-in” cost of
the branching recommendations? How will the
addition of branches, ATMs and alternatives
impact the bottom line in terms of added revenue
and cost? How will the branch impact your
fixed asset ratio? What is the cost of operations
facility enhancements in support of the branching
and growth strategies? Will marketing costs be
impacted in existing and new markets? What are
the added staffing and operating costs?
Assembling the
Right Credit Union Team
Selecting the right team is very important
to the success of strategic branch planning. It
should include all management team members
who influence strategic decision-making and
operations over the long term. In small credit
unions, this may mean having a director on the
team to help sell the solution to the full board.
It always requires CEO involvement. On rare
occasion we have seen the CEO stay out of
the strategic branch planning process. Ninety
percent of the time this causes problems because
the lead, the visionary, the person who links the
management team to the board is providing input
from afar and the planning process suffers. When
the CEO is not involved, the management team
often becomes discouraged, as changes are
made after the committee makes decisions. If the
CEO is always involved in the meetings, the CEO
and the board are represented as the foundation
is set, analysis and assessment completed and
the plan developed.
Board members can be an important addition
to the strategic branch planning team at small
credit unions. We find that boards of smaller
credit unions are more likely to accept a set of
strategies if one or two of their members have
been involved. The reality is that they often are
only involved in the initial meeting and review of
the recommendations going to the board. Their
early involvement can make the sale to the rest of
the board go smoothly.
The chief operating officer will provide input
on the operations of the branches and how they
link together, as they often supervise branch
network operations. The chief financial officer is
of course key as he or she holds the purse strings
and the knowledge of how to project the positive
and negative impact of the branch plan onto the
bottom line. At the end of every strategic branch
plan presentation, the board wants to hear from
the CFO.
A credit union’s marketing manager must be
included. This person promotes the credit union and
its branches. The marketing manager also is key to
understanding competitive positioning, the brand
image, the desired member and staff experience,
and the required budget to promote the existing and
expanding branch network. The marketing manager
is important in defining target market characteristics
in the effort to score markets.
52
The human resources manager is important
for understanding how staff will be used within
each branch. The HR manager should be
involved in conversations about the evolving
branch business model, how to maximize staff
performance, balancing full-time and part-time
staff, hours of operations, and integration of
technologies, culture and training, all important to
the success of a branch.
Until recently IT managers were rarely
included in the strategic branching, branch
business modeling or prototype discussions. But
phone centers are becoming viable and highly
productive branches, processes are moving from
branches to centralized locations, marketing
customer information file data and radio-frequency
identification will be driving staff to member
recognition and development, and integration of a
consistent brand experience through all delivery
channels is a must. The IT manager is a very
important contributor to all of these aspects of a
successful strategic branching plan.
Key product and service managers,
including the managers of mortgage, insurance,
small-business services, financial advisory
services and others, must derive their business
from the same market areas where you will site
your branches. A strategic branch plan must
include their perspective on how they need
to serve the market to be successful and how
they need to be physically and technologically
integrated into the plan.
The branch operations manager can provide
on-the-ground information about branch and
market performance because he or she gets daily
feedback from the branches. Branch operations
managers can provide insights about why one
branch may be more successful than others,
what they hear about competitors, and local
and regional anomalies in business, culture,
geography, residences, and politics that may not
be visible in the data analysis.
Large credit unions often have a dedicated
facility manager. They can provide their
observations of how the buildings are functioning.
Maintenance, landlord, site, traffic changes or
other issues impacting a credit union’s facilities
can cause a credit union to consider relocation
based on facility performance.
The vast majority of credit unions use the
services of an outside consulting partner to
benefit from years of experience in developing
plans for other financial institutions and an
unbiased perspective that can help ensure the
right decisions are made. Additionally, boards
typically prefer that an outside consultant provide
the analysis and recommendations. They want to
feel comfortable that they made every reasonable
effort to get the best recommendations from the
most experienced source. CEOs may see the use
of an outside consultant both as a way to get the
most savvy direction and ongoing advice while
gaining some separation from those making
the recommendations.
A real estate agent should not sit on the
committee due to the confidentiality of the
information, but this person is key to the process
and can provide a wealth of information about
the real estate market, the development direction,
what opportunities may be coming up in the future,
transportation plans, land, building and lease costs,
and real estate politics. A good agent can help
weed out what jurisdictions are saying is going on
and what is really happening in your area, and won’t
take you off track of your strategy.
In our experience, about 20 percent of credit
unions’ existing commercial Realtor relationships
are not the right fit. Realtors who aren’t the right fit
may have knowledge of only one part of a credit
union’s market, become frustrated searching for
sites and lax in their search, or not be aggressive
enough to battle for the best sites on the credit
union’s behalf. Getting the right agent is a big part
of successful branch strategy implementation.
53
The Strategic Planning Process
Every one of the strategic plans we have
developed over the years has been significantly
different. They must be, as every credit union has
unique characteristics, challenges, opportunities
and goals. While the situations vary, the basic
process remains fairly consistent.
• Scope and proposal development
• Fact finding and data gathering
• Discovery meetings
• FOM analysis
• Business and product and service analysis
• Branch auditing
• Member and market analysis
• Market scoring
• Branch business model assessment
• Retail analysis
• Transportation analysis
• Small business analysis
• Geographic and geo-cultural analysis
• Competitor analysis
• SEG analysis
• Branch and ATM assessment
• Real estate analysis
• Merger candidate analysis
• Recommendations
• Branch and ATM solution maps
• Break-even analysis
• Deliverables in terms of how the
recommendations will now be presented to
the management team and board and what
aspects of the project will be property of the
credit union after completion.
Each of these steps is essential to the creation
of a well-founded and savvy strategic branch plan
that includes the tactics necessary to make the
existing branching network productive today and
guide the proper placement of new branches well
into the future. We will look at each of the steps in
general chronological order.
54
Scope and proposal development
The importance of this step is often underrated.
Consultants are asked to describe their approach
to strategic branch planning. The scope of work
and deliverable may vary significantly based on the
consultant’s experience, motivations and desire to
win a project with a low price. Be careful. The scope
of work that drives the proposal should provide an
outline of all the steps that will be taken, the level of
research to be completed, the deliverable, and the
expected results of the work.
To illustrate the work required in developing a
typical strategic branch plan we will look at the
example of developing one for a $500 million
credit union with a community FOM and eight
branches, six in one market area and two in
separate markets.
Fact finding and data gathering
Creation of a solid knowledge base requires
gathering data for analysis. The extent of data
needed depends on the scope of the project and
the desired deliverable. Let’s review the typical
elements that should be considered.
Branch performance data may include
historic and current deposits and loans; noninterest income; specific product performance
including mortgage, insurance, investments
and small-business services; cross-sell ratios;
product and service awareness; net new
members; and transactions in the lobby, at the
drive-through and at the ATM. Here are a few
examples of what the data tables might include.
Existing Branch Growth
Branch
Years
Open
2002
Deposits
2007 Deposits
Deposit
Change
Kennydale
12.5
$46 M
$78 M
$32 M +
69%
$37 M
$111 M
$74 M +
200%
95%
Methow
6
$11 M
$30 M
$19 M +
173%
$8 M
$11 M
$3 M +
38%
37%
Perkins
7
$23 M
$28 M
$5 M +
22%
$23 M
$13 M
($10 M) –
44%
46%
Richmond
30
$147 M
$147 M
$0 M
0%
$134 M
$41 M
($93 M) –
69%
28%
West Pass
3.5
-----------
$17 K
$17 K
------
--------
$6 M
$6 M
35%
Sunnydale
9 Mo
-----------
$927 K
$927 K
------
--------
$789 K
$789 K
85%
Allen
4
-----------
$5 M
$5 M
------
--------
$6 M
$6 M
120%
2002 Loans 2007 Loans Loan Change
L to S
Ratio
Existing Branch Characteristics
Tellers
Total FTE/sf
Transactions/Teller/
mo & /Teller hr
Saturday
Hours
8,100
$18,148/sf
9
15
540 sf
50,608
30/hr
Yes, drive
through
Own
12,000
$6,500/sf
10
18
667 sf
39,500
21/hr
Yes, full service
7
Own
6,000
$4,667/sf
7
12
500 sf
20,700
19/hr
No
Methow
6
Own
6,000
$5,000/sf
6
11.5
522 sf
16,900
15/hr
Yes, full service
W. Pass
3.5
Own
6,000
$2,833/sf
5
10
600 sf
21,600
23/hr
Yes, full service
Allen
4
Oct. 8
2,600
$1,923/sf
3.5
5.5
473 sf
5,400
10/hr
No
Sunnydale
9 Mo
Own
5,000
$185/sf
3
5
1,000 sf
3,200
7/hr
No
Branch
Yrs Open
Own vs. Lease
Richmond
30
Own
Kennydale
12.5
Perkins
Square Feet
Deposits/sf
In addition to these standard measurements,
we also want to calculate efficiency ratios to
help drive future branching requirements. The
basis of these calculations is facility and staffing
data combined with such performance data as
transactions per teller per hour, drive-through
vs. lobby transactions, on-us vs. foreign ATM
transactions, members, deposits and loans per
square feet, and profitability per square foot.
These calculations allow us to see how branches
compare to each other and how many staff and
square feet in what configuration will be needed
for future branches based on market potential.
We need to understand the real estate
obligations as well so we can include real estate
strategies in the plan. We must understand
lease termination and option dates, first rights
of refusal, ability to expand, early-out options,
ground leases, and options to buy so that we can
engineer branch network evolution toward perfect
market coverage. The branch data request must
include real estate information.
Member data is needed to understand the
characteristics of current members and how to
define current and future member characteristics
for market modeling. We need to answer questions
like: Which members are profitable? Which
members use which branches? Which products
are used by which members in which markets?
If we place a branch in this new location, which
members will most likely use the branch? Is
55
there more we can gain in terms of enhanced
relationships and deeper share of wallet in existing
markets that would suggest investment there
before development of a new branch?
SEG data is important for credit unions that
focus solely or in part on employer groups. What
is the number of employees at the SEGs? What
is the member potential? What is the current
penetration? Where are they located and how
does this relate to household locations and
branches? Are there plans to expand, relocate or
reduce the employment base, and to what level?
Shared branch data is important for
understanding where your members are
conducting transactions today. A few years ago
we discovered that 8,500 member transactions
were being completed per month at a shared
branch location. The market surrounding the
shared branch location matched our target
market characteristics, so a branch was located
in the market and immediately supported by
8,500 transactions. Less dramatic, but also
important may be a shared branch location
where 1,500 member branch transactions may
be conducted. This could be a good location
for a micro-community branch of 1,200 to 1,500
square feet in leased space that can evolve into a
full-service, free-standing branch in the future. Or
a smart ATM could be used to introduce a credit
union to the community.
If your credit union offers shared branching
services to members of other credit unions,
the number of non-member shared branching
transactions can be a key factor in determining
branch efficiency. For example, if you are
operating a 2,500-square-foot branch at
95 percent capacity and 20 percent of the
transactions are from non-members, you have
a big decision to make. Should you build an
additional branch to support the growth? Or
would it be more productive to close the branch
to non-members or offer an external non-member
smart ATM and provide more focused member
service and development while delaying the need
for a new branch by three to five years?
In addition to data needs, we need to understand
the business strategies and what drove their
creation. We need to look at the strategic growth,
business and marketing plans. We also need to
study the surveys and reports that support those
strategies, such as member surveys, staff surveys,
and consultant business studies.
analyzed in preparation for a meeting with the credit
union’s strategic branch planning committee.
Discovery meetings
A meeting or series of meetings is held
with the planning committee to review the
data, learn about key issues and to clarify our
observations. This is a first “a-ha” point in the
process. What are the key issues facing the
credit union in terms of competition, field of
membership, product and service expansion?
Should we merge or add branches? What will
be the impact of adding new services? What
part should ATMs play in our delivery array?
Is it better to infill or add remote branches?
We have underperforming branches. Which
should we close? Are we measuring branch
performance in the right ways? Does the data
and assumed market opportunity support the
growth and business objectives? Is marketing
helping drive the desired growth? Are the
growth goals realistic? Are branches being
over- or under-built? Are the branches over- or
under-staffed based on the desired level of
service, product and service array, and desired
member experience?
A good way to start these meetings is to get
right to the heart of the issues so everyone agrees
on the questions that must be answered by the
strategic planning process. This may alter the
scope, but the findings could mean the difference
between success and failure.
During these meetings the consultant and
credit union team must come to a common
understanding about the credit union’s
situation, business and growth goals, and
expected strategic branch plan deliverable. If
the credit union is unable to answer all or some
of the questions noted earlier under situation
assessment, now is the time to address and
answer each one before proceeding.
At the end of the initial meeting, the process,
schedule, responsibilities of each committee
member and deliverable must be clear to all.
A written outline of the proceedings of each
meeting should be created.
The supplied data, surveys and reports are then
56
FOM analysis
The field of membership is the field upon which
a credit union plays and competes. It may be a
single sponsor or multiple-SEG charter. It could
be a community charter defined by a town, school
district, county, parish or state. It could be a trade,
industry or professional charter focused on a
common bond. Or it might be a charter for a military
branch, specific military location or all military.
Each charter type offers challenges and
opportunities in individual markets that define
potential market penetration and, in some cases,
the general characteristics of potential members.
FOMs are also modified by associational charters,
such as alumni or non-profit organizations, and
underserved community charters, which can
enhance potential market penetration. The current
field of membership and options for expansion
should be clearly understood before commencing
the branch planning phase.
Business and product and
service analysis
To be successful, a credit union must develop
and promote products and services that align with
its target markets. This seems obvious, but close
scrutiny will find gaps that when filled will enhance
potential market penetration and share of wallet. For
instance, a credit union was focused on a market
that included a large number of self-employed
individuals. The credit union found that life and
dental insurance were difficult for their members to
get, so it offered access to coverage through their
branches and found many appreciative existing
and new members. Small-business banking is an
example of a product that has been desired by
many credit union members for years. Today, many
credit unions are adding small-business banking,
finding it to be profitable and seeing it create many
new member relationships.
One of the powerful results of market analysis
is an understanding of what the market is looking
for and how the market will respond to specific
products and services. If a credit union wants to
enter a new market, it must have the products and
services to meet the demand or lose business
to other institutions that do. The completion of a
well-conceived strategic plan will predict use of
various products and services. A caveat is that the
consultant must be working with an up-to-date
database rich in household, business product
and service preference data, plus information
concerning potential growth and competitors.
Branch auditing
We talked about the data needed to understand
branch performance from a numbers perspective.
We must also understand how the branches are
performing as a physical delivery tool. Branch
auditing must answer a variety of questions that
help determine the less tangible factors that can
significantly influence performance.
• Is the member experience highly productive
in terms of member relationship development
and selling products and services?
• Does staff experience promote cultural
continuity and success?
• Does the member and staff experience
strongly support the brand?
• Is the brand image effective in promoting the
credit union to existing and new members?
• What is the level of sales culture in the
branch?
• Are staff functioning as they should to
maximize performance?
• What is the level of member product and
service awareness?
• Could branches be better planned to
increase efficiency and productivity?
• Are the branch locations Retail Tier 1, 2 or 3,
with Tier 1 being best and 2 and 3 generally
being less productive?
• Is the site appropriate for the market?
• Is there an imbalance between security and
member development?
• Are member communications effective?
• How might branch neighbors be positively or
negatively impacting performance?
• How are competitors positioned in the market?
• What could be done to enhance performance
of the existing branch in its current location?
The branch audit combined with performance
data provides a clear picture of where a credit
union is today, what opportunities exist at current
facilities, and how existing opportunities should be
balanced with new ones. Can you get the biggest
bang for your buck from enhancing existing
branches and markets or from new markets?
57
Member and market analysis
Significant time and expense goes into
member and market analysis and the payback
is high. Through this work we understand the
condition of existing member relationships
with the credit union, existing and new market
characteristics, the potential of specific products
and services in each market, the competition,
the impact of SEG locations and SEG-based
opportunities, retail characteristics of the
market, traffic patterns, geography, and racial
concentrations. Combined, these factors paint
a very clear picture of existing situations and
opportunities. If level of data and analysis is
sound, the predictability of success is very high.
What is the process that produces these results?
Let’s review an outline.
We must understand where members live and
their current relationships. We must also know
where small-business members are located
and their relationships as well. Where are the
relationships most profitable and enjoy the
highest level of multiple accounts? Where are
specific deposit and loan types coming from?
Which branches do target members use?
Member Household Concentrations
Market Share
Member Household Map
Member Deposits Characteristics
With this information and more we can
understand how a credit union is performing in
each market because we can compare members’
use of deposit products with market potential. For
example, if we know there are seven bank and
credit union branches in a consumer market and
the credit union holds just 5 percent of deposits
and 3 percent of loans, we know there is excellent
potential for growth if the credit union’s products
and services match market household use
patterns.
This matching of products to market potential
works in new markets as well. We know the total
amount of mortgages held by consumers in the
area and the equity from the rich information
in our database. The level of home ownership
is understood. We know the deposit levels in
interest and non-interest checking accounts
for both consumers and businesses. The
58
amount deposited in CDs is tracked. We know
housing values, income levels, and age of head
of households. We can determine financial
institution branch density based on households
for any market. We know the number of SEG
employees and the penetration. And, if there is an
initiative to provide service to a specific ethnic,
underserved or employment group, we know
where they live.
In addition to data about existing conditions,
we also must have a corresponding set of data
that projects all of the elements out five years.
These projections allow us to predict the success
of a credit union’s products and services today,
and how they will grow and be used in five years.
Current data and projected conditions are used to
understand the opportunities in each market and
predict potential performance based on location
and branch characteristics.
Weighted Scoring Attributes—
Lending Center Markets
Total Loan Debt
Growth
30%
Target Age (18-35)
20%
Low Education
15%
Total Renters
20%
Blue Collar Occupations
15%
Each of the criteria must be weighted, as they
hold different values in terms of driving a branch
or alternative delivery decision. Weighting the
criteria should be a joint effort of the credit union
and the consultant, as this will be the basis for
scoring markets and placing branches. Scoring
markets results in the creation of a scoring map
like the following example:
Market scoring
To evaluate markets for branch placement, we
must develop a method to score each market
based on a set of criteria. To do this we select
the market and business criteria that are most
important to creating branch success. We may be
able to capture all the traits in one model or we
may need more than one model to ensure we do
not blur the findings. For example, we may need
to separate consumer from business banking in
some markets; in others underserved community
members vs. SEG members may need to be
looked at separately.
Below we offer two simple examples of what
a scoring model could look like. Scoring models
can include a variety of criteria not shown
here and they are not limited to the number of
elements shown here.
Weighted Scoring Attributes—
Full-Service Branching Markets
Total Households 15%
Banks Per
Household Checking Balance
15%
2007 HH Income
$50,000 - $70,000
15%
XX CU Members
10%
Home Ownership
10%
10%
Small Business
Checking
Mortgage Home Equity
5%
15%
5%
Now that market scoring has been completed,
we can compare the market scores with real-time,
on-the-ground conditions, such as prioritized
retail locations that will provide the draw of
repetitive shopping, natural geography, traffic
volumes and other factors.
Branch business
model assessment
During the discovery phase we audited the
branches to determine the positive and negative
characteristics driving branch efficiency and
productivity. This assessment is more than
determining if the branch looks nice and whether
members like it. The audit drills down to what
elements are impacting performance in terms of
building relationships, increasing share of wallet,
turning members into advocates, making staff
successful, delivering a strong brand experience
and reducing operating costs.
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The audit findings may suggest that performance
is so poor and the experience so off-brand that
a branch business model, member experience
and new prototype need to be developed to fully
capture existing and new market potential. We
will discuss how to develop full new business
models and prototypes in Chapter 4, Retail Branch
Planning, Business Modeling and Prototype
Development. The result of this work has been quite
amazing in terms of accelerating growth and share
of wallet. At this point in strategic branch planning,
we may recommend developing a full new branch
business model or we may suggest branch design
modifications that can bring the member and staff
experience on brand. This will help prevent the CU
from spending money to replicate an unsuccessful
model in its new branches.
Each market offers unique opportunities that
require different branching solutions to ensure
the highest efficiency and ROI. At this point in
the process, we must define appropriate delivery
types in terms of size, staffing, configuration,
capacity and cost. By doing so, we can estimate
the cost of each new delivery solution. Budgets to
enhance facilities will be developed on a branchby-branch basis.
The branch model can vary widely based
on market size; product and service offerings;
centralization or decentralization of mortgage,
insurance, investments, small-business services
and processing; type of cash-handling systems;
vaults; community initiatives; and market
evolution. To illustrate what branch design
standards might look like in outline form, we have
listed a few of the most typical branch types with
their basic attributes.
(2) Community Financial Center
Purpose: To provide convenient community
services to a well-defined market within three
to five miles of the financial center in suburban
areas and regional coverage in small, developing
markets or rural markets.
Attributes: Full-service banking with visiting
credit union specialists. If a branch is
located a significant distance from a regional
financial center, provide key product/service
representatives. A drive-through is preferred. Can
be owned or leased. An end-cap is desirable. $24
million to $75 million in deposits.
Specifications: 1,800 to 3,600 square feet; 6
to eleven staff; three lanes of drive-through;
one walk-up and one drive-up ATM; no vault in
urban or suburban areas, as this service can be
provided by the regional financial center.
Market: 14,000+ transactions per month
Support: 5,500+ member households
(3) Neighborhood Financial Center
Purpose: To provide a small branch to take
advantage of small or emerging market
opportunities.
Attributes: Small and low-cost to build and
operate; cash delivery may be via teller, remote
teller system if a drive-through is present, or via
ATM or remote personal ATM teller. Typically
leased. $12 million to $30 million in deposits.
Specifications: 1,200 to 1,900 square feet;
exterior ATM.
Market: 3,500+ transactions a month
Support: 1,500+ member households
(1) Regional Financial Center
Purpose: To support a large member market area
and an array of smaller branches in a surrounding
region or high density urban market.
(4) SEG Branch
Attributes: Provide full-service banking with
drive-through, centralized mortgage, smallbusiness banking, insurance, investments. May
be owned or leased. Free-standing or in line with
an end-cap in a strip mall. $45 million to $160
million-plus in deposits.
Attributes: Small and low-cost to operate. Often
sponsored space. Cash delivery may be via teller
or via ATM or remote personal ATM teller. $5 to
$30 million in deposits.
Specifications: 3,800–5,500 square feet; nine
to 16 staff; three to five drive-through lanes; one
walk-up and one drive-up ATM; and a vault.
Market: 29,000 + transactions per month
Support: 8,000 + member households
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Purpose: To provide a small branch to serve a
group of select employees.
Specifications: 250 to 1,200 square feet; afterhours service via ATM
Market: 1,000+ transactions per month
Support: 1,200+ members
Additional branch types could include auto
hybrid (micro-branches that focus on driveCredit Union Facility Strategies Planning and Management
through service and can expand in the future),
remote teller ATM, in-store, mobile, lending
centers, small business and check cashing.
Underserved market kiosks are another of the
many variations on the physical delivery theme.
Sample retail and employment location map
When the market opportunities are known, a
set of branching standards can be developed to
deliver the greatest ROI at the most reasonable
cost in each specific market area. These
standards can also be used to estimate the cost
of development, leasing and operations as we will
see later in this chapter.
Retail analysis
After the target markets are defined, we must
determine the geographic points where target
members find retail and service convenience. By
doing this we can locate branches that will get the
heaviest possible target member traffic. Repetitive
shopping is one of the biggest factors that drive
community traffic. But not all traffic is the right
traffic.
If a credit union is going to locate next to
a large retail store, does the retail store draw
customers with target member characteristics?
Is it better for your credit union to locate near
an outlet mall, discount store, Wal-Mart, Target,
Home Depot, Fred Meyer or Whole Foods?
Should you locate next to a mall that has no
grocery store? Is it better to be in the store,
adjacent in leased retail space, on a pad site,
or in a free-standing building along the path
of traffic? The answers depend on your target
market characteristics, how the retailer is viewed
and used in your community, and how easy it is to
access the site.
Retail analysis helps locate the best sites.
These sites are often the most expensive due
to competitive pressure from other retailers and
financial institutions. In this situation you may be
able to find a site along the path to the retailer;
just be certain that it enjoys high visibility and
easy ingress and egress.
Transportation analysis
We need to understand how people move
through the community today and how they will
move tomorrow. Car traffic remains the primary
method of transportation for most Americans so
it is essential to know where traffic volumes are
the highest to provide the greatest opportunity
for branch convenience and visibility. It is also
essential to generally know the characteristics
of the people in the cars so the high traffic
opportunity can deliver target members.
High traffic can also be a problem, making
access difficult and limiting the potential of a
branch. If the branch is mid-block, it may be very
difficult to turn left into the parking lot during busy
hours when most members visit a branch. A median
may be placed at a later date that blocks a left turn.
Branches in this situation often find that branch
traffic is 30 percent to 50 percent less than they
expected. We will talk more about this in Chapter 9,
Site Planning and Design.
In the future we must think more about how we
move people rather than cars. This way of thinking
about transportation is common in Europe and parts
of the northeast United States. The mass addition
of commuter trains could change how we look at
convenience over the next 10 years. Commuter trains
link people to centralized parking areas and masstransit stations (buses) where people then travel
home. These transportation links will start to evolve
into retail and service centers, as they are on the
commuting and shopping path of significant numbers
of people. Credit unions should consider how to tap
into this trend and locate branches or alternative
delivery systems at these high volume points of
converging transportation modes and people.
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Small business analysis
The location of small businesses and
consumer households may or may not align. In
many markets, high volume traffic locations are
also good market locations for small businesses,
as they are using similar services and traveling
along the same paths. But every market is
different and the small business market scoring
model may suggest a branch should be located
more for the business member. For example,
North Shore Credit Union operates a number of
successful branches in British Columbia. The
majority are located at high-volume traffic points
convenient to both consumer and small-business
members. North Shore CU has two branches
in Whistler. One is located for household
convenience with easy auto access, while the
other is positioned in the central retail market
area of Whistler and focuses on small-business
and merchant banking. There is limited auto
access to this branch. Both Whistler branches are
successful because they effectively target and
serve each market.
The market scoring model will define the target
markets that offer the best business opportunities.
The task is to place branches that can support
single or multiple target market objectives.
Geographic and
geo-cultural analysis
Often branch efficiency is defined by a
convenience radius around a branch. We know 33
percent of primary financial institution members
likely live within two miles of a branch, and 38
percent live within three miles. This strongly
suggests a correlation between close proximity
and target use. On occasion, the realities of
geographic and geo-cultural boundaries play
havoc with that logic.
A branch may be well situated for repetitive
shopping, traffic and adjacency to desirable
households, but be a half mile from the ocean,
adjacent to a mountain range or near a river far
from a bridge. This situation requires a close
assessment of how the branch will be supported
with 20 percent, 30 percent or 40 percent
convenience to households.
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In many areas of the country, geo-cultural
boundaries limit desirable target market
adjacencies. It may be an ethnic or economic
boundary that keeps potential members on their
side of the market even though the branch may be
highly convenient in terms of distance.
When placing a branch, it is important to
understand how geography and geo-cultural
boundaries will impact branch use.
Competitor analysis
How will competitors impact the performance
of a credit union branch location? Should a
location be avoided because other institutions are
there? These are questions often asked by our
credit union clients.
In the big picture, competitors impact other
credit unions through their pricing, brand image,
marketing, and convenience. The first three are
very important competitive factors and can be
conveyed through all delivery channels. But
physical branch convenience remains the primary
reason members select a financial institution.
Thus, location can have a big impact on new
member development and retention.
Branch density is an important issue and
should be factored into the market analysis.
How many households are there per financial
institution branch? Will a credit union branch
be viable in a market with 1,000, 1,500, 2,000 or
4,000 households per financial institution branch?
This depends on the size of market and the size
of the delivery system. In urban areas a branch
may be viable with only 500 households per
branch in a two-mile radius if the location serves
a large suburban or rural market, as all institutions
are concentrated in one retail area. An average
rule of thumb is that we need at least 2,000 to
2,500 households per financial institution branch
to make a community-size branch viable.
Credit unions often shy away from a retail
location where a competing credit union is
located or where there are a number of banks.
This may seem rational, but it isn’t. A credit
union may be well-positioned among banks as
an obvious alternative and be able to actually
increase membership due to being adjacent
to a bank branch. If a credit union competitor
is positioned in the best market location, this
may be where your new credit union branch
should go as well. Selecting an inferior site
for separation could mean operating an
underperforming branch. Additionally, if a
credit union finds a great market with very few
competitors and opens a branch, it will likely
be a short time until the competitors build their
branches as well. We suggest market quality is
the most important driver.
deposits have much higher transaction levels than
the ATMs that do not. Foreign transactions for
all of these ATMs far exceed On Us transactions,
suggesting that these ATMs are highly efficient,
provide significant opportunities to sell the
credit union’s attributes and likely make a profit.
This credit union’s low-volume ATMs have been
installed for more than five years. The locations
should be studied to determine if they are
properly sited or if signage needs to be enhanced
or if they should be removed. Additionally the high
usage at some of these ATMs suggests that it will
be well worth analyzing the messaging on and
around each machine and on the ATM screen.
Competitor analysis of products, services,
brand image and marketing is best completed
in the strategic growth planning phase prior to
starting strategic branch planning.
SEG analysis
An important product of strategic branch
planning is engineering how a credit union should
evolve. We know where members are today and
the branching array. With market scoring in hand
coupled with on-the-ground knowledge, we can
determine where the credit union should focus
its resources in the future and what it needs to
get there in terms of branches, ATMs, alternative
delivery systems and marketing.
The second step is to understand where
members are using other financial institutions’
ATMs and if your credit union should place
one in the same market. For example, if 650
member transactions are being conducted at
an ATM not owned by the credit union, it may
make business sense to add an owned ATM
at this location if general market traffic will
support the ATM and the demographics of the
market match target members.
Branch and ATM assessment
An ATM strategy should be included in every
strategic branching plan, as ATMs can perform
as much more than just a cash delivery point.
They are the physical extension of a branch
network. The assessment of ATM performance
should include an analysis of both ATMs owned
by the credit union and ATMs owned by other
institutions.
The first step is to look at the performance of
owned ATMs. Here is an example of what this
might look like for a small network:
Location
West Dunlap DU
Deposits
On Us
Foreign
Total
Use
Yes
1,055
7,309
8,364
High
West Dunlap WU
No
235
1,568
1,803
Low
Williams DU
Yes
1,369
7,245
8,614
High
Bellevue DU
Yes
71
788
859
Very low
Westside WU
No
123
629
752
Very low
Wann Springs DU
Yes
597
5,115
5,712
Moderate
Kennydale DU L3
Yes
1,383
7,476
8,859
High
Westcott DU L2
Yes
1,204
6,976
8,180
High
Richmond DU
Yes
1,231
9,879
11,110
Very high
(DU=drive up; WU=walk up)
You will note that most of the ATMs that take
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Real estate analysis
When the member and market analysis is
complete and the market locations selected,
it is time to analyze real estate opportunities.
Where are the retail opportunities today in each
of the target markets? What is the cost of land
and leasing? How long will it take to acquire
and locate a branch? What is the situation with
existing owned and leased facilities?
This is the time to draw from the experience
and expertise of a savvy commercial Realtor.
Good Realtors know what is happening today
and the names, backgrounds and characteristics
of owners and landlords. They know what is
planned for the future in terms of malls and
single-site land, and they know which retailers are
successful and which are not. Additionally, they
have likely observed the development of financial
institution branches over many years and can
offer a great deal of useful insight.
Information from the Realtor is used in the
strategic branch planning phase to understand
availability of property, where it might be located,
timing and cost. If the Realtor has a history
with the credit union, he or she can also help
understand how the current leases or properties
can be used to accelerate the benefits of the
branching strategy through relocations, subleasing, options and extensions.
Merger candidate analysis
The cost to enter a new market is high in
terms of branch development, staffing, operating
costs and marketing. The cost of a new member
can range between $650 and $1,100. Getting a
new member can be much less costly if a credit
union can find a merger partner in a new or
infill market. For example, if a credit union were
to build a membership of 4,500 at an average
cost of $800 per member, it would spend $3.6
million plus the cost of branching for about $43
million in deposits (at $9,500 per member). The
same number of members and deposits could
be gained through a merger, which could cost
between $600 and $1.5 million depending on
payouts and merger costs. A merger can provide
new member growth at significant savings, plus
bring on trained and knowledgeable staff and add
one or more branch facilities.
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Every strategic branching plan should include
the potential benefit of mergers. Potential merger
candidates should be evaluated based on a
number of factors.
• Type of charter
• Asset size
• Number of members
• Capital ratio
• Member characteristics
• Cultural alignment
• Age of CEO
• Other business characteristics important to
the acquiring or partnering credit union
Read more on mergers in Chapter 11, Mergers:
Market Expansion, Branching and Headquarters.
Recommendations
Branching and alternative delivery
recommendations must follow a logical
progression of goal setting, fact finding, data
analysis, branch auditing, market analysis,
strategic and tactical initiatives, and delivery
systems application. The driving force behind the
tactical application of branches is the strategy.
Check out these examples:
• After a credit union’s situation and
opportunities have been analyzed, a set of
strategies and tactics must be developed
to drive branching decisions over a five- to
seven-year planning period. Millions will be
spent on branch tactics and the strategies
must be strong enough to support the
business objectives.
• A credit union may be in a market with
high household density, large branches
and low market penetration. An effective
strategy may be to infill with small, low-cost
branches, loan centers and ATMs to enhance
target market convenience.
• A credit union feels it must add more new
branches in new markets to grow and return
better ROI. Analysis may suggest a strategy
of closing some branches. Relocating and
remodeling others will produce greater near
term results than adding new branches in the
next two years.
• Eighteen branches may be located in a large
geographic area and operating efficiency is
an issue. A good strategy may be to divest
of branches in underperforming remote
markets, selling the assets and facilities, and
focusing resources on contiguous markets
with higher potential for long-term growth
and profitability.
• A credit union may want to build a new
branch to better compete in an existing
market, but household penetration is
limited by an employment specific charter.
Development of an associational charter
could increase eligible households from 20
percent to 100 percent, providing support for
the new branch facility.
The strategies must be about more than just
new branches. Branches are a delivery method.
The underlying strategies must be about how to
promote the growth, prosperity and long-term
viability of the credit union. If insightful and dynamic,
the strategies will guide the proper placement,
sizing, budgeting and operations of branches.
The strategic plan must include the rationale
behind every recommendation. This is best done
by recapping the findings in easy-to-read charts,
maps and tables as illustrated above, providing
specific rationale for each branch or ATM, and
then consolidating all the information into a table.
A table allows for the comparison of branching
solutions and aids understanding of the cost
and timing. Here is an example of executive level
recommendations for a small credit union.
ATM Recommendation
An ATM strategy should accompany every
branching strategy. It may be that no ATMs will
be added, some ATMs need to be relocated or
new ATMs placed to increase market efficiency,
lead into new markets or attract members and
infill existing markets. While locating ATMs can
be frustrating and take some time, placement
should be guided by specific market location
recommendations that follow the credit union’s
overall branch strategy. These recommendations
should be placed on the branching map to
illustrate the geographic relationship of ATMs to
branches and alternative delivery systems.
ATM specifications within the strategic
branching plan should include the market area,
desired adjacency to retail and traffic patterns,
type of ATM, whether the ATM takes deposits,
expected deposit levels, key reasons for each
placement and timing.
Consolidated Recommendations
Consolidated Recommendations
Existing Branches
Develop and deploy a branded merchandising and
message program for each branch.
4th Q.
2007
Cost TBD
NW Branch
Locate a Community Financial Center in a 2,500 sf leased
facility with drive-through in Santa Ana along Mink Road
and just north of Division, with high visibility and easy
access. Strong focus on mortgage lending.
1st Q.
2008
$700 - $825 K
net present value
Retail ATMs
Locate three retail ATMs. One in the new Westover Mall, the
second in Willard and the third in Byway Center.
2nd, 3rd, 4th Q.
2008
$180 K
NPV
Willard Branch
Locate a 1,800-sf Express Branch in leased space at a
developed retail area just off Highway 10 with drive-through.
Strong focus on mortgage lending.
3rd Q.
2009
$700 - $850 K
NPV
Retail ATMs
Locate two retail ATMs. One near 4th Avenue and Burton
and the second in the Morning Star Center.
1st, 3rd Q.
2010
$120 K
NPV
E Billings Branch
Locate a Community Financial Center in a 2,500-sf leased
facility with drive-through near the intersection of Main
Street and Highway 23. Strong focus on mortgage lending
and business banking.
2nd Q. 2011
$600 – $750 K
NPV
Evaluate growth and market characteristics in these
markets to determine the need for smart ATMs or mini
community branches
2nd Q. 2011
TBD
Melburn and Lacamas
65
Branch and ATM solution maps
270,000 Households
Here we show two basic types of simple maps.
Multiple maps may be needed in more complex
situations when the results of two scoring maps or
multiple target characteristics need to be shown.
These maps may include closures, relocations,
up- or down-sizing, market, consumer and smallbusiness evolution and five-year projections.
The first map below illustrates a seven-year
retail branching and ATM strategy in a mediumsize market area with approximately 135,000
households. The underlying market characteristic
is potential member growth in markets with target
characteristics today and in five years. The second
map shows a five-year branching strategy in a
market with 270,000 households and divergent
demographics overlaying the geographic field of
membership boundaries.
Partial Map—670,000 Households
Branch and ATM solutions maps are an
important communication tool for the board,
management team and Realtor representing your
credit union. They can illustrate the geographic
relationship of branch, ATM and alternative
delivery systems, and show major highways, retail
centers and SEG concentrations. Additionally,
the map background can indicate a key value
used to select markets, such as new member
development, deposit and loan generation,
highest potential household or small-business
growth. Instead of the branch and ATM solutions
map, the market scoring map can be used.
135,000 Households
Branch, Alternative and
ATM Site Search Specifications
When the strategic branching plan is completed
and then approved by the board, the site search
begins. Each location was selected in the
branching strategy to perform in a specific way.
The site selection process must follow the credit
union’s overall branch strategy for the plan to
be most effective. The location, type and size of
site, ingress and egress, relationship to repetitive
shopping, traffic volumes and other factors need
to be specified in writing to guide the real estate
search and site acquisition.
66
Break-even analysis
Before a board approves a strategic branching
plan, it should understand how the relocation,
closing, remodeling and addition of branches
impacts the bottom line. On an individual branch
location basis, break-even analysis can be used
to understand how long it will take a specific
delivery model to become profitable. The process
of break-even analysis is just as important in
reverse. It can be used to properly size branches
based on the potential return.
Read more on break-even analysis in
Branch Investment.
Summation
Branches are very expensive to build and
even more costly to operate. Today most branch
networks suffer from some or a good deal of
market inefficiency. Completion and application
of a strategic branch plan should be done by
every credit union with over three branches
and reviewed every two years. This work can
make the difference between a credit union that
just does OK and one that thrives, grows and
returns significant profit to its members and the
communities it serves.
Deliverable
The strategic plan should be presented in two
forms. First the complete strategic branching plan
should be provided with all findings, brand and
branch assessment, analysis, charts, tables, maps,
strategies and tactics. This should be supported
with rationale, recognize branch and alternative
delivery systems, suggest locations, provide cost
estimates and provide for timing for new branches,
ATMs and alternative delivery systems.
The second presentation form should be an
executive summary in a format that is preferred
by the CEO and board of directors. The first
form typically ranges between 75 and 130 pages
depending on the size, type and complexity of
the situation and opportunities. The executive
summary should not be more than 25 pages
and often is 15 to 18 pages in length. This allows
the board to concentrate on the key issues,
what is driving the analysis and solution, final
recommendations, timing and cost.
Combining Strategic Growth and
Branch Planning
On some occasions both growth and branch
planning must be completed quickly, simultaneously
and within the same project structure. If done
properly, this methodology does not negatively
impact the end product. In fact, if completed by the
same consultant within the correct order of tasks,
the result can be enhanced.
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68
04
Retail Branch Planning, Business
Modeling and Prototype Development
Over the past 20 years, credit union branches have experienced
a transformational evolution from focusing on transactions and
limited lending for large employer groups to operating communitybased full-service retail banking centers. These centers promote
interaction with members through a well-branded and engineered
member and staff experience. It is no longer enough to just design
an attractive branch that members say looks nice. Success today
is about delivering a strong, positive and differentiating branch
experience for members and staff that is extended through every
delivery channel.
Chapter 4 • Retail Branch Planning, Business Modeling and Prototype Development
69
Branches remain the most important point of
contact for most members. While much attention
is focused on the latest in technology—like phone
banking—recent surveys indicate members’ first
issue in selecting a financial institution is branch
convenience. The importance of branching
is further confirmed by the trends in branch
visits. The average number of member visits to
branches dropped about 5 percentage points
during the technology boom in 2002 to 41 percent
per month. Today the percentage has risen back
to 45 percent. Even young people want branches.
While branch visits are low and supplanted by
online and phone banking as people go through
their teens and early 20s, as they mature, get
married and have families, physical branch
locations become important. We are not saying
that branches replace technology. Rather, as
members mature they want to add the physical
branch and staff experience to their methods of
banking and social network.
The need for branches is confirmed by the 2008
Credit Union Growth Study conducted by the
CEO Advisory Group, Kent, Wash. The two most
important factors that correlated with credit union
growth over the previous five-year period were
“rates” and the “addition of branches.” Branch
expansion was a primary driver of growth. Further,
in the CUES/EHS Design 2009 Credit Union Facility
Survey, the vast majority of respondents said that
adding branches is “important” or “very important”
to their credit union’s success. But just placing
branches for convenience is not enough in today’s
competitive environment.
Branches must be competitive in their ability
to present a member and staff experience
that differentiates the credit union from the
competition with more than “we provide the
best service.” Providing excellent service is
the baseline in the financial industry, as all
competitors, particularly other credit unions,
describe best service as an integral part of their
branch and relationship experience.
Branches are costly to build, lease, staff
and operate. And, marketing is expensive. The
branch facility, location and the member and
staff experience must be highly productive or
branches are a waste of money. For example,
a free-standing branch presenting the typical
service experience and modest brand image
may cost $1.5 million to construct and hold $35
million in deposits and $25 million in loans. If the
same branch location and size are enhanced with
a strong brand image and exceptional member
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and staff experience, the associated deposits and
loans can increase significantly over a short time.
The cost is often just 10 percent to 15 percent
more for 25 percent to 50 percent more business.
Is this an exaggeration?
North Shore Credit Union, N. Vancouver, British
Columbia, was a $790 million credit union five years
ago. It wanted to own the North Shore, Vancouver
market by creating a brand that would significantly
differentiate the CU in this highly competitive
market. North Shore CU clearly defined its target
markets and worked with EHS Design and Weber
Marketing to create a unique branch experience.
We developed a concept that connected with the
“emerging wealthy” market called the “financial
spa” (which addressed financial, physical and
mental health). The credit union extended this
concept through all its delivery channels and
market.
The first branch application of the concept was
the replacement of an existing branch in the same
mall. The existing branch was growing at the
rate of $1 million per quarter. After opening the
new branch, the rate of growth accelerated to $1
million per week and continues to grow at a very
high rate. The branch now holds $250 million in
deposits with a high loan ratio.
The concept has been rolled out to a number
of other branches with excellent results as well.
Five years later, through the exceptional efforts of
North Shore CU’s management team and staff,
the credit union has $2.2 billion in deposits within
the same geographic area. This story will be
presented in more detail at the back of this book
in Chapter 15, Case Studies.
One of the primary tactics used to generate
North Shore CU’s success was the integration
of the brand concept through all delivery
channels. (Read more in Chapter 5, Building
Transformational Brand Experiences.) Brand
convergence across all delivery channels can
significantly expand the positive impact of a great
brand on a target market. The cost-to-benefit
ratio is very favorable with full commitment to
implementation and ongoing operation.
The effort in this chapter is to share with you
how this work is done and how you, too, can create
powerful retail environments that enhance branch
performance—increasing deposits and loans,
accounts per household, cross-selling, customer
and staff satisfaction, and advocacy scores.
The brand comes first
Creating an attractive branch is easy. Most
designers and architects can design a branch
that members will like. If you ask them if they
like a branch after completion, change alone
typically produces a positive answer. But is all
you want from spending $150,000 on a remodel,
$450,000 for an inline branch or $2.3 million on a
free-standing branch a member response that it
is pretty? Most credit unions feel successful with
this return, but they shouldn’t. The return should
be much more from spending all that capital, plus
operating costs. The benefits must be tangible
in terms of increased member development,
accounts per household, deposits and loans,
use of non-traditional services and generation of
non-interest income, staff success, net advocacy
scores, ROI and member satisfaction. The
path to creating these benefits in every branch,
both existing and new, is the development of a
powerful brand and brand experience.
The level to which a credit union can create
a powerful brand depends on how clearly its
leaders can define who they are and where
they are going. It is the same for any brand—
Starbucks and coffee, Kleenex and facial tissue,
or Microsoft and software. How is the credit
union defined today by its members, community
and staff? How should it be defined in the future?
And how will it get there? That is the brand path.
The expression of the brand comes in many
forms. For members, branches are the most
tangible representation of a brand. Because
branches can be entered, they have three
dimensions. With a branch visit, all of members’
senses are activated, one-on-one socialization
occurs, and the member experience is visceral.
Highly effective branches are those that most
clearly express a credit union’s well-defined
brand through the physical experience,
methods of communications and messaging,
interaction with staff, perceived level of service
and expertise, and relevance to their individual
life cycle needs. The brand is the guiding
light in branch business modeling, prototype
development and market application.
Translating brand into a powerful
member and staff experience
Every element of the member and staff
experience must be defined in terms of brand
support. How does the path members follow
through the branch support the brand experience
objectives? How does the way staff interacts with
members support the brand? Why have particular
teller line or teller pod details and materials been
chosen? Is personal transaction service more
aligned with your brand than interactions with the
remote teller system or ATM cash service? What
level of privacy is required? How must messaging
and merchandising help converge the credit
union’s voice and visual presentation through all
other delivery channels?
Brand translation cannot be faked. Often
we find branch designs that are pretty but
underperforming and were created based on
the answers to decorator questions like “What
do you like?” and “What do you think your
members would like to see in the branch”? This is
certainly important in the end, but there are better
questions, such as:
• What are the key characteristics that drive
the brand?
• Is the brand strong enough to compete and, if
yes, what significantly differentiates your credit
union from other financial service providers?
• What words do members and the community
use to describe the credit union today and
what words would you like them to use in
the future?
• What do you have in place and what must be
added to gain the desired perception?
• How can you translate these attributes into
the entire member and staff experience from
entering the parking lot, to first seeing the
building, to approaching the front door, to
entering and feeling the center of attention,
to acquiring service and exiting?
At credit unions, the focus is rightfully on the
members, as they are the owners of the financial
institution. This focus sometimes causes credit
unions to forget about how important the staff
experience is to the success of a branch. If you
want strong delivery of your brand, staff must
be having the same branded branch experience
including how they communicate with members
and other staff, their placement and workstations,
such sales and service aids as merchandising
and messaging, and a pleasant and interesting
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environment in terms of health, lighting,
temperature, sound, smell, touch and visual
appeal. For some of the most successful credit
unions, this means extending the brand into
back-office areas. Is the small lunch room painted
white with little light and piled with boxes, or is it
an extension of the public branch environment?
You will hear many people say that branch
design is simple. It’s pretty much the same for
every bank or credit union. People come in, they
want money or service and they leave. While
true in small part—as it is for customers in a
restaurant just wanting good food—decoration is
a small piece of the member experience puzzle
and contributes little to differentiating a credit
union from others.
A successful branch business model and
prototype is not just about being pretty and
getting members to say “what a nice place.”
We certainly want members to like the interior
design and building, but our primary objective
is to develop prototypes that deliver a powerful,
rich and differentiating branded member and staff
experience that is highly productive in terms of
building relationships, increasing awareness of
products and services and their use, and making
staff successful.
The difference in the quality of brand
application can be measured. The story of how
North Shore CU significantly enhanced branch
performance through the creation of a new and
powerful brand image is noted earlier in the
chapter. Additionally, we have provided a number
of case studies at the end of this book.
Every credit union is unique. To be successful in
the market, credit unions must be able to express
a clearly defined brand to members and potential
target markets. These same differentiators must be
expressed through the member experience through
all delivery channels including the branch.
After development of a new brand image
or updating the existing, the next step toward
a highly productive branch business model is
translating the well-defined brand into a physical
member and staff experience.
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Assembling the right branch branding
team is key to measurable success
All the senior credit union players should be
on the branch business modeling and prototype
development team. These are typically the same
players that were on the strategic branching
team and participated in the branding exercise
and brand solution development. Through this
investment in time, emotions and experience,
they can bring a wealth of knowledge to the
process. The team members typically include the
CEO for vision and guidance, CFO for operations
and budgeting, marketing manager as the prime
brand advocate, HR as the representative of
staff and responsible for cultural development
and productivity, IT manager to help understand
how the member experience can be supported
in terms of information, process and messaging,
representatives of mortgage, investments and
insurance services as they must serve and sell
within the environment, and the facility manager
who will need to maintain the branches. On
occasion there is a board representative to
connect the board’s vision with the management
team, but this is rare.
The use of outside branding and design
consultants is essential for even the largest credit
unions. Their expertise should have been developed
over many years by completing hundreds of
projects for both banks and credit unions across the
nation.
Be very careful in your selection of a design
consultant for the development of branch prototypes
and business models. It is easy to say you have a
great deal of experience, but this is relative.
Has the firm completed over 800 to 1,000
branches so they understand how a branch
must functionally operate? Do they attend
national conferences to learn about what is
new in terms of service, equipment, programs,
products and services, consumer trends and
branding? Do they write and speak about their
work? Are they actively involved in professional
design and credit union organizations? Who
specifically from the firm will be designing your
branches and what is that person’s experience?
How sophisticated are the performance
measurement systems and how will they help
you measure success? Did this consultant
help you develop your strategic branching plan
and understand how those strategies might
impact branch planning and design? Is he or
she experienced in security planning so that
your branches are both high performance and
safe? Does the consultant’s work all look and
function the same for each client? How will
the consultant work with your team to create
a unique member and staff experience that
differentiates you from your competition?
environment our members live in. For Fort Worth
Community Credit Union (www.ftwccu.org) this
meant water atomizers at the entry approach
that reduce air temperatures on 100-degree days
to 85 degrees. In addition, a water fountain was
placed as a feature in the entry.
Selecting the right consulting partners is key to
realizing the potential of every branch and market.
Are they more expensive than the local architect
or designer? Yes. If they are very good at what
they do, they have been able to develop a national
practice. Using a national firm often requires
more cost in terms of location, travel and salaries.
But there is also a big payoff that significantly
exceeds the difference in fees. The difference is
in measurable performance. Our observations
tell us that when a branch delivers a strong brand
experience, deposits, loans and ROI are high
compared to decorated and lackluster branches. It
is easy to calculate the difference in value if in five
years your branch will be twice the size in terms of
members, deposits and loans. Compare that to how
it would be with inexperienced brand development
and translation into a branch. Remember North
Shore CU’s story earlier. The return on highly
productive design is not 50 percent or 100 percent;
it can be 5,000 percent, 10,000 percent or more
over the lifetime of a branch.
The assumption is that when a new branch
business model is developed it will cost more to
operate than the existing model. But this is not
always the case. While the objective is to create
a very high-performance branch, there may be
ways to reduce operating costs through use of
technology, centralization of processes, changes
in cash transaction processes, cross-training, and
sizing to market potential rather than sizing to an
arbitrary standard.
Developing a clear
understanding of branch objectives
The charrett process drives
innovation and consensus
The first step in the brand translation process
is gaining a clear and common understanding
of what a branch is for. This seems like a simple
question, but when it is posed there often are a
few seconds of silence. The process of answering
this question within a structured and proven
framework can quickly define the expectations of
what a branch should do for the credit union and
its place in the delivery array.
The first step in developing a well-branded
branch business model and prototype for new and
existing facilities is the charrett process. Within the
context of branch planning, this is a dynamic and
engaging process that quickly gets to the core of
brand, generates creative branch translation and
gathers consensus. This process is simple, yet
provides deep clarity and rational and creative
design solutions that can be tangibly measured.
An important product of this discussion is a
list of the performance expectations that can
be used to drive decisions. These performance
expectations might be something like: The branch
must make our members feel important, the
center of attention and smart. This statement
can drive what members see and feel as they
approach the branch, where they enter, how they
are greeted, what they experience through their
visit, and the type and location of lighting, flooring
and surfaces.
A number of questions must be answered
or revisited during the business modeling and
prototype process.
Another performance objective could be that
the branch must project our understanding of the
These performance or branch objectives can
be used as a check point in every decision to
ensure the process remains on track and the
collective mind remains on task. With a set of
clear and common objectives in hand, the team
can move forward to developing the branch
business model and prototype.
Developing the branch
business model and prototype
• What is the brand?
• What are the productivity goals in terms of ROI,
growth, break even and share-of-wallet?
• What impact do existing branch conditions
have on the design of the new branch
business model in terms of how it might
be applied to existing facilities to ensure a
consistent brand image?
• Should the prototype be based on a specific
73
site or in the abstract for whole and partial
application to existing and new branches?
• Should more than one prototype be developed
for different types of service offerings?
• Should the prototyping include the exterior
brand statement as well?
• What are all the potential types of locations:
full-service freestanding, in-line, in-store, SEG,
lending or business banking office, ATM?
• Are there community restrictions that might
impact the brand application?
• Are there competitive issues that may
impact design?
• Are there philanthropic initiatives that should
be considered in the design?
• Where is the credit union in its
cultural evolution?
• What are the capital and operational
budget goals?
• What is the level of robbery and
fraud concern?
• Will branches be placed in target markets
with characteristics that will require
modifications to the final prototype?
• Are there parallel initiatives that could impact
the final design in the future?
Business modeling
and prototype development
Before we discuss the process, let’s define
what business modeling and prototype
development mean. Business modeling is the
task of creating the method of operations,
processes, procedures, responsibilities, and
resources necessary to reach the objectives.
It is like creating a script for the multi-function
business of retail branching and brand delivery.
Prototype development is the creation of the
physical environment needed to support the
business model through a consistent application
of retail delivery parts.
The Process
The session starts with a review of the team’s
expectations of the work. Then we launch into the
brand objectives and discussing questions similar
to those listed above.
This is typically followed by a review of industry
trends in business modeling and prototype
development including what is working, what
is not and what the future looks like in terms
of service delivery. Now is also the time when
consultants should present industry surveys,
studies and papers that reinforce their position
on important design and operating issues as they
relate to the client credit union.
An important part of this process is mapping
out the member experience so that it is generally
controlled from start to finish. By doing this,
economies can be created in the design. We know
how members will move through the space and
interact with staff and we know where to place key
messaging. Here are some questions that should be
asked as the mapping is completed:
• What should members see from the street
and as they enter the site?
• What should they experience as they
approach the branch in a car and on foot?
How should the building make them feel?
• What and who do they see upon first
entering the facility? How do they feel?
• How do they know where to go to get what
they need?
• Where is the greeter and, if there is no
dedicated greeter, who will say “Hi”
and “Welcome”?
• As members move toward the teller lobby,
what do they see? What kinds of messages
are they getting? Who is talking with them?
• What do members see and do in the
queuing line? Can they see a video with key
messaging and news? Can they pick up a
brochure? Is a staff member able to help
them in line?
• As members approach the teller, what do
they see? Is the teller separated by bulletresistant glass, behind a teller line with high
wickets or does the teller come around an
open pod to shake their hand in greeting?
• As a member approaches a member service
representative, how are they greeted? Does
the MSR remain seated and shake the
member’s hand across the desk, get up and
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shake hands or come around to the front of
the desk?
• Should members have the choice about how
they want to do business with an MSR–at a
stand-up or sit-down station?
• If a member wants more privacy, how is
it created?
• As the member exits, is he thanked for coming,
and reminded of key products and services?
• Is it easy to navigate back to the parking lot
and exit?
As the session discovers answers to the key
branding and modeling questions, the project
specifications or programming is developed
so the basic components are understood. For
instance, a credit union may decide that the
model should be based on the largest potential
branch size so that all the retail components
can be fully developed and defined, and then
segmented for smaller branches. This could
produce a basic program that looks like this:
3,800 square feet on one floor
3 lanes of drive-through
Parking for 35 cars
1 conference room for 6 people
1 vault
1 public and one staff-only bathroom
1 lunch room
1 cash room
1 ATM and IT room
1 small storage area/work room
2 double teller pods
1 four-person reception/education area
1 kids area
1 member PC
1 coin counter
1 lobby with 20 in queue
1 manager/coach in a partially enclosed
workstation
3 MSRs
1 greeter
1 mortgage representative in an office
1 “hoteling” office for visiting mortgage,
investment and insurance representatives
The list then becomes the foundation upon
which the brand is applied. The brand may impact
the square footage. In some markets more space
per staff may be needed to attract higher-income
members, a community room may need to be
provided adding 900 square feet, the reception/
education area may need to be enlarged because
it will be used for seminars and staff training after
hours. The greeter station may be for a full-time
staff person or a shared workstation requiring an
additional MSR station.
The programming process must also address
how messaging will be integrated into the branch.
The pattern of member movement through
the branch must enhance the impact of each
marketing location.
The use of specific technologies affects
the design as well. What type of systems and
hardware will the tellers be using? Will the staff
be using laptops so they can move from their
workstation to the greeter position and then to a
conference room for privacy? Or will they work
from a PC? Will RFID be integrated in the branch
plan, requiring placement of readers?
Will a video messaging system be placed in the
branches for member communications, seminars
with members and staff, and expression of the
brand? How might this impact the plan?
When should staff and members be standing
and when should they sit? How will this impact
furniture and cabinetry design, information
sharing and privacy?
What should be a member’s experience from
the time she sees the building, during her time in
the branch and as she leaves?
These and many other questions must be
answered in the first session.
Engineering the branch experience
The second planning session consolidates
all the information about brand objectives
and programming into a short synopsis for
confirmation. This is important, as the design
process must be based on step-by-step
consensus so that the final design is totally
relational as well as highly creative.
The first step in engineering the member
and staff experience is to create a relationship
bubblegram or member experience map. This
mapping is initially done in the abstract to
reflect the discovery nature of the process. The
map notes all the key programming elements,
and places these elements along the member
experience path as determined by the branch and
consulting teams. Here is an example of what
member experience mapping might look like.
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Brand experience mapping
how it might work in a specific branch. They can
discuss how members and staff will experience
the brand as they move through the branch. As
team members modify or approve the abstract
relationships, they are solidifying how a branch
must function to reach its objectives no matter its
size or configuration.
At this stage all of the brand objectives and
programming are reviewed and approved before
moving forward with the development of the
branch floor plan.
Creating the branch planning standard
When a credit union approves the brand
experience and programming, the next step is to
create a plan that delivers the brand experience
within the confines of architecture. This can
be developed for one or multiple sites or in the
abstract as the basis for future branch design.
The purpose is to show how the branch space
will function at scale. The size and placement
of workstations is defined, worksurface heights
expressed, merchandising and messaging
located, and video messaging positioned. This
plan also illustrates how member development
will be accomplished and how SafeCatch (see
chapter 12, Security Planning) will be operated.
Retail Delivery Plan with Member
Path and Interaction Overlay
The organic nature of this technique allows
a credit union to focus on the relationships of
staff to members to space to messaging and
key product displays rather than thinking about
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All of the above discovery, planning and design
tasks are completed in one day. We feel the
best results can be gained in a dedicated fullday session as we are able to bring busy people
to a single task and gain consensus on critical
issues driving the member experience. It not only
works well every time, but also produces highly
productive branch business models.
We have now completed the first step in the
process of creating a new branch business model
and prototype. The next step is to build on the
work that has been done to develop the branch
prototype with specifications.
Developing the branch prototype
The real interior and architectural work starts
here as the branch concepts are translated into
materials, colors, finishes, cabinetry designs and
specifications sufficient to guide application to
real free-standing buildings and lease space.
The result of this work is the creation of retail
branch prototype standards and merchandising
standards.
The standards package should generally
include the following:
Interior
• Creative brief referencing the brand
translation work
• A perspective drawing
• Floor plan with retail zones
• SafeCatch overlay
• Floor plan with cabinetry locations
designated
• Reflected ceiling plan
• Color and materials for all surfaces, furniture
and cabinetry
• Finish plan and specifications
• Furniture recommendations
• Equipment integration with specifications
and floor placement
• Elevation of key retail components
• Merchandising design
• Merchandising locations with plan reference
Exterior
• A perspective drawing
• Site plan
• Key elevations
• Signage locations
• Equipment locations
• Color and materials specifications
The size of the merchandising package will
vary with every credit union. For some, it will be
a comprehensive program with video, posters,
back-lit displays, use of Microsoft’s “Surfaces”
for infotainment, rear projection on the windows
and environmental graphics, while for others it
is limited to a few posters and collateral pieces.
Often a merchandising standards program will
include the following:
• Corporate identity and graphic displays
• Key brand message and image feature wall
• Primary and secondary product posters for
teller and high impact display walls
• PC-area merchandising and
instructional signage
• Lifestyle merchandising posters and product
display graphics
• Interior directional signage and instructional
signage program
• Collateral display features
• Credit Union Service Organization,
non-traditional and third-party features,
signage and collateral display
• Video messaging recommendations for
development
Very tight coordination of the merchandising
program with the branch plan is required to
ensure it is effective, will be applicable in a variety
of forms at every branch location, and can ensure
consistency to save cost. Every merchandising
element must be located on the prototype plan.
If the credit union is developing more than one
prototype—let’s say a regional, community and
micro-branch—keyed plans should be developed
for each.
Floor Plan with
Merchandising Overlay and Notation
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Real Life Brand Translation
How do brands impact branch interior
design in real life? Here are a few examples of
designs created for branch interiors with a short
explanation of each. More detail can be gained by
turning to Chapter 15, Case Studies.
$450 million Red Canoe Credit Union
(http://www.redcanoecu.com) Longview, Wash.,
was required to change its name by its original
sponsor, Weyerhaeuser Company, and access to
over 200 employee locations was restricted. The
board and management team decided to gain a
community charter and selected the name Red
Canoe. The new branch interior had to deliver a
member experience that would retain existing
members while attracting new members in new
markets that did not know of Weyerhaeuser CU
or Red Canoe. The branch image reflects the
connection to nature, so important to the target
members. The use of natural materials with bold
colors delivers a powerful translation of Red
Canoe CU’s brand position.
As previously mentioned, North Shore Credit
Union wanted to own the North Shore Vancouver
market with a new brand and branch concept.
The CU needed a strong new image that would
attract and retain the emerging wealthy and
wealthy markets. A spa concept was developed
to promote member, staff and community
financial, physical and mental wellness. This new
brand image drove the development of brand
messaging through all other delivery channels
and in marketing. This, coupled with significant
product and service initiatives, resulted in nearly
300 percent growth in five years.
Member entry view of North Shore Credit
Union’s community ibranch
$315 million Air Force Federal Credit Union
(http://www.airforcefcu.com) San Antonio, Texas,
wanted to update its image to attract more young
base personnel and connect more effectively with
families off base in existing and new markets. The
brand translated into the branch with references
to flight combined with a strong financial advisory
image. This branch employs ATMs for cash
delivery, which significantly reduced staff without
losing members, and allowed the credit union to
focus on member service.
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$485 million Aloha Pacific Federal Credit
Union (http://www.kalanet.com), is located in
Honolulu. At the beginning of our work with this
CU it changed its name from one focused on
an employment group to a name that embraces
living and working in Hawaii. The branch concept
is driven by the Hawaiian concept of “Ohana,”
being part of the family. When you enter the CU, it
is like being in an extended home. It is hospitality
and business-savvy Aloha Pacific FCU style.
$625 million TwinStar Credit Union
(http://www.twinstarcu.com), Olympia,
Wash., located a new full-service branch in
an agricultural community that served a wide
region and was growing in new businesses,
households and sophistication. The right theme
for this market was a combination of small-town
agriculture with an emerging regional business
community. The branch combines traditional
brick with a curved steel roof and exposed
interior structure. It reflects an appreciation for
the past and a vision of the future.
$168 million Yolo Federal Credit Union
(http://www.yolofcu.org), Woodland, Calif.,
wanted to create a brand image that would
attract successful farmers, university professors,
students, and the communities that supported
them. We agreed that an agribusiness theme
combined with sophisticated outdoor activities
would be attractive to members. The branch uses
natural materials and makes reference to key
crops and sports. The branch continues to do
very well.
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Brand characteristics should influence exterior
branch design as well. We have selected a few
examples from our portfolio:
Red Canoe CU wanted its branches to look
substantially different from its competitors’, and
to reflect the CU’s strong new brand image.
Curves were used for differentiation along with
rich materials on the exterior to create a high
quality, welcoming experience that could be
successfully replicated in additional freestanding
facilities as well as at the entry to leased in-line
properties in a variety of target markets.
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$780 million Columbia Credit Union
(http://www.columbiacu.org), Vancouver, Wash.,
had just initiated a “green” program when we
started the work. The new branch concept was
designed to deliver a silver LEED Certification
and actually delivered gold. (For more details on
the levels of certification, please see Chapter 8,
Going Green.) Columbia CU wanted the building
to clearly express its commitment to protecting
the environment and sustainable design. The
branch retains roof water for irrigation, and has
heat-resistant windows and low-impact plantings.
Additionally, Columbia CU enhanced the way it
does business to integrate green into process,
products and services, and the credit union culture.
$225 million Yakima Valley Credit Union
(http://www.yvcu.org), Yakima, Wash., is located
in agricultural and wine country. The branch
design had to reflect the community’s new
direction toward a very sophisticated view of
agribusiness while still relating to its history. The
branch design pulls from both historic and new
elements of the local architectural vernacular
while suggesting openness and accessibility.
$157 million Catholic Credit Union
(http://www.catholicfcu.org), Yakima, Wash.,
has successfully focused on a strong Catholic
community for many years. The CU needed a new
headquarters and branch design that suggested
stability, commitment to the community, and
modern thinking, while not making reference to
the Catholic Church. A more formal architectural
approach was taken with the initial massing.
Then elements were added to enhance the local
architectural style: a curved exterior wall, floating
staircase, perpendicular sun shades and a filigree
HVAC screen. The same design was applied to a
5,000-square-foot branch in a remote market 35
miles away with good success in terms of brand
recognition and growth.
TwinStar CU wanted an exterior design that
would express its savvy nature, connection
to both big and small financial centers and
willingness to express a strong brand. The
branch’s use of traditional and non-traditional
shapes and structures provided the right
message to help this credit union compete.
$707 million Kitsap Credit Union (http://
www.kitsapcu.org), Bremerton, Wash., needed
a branch that would attract doctors, merchants,
Navy personnel and people who “work in the
woods.” The branch architecture presents a
lodge image that is familiar to and embraced
by all target audiences. All age, income, gender
and ethnic ranges feel welcome and comfortable
approaching and entering this branch.
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$511 million HAPO Credit Union (http://www.
hapo.org), Richland, Wash., is in expansion mode
to take advantage of growth opportunities in its
growing market. While the CU had a number of
existing branches of various designs, it wanted
to create a new brand image that could be more
effective in terms of attracting and retaining
members and make the CU more competitive.
The branch design is unique in the market, while
adaptable to a wide variety of locations.
Branch design
Branch performance is significantly impacted
by branch design. For example, retail branch
space efficiency is a factor overlooked in the
planning of most branches. Retail branch space
efficiency means considering the ratio of the
space where staff and members connect and
develop relationships and where sales and
service is conducted to back-office space only
used by the staff. In the ’70s and ’80s a branch
with 65 percent efficiency was considered
productive in terms of square feet. Today we still
see branches being built with this low efficiency.
But what if this branch were 85 percent to 90
percent efficient? Efficient planning means
that a 5,000-square foot free-standing branch
building could be reduced to 3,500 square feet
and provide the same level of performance,
saving over $400,000 in construction cost and 25
percent in facility operating cost.
Good branch design creates a powerful brand
experience for both members and staff that helps
differentiate a credit union from its competitors.
Brand convergence is created among other
branches and delivery channels. Good branch
design enhances the ability of staff to interact
with members. It makes the environment safer.
Member and staff product and service knowledge
are enhanced in measurable ways.
The benefits of excellent branch design are
measurable in terms of increased member use of
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products and services including non-traditional
offerings, accounts per household, deposit
and loan balances, staff success, member
satisfaction, good productivity ratios and net
advocacy scores.
Types of Branches
Should one type and size of branch be applied
to all markets? In years past this was popular as
banks and credit unions developed one prototype
that could be applied to every market. We still see
some institutions doing this today. The difficulty
is that these branches often underperform in
both good and bad markets. They are undersized
in some markets and oversized in others. It just
makes common sense to match the cost of a
branch to its potential to break even and become
profitable within a defined period of time. How
then do you create a retail branch business model
and translate it into different size branches?
The process requires two steps. The
strategic branch planning process includes the
analysis of markets in terms of member growth
potential, timing and potential branch evolution.
In some markets it might be best to develop
a 4,100-square-foot branch with five lanes of
drive-through. For this branch there might be
2,500 existing members who will find the branch
convenient, as well as the potential to penetrate
surrounding target markets to a level that will
add at least 3,000 new members. In another
market there may be only 100 members with
growth expected to reach 1,800 members in four
years. In this market it may be best to lease a
1,500-square-foot branch for five years with three
five-year options to renew and an early out option
in three years to match market potential.
Types of branches can also be driven by a
credit union’s desire to own vs. lease. A market
may offer the potential of 7,500 members in 15
years based on household growth, but near-term
penetration will only deliver 2,500 to 3,000. If a
credit union wants to own its facility, it could build
a 5,000-square-foot retail facility and lease out half.
Or, it could build a 3,200-square-foot branch that
can be easily expanded in the future. One hybrid we
have used successfully in some new markets is the
drive-through micro branch, which offers five lines
of drive-through, a 1,000-square-foot lobby with
three staff and, in some cases, a safe deposit vault.
The small branch is placed on the site so it can be
expanded as needed in the future.
There are hundreds of market types and there
could be hundreds of branch applications that
would be most productive. For the sake of brevity,
let’s look at a few examples.
Community Branch—Free-standing
Regional Headquarters Branch
Regional Branch—Free-standing
Automated Cash Delivery Branch—Large
Community Branch—Leased Space
Drive-Through Branch
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Neighborhood Express Branch
In-Store Branch—Large
Branch Planning Components
Every branch, no matter its size, is composed
of individual functional areas strategically
grouped together to provide the member
experience. The design of each area, how it links
to adjacent elements and its placement along
the member’s path is the backdrop to creating a
powerful member experience.
Over the past five years, the design of these
functional branch areas has evolved. Following
is a review of each area’s function and specific
design consideration.
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Site
All branches have site considerations. The
site is the outside of a branch. It is the first step
a member takes on your property toward the
branch and, for those who use the drive-through
or exterior ATM or night depository, the site may
be the only physical connection. The site needs to
be the start of the member’s positive experience.
The site is also the last contact members have
with your branch. You want them to leave with a
positive feeling. Can they easily get out of their
parking spot, move to the exit and safely make a
left turn? Egress as well as ingress is important to
a member’s perception of convenience.
Site design considerations and attributes:
• Dumpster should not be visible to the public;
access must be approved by the trash
collection company
• Plantings used on the site should be
appropriate to the climate, limit water use
and maintenance, and be guaranteed by
the provider
Building exterior
• Roof materials should be low maintenance.
• All HVAC units should be screened from
public view.
• In areas with heavy snow loads and freezing
temperatures, heated down spouts and
walkways should be specified.
• Easy-to-see primary signage and clear
directional and circulation signage. There
should be a lighted sign that displays 24hour ATM.
• Windows should be high UV-resistant and
sun screens provided.
• Branch visibility from the street
• Easy ingress
• Visibility into the building should be easy
from the street and parking area.
• No backup into the street caused by the
drive-through or poor circulation in the
parking lot
• Windows should be placed on all sides of the
building for observation of suspicious people
or of a robber after a robbery.
• Easy traffic circulation
• Ability to leave the drive-through and directly
access the branch
• The exterior of the building should be
designed to support the brand to the
greatest extent possible.
• Escape or bypass lane provided
• All sides of the building should be well lit.
• No compact car stalls for members
• The underside height of the drive-through
canopy should be at least 11 feet.
• No stacking of drive-through cars in
pedestrian path
• Trees should be trimmed to at least six feet
off the ground and bushes no more than two
feet high for security and visibility.
• Well lit
• The use of trees should be considered to
provide building shade.
• Provide locations for exterior merchandising
and messaging. This could be adjacent to
the ATM or night depository, along the path
to the drive-through, at the drive-through
islands or above the tellers in a head-on
drive-through configuration.
• Provide an area away from the building for
staff who smoke
• Provide a bicycle rack
• ATM sites must be lit to state specifications
• Walk-up ATMs must be completely visible
from the street
• Covered by security cameras
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Building Entry
• Entry should be completely visible from
the street.
• An exit camera should be built into the door
frame five feet off the floor.
• If double doors are provided with an atrium,
there should be sufficient space between the
doors for easy in and out.
• For privacy, ensure there is sufficient space
between the first queuing member and a
member at the teller area.
• Provide a drinking fountain.
• If an ATM is placed in the atrium, sufficient
space must be provided for three members
to queue without blocking the door.
• A coin counter may be placed in the lobby. It
should be visible but out of the path and well
sound proofed.
• The entry door should be visible to the
greeter and other staff.
• The vault door should be visible from the
lobby.
• A member standing at the door should not
have a clear view of the teller line.
• Staff support areas should not be visible
from the lobby.
• One exterior ATM should be placed adjacent
to the entry.
• Do not let members face the teller area
as they use the checkstand; rather turn
the stand so they must turn around to
see the teller area. This is a key element
of SafeCatch. (Read more in chapter 12,
Security Planning.)
• Determine where merchandising and
messaging can be placed at the entry.
• Signage should include the hours of operation,
a welcome sign, emergency numbers, address
and any other jurisdiction requirements.
Lobby
• The lobby should be visible to members and
staff at all times while in the lobby.
• The lobby should be visible from the exterior
so product and brand messages can be
seen from outside.
• Member queuing should be structured to
control order of arrival, as well as sight and
sound privacy.
• Provide video messaging and merchandising
to members waiting in line to enhance
product and service awareness.
• Ensure that the walking surface is non-slip.
• Design the space so sound privacy is maintained.
• Position the lobby so members know about
the credit union’s non-traditional services.
• Provide brochures and take-aways in
the lobby.
• Coffee should not be directly available in the
lobby. Rather, it should be provided in the
member reception/education area.
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• On the approach to the lobby, place a
merchandising element in the member’s path
and place a hidden camera five feet above
the floor.
Shared branching
• If a branch provides transaction services
for members of other credit unions, nonmembers should be taken out of the queuing
line and handled with a smart ATM at a lobby
location or outside the branch in a separate
lobby or at the ATM.
• If an ATM is used for shared branching
transactions a location will need to be provided
where at least five non-members can stack
without blocking member and staff activity.
• If shared branching is pursued, the credit
union will need to remember that it may
reach transaction capacity ahead of
schedule and will need to make a decision
to close the branch to non-members or build
another or bigger branch to accommodate
greater member and non-member
transaction volume.
• Wherever shared branch transactions are
conducted, information about how to join the
credit union should be provided. Non-members
who find your branch more convenient may be
willing to belong to two institutions.
Concierge Station
• Today, concierge stations are being placed
in most large branches. In small branches
concierge coverage can be providing by
rotating staff through a shared station
or from one of the well-positioned MSR
stations.
Examples of concierge stations
$670 million American First Federal Credit
Union (http://www.amerfirst.org), LaHabra, Calif.
• The concierge should be standing so that he
or she is eye to eye with members.
• The concierge should be positioned in the
member’s path so active engagement is
encouraged.
• There should be a place at the concierge
station for a small display of flowers, or a
basket of apples.
• The concierge should be able to see the
entire retail portion of the branch. He or she
should have visual control of the waiting area
and coffee.
North Shore CU
• If the concierge station is shared, consider
the use of laptops for MSRs.
• There should be space around the station for
members to be able to step out of traffic for
a conversation.
• There should be a single strong message
presented behind this station. It is a key
messaging wall.
Yolo FCU
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Reception and Member Education
• Places where members wait should be more
than just a place to wait. Educational materials
should be provided to “infotain” members.
• These areas may double as after-hours
seminars space for members or training
areas for staff. Consider the flexibility
required to accommodate this goal.
• Chairs should be used instead of sofas, as
people are often uncomfortable sitting on a
sofa with someone they do not know. The
chairs should be solid and have arms so elderly
members can easily get in and out of them.
• This area should be adjacent to the entry and
completely visible to the concierge and at
least one other staff person.
• The area should have visibility to the dedicated
or shared offices for mortgage, insurance,
investment and small business services.
Display and cultural connection
A credit union may have the desire and
willingness to add a non-banking retail
component to its branches to increase the
connection with members. Umpqua Bank (http://
www.umpquabank.com) Roseburg, Ore., has
been very effective with this tactic. In the credit
union industry, North Shore CU has been most
successful in promoting its brand image and
message through the display and sale of art in
its branches. A display area is placed along the
member’s path through lobby. Is it effective?
From the response it must be. Many of the artists
tell North Shore CU that they sell more of their
work in the branches than they do in art galleries.
Members say they like seeing high quality art
combined with North Shore CU’s unique brand
of financial, physical and mental well being. The
people at North Shore CU must have the same
interests and values.
North Shore CU
Homestreet Bank (http://www.homestreetbank.
com) Seattle, waiting and investment club area
Columbia CU’s reception/green education area
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Member PC area
North Shore CU
Five years ago it was thought that members
would come into a branch to use PCs. We know
today that virtually all members have access to
PCs at home and work and do not come to a
branch for access.
• The purpose of a PC is not limited to finding
information. It can be used for filling out an
application in the branch, as entertainment,
and as an element of brand: “We are high tech
and high touch.” A single PC is often enough.
• The PC should be located adjacent to
the reception area at a comfortable
sit-down station.
• Signage should be placed above the screen
to indicate its availability.
• The screen should be positioned so it cannot
be seen by other members or suffer high
illumination from the windows.
Kids Areas
Kids areas have evolved from the simple to
the complex and back. Five and 10 years ago,
kids centers offered video entertainment, but this
made it hard for parents to leave before the video
was over. Toys were provided but they seemed
to migrate into the path of members. Additionally,
members became concerned about germs,
requiring costly cleaning or sending out for
service on a scheduled basis. Today kids areas
have been simplified.
• Place kids areas in branches where there
will be a large number of children, not in
business locations.
• Locate kids areas away from staff.
• Locate kids areas so there is full visibility
from all areas of the branch.
• Provide a small surface for writing and some
fixed toys that are easy to clean.
• Put one staff member in charge of keeping a
constant eye on the area.
Teller – Traditional
Traditional teller stations are those that
separate tellers from members to protect cash.
Cash handling in banks was, and is today at some
institutions, from a teller cage that was created
by placing a row of bars on top of a teller line. A
derivation of this is teller lines with bullet resistant
glass on top. The second major evolution was
counters with wickets and not bars as we saw
from the late ’30s through the ’90s.
Today traditional teller lines are used in about
50 percent of new branches. Part of the reason
is that the financial institutions still using teller
lines have not yet converted from cash drawers to
cash- handling equipment. Another reason is that
in some high-risk environments the traditional
barricade between tellers and the lobby is
required. Let’s look at a few teller line studies
done to understand the relationship of the teller to
equipment in a traditional teller line.
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Single-position teller activity study
• Is there a light directly over every
transaction surface?
• Are the security cameras positioned so they
can see under the hat of members?
• If a teller needs to walk away from a
situation, where can he go?
• Can tellers complete such tasks as writing
cashier’s checks while maintaining eye
contact with members?
• How will non-member transaction problems
be handled?
• Has the teller counter been designed so that
it can accept a cash dispenser in the future
without significant modifications?
Double teller position study
• Will the staff be comfortable on their feet
all day?
• Is the teller’s monitor visible to the lobby or
through an outside window?
• Is the space behind the teller line solid so it
can be used for display, or is it a window that
distracts members and wastes the primary
opportunity to communicate with members
while in the branch?
• Are the surfaces highly durable?
• Is the counter surface of a type that will
retain fingerprints after a robbery?
• Where are the security devices located and
are they easy to access?
These stations will continue to have their place
as they are the right answer for some high-risk
environments and match cultural service needs in
some markets.
There are issues to consider when planning a
teller line:
• What is the level of risk and which type
of teller line best balances security with
member development?
• Would double teller stations be best to
reduce robberies, share equipment and
allow mentoring?
• Where will notices be placed on the
counter surface per National Credit Union
Administration requirements?
• What will members see when they approach
the teller line?
• Can staff see members and the lobby over
the hoods?
• Where can a member set her purse while
conducting a transaction?
• Is there privacy between transaction points
in terms of sound and sight?
• How can you show a teller position is closed
in the most pleasant way?
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We have designed a number of traditional teller
lines for credit unions. Here are a few examples:
American First CU
Teller/MSR pods
In the late ’90s Washington Mutual, now
becoming Chase Bank (http://www.chase.com),
created the “Occasio” branch that revolutionized
cash delivery. This was made possible by
advances in technology.
Washington Mutual’s Occasio Branch
Fort Worth Community CU
Traditional teller lines will continue to have their
place in branch planning, but will be used less and
less as credit unions convert to cash dispensers,
enhance their cultures and increase member
development, and use alternative cash delivery
systems, such as remote tellers and ATMs.
Cash dispensers and recyclers opened up new
member relationship possibilities by limiting the
amount of funds that can be taken in a robbery,
reducing potential losses in transit from the teller
position to the vault, retaining the currency in a
rated dispenser, reducing balancing time at the
end of the day by an average of 30 minutes, and
allowing staff to focus more time on members.
No longer does staff need to be separated from
members for the protection of cash. In fact,
our work with the FBI in the development of
SafeCatch shows us that teller pods enhance
the performance of SafeCatch and its ability
to reduce robberies and fraud while enhancing
member development. (There is more about
SafeCatch in chapter 12, Security Planning.)
One of the biggest contributions to branch
efficiency was made by teller pods. Now that staff
is not segregated from other staff and they had
more contact and member development time it
made sense to cross-train tellers and MSRs. This
has resulted in a reduction in staff, a higher level
of member service, increased cross-selling, more
satisfied staff and members, and an enhanced
service and sales culture that enjoys a much
closer connection with members. In fact, some
credit unions have taken the pod-driven cultural
evolution to the next step. Their teller/MSRs greet
each member by walking around the pod and
shaking their hand.
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While the development of today’s advanced
teller pods was born of the work Washington
Mutual had done, they are much evolved. For
example, the Occasio model falls apart because
of how the teller pods were positioned. When
large numbers of customers (more than five)
came in to the bank, they did not know where
to stand or who was going to serve them.
Repositioning has allowed for efficient queuing at
busy times. The Occasio model used single freestanding pods, which increased the likelihood
of being robbed, made vacant stations more
obvious and required a separate cash dispenser
for each.
Today’s teller pods are a hybrid of the original.
We have combined teller pods into groups of two,
so tellers can share one cash dispenser, provide
mentoring to another staff member, and cover
two stations with one person. Let’s look at a few
examples of high performance teller/MSR pods.
Teller pod plan
takes advantage of technology. For example,
we worked with a credit union that wanted to
customize its cash and service delivery for
small markets with mature members to collect
deposits to loan out in younger markets. The
CU expected to see 85 to 150 people a day that
had $25,000 to $40,000 in their accounts. The
appropriate member experience in terms of cash
delivery would be to sit down, but many of these
members conducted other business as part of
their transaction visit. This need resulted in a
hybrid teller/MSR workstation that combined both
a stand-up counter and sit-down conference area
with a shared cash dispenser.
Drive-through tellers
Drive-through teller positions have changed
little over the past 15 years with the exception of
cash dispensers and recyclers and remote teller
systems. The traditional drive-through teller has
direct visibility to drivers and sits at a teller station
with all the same equipment as a lobby teller.
We are often asked how efficient drivethroughs are in terms of handling transactions.
We find that well-designed and operated drivethrough tellers will handle 40 percent to 60
percent of the transactions depending on market
characteristics and time of day and year.
North Shore CU
Every method of delivering cash and service
should be constantly evaluated for how it meets
the needs of each credit union or market and
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In our audits of hundreds of branches per year,
we are surprised to find how many credit unions
and banks do not take advantage of the sales
opportunities at drive-throughs. If 40 percent of the
members prefer the drive-through to the lobby, this
group should receive effective communications.
Signs placed along the line of travel can tell a
marketing story, vertical towers at the islands can
display key products, collateral placed at the kiosk
can provide a take-away, and a reader board or
video monitor can project moving messages. Most
importantly, drive-through tellers can sell in line. You
may be surprised to find that certain members will
want to get into a specific lane so they can talk with
their favorite teller. These tellers can cross sell at this
point of contact, given the right tools and training.
Operating a drive-through can be made easy
or difficult by the layout. Equipment vendors
offer good guidance concerning design, but it is
important to check on how they lay out the space
as it should be different for different drive-through
configurations. The primary issues are sight lines,
delivery tube locations and cash locations. Below
is a study of a drive-through configuration.
Drive-through teller study
We are all familiar with the traditional drivethrough design of lanes running parallel to a branch.
At times site restriction or the desire to create a
more interesting design requires an alternative
configuration. These are typically a head-on
configuration where the cars face the teller window
and turn 90 degrees as they exit. Another option is a
modified head-on where cars face a perpendicular
window and turn 45 degrees to one side. Here are
examples of each configuration:
Head-on drive-through configuration
45-degree head-on
drive-through configuration
The design of drive-throughs is well documented
by vendors. Even with this resource, there are a
number of factors that should be considered:
• The room available for car stacking should
accommodate at least five cars in each lane.
• The turning radius should be sufficient so
cars can easily negotiate the path.
• The minimum height of the canopy should be
11 feet above the ground.
• The distance between island curbs must be
at least 8.5 feet.
• Bollards should be placed to protect all
structure and equipment.
• The drive-through ATM should be located on
the outer island, and well signed.
• A bypass lane must always be provided.
• The driver of the car should be well
illuminated so that the security camera can
see who is making the transaction.
• The drive-through window must be shaded
from the sun throughout the day.
• The kiosks must be protected from the rain.
This may require an extension of the canopy
in some environments.
• Merchandising and messaging should be
placed along the path of members.
• A lighted 24-hour ATM sign should be
located at the street and clear signage
should lead to the ATM(s).
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• The teller must be separated from the
building exterior with bullet-resistant glass
and surrounding building materials.
thousands per year over the cost of a branch,
while still providing a level of face-to-face service.
• Cash dispensers should be used by the
tellers to reduce transaction time, increase
security and enhance member focus.
We have employed ATMs and RTSs with
excellent success at specific client locations.
Here is an example of RTS units employed at Air
Force FCU’s main branch:
• The drive-through tellers should be separated
from the lobby. Sound must be controlled.
Air Force FCU
Alternative Cash Delivery
Every branching opportunity is unique
and requires different delivery methods to
be successful and deliver a good ROI. Until
recently, every branching opportunity required
tellers for cash transactions. The application of
drive-through technology gave us remote teller
systems that could be used inside the lobby. The
advantage to RTS is that they can be operated
from behind a wall to maximize security while
delivering a modified level of personal service
through a video monitor. These systems can also
be used in drive-throughs where a direct sight line
between tellers and motorists cannot be created.
The disadvantage to the RTS is that it does not
reduce the number of tellers as first promised
unless it can serve members in both the lobby
and the drive-through. Some members do not
like touching the phone for health reasons, while
others do not like being separated from staff.
A strong warning: It is very difficult for
members of an existing branch to accept RTS
in a remodeled branch. A number of banks and
credit unions that have tried this tore the RTS out
later and returned to a teller line or pods. It is best
to use RTS in new installations.
People want to talk face to face. This was
reinforced by observation of a high-tech
credit union’s branches. The majority of their
members were well paid, highly educated and
technologically savvy. A few of the branches
offered both RTS and live tellers. At every visit
there would be 15 to 20 members in the teller line
and not one member at the RTS window.
ATMs have been around since the early ’70s
and continue to be an efficient cash delivery tool.
Recent advancements have enhanced ATMs to
provide copies of deposited checks and handle
merchant deposits. Within the past two years,
smart ATMs have been created that offer remote
teller services from anywhere in the world. This
advancement means that a credit union could
provide a smart ATM at a large SEG saving
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Member service area
The service and sales zone of a credit union
branch includes the member service area. The
staff in this area work differently than they did
10 or 15 years ago. Today CUs cannot wait for
something to happen; they must be proactive in
creating and building relationships. MSRs must
be positioned so they have a complete view of the
lobby, can recognize and address members when
they enter, and be able to move to the lobby and
back with ease.
MSR workstations should be multifunctional
in terms of their ability to accommodate
members’ time and privacy needs. These
workstations should allow members to choose
if they want to stand up or sit down to conduct
business. Members should also be able to
adjust themselves within the space to gain their
required level of privacy. One method of doing
this is by providing a workstation that offers two
communication surface heights, one for standup and one for sit-down. Here is an illustration of
a quick serve station with stools, designed for a
branch that wished to attract young members:
Quick Serve Station
Conference room
Every branch should have a conference room.
These rooms serve many purposes. They are
private places to take members or staff. They
can be used as closing rooms. In small and
medium market branches they may be used for
“hoteling” visiting staff from mortgage, insurance,
investments or small business services. They can
also be used as a community benefit and allow
groups to meet within the branch environment.
Conference rooms should be positioned for
easy access from the lobby. They should not be
positioned at the front of the branch if windows
are limited, as they are often unoccupied and
make the branch look empty.
The MSR function is key to the success of a
branch and there are a number of factors
to consider:
• Must be able to see the entire branch and
have easy access to the lobby.
• Sound control is mandatory.
• A conference room must be available for
private conversations.
• Double MSR positions work well for
staff mentoring.
• Monitors should be able to turn so MSRs can
partner with members.
Today, conference rooms should include
a video monitor to constantly run the credit
union’s video messages, connect headquarters
with other branches for training and cultural
development, and support member seminars.
Manager/Coach
The manager is the leader of the service and
sales team. In the past managers were placed at
the back of a branch in an office. This is not an
active position within the branch. In all but the
largest branches, managers should be placed in
close proximity to members so they can lead the
member development effort and show the staff
how it should be done by example.
The branch manager must be positioned to see
the front of the branch as well as the lobby and
teller line. He or she must be visually accessible,
while being able to create a totally private
environment either by shutting a door, sliding a
wall or moving to a convenient conference room.
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Vault
Fewer vaults are installed in branches today
than 10 years ago. Our studies indicate that the
convenience radius for deposits is two to five miles
while the convenience radius for safe deposit
boxes is 15+ miles. The use of cash dispensers
and recyclers means that much less cash needs
to be stored in a vault than in the past. Many of our
clients are opting to use rated safes that hold safe
deposit boxes to save cost and be able to relocate
the safes if they leave a leased space. No longer is
it necessary to place a vault in every branch. While
the use of vaults has dropped, we continue to place
them in market central locations, regional offices
and branches in remote communities.
Classifications, specifications, installation
and operations of vaults are well documented by
vendors, codes and security guidelines, so I will
not take space to include them here. But there are
a few questions you should ask when designing a
vault into your branch:
• Do we need to include a cash room if we are
using cash dispensers?
• What is the highest demand potential for boxes?
• Which size of boxes will be most popular?
• Should we use a modular or in-place vault?
• Can we expand the vault if needed?
• Is the viewing room and the path to it secure?
• Do we have a day gate?
• Does the vault include an air vent?
• Is the door to the vault visible from the front
of the branch for police viewing?
• If we will install a self-service vault, where
should the vestibule be located? Where is
the person located who is responsible for
the vault and do we have a security camera
located in the vestibule and vault?
Workroom and cash room
A cash room is needed to process cash, fill
ATM cassettes and process merchant bags. Its
design should include the following attributes:
• Located behind the teller area.
• Secured behind a locked door with a
180-degree peephole.
• If there is no vault, the cash and coin safes
should be included in the work room.
• This room can include storage if access
is controlled.
• The room should include an alarm
enunciator.
• There should be ample surface for all processing,
binder storage and the video recorder.
• If the room is on a window, the window
should be covered with Armor-coat and
visibility restricted.
CUSO and non-traditional services
Credit unions are benefiting from the addition
of non-traditional services like mortgage,
insurance, investments and small business. Our
analysis of branches often includes a survey of
members to understand their awareness of a
credit union’s products and services. It is often
surprisingly low. The reason is that while these
services are top of mind for a credit union, they
often suffer from modest marketing or graphic
branch communications.
Non-traditional services, particularly in times
when credit unions need non-interest income,
must be presented in ways that grab and engage
members’ attention. In branch planning this means
that the spaces that support these services should
be located in the members’ visual path, that is next
to reception areas. The presence of the services
should be reinforced with merchandising and
messaging. In small branches this may be one
office that is shared by all visiting staff or in a larger
branch this may be a mini-suite of offices that offer
a full array of services.
Debit/credit card production room
Some credit unions are producing their
own debit/credit cards at the branches. These
production areas must be located in a secured
room that protects the card machine and the
cards in a safe. Typically these rooms are not
visible to members as they are a secure, backroom function. The size of these rooms can be as
small as six by eight feet.
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Lunch room
Lavatories
Lunch rooms should include a refrigerator,
microwave, sink, dishwasher, trash compactor
and recycling bins. In a branch it is good to
provide a sofa so a staff member can lie down.
A television is also suggested. This room should
include an alarm enunciator light as well.
The interior of lavatories should be designed to
the same level of the branch interior to extend the
brand image through all member and staff areas.
The quality of a lunch room reflects how a credit
union feels about its staff. While the size of lunch
rooms is often driven by the amount of space
available in a facility, it is not a place to scrimp.
There are two back-office areas that are most
important to staff: this area and restrooms. If a
credit union wants to walk the talk about creating a
powerful brand culture, it needs to extend the same
quality in these areas as it does in the branch.
It is best to locate lunch rooms on window
walls and, if the site will allow, provide a place
for staff to sit outside in the summer. It is a good
idea to provide lockers for staff in the lunch room
area. Often coat racks are forgotten in planning. A
space for this type of need should be provided.
Storage room/area
In the past one of the big space users was
storage. In most of the small and medium-sized
branches designed today, there is no storage
room. Instead storage areas are provided in
common hallways and work areas. Just-in-time
delivery and paperless work environments have
significantly reduced the need for bulk storage.
Janitor closet
There must be a janitor’s closet in every branch,
typically by code. It does not need to be large, but
needs to provide a slop sink and a place to store
cleaning supplies. Often a room four to five feet
wide and five to six feet deep is sufficient.
Most credit unions want to provide two
lavatories even though they may not be required
by code. If there is just one lavatory, it should
be located in a staff-only area with supervised
member access. The lavatory should never be
behind the tellers or on the path to the drivethrough tellers. If there are two lavatories, one
should be dedicated to the staff and the other
to members. The member lavatory should have
public access, but the access must be controlled
visually and by placement so it does not become a
public lavatory or a place for a robber to prepare.
ATM and night deposit room
The ATM and night deposit room is often
adjacent to the entry door for member
convenience to the equipment from the exterior.
The room needs to be of sufficient size to
maintain the equipment. Sufficient 24/7 HVAC
should be provided. The entry door should be
of sufficient size to allow the equipment to be
moved in and out. (You would be surprised how
often this is missed). A small shelf should be
provided for minor processing.
Security for this room is important, particularly if
it includes IT as well (see below). The door should
include a 180-degree peep hole and an alarm
enunciator light should be mounted on the wall.
IT room
There is a surprising variation in the size of
IT rooms in branches. In some recent branch
planning, we have seen IT rooms that are
150 square feet with no intent of acting as or
becoming redundant IT sites. These are well
oversized. We no longer need to accommodate
multiple servers in IT rooms. Instead all of the
equipment is typically gathered into one IT
systems rack. It is very efficient to locate the IT
equipment with an ATM as this typically includes
24/7 HVAC and is secured.
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Security planning and SafeCatch
Branch security is an extremely important
issue in branch design, but most branches suffer
from poor security planning making them more
likely to be robbed or experience fraud. In chapter
12, Security Planning, we discuss our work
developing SafeCatch with the FBI, so I will not
go into great detail here. But let’s look at a few
things to consider in branch security planning.
• Security starts at the street and so should
the planning in terms of creating a safe path
and environment for members and staff.
• In the site design portion of this chapter, we
include a number of security concerns that
should be considered.
• People outside the branch should be able
to see inside the branch at all times, but not
have full view of the teller lobby or stations.
• A staff member should always be positioned
to greet members when they enter.
• Hidden cameras should be placed five
feet above the floor at the entry and
perpendicular to members on their way to
the teller line.
Hiring the right consultants
and contractors can reduce risk
and increase ROI
Branch planning and construction is a
specialty. It is more than just a retail box that
racks are moved into. It is a delivery channel that
is expensive to build and operate. In planning and
construction you may pay a little more to gain
the input of industry experts, but the payoff can
be big in terms of cost and time savings during
construction, rightsizing, operations efficiency,
engineering a highly productive member and staff
experience, and delivering high ROI.
Designing high-performance branches
requires a bit more effort and cost. But if a
credit union is willing to make a commitment
to excellence in member service and create a
strong and differentiating brand and branch
experience, the CU will reap more than just a nice
facility. It will gain a brand expression everyone
understands and can operate and an environment
that will support brand evolution for the life of
each branch.
• The check stand should not face the
teller line.
• The member lavatory should not be easy to
access without staff recognition.
• Teller staff should be able to walk away from
their stations.
• To reduce response time the alarm should be
connected to the police department as well
as the alarm company.
• Staff should be trained in SafeCatch, as
it has proven to reduce robberies while
enhancing member development.
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05
Building Transformational Brand
Experiences—and Generating Big Results
By Mark Weber, President, Weber Marketing Group
Good member service of the kind we have come to expect is not
enough to win lifetime advocates. As Jim Collins says in his now
famous book, Good to Great, “Good is the enemy of great.”
Settling for “good service” experiences inside your branches, on
the phone, or on your Web site sets the bar at the same average
height almost every other financial institution in the nation is also
shooting for. But “good” won’t win the competitive battle to delight
consumers, create wildfire with passionate advocates, or win a
larger share of their financial wallet.
Great brand experiences are created and managed from the inside
out, across the entire organization: from HR, to operations, IT,
lending and eventually to the consumer via your delivery channels.
Great brands are not finished in a vacuum, inside marketing
departments or even in creative branding agencies. World-class
financial brands like ING, USAA and Schwab have redefined the
impact of creating brand preference among consumers with an
integrated, well-managed marketing strategy, simple product
delivery, careful channel management, and consistent brand
experiences at every touch point.
Chapter 5 • Building Transformational Brand Experiences—and Generating Big Results
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But why would anyone not want to deliver on
“extraordinary brand experiences” instead of “good
service”? Because it requires hard work, a changed
mindset, team discipline. It requires a whole new set
of behaviors, strategies and process to enact real
change. And perhaps never before has the need for
well-focused performance objectives and results
become more vital to tie service experiences to
bottom-line relationship building. But how do you
shift to get there?
Can a credit union really
aspire to be the Ritz-Carlton
of financial experiences?
In Vancouver, British Columbia, one credit union
saw a gap in the market to provide an extraordinary
level of service and a unique brand focus no other
bank or credit union was providing.
How are great
service brands built?
Great service brands aren’t built with brilliant
strategies, new mission statements or gorgeous
marketing materials alone. And friendly, personal
service is not enough to win converts, build deep
relationships, and unleash “brand advocates.”
Great brands require human understanding,
clarity and focus, staff buy-in, training and daily
execution from every employee. Great brands that
stand apart from the competition are built from
the “inside out” by employees who consistently
commit to improving and delivering on a clear
set of brand promises, passionate behaviors and
tangible actions. They must be supported by an
integrated brand program built on a driving and
unique promise, a bold personality, strong design
and imagery, and a powerful look and feel.
From Starbucks to Marriott and Nordstrom
to Disney, great brand service experiences
are clearly defined and understood by every
employee — and then lived out daily in their
actions, behaviors and treatment of members.
“A brand is a living entity, and it is enriched
or undermined cumulatively over time, the
product of a thousand small gestures.”
– Michael Eisner, CEO Disney
100
Together with North Shore Credit Union, Weber
Marketing and EHS Design engaged a crossfunctional team of 18 managers and set out on
building a new brand model based on delivering
the highest level of service possible. The new
brand model was built around a concept of
financial wellness and dubbed the “Five-star Spa
Experience.” It created an unparalleled level of
member intimacy and trusted adviser services.
Based on hospitality experiences, the branch
experience is guided by concierges who have
undergone training from the Ritz-Carlton staff.
Built around a guided spa-like encounter, visitors
are given tours of the branch and introduced to
professional service advisers. Teller counters
are replaced with concierge stations. A bold
“Discovery Wall” engages consumers in video
messaging about the brand and community
involvement. Branch patrons are encouraged to
enjoy a latte, free wi-fi access and online services.
The first prototype in Park Royal set new
records for deposit, loan and investments under
management, generating a total portfolio of $25
million the first year. Subsequent branch rollouts
in Whistler and N. Vancouver have also helped
grow the balance sheet, investment non-interest
income, and core deposits and loans to record
levels. The spa brand has set a new standard that
has grown market share fast enough that even
Canadian banks are watching and listening.
How do you get everyone to
live the brand with boldness?
The mere fact you have developed a new
brand or opened a beautiful new branch is not
life-changing news for your staff or members. It
is often perceived as just another new marketing
campaign. Buy-in and behavioral change is
gained from leadership’s deep engagement,
taking ownership and building a sense of shared
creation in the brand experience.
Employee input through focus groups and
engaged brand workshops can help create a
compelling brand position that aligns every
touch point of your organization with your
employees’ actions. This is a chance to instill a
fresh approach to your brand so that everyone
is “walking the talk” every moment of the day.
Passionate staff can become “evangelists” for
your brand if their energy becomes contagious
and real. You can feel it and see it.
Our client “brand camps” utilize an intelligent
process and curriculum focused on fresh learning
skills, stretching behaviors, great service storybuilding and team-building exercises focused on
living out your brand. We work to uncover vital
“stories” of stellar service, create excitement
about treating members better than any other
organization does, providing “trusted advisor”
levels of engagement, and delivering world-class
service – instead of routine cash transactions.
“Branding demands commitment—
commitment to continual re-invention,
striking chords with people to stir their
emotions, and commitment to imagination.
It is easy to be cynical about such things,
much harder to be successful.”
– Sir Richard Branson, CEO, Virgin
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Meet a bold new Northwest brand
What people discovered, once they began
to call the credit union, walk into the branches
and see what the “new” brand looked like, was
an experience that had been engineered with
training, planning, preparation and execution over
many months. Every detail of service experiences
had been designed. Every touch point from the
branch interiors, merchandising, bold new Web
site, collateral systems and communications were
re-engineered – and all focused around the new
brand promise, “Your dreams. Our passion.”
When it first launched the new brand name,
Red Canoe, consumers and the media called it
“odd,” “different,” “not bank-like.” Within a week,
virtually every consumer in the credit union’s
multi-county area was talking about the unique
new name. Consumers expressed both positive
and negative opinions. But all of them were
talking about Red Canoe. As the brand began to
come to life in words, pictures and messages via
advertising and member and staff conversations,
the impact of the new brand created market-wide
awareness almost overnight that a new kind of
banking was now available.
The staff was aligned to deliver on that promise
with all-staff events, multi-media communications
and calendars. The internal brand building was
designed and trained around well-focused staff
actions, brand attributes, key messages, and
relevant ways to share the Red Canoe name,
meaning and brand: “expresses our passionate love
of the Northwest environment and our desire to help
guide our members to smarter financial choices.”
In 2007, a credit union in southwest
Washington State took a bold and decisive move
to radically transform its brand and engage its
employees in a fresh, dynamic new vision. They
believed consumers in the Northwest were
looking for a financial institution that was bold,
progressive, unique, and passionate about
service and help. Banks were not delivering that
promise. The CU began what would become a
deep brand journey with our process.
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In its first 12 months of launching Red Canoe,
the former Weyerhaeuser Credit Union generated
massive results and never missed a beat from its
old, well-known name. They replaced five years of
flat member growth with 12 percent net member
growth and record growth of deposits and loans.
Branch events generated traffic in the thousands
– with people they had never seen before. Every
employee of the organization was committed
to delivering “extraordinary Red Canoe brand
experiences.” The brand attracted new, younger
members and created a pride among employees
and existing members that is contagious – and
still spreading like wildfire.
Building great brand
experiences is a game-changer
In our experiences as a brand agency
designing, conceiving and installing over 180
award-winning brands, new credit union names,
retail merchandising, branded environments,
and integrated Web environments, our clients
have helped us learn some things about creating
great brand service experiences – and generating
results. Building a great brand is an ongoing
process and requires hard work and passion to
maintain success – it’s a marathon of seeking
excellence, not a speed race.
Amidst a new millennium of competition from
now trillion dollar banks and popular online
brands like ING and Schwab, many credit unions
are under-utilizing the wealth of their brand image
by not effectively branding their branches and
their service experiences from top to bottom. ING
and Schwab spend incredible resources to build
their brands by managing every customer “touch
point” into one seamless quality impression. And
great brand experiences must be built from the
inside out.
You need good processes
and commitment to engineer
real brand change
Successful brands don’t happen by chance.
They are built by embracing positive change
and a renewed vision shared with your team.
By leveraging your staff, senior management,
back-office employees and key leaders to work
collectively within your organization to engage
a new level of member “advocacy building,” not
just service satisfaction, the laser focus of people
and the payoff can be large. Once again, “good
service” is a threat to your success. The bar is too
low and consumers are literally switching financial
institutions for great service.
a baseline of your brand’s perceptions, your
service experience strengths and weaknesses,
and your awareness in the market. It will be a
critical guide to help you understand how to
reshape perceptions into a long-term positive
brand strategy – backed by new actions, service
behaviors and a re-engineered brand program
across all channels.
Reshape your brand image and
make your brick and mortar
pay off
With an emphasis among many members to
find and maintain a personal and trusted financial
relationship, your credit union should capitalize on
creating a rich service experience and building your
brand with every branch visit. From the exterior sign
identity, to the interior style, product awareness
building, online demonstrations, collateral and
brand features, shaping great experiences requires
carefully crafting the details to achieve an engaging
and quality brand experience with results.
One of the first steps in brand building is to
dive into internal and external brand research to
define the equity in your current brand and the
position your brand image occupies in the minds
of everyone vs. your competitors – employees,
management, members, community and/or
SEG prospects. It requires careful research
and analysis to uncover perceptions held in the
community among both members and prospects.
Those findings may surprise you, but a critical
and unbiased review will help you establish
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Like it or not, your credit union is forming market
impressions on members and prospects everytime
someone steps inside your branch or visits your
Web site. If that brand image is not consistently
one of quality service, diverse financial products,
relevant local messages and values that you believe
in, you may be sending members across the street,
or out onto the Web to seek an alternative financial
brand. Welcome to branding in the new millennium.
Transforming your existing branches from
sometimes mundane, dated-looking check-cashing
centers, into branded, dynamic and warm spaces
doesn’t have to cost an arm and a leg either. By
starting with a facility audit of each space and
market conditions, a merchandising agency can
help build a plan, create a manageable budget,
design, fabricate and install a working program
within months. Sometimes a coat of paint, some
cleanup of old materials and a fresh new set of
merchandising materials can transform a dated
branch into a refreshing and warm space.
Improving your image and sales
doesn’t have to cost a fortune
With a few cosmetic updates like bold paint
and the removal of old systems, plants and
artwork, spaces can look and feel like you just did
a million dollar remodel – for a small fraction of
the cost. The impact on your brand image, your
product awareness and the leads created to help
your staff cross sell makes this investment go
straight to your bottom line – and increase branch
performance within days of the rollout.
Here are a few before and after photos of
credit unions that have updated existing branches
and seen improved performance results in brand
image perceptions, product awareness and
selling and member satisfaction:
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360-degree brand assessment
sets the direction for the future
Start your brand program with a
comprehensive 360-degree assessment of
your current brand with staff and management
surveys, member research, branch audits,
marketing program assessments and online
service assessments. It will help define
your competitive advantages, unique value
proposition, and brand differences that will
become the core DNA of the new brand program.
By combining key strategic, cultural and
experiential insights from within the organization
via internal research with external market research,
you can reveal critical insights to your brand image
relative to competitors. Using those insights, we
guide and direct organizations. We start with
a brand vision workshop to develop a renewed
and clear way of living out the brand. This helps
build a future-oriented and powerful “externally
focused” consumer brand image, as well as service
experiences nothing like your competitors’.
Transformational branding
To engineer and manage your organization
through a transformational branding program
requires a well-crafted and tightly-managed
process to engage employees throughout the
organization. It must be holistic and build your
brand from the inside out, from what your brand
promise is and what actions help live out the
brand, what the key messages are that set us
apart and ensure success. Integrating how you
look helps solidify that image completely.
Our re-branding process builds a
foundational brand strategy, backed by a
clear set of organizational plans, process
improvements, product enhancements, staff
actions, and tactical marketing implementation
to ensure a smooth and comprehensive
execution of the program. The process deeply
engages senior management, supervisors and
staff toward the future desired brand program.
By consistently delivering on a well-understood
and highly differentiated “brand promise” that
sets you apart (both internally and externally)
combined with a unique value proposition to
consumers, the brand process is the foundation
for launching a major transformation for your
credit union.
Once the brand program is built, it is
matched with a comprehensive brand identity,
communications implementation program and
staff training focused on driving increased brand
“ROO” (return on objectives), enhanced team
focus and morale, leveraging faster growth, and
building richer brand experiences that foster
consumer advocacy.
Often this transformation will be based on an
element of “aspirational” stretching toward the
future. That always requires critical thinking to
focus the organization on improvements in service
delivery (branch experiences, phone and on line),
enhanced staff training, product re-tooling, process
changes and a fresh focus on higher levels of
service quality and exceptional experiences.
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Road map to strategic brand
alignment & cultural shift:
• New brand vision for the future: align with—
or refresh—your mission statement
• Set aspirational goals of a future consumer
brand promise and image
• Simplify and ensure memorable core values
that drive and inspire your team to work
toward common goals
• Brand strategy that focuses everyone on the
same brand experience with clear, concise
and trainable messages
• Well-defined role of staff brand actions
and people delivering extraordinary brand
experiences, not just “good member service”
• A set of unique branded products and pricing
Transforming touch points to improve
relational experiences and results:
• A sound new branch prototype business
model to create rich member service
experiences that inform, educate, create
interest for new services, and support staff
relationship building
• Unique branch style, interior brand look,
image and messaging to align with the new
brand promise
- Brand service standards and measurable
staff actions to manage experiences
- Branch scorecard for measuring
performance
• All-company educational multi-media
rollout event with brand presentation, clear
implementation plans and a “road map” of
building the brand internally and externally
• A galvanizing all-employee “brand camp” to
teach new skills for living out the brand in
well-managed, unique extraordinary service
experiences that create raving fans of
members old and new
• Relationship-building and new member
growth program and tactical process
follow-through (“onboarding” to deepen
the services of new members via outbound
calling programs and targeted matrix mail)
• Expansion of convenient branded e-services
to drive access, 24/7 banking and
progressive image using permission e-mail
program and e-statements
Improving branch
performance is no longer
an option in rebranding
The move to a more branded retail environment
in your branches to increase sales is the smart
strategic and tactical first step toward increasing
performance, awareness and positive service
experiences. But it requires more than just goodlooking branches, or plasma monitors with digital
video and national news feeds.
Most bank and credit union branches today
look, operate and perform exactly like the one
right across the street. They are driven by
commoditized transaction-based service (a
high-cost operation), not rich retail brand service
experiences delivered by employees. Rich
retail experiences yield deeper relationships,
lifestyle solutions and increasing performance.
Consumers are seeking better information and
knowledge to make life decisions today.
Improving your ability to grow low-cost deposits,
as well as cross sell major complex services like
mortgages, investments and small business banking,
and still bringing consistency to your brand, can
boost member and prospect perceptions of your
image and better financial results.
This follows the major shift in the financial
industry toward a more branded full-service
retail experience that yields results. That shift
is to more comfortable and enjoyable member
(and staff) experiences than the 30-year-old
transactional model of velvet teller ropes and
giant teller counters. The traditional has become
expensive to manage, and its performance hard
to improve upon. Consumers need to learn how
and why to use new technologies from online
banking to mobile banking with trained staff to
open and guide the service. They want advice
and help from people.
• Branded online Web experience with
new architecture and consumer-friendly
functionality (behavior-based modeling and
“dashboards” for custom experiences)
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With rising competition from now trillion dollar giant
brands like Chase, Wells Fargo and Bank of America,
the evolution of your brand experience and full-service
product offerings backed by great service are needed
to help you build the trust and deeper relationships
that will set you apart from these mega-banks.
• Industry variances on branch costs, sales
measurements and break-even analysis are
significant—regardless of whether a branch is
effectively merchandised to support relationship
building. The differences are caused by some
key factors, the most important of which are
major, like the quality of site locations, market
real estate cost differences, the level of retail
design, merchandising fit, finish applied,
alternative cash delivery technologies (like
video tellers, smart ATMs and cash recyclers),
signage, and messaging.
Branch performance, ROI and break-even
periods are also significantly impacted by variable
differences like the experience and performance
of managers working as coaches, staff sales
culture, branch marketing, media advertising,
and traffic generation that supports sales growth,
market awareness and new member acquisition.
A handful of high-impact improvements like
highly visible and well-branded investment
and mortgage centers, savvy Internet centers,
waiting areas with information centers, and
digital videos sharing community involvement
all strengthen brand image perceptions and
product lead generation.
How many credit unions quantify
branch performance today?
The vast majority of credit unions today struggle
to quantify or measure bottom-line performance,
break-even point or ROI of their branches. The
challenge of measuring performance ranges from
inadequate software and systems able to analyze
sales results, or accurate cost-accounting to
define branch, household or product profitability.
Some credit unions have closed underperforming
branches, but lack the right data to make those
decisions. They need strong geo-demographic
and financial analytical software.
Many factors can be controlled to help influence
better performance, such as knowing consumer
demographics; access to deposit, loan and
investment data; market competitive saturation;
and the selection of superior retail locations. There
has never been a more important time to ensure
branches are growing deposits, retaining profitable
members and building market share and member
relationships than today. It is vital to have access
to accurate market-level data to guide decisionmaking. This kind of factual market intelligence is
vital to gather and analyze. From it a credit union
can build branch performance strategies and plans.
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Case studies in credit
union branch performance
In June, 2008 a $700 million credit union
reported the four-year results of its five-year
geo-demographic branching study, site location
changes, new prototype branch model and rebranding and merchandising efforts developed by
Weber Marketing Group. CUES member, Juli Anne
Callis, former executive vice president of KeyPoint
Credit Union, Santa Clara, Calif., and a member of
Filene’s i3 group reported:
“The recommended new retail locations we
opened at KeyPoint succeeded in reaching and
often exceeding targets on or ahead of plan…
many have been fully or almost fully expensed.
The two new EXPRESS Branches only have
two months under their belts, no advertising
to speak of and the transactions from existing
members are beating older locations, therefore
the servicing value we had hoped for in very
small spaces is working and sales are being
booked in both units.”
“Average branch size was reduced 40
percent; average deposits increased 45
percent per branch.”
“The branded branches are growing at a
rate of 15 percent – 100+ percent annually
vs. negative growth for our four legacy older
branches.”
“All branches exceeded their three-year
break-even projections.”
“Hands down we are leading in great
branding via the branches, staff quality and
uniforms, etc…the stage is set for success and
the actual growth of the model is strong.”
In mid-2006, we rolled out a “retail brand and
merchandising wrap” to 22 branches across four
regions of Arizona, as well as three new sub-brands
for wealth management, small-business banking
and home lending services.
• $1 billion Arizona State Credit Union (http://
www.azstcu.org), Phoenix, achieved doubledigit growth in deposits, consumer loans,
mortgage loans and investments. SVP/
Marketing Paul Stull shared the results of
the overall rebranding and merchandising
program: “The bulk of our entire 2006 revenues
were generated in the final four months of the
year following the brand and merchandising
program implementation, media launch, and
the rollout of the new sub-brands.”
Another credit union in San Diego quantified
with research that its average branch was
generating two to three product leads per staff,
per week in pre-testing before rolling out a retail
merchandising program (a total of 550 product
leads a month to their staff).
• Six weeks after the installation of the
retail program in 11 branches, the CU was
generating seven to nine new product
leads per staff per week, a 300+ percent
increase over existing merchandising. The
merchandising program generated over
1,700 product leads each month, a 300+
percent increase, or almost 1,200 additional
key product leads per month.
Those opportunities for helping staff cross sell
and build relationships are invaluable. In the absence
of a branded merchandising program, thousands
of visits to the branches each month are wasted
opportunities for creating product awareness,
interest, “trial” and bottom-line performance.
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Helping credit unions create
new performance measures to
quantify branch results
With few successful models of high branch
performance, ROI and breakeven acceleration,
we have worked with many of our clients to
help customize a set of what we call branch
key performance measurements (KPM). These
measurements speak to a wider and more
strategic valuation of elements beyond just ROI,
which we call return on objectives, or ROO. This
new set of “ROO benchmarks” helps measure
future branch performance and ways to value the
investment in product merchandising, branding,
marketing communications and relationship
building. These ROO measures include:
1.Higher member revenue and share
of wallet
- More productive deposit acquisition and
increased average balances
- More productive growth of key lending
products, including direct auto lending
- Deeper customer awareness of key
traditional and non-traditional products,
such as mortgages and small-business
banking, lead generation and sales.
- Higher ratio of profitable members per branch
2.Enhanced member service, retention and
advocacy scores
- Increased member retention ratio
- Reduced transaction time (via video, cash
dispensers, recyclers, smart ATMs)
- Increased member service interaction time
- Increased member service satisfaction
and advocacy scores (resulting in higher
referral ratios)
3.Accelerated market share growth and
penetration
- Increasing annual competitive share of
market, defined by both members and
balances
- Increasing branch traffic via sales events,
targeted marketing, media, PR
4.Enhanced staff satisfaction and
relationship culture management
- Acquiring strong sales and service talent
by offering superior work places
- Hiring, managing and incenting a new
generation of “relationship managers,” not
operational managers
- Retaining high-quality employees and
ensuring strong incentive programs tied to
performance indicators
- Ensuring brand continuity of staff actions is
lived out, measured in mystery shops
5.Building a stronger brand image and
value proposition
- Consistency of brand image, why we’re
better than banks
- Clear value proposition of why we’re a
better alternative
- Integrated product and promotional
displays and graphics
- Coordinated brand style, messages
- New methods of sales collateral beyond
traditional 4” X 9” brochures
- Utilizing digital media to enhance dynamic
content and local messaging via Web
feeds
Generating branch traffic
to grow membership
Whether opening a brand new branch that
needs to gain awareness in the market among
non-members, or to stimulate the growth of existing
branches, you need to build traffic-based sales
events to help your branch performance. Opening
a branch in a new community is not big news to
residents these days. They need a reason to come
in, let alone consider switching financial institutions.
We have developed a highly successful
proprietary sales event to establish community
relations, instantly spike branch foot traffic into
the hundreds, generate new member accounts
and profitable business, and electrify your staff in
an accelerated sales culture program. The focus
is on building a “bell-shaped growth curve” to
spike business and build market share instead of
the typical slow, trickle volume. This program is
designed to accelerate ROI on branch facilities,
grow market share and leverage word of mouth in
the community.
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integrated into providing a “full-service” banking
image for the credit union.
The program is led off by a pre-VIP event to
secure key relationships with the community
“influencers,” such as business leaders, SEG
partners, “movers and shakers” linked with
your board and management. The event builds
vital awareness of your role in supporting the
community. No one cuts any ribbons.
It is followed by a weekend sales event unlike
anything most consumers have been to. It is
highly orchestrated, with five trained teams of
staff all coordinated to engage consumers, invite
them to join and open new accounts. It’s a great
business development opportunity for all major
services including mortgages, investments and
small-business banking. This event format is also
a great way to introduce your unique brand of
great service and your senior management and
staff to the community.
Unlike the typical ribbon-cutting, cookies
and coffee opening, this sales event is about
generating a volume of new members in the
hundreds, and deposits and loans in the millions
of dollars in one five-hour period. The average
event has yielded between 250 and 1,000 visitors,
from 75 to 450 net new members, and from $1
million to $24 million in new deposits – all in
five hours! That would be a great year for many
branches. It supercharges a branch to record
numbers and sustains growth for many months,
vs. the path of slow, gradual monthly build up of
business that most branches follow the first year
or two.
This sales event has been held in small and
large markets across the United States and
generated similar results for many years. One of
the side benefits and great outcomes is training
staff with multi-tiered teams to focus 100 percent
of the day on delivering world-class service, but
this time asking prospects to move their banking
relationship over to the credit union. Cross-selling
is built into the event. Relationship development
is rampant and your highest-value services are
110
Grand opening sales events of in-store
branches at OnPoint Credit Union drove
strong new member growth.
The program is a highly-targeted community,
member and prospect event utilizing many
communication channels including targeted direct
mailings, print, online and radio advertising, inbranch collateral, branch merchandising, outdoor,
and event-based communications. Special
offers are developed for a range of key products,
including core deposits and consumer loans.
Valuing lost opportunity
costs in “un-merchandised”
current branch visits
In the absence of a strong in-branch
retail brand image and compelling visual
merchandising program to build product
awareness and stimulate additional leads,
financial institutions should consider quantifying
the potential value of 1000s of weekly visits by
members and prospects into the branch network
with a captive audience for five to 15 minutes.
These visits are what retailers, auto dealers, fast
food chains and grocery stores all value as pure
gold. Are you missing out on sales every day?
• Are you fully capturing your customers’
attention, interest and generating new
behaviors beyond check cashing to the
fullest capability, or are you instead wasting
opportunities? This is another way to view
the ROI of costly brick and mortar.
Retailers prize this valuable “dwell time,” while
customers pause at the checkout, to sell their
most profitable products at the cash register,
place the bread and milk at the back of the store
to stimulate additional sales, use merchandising
techniques from shelf height to end caps, and
put in place free-standing displays, impulse items
and kiosks.
• For many years many CUs made their most
visible merchandising product traveler’s
checks — the least profitable product in
their mix.
The driving reasons for moving to enhance
your branches with stronger branded
environments and retail merchandising should
focus on several key issues:
• Making the most of teller wait times using
digital video and product displays helps
reduce perceived wait times and increase
satisfaction levels and is the perfect time to
communicate vital brand and key product
and service messages about such offerings
as 24/7 online banking and bill-paying.
1.Increasing member awareness of key
products and boosting staff lead generation
to increase share of wallet. The vast
majority of consumers have relationships
with multiple FIs, from Visa cards to car
loans, CDs, mortgages and investments.
Awareness inside the branch is the first step
towards interest, action and leads that staff
must use to close the sale. Increased share
of wallet is directly translatable to enhanced
productivity, member retention and ROI.
Retailers measure their store space and sales
efficiency in more tangible terms like sales per
square foot, same store sales, return frequency
of visits and lifetime customer value. There are
some similarities between successful retailers like
Starbucks where customer visits of 3.5+ times
a week are among the highest in the beverage
industry, and primary financial institution bank
customers who visit their PFI between three and
four times a month.
2.Improving your staff relationship, sales
culture and tools with a strong focus on
products, solutions and life-stage marketing
messages (e.g. retirement planning, debt
reduction, starting a business). Helping
staff cross sell using visual product cues
is a major reason for merchandising, but
to accurately quantify ROI there must be
methods in place to track sales already and
then quantify increases in sales.
The fundamental difference for retailers
and financial institutions, however, is that
retail products are tangible goods that can be
merchandised, touched, tried on and sampled,
while financial services are intangible promises.
Financial services require strong visual imagery,
graphic displays, collateral materials, branded
features, digital media, Internet demonstrations
and three-dimensional displays to create higher
levels of awareness, interest, action and trial.
3.Enhancing your brand perceptions among
both members and prospects as a unique,
full-service, friendly and smart financial
institution. Brand ROI cannot always be
measured exactly because not everyone
came to the branch to purchase a loan that
day. But generating a unique and compelling
value proposition helps set you apart.
4.Moving the focus and member perceptions
of branches from a transactional focus on
check cashing, to richer “brand experiences”
that are well defined, managed, high service
models that communicate the brand. This
would suggest shifting more towards great
brand experiences like Starbucks, Charles
Schwab, ING and Umpqua Bank.
5.Considering “high touch connections” to
the community, like small neighborhood
financial seminar areas for community
gatherings like the Chamber of Commerce,
non-profit groups, small business advice,
and investment seminars.
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Digital displays help dynamic
messaging and brand building
In-branch digital merchandising systems
impact point-of-sale display marketing positively
with flexible, dynamic multi-media messaging.
Played on high-resolution liquid crystal displays
and plasma screens, they drive strong messages
and greatly help to reduce paper. Content and
location of monitors can be adapted based on
the observed habits of members, your brand and
product goals.
With digital screens, it’s easier to build your
brand personality with dynamic multi-media than
just print or signage alone. You can do messaging
about what you’re doing in the community in
terms of seminars, events, social responsibility,
etc. In addition, screens can educate on more
complex products like home equity lines of credit
and mortgages. Supplementary smaller screens
allow members touch-screen control for more
flexible options.
112
06
Strategic Operations Occupancy Planning
Operations centers are costly to build and operate. Even if a credit
union leases its operations center, the occupancy costs are still
very high and, in actuality, higher over the long run as lease rates
rise over time and drive occupancy costs higher than ownership
past six to seven years. No longer are operations centers nondescript, out-of-the-way places to house non-member-contact staff
with the primary function of supporting branches.
Today, operations centers are directly involved in member service,
member communications and brand promotion. The development
of sophisticated call centers has exploded over the past 10 years
as credit unions realized the need to increase service to members
who do not find branches convenient and to enhance the sale of
products and services by combining technology and people in a
way that is comfortable for members. The call centers take phone
responsibilities away from branches so branch staff can focus on
on-site member development and increase the consistency and
quality of phone service.
Chapter 6 • Strategic Operations Occupancy Planning
113
Operations centers have become more
important to retail delivery because they often
manage marketing, branch-side merchandising
and training from a central location. This
integration of member service between branches
and operations centers requires development
of a common culture understood and promoted
by staff at all locations whether branch or
operations.
An additional factor causing operations center
evolution is the need to compete for and retain
the best employees. In our ongoing operations
planning work, we are regularly asked to include
shower rooms, workout rooms, full kitchens, cot
rooms, nursing rooms, libraries and bike racks.
Some of these accoutrements were integrated in
operations centers until the 1970s and then were
eliminated as cost-saving measures during the
following 30 years. Today they are back because
these employee benefits are needed to provide
a competitive work environment, reinforce many
credit unions’ cultural initiatives, increase physical
fitness and physiological well being, and to
acquire and retain the best staff.
As this book is being written, the nation and
financial industry are in crisis. Some credit
unions are cutting back on facilities while
others are positioned to take advantage of new
opportunities to grow. Whether a credit union
is experiencing negative, stagnant or good
growth, everyone is concerned about maximizing
efficiency. From our work with a wide range of
credit unions, we know there are opportunities
to increase operations occupancy efficiency
(the cost of operations occupancy compared
to operations productivity), due to poor use of
space, poor configuration, or redundancy due to
mergers. We know that just a 5 percent increase
in efficiency in a 20,000-square-foot building
can save nearly a million dollars over 20 years
at today’s rates. Analyzing existing operations
center environments to discover hidden cost
savings opportunities will be included in this
chapter.
Operations facilities are important to every
credit union and the purpose of this chapter is
to share our experience helping credit union
CEOs and boards analyze their short- and longrange occupancy needs, consider all the options
and then make critical decisions concerning
size, timing, own vs. lease, location, real estate
strategies and cost.
114
What is driving staffing
and facility growth?
While average assets per staff continues to
improve among all credit unions due to success
in acquiring additional deposits through an
expanding array of products and inflation,
average members per staff continues to decline.
In 2009 Callahan & Associates reported that while
average assets per employee rose from $3 million
to $3.4 million between 2004 and 2008, the
average number of members per staff declined
from 396 to 371. This reduction in member to staff
efficiency is being driven by the need to support
new products and services that are increasing
both deposits and loans per member. This
means that over time there has not been a direct
correlation between adding members and adding
staff. Credit unions have had to add staff faster
than new member growth to keep up with new
products and services.
Operations centers are delivering more retail
services than in the past. We have seen the ratio
of branch to operations staff change at all credit
unions we work with. It has not been unusual to
find the percentage of operations staff increase
from 35 percent to 45 percent over the past 10
years. Ten years ago few credit unions had large
call centers; today nearly every credit union
over $100 million in assets operates a phone
center. This has reduced FTEs at branches. Loan
processing has been consolidated from branches
to operations centers.
There is a force that is starting to increase
operations efficiency and pull the staff growth
curve down. As Fred Cook, EVP/IT manager
for North Shore CU, N. Vancouver, British
Columbia, puts it: “Today we operate with
process workers, but tomorrow everyone will be
an exception worker as technology handles all
standard processing.” In the mid ’90s there was
the expectation that this would immediately
start reducing staffing, but the lack of systems
integration and computing power meant that
only small gains could be made, such as in
mortgage processing.
On average, as credit unions get larger in
terms of members and assets they become
more efficient in terms of the number of staff
to assets which reduces relative operating cost
and increases return on equity. We must include
efficiency of scale when determining the number
of staff and space needs.
Combining the positive and negative forces
affecting staffing projections can make the
process complex. A process that simplifies the
analysis and looks at staffing and space needs
from a number of angles can produce trustworthy
projections and a variety of occupancy scenarios
based on a variety of growth patterns and events,
such as economic shifts and mergers.
Strategic operations
planning process
Over the past 35 years, we have worked with
national, regional and local banks in operations
occupancy planning plus completed over 100
strategic operations occupancy and headquarters
plans for credit unions ranging in size from $50
million to $5 billion in assets. In the following text
we offer an outline view of a strategic operations
occupancy process designed for a $2 billion
credit union.
Key issues and
questions to be answered
Every credit union starts with a different
situation. It may be an existing building that is
past full capacity, two or three buildings with
high occupancy cost and cultural development
problems, a leased space that has become too
expensive to occupy over the long term, or a small
building that can be expanded on a large site. These
occupancy and real estate issues can impact the
ability of a credit union to perform so the strategic
operations occupancy plan must address all the key
issues and offer short- and long-range occupancy
solutions. Let’s look at a few of the most common
questions that must be answered:
• How much operations space do we need
in five, 10, 15 and 20 years based on a
variety of growth and potential major
events, such as mergers, a new charter or
an economic downturn?
• How does the business plan impact staffing
and space growth?
• What is the best location for the operations
center based on the current and projected
branch network?
• How will the likely evolution from “moving
cars” to “moving people” impact our
location decision?
• Should we be considering a “green”
building? What are the benefits, options
and associated costs?
• What will be the impact of new products
and services?
• Should we sell our existing building, retain
and refurbish it, or buy adjacent property?
• Is our existing building efficient in terms of
space usage?
• Do we need a branch with the headquarters?
If business banking is important to our future,
do we need to locate the entire business
banking operation downtown or could we
just locate the business member contact
staff there and keep the operations and
administration offices with the credit union’s
main operations center?
• How will telecommuting impact our
occupancy needs in the future?
• How will technology impact our staffing and
space needs?
115
• How will potential new products and services
impact our staffing and space needs?
• How should our brand impact decisions
about our location, market presence, building
design and type of occupancy for the staff?
• Should we locate at two sites or one?
• Are there conditions in the community or
with our membership (like unions) that
must be considered in the strategies and
cost estimating?
• Should we purchase sufficient land or a building
for a 10- or 20-year occupancy solution?
• Is leasing the best occupancy solution based
on our business strategies?
• What are the pros and cons and cost
variables for each occupancy option?
• What should be the balance of resource
allocations between branching and operations
occupancy, and what can we afford?
These and other credit union-specific
questions must be accurately and fully answered
by the study, as a weak answer may make the
rationale for specific solutions invalid.
Now that we know the questions, we can start
developing answers. Some of the questions
are business related and should be answered
before moving forward with the programming
and analysis. The next step is programming each
department’s space needs. It is essential that
department managers as a whole understand
the growth objectives of the board and what their
departments must do to succeed. By doing this
everyone will be headed the same direction at the
same speed, and their staffing and support space
projections will be in alignment with the CU’s
overall growth plan.
116
Staffing and space needs
Programming
In the programming phase we ask each
department manager to project the number of
staff needed to support the business and growth
goals for the next 10 years. While 10 years may
seem a long way into the future, the credit union
will be occupying the space for 10 to 20 years.
Department managers are in the best position
singularly and together to make staffing and
space needs projections.
Each manager is sent a series of customized
questions. These questions include staff by
function, support space needs and adjacencies
to other departments, building infrastructure
and member interaction. Questions about
environmental needs, how lunch breaks are
taken, where copies are made, needed level
of security, heating and air-conditioning are
asked. The department managers are also
a good source of information about general
staff and operations issues, such as cultural
development, training needs and efficiency.
The number of staff for each function
for each of the planning years is noted
on a departmental summary sheet. The
programming is then reviewed by a planner
who ensures that the department managers
understood the questions and looks at the
interrelationship of each department to the
whole credit union to determine if there are any
overlaps or voids in planning.
During the meeting with each department
manager, the workstation sizes and
configurations are discussed for each work
function. When all the interviews have been
completed, workstation standards are
developed so we can calculate individual
workstation sizes and the space needed for
each department. The size of workstations
is driven by the need of each occupant to be
productive and comfortable completing their
responsibilities, cultural norms, pay grade, need
for privacy and equipment support. Following
is an example of a programming form and a
programming summary sheet.
Example programming forms
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Example Programming Summary Sheet
End 2007
Headcount
Department
Administration
7
Call Center
Vault
Consumer Loans
End 2010
Sq. Ft.
Total
Headcount
End 2013
Sq. Ft.
Total
Headcount
End 2016
Sq. Ft.
Total
Headcount
Sq. Ft.
Total
Notes
2,369
7
2,369
9
2,590
9
2,590
N.13
9
967
10
1,026
11
1,084
12
1,143
N.5, 7
455
455
455
455
11
2,496
14
2,865
17
3,049
20
3,418
N.42
N.1
Electronic Services
5
987
6
1,097
7
1,208
7
1,208
N.33,6,9
Facilities
1
1,833
1
1,833
1
1,833
1
1,833
N. 2,4
General Office
4,134
4,134
4,134
4,134
N. 3
General Management
9
4,107
10
4,255
10
4,255
11
4,403
N. 10, 12, 22
Information
Systems/Networks
7
1,619
9
1,788
9
1,788
9
1,788
N. 8, 17
Loan Servicing Department
4
402
5
486
5
486
6
571
Marketing Department
3
941
4
1,052
6
1,247
8
1,442
Real Estate &
Commercial Lending
7
1,112
11
1,554
13
1,788
15
2,009
Records Retention
4
844
5
928
5
928
5
928
24,845
Subtotal
N. 11
N.23, 24, 25
N. 16
N. 15, 26
67
22,266
82
23,842
93
103
25,922
15% Gross Bldg
3,340
3,338
3,727
3,888
N. 41
Total Square Footage
25,606
27,180
28,572
29,810
End 2004
Branch
Future HQ Branch
Total Square Footage
Headcount
Sq. Ft.
Total
End 2007
Headcount
End 2010
Sq. Ft.
Total
Headcount
Sq. Ft.
Total
End 2013
Headcount
Sq. Ft.
Total
Notes
7
6,752
7
6,752
7
6,752
7
6,752
N. 14
6,752
6,752
6,752
6,752
The size of individual workstations can vary. For
instance one credit union may feel that a 36-squarefoot call center workstation is sufficient for a teller
operator while another may feel that a 54-squarefoot workstation provides a more comfortable
space suitable to a phone branch teller/MSR.
A processor may need only 64 square feet if no
one visits his or her space, or he or she may need
84 square feet if supervising others. The goal in
developing workstation standards is to devise a
limited number of standards that can be applied to
a variety of work responsibilities.
President/CEO’s Office
The standardization of workstations makes
planning, reorganizing, moving staff, inventorying,
maintenance, and HR management easier. In
planning, workstation modules of similar size can
maximize floor plan efficiency. Partitions and walls
can most easily follow a building’s grid lines which
typically align with building columns and window
mullions. Here are a few illustrations of workstation
standards common in the financial industry.
118
SVP and EVP Office
Accountant/AVP
AVP and VP Workstation
Processor or Large Call Center Workstation
Quick Serve Desk, Primarily in Branches
Supervisory, Customer Contact Work Station
119
Micro Phone Center Workstation
When credit unions are looking at building
a new facility, they need to add an additional
factor onto net usable space. In the programming
summary sheet shown earlier, you will note
the addition of 20 percent to calculate gross
building square feet. If this factor is not added
on, your new building will likely be too small. The
gross building square feet factor includes stairs,
through-the-floor penetrations, such as columns
and stairs, and wall thickness around the building.
There is typically a big jump between the
amount of operations space a credit union currently
occupies and the amount of space required in the
first year of occupancy in a new facility. This can be
shocking to a board unless it is clearly explained.
One reason for the big difference is that staff in the
existing building are often crammed in as the credit
union grows and the staff makes do.
The individual department programming form
shown earlier includes workstation standards to
calculate the total amount of space needed for all
functions. Also included is the amount of space
needed for support areas such as work areas, file
cabinets, etc. In addition to these spaces, we must
also capture general office needs. This is typically
accomplished on a separate programming form
and includes all other spaces, such as board rooms,
lobbies, cot rooms, lunch rooms, conference rooms,
storage rooms, coffee centers, training areas, etc.
You will note on the individual programming
form that a factor for circulation is added at the
bottom. This is the amount of space required to
access all areas of the credit union and includes
primary circulation (lobbies and major corridors)
and secondary circulation (pathways leading to
departments). Tertiary circulation, or the space
needed to move within a workstation, is included
in the individual workstation standards. The
addition of workstation and space standards
plus the circulation factor adds up to net usable
space. In a lease situation you would need to
add net usable space to a building Common
Area Factor to get the net rentable space used to
calculate the size of lease space you need.
When calculating the amount of space you
need, it is important to understand how you are
calculating space and how the landlord is defining
the amount of space offered. The best way to test
fit is to develop a schematic plan that shows you
exactly how you will fill a proposed space.
120
A second key factor is that a new facility must
include the physical infrastructure to support 10
years of staffing projections. It is not unusual to
see the current average square feet per staff total
280 square feet while the first year of occupancy
in a new facility requires 370.
The third factor is that most credit unions
plan for a 10-year solution so there is additional
space planned for new staff. The reality is that
workstations are not bigger in the beginning, only
to shrink later. Rather, workstation sizes remain
on standard as staff is added. Infrastructure
space remains constant and unused space can
be leased out to others.
We are often asked: What is the optimum
aggregate space usage per staff at full occupancy?
The answer varies depending on culture, size of
training rooms, inclusion of community rooms and
circulation factors. We find full occupancy averages
between 275 to 360 square feet. In our CUES/EHS
2009 Credit Union Facility Survey, we were surprised
to learn that responding credit unions averaged
between 330 and 450 square feet per staff member
per asset category. There may have been some
mis-measurement (See Chapter 1), they are in midoccupancy cycle or the vast majority of credit unions
are not efficiently occupying their operations facilities.
We have now calculated the amount of space a
credit union will need in a leased, existing or new
owned facility. The big question at this point is: “Are
our staffing and space needs realistic?” The way to
answer this is to match the speed of staff growth
to a variety of asset growth rates, staff-to-asset
efficiency ratios, industry averages and historical
ratios, such as staff to assets and staff to members.
Asset growth scenarios
Building and occupying facilities is a big cost and
it is essential to show the board that the numbers
are rational. One of the first steps is to remind
the board of how big the credit union will be in
terms of assets based on their growth goals and a
range of asset growth scenarios. For this exercise
we will assume an East Coast credit union has
approximately $2 billion in deposits in 2008.
Asset Growth Scenarios (in billions)
Year
4%
6%
8%
10%
12%
2008
$2
$2
$2
$2
$2
2013
$2.5
$2.8
$3.2
$3.5
$4
2018
$3
$3.8
$4.7
$5.7
$7
2023
$3.8
$5.1
$6.9
$9.2
$12.3
2028
$4.6
$6.8
$10.1
$14.8
$21.6
Two additional methods of comparing
efficiencies are (1) to look at the 5300 reports
of credit unions of similar size, determine
operations-to-branch-staff ratio and then
calculate the operations staff-to-asset efficiency
ratio and (2) call peers and ask them for their
efficiency ratios. Following is an example of what
operations staff-to-asset efficiency ratios might
look like over time.
Example operations staff-to-asset
efficiency ratios under five growth scenarios
(assets in millions)
Year
4%
6%
8%
10%
12%
2008
$13.5
$13.5
$13.5
$13.5
$13.5
2013
$15.4
$15.7
$16.1
$16.4
$16.9
2018
$17.5
$18.3
$19.2
$20.2
$21.5
2023
$20
$21.3
$23.1
$25.4
$28.5
2028
$22.7
$24.9
$28.2
$32.9
$39.7
Projecting staffing and space needs based
on a range of asset growth scenarios
We now know how big a credit union will be
in terms of asset growth and we have predicted
staff-to-asset efficiency ratios based on analysis of
current credit union performance and peer analysis.
Our next step is to project the amount of space that
will be needed under a variety of growth scenarios.
One more factor is needed to project space needs.
Operations staff-to-asset efficiency ratios
Operations efficiency ratios are driven by
inflation, increased operating efficiency (evolving
from process workers to exception workers),
more products and services per member, share
of wallet, shifts in the ratio of operations to
branch staff and the ever changing balance of
positive and negative forces. While all these
factors make estimating future efficiency ratios
a combination of art and science, we can look at
current efficiencies of credit unions on average,
using CUNA and CUES data as resources. This
data gives us a look at the efficiency ratios of
existing credit unions over a range of asset sizes.
An average square footage per staff is required
that can be multiplied out for aggregate credit
union square footage over time and under different
growth scenarios. As mentioned earlier, the CUES/
EHS facility study indicated a full occupancy range
of 330 to 450 square feet. In our work the average
is much lower—275 to 360—and likely reflects
increased building efficiency. For this illustration we
will use an arbitrary average of 323 per staff as the
mid point in the planning occupancy cycle.
We now have all the factors we need to
calculate the square footage needs under each
growth scenario.
Year
4%
sf
6%
sf
8%
sf
10%
sf
12%
sf
Programmed
sf
2008
55,987
55,987
55,987
55,987
55,987
55,987
2013
52,435
57,605
64,199
68,933
76,449
62,679
2018
46,629
56,481
66,583
76,752
88,558
66,177
2023
61,810
66,494
84,025
103,884
123,119
TBD
2028
66,009
77,476
99,852
132,308
159,295
TBD
121
One of the formulas used to calculate
programmed space needs is the average space
standard times the projected staff for each planning
period and then extrapolated out to the end of the
desired planning period. Abstract projections based
on assets use a different formula that divides the
assets by the efficiency ratio and then multiplies the
result times the average space standard for each
planning period.
Full-circle evaluation—Does the staffing
plan support the business objectives?
You will note that we have included the
programmed square feet at the right hand side of
the table. This is done so that a credit union can
compare the programmed square feet against the
abstract projected square feet to determine if the
programmed numbers match the desired growth
scenario and if the projections made by department
managers are rational in terms of efficiencies of
scale and peer analysis. This example credit union’s
goal was to grow at 6 percent to 10 percent per year
over a 20-year period. The programmed square
feet is very close to the calculated 8 percent growth
square footage needs.
Occupancy options and recommendations
If there were a big difference between
programmed square feet and square feet calculated
based on efficiencies and peer data, it would be
time to discuss what is causing the difference and
how to change the staffing and support space
needs projections to align with realistic space needs.
Cross checking historical efficiency
improvements and growth rates
One last back check is prudent at this point
in planning. Are the business objectives fully
supported by the staffing and space needs
projections? This provides a full-circle comparison
of the business plan to staffing and space needs.
There is always more than one answer to the
questions of which occupancy solution is best.
In our work we have seen this range from three
to five options when considering a new or leased
facility to 12 to 15 options when considering use
and expansion of existing facilities’ vs. a new
facility, leasing portion or all of the needed space,
own vs. lease, etc.
These occupancy comparisons can be quite
complex as they need to compare remodeling and
construction costs, leasing variables, operating
costs, timing with existing leases, reinvestment
requirements if a building is sold in Canada,
lease rates, vacancy factors, income from leasing
to others, moving cost and inflation, and other
scenario-specific cost elements. For the board
presentation of the occupancy options, it is best
to render these calculations down to the simplest
elements for comparison. Here are a few examples
of what these comparisons could look like in the
simplest form for a fictitious credit union.
Space is very expensive to build and operate,
and cross checking the projection is very
important. You do not want to overbuild and you
do not want to underbuild and have to relocate,
lease space or undergo a construction project
ahead of schedule unless for exceptional and
positive business reasons.
In addition to the peer analysis it is good
to look at a credit union’s historic growth and
efficiency trends in terms of staff-to-assets,
staff-to-members and the ratio of operations to
branch staff. These should be compared to the
future ratio projections, so as sailors do, you can
steer by looking both ahead into the future and by
looking back at your wake.
122
Option 1.a
Option 1.b
Expand existing operations building in two
phases in City A and lease out unused space.
Expand existing operations building in
one phase in City A and lease out unused
space.
In this scenario, the credit union remains in its
existing building and purchases adjacent land
sufficient to construct the additional needed
space in two phases. This new structure would
likely be a separate building. The existing building
offers 14,079 square feet of space. The 20-year
occupancy need is 87,337 square feet. This means
the building will need to be 73,258 square feet.
Option 1a
Land cost: $6.50 per
square foot for 5 acres
$1,415,700*
Construction cost: $170
per square foot for initial
10-year needs of
33,853 sq. ft.
$5,755,010
Second-phase
construction at $231.69
(2014) at 39,405 sq. ft.
$1,415,700*
Construction cost
at $170 per sq. ft.
$12,453,860
Remodeling cost
at $60 per sq. ft.
$844,740
Lease income vacant space
5 year @ $16.80/sq. ft.
- 10% vacancy
+ 33% operating cost
($696,893)
5 year @ $16.80/sq. ft.
- 10% vacancy
($2,583,605)
10 year @ $19.95/sq. ft.
– 10% vacancy
+ 33% operating cost ($2,240,470)
15 year @ $23.70/sq. ft.
– 10% vacancy
+ 33% operating cost ($1,678,494)
$844,740
15 year @ $23.70/sq. ft.
- 10% vacancy
+ 33% operating cost ($1,678,494)
Take back tenant
improvement costs
10 year @ $30.00/sq. ft.
$436,650
Tenant improvement 15 year @ $35.00/sq. ft.
$509,425
20 year @ $40.00/sq. ft.
$509,425
Total
Take back tenant
improvement costs
10 year @ $30
What is tenant
improvement?
20 year @ $40
Total:
$436,650
$994,000
$16,200,457
*Assuming no buildings on the purchased site.
ProsUse 2014–2016 dollars for second
construction phase rather than spend
the money today
Option 1b
Land cost: $6.50
per square foot
for 5 acres
$9,129,744
Remodeling cost at
$60 per sq. ft.
Lease income vacant space
This scenario nearly matches Option 1.a, with
the exception that the building is constructed in
one phase rather than two.
Maintains presence in City A
ConsMay be difficult to assemble required
acres adjacent to the branch
Land cost is high and could be even
higher if existing buildings need to be
purchased and removed
Risk of fewer potential tenants for vacant
space compared to a location to the west.
Moderate initial costs
Not central to growing market
$10,151,806
*Assuming no buildings on the purchased site.
ProsLowest long-term cost due to building
with current dollars vs. future dollars
Maintains presence in City A
Able to retain operations staff in
existing building and maintain close
proximity
ConsVery difficult to assemble required
acres adjacent to the branch
Land cost is high and could be even
higher if existing buildings need to be
purchased and removed
Risk of fewer potential tenants for
vacant space compared to a location to
the west
High initial costs
Not central to growing market
Higher long-term cost due to building
with current and then 10-year dollars
123
Option 2.a
Pros All operations staff in one building.
Retain City A presence
Build a new facility to accommodate all
of headquarters needs (two phases) in
the center of the growing market (City B).
Retain existing building for branch and
lease out unused space in both facilities.
Retain City A branch and drive-through
Use 2014–2018 dollars for second
construction phase
Option 2a
Land cost: at $4 per
square foot for 6
acres:
$1,045,440
Construction cost at
$170 per square foot
for initial
10-year needs at
47,932 sq. ft.
$8,148,440
Second phase
construction at
$231.69 (2014) at
39,405 sq. ft.
$9,129,744
Remodeling
allowance
for branch
$400,000
Lease income—
new building
Take back TI costs
Lease income—
existing building
ConsRisk of not leasing vacated or vacant
operations space
Operating two office buildings
No income from sale of existing
headquarters
5 year @ $20.00/sq. ft.
- 10% vacancy
($829,635)
15 year @ $28.21/sq. ft.
– 10% vacancy
($1,997,903)
10 year @ $30.00/sq. ft.
$436,650
20 year @ $40.00/sq. ft.
$994,000
5 year @ $16.80/sq. ft.
- 10% vacancy
($449,402)
10 year @ $19.95/sq. ft.
– 10% vacancy
($533,665)
15 year @ $23.70/sq. ft.
– 10% vacancy
($633,977)
20 year @$ 28.15sq. ft.
– 10% vacancy + 33%
operating cost
($753,015)
Total:
124
Space available for interim staff
expansion if Phase I headquarters
project needs to be delayed or growth
occurs faster than expected
$14,956,677
Option 2.b
Option 3
Build a new facility in two phases to
accommodate additional headquarters needs
in the center of the growing market (City B).
Sell existing headquarters building and lease
back branch space and drive-through.
Lease new space required to
accommodate headquarters needs in City
A. Retain existing building for headquarters
occupancy. The main branch space
remains in the calculations at 6,752 sq. ft.
Option 3
Option 2b
Income from sale
of building:
Lease back branch
(4,700 sq. ft.)
($2,011,819)
5 year
$394,800
10 year
$468,825
15 year
$556,950
20 year
$661,525
Land cost: $4 per
square foot 6 acres
Tenant improvement
allowance for leased
space*
$8,148,440
Second phase
construction at
$231.69 (2014) at
39,405 sq. ft.
$400,000
5 year @ $20.00/sq. ft.
- 10% vacancy + 33%
operating cost
($829,635)
15 year @ $28.21/sq. ft.
– 10% vacancy
($1,997,903)
10 year @ $30.00/sq. ft.
$436,650
20 year @ $40.00/sq. ft.
$994,000
Total:
5 year @ $16.80/sq. ft.
$1,621,032
10 year @ $19.95/sq. ft.
$3,376,837
15 year @ $23.70/sq. ft.
$5,736,348
20 year @$ 28.15/sq. ft.
$9,212,194
5 year @ $25.00/sq. ft.
$599,775
10 year @ $30.00/sq. ft.
$436,650
15 year @ $35.00/sq. ft.
$509,425
20 year@ $40.00/sq. ft.
$994,000
Total
$23,332,081
*Anticipating landlord includes additional tenant improvement
allowance in deal of $20 per sq. ft.
Pros Low initial cost
$17,397,017
ProsGain income from sale of existing
headquarters
$845,820
$9,129,744
Remodeling
allowance
for branch
Take back tenant
improvement costs
Lease required
headquarters space
$1,045,440
Construction cost at
$170 per square foot
for initial
10-year needs at
47,932 sq. ft.
Lease income—
new building
Remodeling
allowance
for existing
headquarters and
branch
All operations staff in one building
Maintains headquarters presence in
City A
Leasing rates lower in City A than
anticipated in City B
ConsSecond highest long-term occupancy
cost
Limited control over leased space
More limited development of benefits of
appreciation to fund next headquarters
occupancy need
Retain City A visibility through Kent
Branch and drive-through
Income gained from leasing space in
stronger market
Use 2014–2016 dollars for second
construction phase
ConsMust lease back existing headquarters
branch
125
Option 4
Lease new space for all headquarters
needs in City A. Sell existing building, and
lease back branch space. The main branch
space remains in the calculations at 6,752
sq. ft.
Option 4
Income from sale
of building:
($2,011,819)
Lease back branch
(4,700 sq. ft.)
5 year
$394,800
10 year
$468,825
15 year
$556,950
20 year
Lease required
headquarters space
The primary occupancy options have been
analyzed in terms of cost and pros and cons.
With this data in hand we can make a set of
recommendations. Let’s look at how this might
play out.
Occupancy Option
Recommendation
We have looked at six long-range occupancy
options. To recap, these include the following:
Options
1.a
Expand existing operations
building in two phases in City A
and lease out unused space.
$16,200,457
1.b
Expand existing operations
building in one phase in City A and
lease out unused space.
$10,151,806
2.a
Build a new facility to
accommodate all headquarters
needs (two phases) in the center
of the growing market (City B).
Retain existing building for a
branch in City A and lease out
unused space in both facilities.
$14,956,677
2.b
Build a new facility in two phases
to accommodate additional
headquarters needs in the center
of the growing market (City B).
Sell existing headquarters building
in City A and lease back branch
space and drive-through.
$17,397,017
3
Lease new space required to
accommodate headquarters
needs in City A and retain
existing building for headquarters
occupancy.
$23,332,081
4
Lease new space for all
headquarters needs in City A, sell
existing building and lease back
branch space.
$30,293,944
$661,525
5 year @ $16.80/sq. ft.
$2,803,668
10 year @ $19.95/sq. ft.
$4,781,217
15 year @ $23.70/sq. ft.
$7,404,710
20 year @ $28.15/sq. ft. $12,292,683
TI Allowance for
lease space:*
5 year @ $25.00/sq. ft.
$1,001,310
10 year @ $30.00/sq. ft.
$436,650
15 year @ $35.00/sq. ft.
$509,425
20 year@ $40.00/sq. ft
Total:
$994,000
$30,293,944
*Anticipating landlord includes additional TI allowance in deal
of $20 per sq. ft.
ProsMaintain City A presence through
the branch
Low initial cost
Do not need to maintain a building
All operations staff is together
Cons Limited control of occupancy
Highest long-term occupancy cost
20-Year Cost
Leasing required space
The long-term cost of leasing the required
space over 20 years is very high in Options 3 and
4. Generally, leasing is a less expensive option for
the first six to seven years and then flips to being
the most expensive option as lease rates continue
to rise and there is no long-term investment
developing equity to financially support the
next occupancy cycle. This long-term rationale
coupled with the desire to own rather than lease
eliminates Options 3 and 4.
126
Building in one phase or two
The long-term cost of building all the required
space in one phase is the lowest over 20 years.
This is primarily due to spending current dollars
that lose value in the future, stabilizing the rental
rate, and leasing unused space at the market rate
with modest vacancy. The risks over the long term
are higher in building in one phase, as the credit
union must use significantly more of its capital
and occupancy rates depend heavily on market
conditions. We understand that while land is more
costly in City A by about 50 percent, lease rates
are somewhat lower due to positioning at the
side of the growing market. The exception to this
risk would be development of a long-term lease
arrangement with a government agency or other
large and secure tenant that would allow you to
“take down” space as needed to accommodate
future growth.
Recommendation
We recommend Option 2.a: build a new
facility to accommodate all headquarters needs
(two phases) to enter the growing market and
retain the existing building for branch and
lease out unused space in both facilities for
an estimated comparative 20-year occupancy
cost of $14,956,677. This option allows you to
accomplish the following:
• Retain your branch and current significant
presence in City A
• Retain space to accommodate unexpected
operations growth
• Potentially lease out unoccupied space to a
government agency or other tenants
• Position the new headquarters in the center
of the growth market for high visibility and
easy short- and long-term access efficiency
• Offer high-quality space in a strong
leasing market
• Use limited capital to accommodate 10-year
requirement and not risk higher cost on a
long-term bet
Real estate strategies
The above occupancy examples include a
number of real estate strategies. In good and
bad economic times, credit unions should be
open to all options in the assessment phase.
These may include building and owning; building,
selling and lease back; leasing; leasing to own;
purchasing an existing building or condominium;
or partnering with a developer or other credit
union. There are hundreds of sub-options based
on each credit union’s situation. It is extremely
important to recognize and evaluate all the
options as the cost of developing and occupying
operations facilities is extremely high.
Cost estimating accuracy
Cost estimating is one of the danger points
in the operations planning process for CEOs.
If the cost estimating is done by someone
who has limited experience designing a
headquarters building for credit unions,
particularly if a branch is included, there is
much risk. In our 35 years planning, estimating
and presenting to boards of directors, we
have come to know that the new headquarters
budget decisions are big for every credit union.
In the strategic planning phase, credit unions
are guided through the process of aligning
business objectives with staff and space needs
to produce a budget. The initial budget is
approved and the board moves forward with
trust in the CEO and consultants to complete
the project on time and budget. The first time
a CEO has to go back to the board for more
money, directors lose confidence and are
often suspicious through the remainder of the
project.
If cost estimating is accurate and cost
savings can be realized through completion
of a new headquarters delivered on time and
under budget, a board’s confidence in the
CEO is enhanced and the board feels smart
and proud of the facility and credit union. To
accomplish this, credit unions need to work with
experienced consultants that can deliver accurate
cost estimates and back up the estimates with
real performance. Read more in Chapter 13,
Construction Delivery Methods and Strategies.
127
The occupancy experience
We will cover the design of operations facilities
in the next chapter, but the strategic planning
phase is the right time to outline occupancy
experience goals. Engineering an occupancy
experience for staff in operations facilities is as
important as designing the member experience
in branches. As more services are delivered by
operations staff, they must have the same brand
experience as branch staff if a consistent brand
message and voice is to be delivered through
all delivery channels. This brand experience can
also be translated into how efficient the building
is, where it is located, the desired inside and
exterior amenities, types of flooring and wall
systems that will be used, parking vs. transit
issues, going green and community interactions.
The reason it is important to discuss the
occupancy experience during strategic planning
is that the decisions made here can impact cost.
For example, if you would like to connect closely
with the community or offer a space for SEGs to
use during events you may want to include a large
community room. This room could be between
800 and 3,500 square feet and significantly add
to the building cost.
With the occupancy experience outlined ahead
of space planning and budget discussions, the
required enhancements can be integrated into
future building design without significant changes
in cost assumptions. In other words, if we capture
full intent prior to budgeting we will not have to go
back to the board for more money at a later date.
Efficient and productive headquarters facilities
are important to credit unions whether they lease
or own. A well-constructed strategic facility
plan will produce occupancy recommendations
that clearly support a credit union’s business
plan and objectives, provide a modern space
that enhances the performance of staff, offer
flexibility to accommodate change, promote
a strong differentiating brand in terms of staff
experience and appearance, and provide a sound
appreciating asset that will help support the next
growth cycle.
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07
Headquarters Planning and Design
Growth is a necessity in the credit union industry to survive and
thrive, said over 70 percent of respondents to the CUES/EHS
Design 2009 Credit Union Facility Survey. Growth was even more
important for credit unions over $200 million in assets with 95
percent responding positively. As growth of membership continues
and products and services expand, headquarters facilities must
also grow to support staffing requirements, even as they take into
account the inherent efficiencies of scale.
The cost of developing, remodeling and operating headquarters
centers is very high. Each dollar spent on headquarters occupancy
must increase efficiency and productivity. This is as important for
small credit unions with small facilities as it is for large credit unions
occupying multi-story headquarters. The 2009 Credit Union Facility
Survey found that credit unions under $100 million in assets average
$8,956 in assets per square foot, those between $100 and $250
million in assets average $10,768 per square foot, CUs between $250
and $500 million average $13,478 per square foot, CUs between
$500 and $1.2 billion average $17,120 per square foot and those over
$1.2 billion in assets average $20,067 per square foot. The correlation
suggests that small credit unions require about twice the space of a
large credit union per asset dollar.
Chapter 7 • Headquarters Planning and Design
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Based on current construction prices and
average assets for each group, credit unions
are looking at new operations facilities with
construction costs alone of $1.5 million, $3.9
million, $6.5 million, $12.3 million and $21.4
million respectively for each of the five asset
categories. The impact of this level of capital
expenditure is high, even when amortized over 39
years. Planning must be accurate so that facilities
are not over or under-planned. A credit union’s
occupancy and real estate strategies must limit
capital and operating cost, while ensuring the
required facilities are developed to support the
business plan and growth strategies for the next
five, 10, 15 and 20 years.
Our 2009 facility survey also told us that just
25 percent of the responding credit unions lease.
This percentage may rise as credit unions take
short-term gains by selling and leasing back to
real estate investment trust companies that run
and manage income-producing property. But, the
long-term higher cost of leasing plus the loss of
an appreciating asset will actually set most credit
unions back financially.
Because the level of space use efficiency
directly impacts lease cost, the need for efficient
facility planning is just as important in leasing as
in planning a new owned facility. It is not unusual
to see a variance in planning efficiency (the ability
to fit more staff in one building than another
based on such factors as floor plate size, building
modularity, code and hallway requirements, core
locations and so on) of 5 percent to 10 percent,
which can substantially increase occupancy cost
whether you lease or buy.
In terms of leaseable square feet to gross
building square feet, a good figure for planning
efficiency is 85 percent. When credit unions
evaluate leased spaces, it is typically a
comparative value, such as “We can fit 50 people
in 15,000 square feet in building A, but building B
will require 17,400 square feet for 50 people.”
In this chapter we’ll present an outline of a
headquarters planning process that has proven
to be successful in terms of producing efficient
and highly productive branches, creating a strong
brand image and staff experience, reducing
operating cost, integrating “green” features and
providing a credit union with an appreciating
asset. We assume you have completed staff and
space needs programming, created efficient
space standards, considered efficiencies of scale
as you grow, and conducted peer analysis to
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help ensure your projections are rational within
the industry compared to some of the best
performing credit unions.
Before we discuss operations and
headquarters planning in detail, let’s first look at
the latest trends in planning.
Trends
What are the latest trends in operations
facility planning? It is important to understand
what is changing in the industry in terms of staff
accommodations, sustainability, design and
contracting methodologies, environmental issues,
and branding. Let’s look at what has evolved over
the past five years.
Evolving from a culture of process workers
to exception workers
Fred Cook, EVP at North Shore Credit Union
in N. Vancouver, British Columbia, sums this up
well: “A few years ago our operations staff were
primarily process workers but tomorrow they will
be exception workers. In other words, in the past
we needed a large number of workers to process
information because of a lack of fully integrated
and intelligent systems, but in the future our staff
will only need to manage the exceptions in the
process.” The result of this ongoing evolution
for North Shore CU has been a tripling in asset
size over the past five years with only a modest
increase in staff. The impact of this trend on
staffing and space needs will be significant.
Filing space is dropping fast
Headquarters need less bulk filing space than
they did five years ago, thanks to technology. Most
credit unions are employing imaging to reduce
or eliminate paper files. This means that a $500
million credit union does not need a 700-squarefoot, two-hour-fire-rated vault to store files.
Because information is available on line, we are
seeing the need for significantly fewer binders.
Fewer file cabinets are needed in departments and
workstations. And, there is no need to store pallets
of paper with a three-month back-up.
Large conference rooms dropping in size
In the past many credit union brought most of
their staff to meetings at the headquarters and
these same credit unions held large member
events. Both occasions needed a space to
accommodate the large number of people, but
the space was only fully utilized once or twice a
month. The cost of these large conference rooms
is high. Today, most credit unions would prefer
to save the cost of constructing a large meeting
facility and rent space when needed at a hotel or
conference center. The cost is less, and it is often
just as convenient. In addition, food service often
is available. Branding and messaging can be
brought to the sites.
No more basements
Ten or more years ago, credit unions often
built a basement under their facilities. It was
considered cheap space—credit unions needed
a foundation anyway and a basement would be
a good place to store supplies. As credit unions
grew, they often moved storage offsite and
placed staff in the basements without windows or
good ventilation. Today few credit unions build full
basements as they realize there is a limited need
for storage, that IT does not want to be at the
bottom of a pool if there is a water leak and that
staff does not want to work in a basement, even
in a partial-daylight basement.
purchase that the local jurisdiction required
an additional $1.5 million in building upgrades
before occupancy. The end result was the loss of
$500,000 and occupancy of an old building.
On the other hand a number of credit unions
have saved significantly by purchasing and
renovating existing buildings. In the late ’90s $1
billion Spokane Teachers Credit Union (http://
www.stcu.org) Spokane, Wash., was going to
build a new 50,000-square foot headquarters
for $7.5 million. We were able to find a
115,000-square-foot building for $3.5 million. The
cost of full renovation was less than $1 million
and the vacant space was fully leased at the
market rate, providing a level of income that paid
a good portion of the occupancy cost. The same
story is true for a number of credit unions that
were fortunate to find the right building at the
right time in the right location.
85,000-square-foot office building purchased
and remodeled by Air Force CU
Purchase an existing building
It is wonderful to move from an old building to
a modern new facility. Staff members feel they
can be more successful. Directors feel proud that
the building represents the credit union’s success
on their watch. There is a new, large-brand
expression in the community. But, the cost is
high. If available, and done correctly, an existing
building is a cost-effective and equally productive
alternative. This means understanding the real
cost of purchase includes site improvements,
electrical and mechanical systems, existing
structural and seismic upgrades, fire suppression
and amenities.
Going Green
Every credit union we talk with today wants
to integrate “green” into its headquarters facility.
The big question is how much green? How do we
balance the cost with the tangible and intangible
benefits? Read more in Chapter 8, Going Green.
A few years ago a credit union on the West
coast was considering building a new facility for
the cost of $5.5 million. It found a building for
$3.5 million and figured that with a $1 million
upgrade it would save $1 million. This sounded
good, but the due diligence process was not
complete. The credit union found out after
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Physical and mental well being
Cultural
Beyond just showers, we are seeing a significant
rise in the desire of credit unions to provide onsite
physical fitness in terms of workout areas or outside
tracks around the campus. Credit unions now
include dedicated rooms with exercise equipment
matching what you find in modern gyms.
Credit unions need to bring their new
or evolving brands into the headquarters
environment. We now know that sales training
alone will not be productive or stick with
employees if there is not first strong brand
training. This brand training needs to be applied
to headquarters staff at a level near equal
to the branches. In addition to training, the
environment in which employees work must
reinforce the brand as well. This means that
elements of the brand should be integrated into
the headquarters design. Branch merchandising
should be displayed. Headquarters and branches
should be connected by video conferencing for
cultural events and training. And areas should be
provided that make cultural statements, such as
coffee areas for meeting other staff, areas to step
out of the flow in hallways for conversations, quiet
rooms, a well-designed lunch room and physical
fitness opportunities.
Every credit union is in competition with banks,
credit unions and other businesses for the best
staff. Today staff members expect more from
employers than they did 10 or 20 years ago. For
example, I am often asked by boards: “Is it really
important to provide showers for staff in the
headquarters?” The answer is that it depends on
where you are located and the business culture. In
a growing number of markets, staff want to bicycle
to work or run or exercise during lunch. These staff
members must have showers available. If they
cannot continue their exercise program with you
they will find another employer to work for. A few
years ago a large credit union in the Northwest was
courting a new chief financial officer. He asked if
they provide showers for staff. The credit union said
no and he went to the competitor.
In the ’70s most headquarters facilities
included a cot room. Until recently cot rooms
have been discouraged by most boards as a
waste of space. “If someone is so sick they need
to lie down, they should go home” has been
the thinking. The reality is that some valuable
employees need to lie down or find a quiet space
for a few minutes. That is all they need to return
to work. Many more mothers of newborn children
are returning to work early. They need to have a
private place to lactate and refrigerate the milk.
The lunch room or bathroom is not suitable.
Lunch rooms had included full kitchens years
ago. Then lunch rooms became smaller. Because
of concern about smells and time away from
work, kitchens changed to kitchenettes and
microwaves replaced stoves. We are now seeing
a rebirth of the kitchen, as credit unions see the
ability to bake a cake or occasionally cook a meal
as important to creating a warm culture.
Lunch rooms are also changing from one large
space to areas where staff can choose how they
want to experience lunch. We are seeing the need
for three primary areas (1) open areas where staff
can meet and chat with their friends, (2) a space
where groups can watch the “soaps” and (3) a
quiet area where people can read.
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Most credit unions have seen an increase in
the percentage of headquarters staff compared
to branch staff. This is the result of more products
and services being delivered from headquarters,
such as the call center, centralized processing and
ever-increasing products and services. A strong
brand experience is most effectively projected by a
consistent member experience delivered through all
channels. To do this the branch and headquarters
staff cultures must be aligned.
While designing a headquarters, the
question should be asked: “How are we actively
supporting our evolving culture through the way
we plan and operate our space?” For example, a
credit union will need to ask:
• How much space should each staff have to
meet their functional and cultural needs?
Call centers are a perfect example where
some credit unions give each member
service representative 25 square feet
and others provide 65 square feet. The
difference in size impacts the way each
staff person performs and this telegraphs
through the phone to the member as a
subtle and subliminal cultural statement.
• How much privacy are we providing in terms
of visual separation and sound reduction and
masking? Does our culture require visibility
of each staff person to the other or should
they be separated? Is our culture one of
process workers who should be visually
separated or are we moving to exception
workers and need to drive interaction?
• Have we included exercise areas and showers?
• Is the kitchen outfitted to match our culture?
Do we want staff to be able to cook for
events?”
• Is part of our culture to be fun? How do we
express this? A game area, weekly bocce
ball in the halls, line dancing in the lobby on
Friday (all of which have been employed by
credit unions)?
• Is the credit union family oriented and kid
friendly? What accommodations are made
for kids? Is there a private room with a
refrigerator for nursing mothers?
• What colors and materials are used? Do they
express the brand?
• Do we need to provide areas for staff to meet
and chat such as small cul-de-sacs along
major hallways?
• Do we want to combine the branch and
headquarters cultures? Should we provide
display areas for common goals and promotion
of products and services and campaigns?
Environmental
Advancements continue in the ability to
increase staff comfort and manage energy
costs. New heating and cooling systems on the
market today reduce energy and maintenance
costs. New building designs can include many
more zones to increase the ability to more tightly
regulate the environment. New window coverings
significantly reduce heat gain and loss. Master
controls turn lights on and off based on the
amount of light coming in through the windows.
Light controllers sense when people enter a
room and turn on the lights. White noise is used
to increase voice privacy. Raised floors allow
simplified wiring and the ability to make heating
and cooling workstation and office specific.
A few years ago the commercial furniture
industry conducted a study to determine how
modular partition systems had changed the
work environment. One of the findings was that
staff members felt they were less productive
because partitions brought them too close
together creating sound problems, primarily
sound recognition. While partitions have done
much to increase space efficiency, they have also
created sound privacy issues. When designing
a headquarters, great care must be taken in
planning the relationship of staff to each other,
the kinds of surfaces that will be needed to
absorb sound, and the potential use of white
noise to limit recognition of conversations.
Smell seems like a minor issue, until there is a
problem. The primary causes of bad smells, as
defined by individual staff members, are kitchen
and food-related odors. The issue of off-gassing
was a big concern a few years back. Today
manufacturing processes for most building and
furniture materials has eliminated the majority
of off-gassing issues. Kitchen odors can be
eliminated with sufficient negative air pressure
and proper ventilation. Food odors must be
handled by policy.
We complete a large number of surveys
and interviews in the development of strategic
headquarters plans and in designing new
headquarters facilities. One of the biggest
requests is to have daylight and good artificial
light. Buildings today should have wide expanses
of glass to let in as much natural light as possible.
Additionally, artificial light is on the brink of
an evolution from florescent to a new product
developed by VU1 (http://vu1.com) Corporation
called electronic stimulated luminescence lighting
technology, an entirely new energy-efficient
light. It is neither incandescent, fluorescent nor
a light-emitting diode. This new light is better
than fluorescent because it is full spectrum,
lasts longer, does not contain mercury and is
dimmable. This new product will be on the market
in late 2009.
Workstations are continuing to evolve in
terms of their flexibility, ability to meet individual
employee needs, cabling and wiring attributes,
sound absorption and visual appeal. As we
experience the increasing pace of change, we
need to understand how the workstations we
specify today will meet the changing needs of
staff in the future.
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Working from home
Will employees be able to work from home in
the future and how will this impact space needs?
This question is asked by every executive team
we work with and then it’s asked again by the
boards. We have been addressing this question
since the mid ’80s without much change. The
answer is that only a few employees can work
from home, and only part time. These include
executives and some marketing and business
development staff. Line staff cannot for a number
of reasons. How do you handle liability in an
environment you cannot control? How can you
create a strong culture if staff rarely meets face
to face? How do you provide ongoing training?
Nearly all executives feel a need to come to
work to connect with others, to be energized by
association with co-workers with a common goal,
to brainstorm, to socialize.
Working at home is not an issue of technology.
We have the needed solutions today. The issue
is that a well-structured work/social environment
where employees can succeed is what most
staff members want. Working at home will have
little impact on headquarters space needs for the
foreseeable future.
Call centers
Call centers are becoming highly productive
branches. It is not unusual in our analysis to find
that a call center is completing more transactions
and logging more cross selling than most of
the physical branches in the network. Many
call centers are starting to do outbound calling
to specific target customers to enhance their
relationships and increase member service.
Call centers are branches and need to drive
the same cultural experience as branches.
Merchandising needs to be placed on the walls
and the interior environment should reflect a
similar brand image as the branches.
The call center staff and environment will
evolve to offering video conferencing and
supporting smart ATMs that will allow them to
operate as a virtual teller anywhere in the world.
Child care
In the past many credit unions thought about
providing on-site child care. The main issue is
liability. All of the credit unions we have worked
with or observed have chosen to support a local
child care facility near their headquarters rather
than directly provide the service in their location.
Flexibility
The pace of change continues to accelerate
and headquarters facilities must be able to
respond. We are just starting to benefit from
wireless. In the near future we will see wireless
connections to central servers. We also will be
using battery packs so that no power cables
are required. This, coupled with moveable
workstations, will allow staff to work alone or
together in nearly any location they like. This will
also free space planning from the need to place
workstations in proximity to power and computer
cabling, and significantly reduce the labor cost
associated with workstation relocation.
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Cost of construction and renovation
One of the big stories about headquarters over
the past five years is the cost of construction. Up
to late 2008 the cost of construction was climbing
at the rate of 7 percent to 10 percent a year. The
following economic decline is producing a leveling
off of construction cost and we may even see a
decline as the economic crisis continues worldwide.
Even in poor economic times it will likely be better to
own than build. The economic situation may make
purchasing an existing building very attractive.
Headquarters
Planning and Design
Selecting the right consulting team
This is a critical decision point for CEOs. Which
design and consulting strategy should I employ
to ensure my credit union gets the best possible
headquarters facility, at the most reasonable
price while reducing my personal risk? There are
a number of questions to ask.
Is design/build the right answer or should I
contract the design and construction separately
and hire a construction manager? The CUES/
EHS Design 2009 Credit Union Facility Study
indicated that nearly half of the responding credit
unions use design/build. Of those responding
credit unions with assets over $500 million, over
75 percent employed a design/build strategy. The
scale of larger projects and greater financial risk
is likely causing large credit unions to place all
responsibility with one firm.
Should I employ a local design/build contractor
or a national credit union industry contractor?
This depends on many factors:
• Does the local designer have significant
experience designing headquarters for
financial institutions or would it be best to work
with national designers that have completed
numerous facilities across the country and
bring vast experience to the process? Many
inexperienced designers will tell you that your
headquarters project is just another office
building and all you need is a good architect
and interior planning. Is your multi-million dollar
headquarters just another office building?
• Does the local contractor have the
experience and financial backing to build
your facilities? Will you get the best pricing or
would a contractor that is more independent
from local pressures deliver a better
product and a lower price and still use local
resources?
• What is the experience level of the national
design/build contractor? How does it
differentiate itself from other national firms?
Is their process open book? What is its
policy about shared savings? How will it
balance the need for ensuring integration of
the right local contractors while gaining the
best prices and work? Is the employment
of union workers required and how will
the national firm work with the unions? Is
bigger better in terms of safety and product
or can a smaller national contractor focus
more on your needs and deliver a superior
headquarters, under budget and ahead of
schedule?
• Do we want to “go green” and who can
show us the best way to balance the cost
and benefits?
• Will the national design/build firm hire a
local architect and try to guide from afar or
work with a nationally known architect with
significant financial institution experience?
• How involved is the national firm in the credit
union movement? Is it a leader or a follower?
• What are the hidden motivations of the
design/build contractor? To build you
a new building? Do the vast majority of
the contractor’s projects result in new
headquarters (greatest profit for the
contractor) or are there a number of
examples where the firm helped credit
unions find existing buildings to purchase
and remodel? Does the contractor offer
strategies for phased construction over time
or one large solution? At the end of strategic
occupancy planning, does the contractor
analyze own vs. lease, renovation vs. new
and purchasing existing facilities vs. building
new headquarters in terms of cost, timing,
brand and performance?
• Is the person making the presentation for
the multi-million dollar relationship the one
who will guide and work on the project or the
sales person or chairman who will only be
involved on the surface of the project?
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There are many questions to ask before you
select the best method of moving forward with
a headquarters project. This topic is covered
in much greater detail in the Chapter 13,
Construction Delivery Methods and Strategies.
Due diligence and site analysis review
You may already own a piece of property, or
are holding off on your search until you select
the architect or design/build contractor to
complete the strategic occupancy plan. Whatever
the situation, you will need to analyze the site.
If you already own the property you hopefully
completed full due diligence, including gaining an
ALTA-level survey (with elements specified by the
American Land Title Association (http://www.alta.
org) to align a survey with a title), soils analysis,
phase I environmental study, and code review.
Whether the property is existing or new,
you will need to understand how the site will
accommodate your headquarters and possibly
an integrated branch project. The site should
be analyzed to understand if and how it can
provide good ingress and egress and circulation.
The analysis also should consider if the building
can be well positioned on the site for visibility
and maximum site efficiency, whether there is
sufficient land to meet the building requirements
in one or two phases, and if there is sufficient
space for the required parking. Setbacks, green
zones and storm water retention also need to
be considered as well as whether community
amenities can be integrated as desired.
Additionally the site needs to be analyzed in
terms of impact on construction cost. Should
more soils analysis be completed? Is the land
stable or is there soft soil that will require
expensive pilings or a structural slab? Must
the building be placed at a specific location
that changes site efficiency? The added cost
to a 30,000-square-foot building due to site
conditions could range from $15,000 to $1.5
million, depending on the severity.
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Understanding building efficiency
Space use efficiency contributes significantly
to the performance of a building in terms of the
cost of occupancy. Large space users looking for
a new location to lease generally analyze three or
four existing buildings to determine which will be
most efficient and provide the greatest capacity
at the lowest occupancy cost. The difference in
the occupying cost of a highly efficient vs. a fairly
inefficient building can be 5 percent, 10 percent
or even 15 percent.
The attributes that drive building efficiency can
be planned into a new building’s design from the
beginning, but it requires working with a design
team that has completed millions of square feet of
office planning in a variety of buildings in different
jurisdictions across the country. The team must
understand the efficiencies created by floor plate
sizes and shapes, the position of the core to
window walls, window positioning, wall thicknesses,
and placement of vertical penetrations.
Understanding planning efficiency
The benefits of building efficiency are
multiplied when the space use inside the building
is well planned. For example, our firm completes
over a million square feet of corporate space
planning a year. The City of Seattle asked us
to analyze the occupancy of all its offices. We
found a number of opportunities to reduce space
usage while retaining high staff performance
and satisfaction. The result of this work was a 23
percent reduction in space usage and a savings
of millions of dollars in occupancy cost. When
good building efficiency and planning efficiency,
are combined, the savings are significant and
long lasting.
The Headquarters
Planning Process
There are a number of basic steps in the
process of designing and building a new
headquarters facility. There is some variation
based on the design and construction
methodology selected; the size of the project;
and the geographic, cultural and political
environment. Generally the process follows the
same steps. In the following we will present an
outline of the process based on a 45,000-squarefoot building built in the lower 48 states. We will
assume that the project will utilize a design/build
project methodology as this was selected as the
preferred method by many of those credit unions
responding to the CUES/EHS Design 2009 Credit
Union Facility Study. We will also assume that
the strategic plan has been completed and a site
found but not yet purchased.
Site selection
1) Establish site criteria.
What should be the relationship of the
headquarters location to the current and
expanding branch network? How will the
relocation affect staffing in negative and positive
ways? Is public transit available in the market?
What are the current and projected future
demographics? Should the location advance your
small business objectives as well? Is high visibility
important? What should be the attributes of the
surrounding markets in terms of target member
development if a branch is desired inside or
adjacent to the headquarters?
2) Confirm the site criteria.
Calculate how much property will be required
based on the projected building size, circulation,
and code requirements for parking, setbacks,
green zones, storm water retention and filtration
systems, etc. An industry rule of thumb is one
acre for each 10,000 feet occupied by the credit
union without structured parking. However, high
land costs can generate other creative solutions
that can drive the land need down 50 percent.
Don’t settle for a ballpark number. Understand
exactly how your 10- and 20-year needs will be
met by the property.
3) Confirm the site development strategy.
Every credit union must wear two hats when
looking for property, that of a credit union and
that of a land owner/developer. Is it best to
purchase twice the needed property, complete
your development, and sell off the unneeded
property at a 100 percent to 200 percent profit
in two years? Should you develop the property
and then lease it back to increase available
capital for branch expansion? Should you
develop your facility and an adjacent facility that
can be leased, then used for your long-term
expansion or sold if growth slows or operating
efficiencies dramatically increase? Know your site
development strategy before you start looking
and then be prepared to modify the strategy as
real estate opportunities present themselves.
4) Select the best site or sites for further study.
Ask the real estate agent to provide a property
report that indicates all the appropriate properties
in the search area, both listed and unlisted. The
design/build contractor will be motivated to look
at vacant land and the realtor will want to include
existing buildings for consideration. Use both
these motives to find the right solution for your
credit union.
The report should be organized with an
introduction to and a map of each site located by
number (a current aerial photo is best), followed
by a page or two of explanation about each site
and building. At the minimum, this initial report
must include location, size, price, availability, site
conditions, zoning, owner, situation and a photo.
Typically, these reports include 12 to 18 sites.
Then a short list of the most promising two or
three is generated, and more detail is provided by
the agent toward making a final selection.
5) C
omplete due diligence and site
feasibility studies.
Each area of concern, such as soil bearing
capacity, code compliance, traffic mitigation,
hazardous materials, wetlands issues,
community group concerns, easements, liens,
etc., should be completely understood. Most
likely engineering studies will be completed for
soils, due diligence surveys, traffic mitigation,
and environmental reports.
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6) Complete schematic site feasibility or
building studies to test the fit of the desired
building or occupancy goals and inform the
selection process.
The architect should provide schematic studies
of each site that analyze building position, ingress
and egress, parking, drive-through, zoning,
and other issues. If an existing building, the
architect should study the ability of the interior
to accommodate the short- and long-range
occupancy needs. This analysis will typically reduce
the selection to one or two sites. While the architect
has developed the site plans using the local codes,
it is mandatory that the final schematic plan is
reviewed by the governing jurisdictions so there will
be no surprises after purchase.
7) Complete project cost estimates.
When the feasibility plans are complete, the
next step is to prepare probable project cost
estimates for one or multiple sites. These ballpark
estimates are based on the project goals and site
conditions. With these estimates in hand you can
go to the board of directors with a total probable
project estimate so the board understands the
potential project cost. There is an important
caveat here. The board must understand that
the estimate is based on initial studies and
ballpark estimates. As the project develops
there may be increases or decreases to the cost
estimate based on further engineering, changes
in jurisdiction requirements, market costs of
materials and labor, and other factors.
8) Select the favored site.
Using the site studies; traffic studies and
probable project cost estimates, select the best
site to meet your needs. Prior to purchasing the
total project estimate should be compared to the
amount your regulator will approve. If this is not
done, the project may be stalled until additional
capital can be raised, which may negatively
impact the occupancy strategy.
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9) Make a contingent offer.
The purchase and sales agreement should
not be contingent on specific issues. Rather, the
contingency should be limited to board approval
without proof of reason. This offers the credit
union maximum flexibility. It is essential that
an attorney familiar with the credit union and
commercial real estate prepare the offer and
make any future modifications.
A word of warning: Real estate agents in
general want to find you a site or building and
close as quickly as possible. It is not unusual
for a credit union’s real estate representative to
suggest a 30- to 45-day due diligence period.
This is often the amount of time the seller wants.
This is not sufficient time to complete accurate
due diligence. Do not be forced into a short
due diligence period. If you must agree to a
60-day due diligence period, suggest leasing or
purchasing two or three consecutive options for
$3,000 per month after the 60 days to be certain
your purchase will not become an expensive
headache.
10) Negotiate the final deal.
If all site concerns are removed, the local
jurisdiction approves the preliminary site plan,
and the property continues to meet your criteria,
purchase the site. If the site is an existing building
and you are leasing, ensure that the leasing
agent has a commercial background and can
assist with matching the lease conditions to the
strategic occupancy plan tactics. A work letter
must ensure the space is built out to the credit
union’s exact specifications.
There is an opportunity here for cost savings
for both headquarters and branch projects.
Landlords will typically offer to build out the
space and amortize the cost over the term of
the lease. The cost of using this methodology is
higher and may or may not be an advantage for
your credit union. Financially it is usually better
to contract and fund the tenant improvement
remodeling work yourself, saving the owner’s
cost of funds and the 10 percent to 20 percent
up-charge for profit. Additionally, the base rent
number does not then include TI costs that
escalate over time.
11) Take possession of the property.
Ensure that all requirements are completed
by the seller or landlord on a timely basis. Have
you received warranties and operating instruction
on building systems? Do you have a copy of the
covenants and restrictions that will guide your
development or remodeling? Are there joint
occupancy or mutual parking agreements? Do
you know who provides maintenance on the
equipment? Evaluate the architectural consultant’s
performance and determine if you wish to continue
using the consultant’s services through the
architectural and construction phases.
12) Update the schedule and cost estimate
At the end of this phase, the design/build
contractor should update the cost estimate and
schedule to ensure the project remains on track
and any discoveries are addressed.
Architecture and interior planning
1) Reconfirm project responsibilities and the
schedule.
Review the project responsibility matrix and
schedule previously developed by the design/
build firm and make modifications as necessary.
Expand the schedule to include all of the key
milestones and individual steps throughout the
project so all the players know what they are
responsible for and when their tasks must begin
and be completed. Additionally, this detailed
schedule helps to impress upon each player how
his/her performance affects every other team
member and the success of the entire project.
2) Define the credit union’s desired image and
staff experience.
Determine the most appropriate and market
effective image or “brand statement,” based
on the retail architectural and interior retail
concept created during branch image standards
development. If the brand has not yet been
translated into physical form, now is the time to
develop a clear understanding of who you are,
how you want to be perceived by members,
staff and the community. Then you can create
the most effective brand image. You may want
to review Chapter 4, Retail Branch Planning,
Business Modeling and Prototype Development.
The architectural image should be strong
and appropriate, conveying the most positive
characteristics of the credit union. It should
also contain common elements that are used
in branch exteriors as well. Remember, the
headquarters is your largest facility and can be
a very large billboard advertising your presence
and commitment to the community. The following
two photos are an excellent example of how
headquarters design can be translated into
branch design.
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3) Complete site planning.
Refine the detailed site plan completed
during the site analysis phase by engaging the
services of a civil engineer to provide an accurate
rendition of the proposed site development plan.
Schedule jurisdictional review of the site plan and
gain approval. Determine if the civil engineering
changes the project cost estimate.
4) Complete the schematic design phase for
architecture and interior design.
The interior layout and architectural footprint
should be developed at the same time. Your
specific interior layout needs should drive
the architectural plan to maximize potential
occupancy efficiency. Additionally, if a branch
is included with a drive-through, the pathway,
stacking and exiting will have a big impact on site
efficiency. The interior plan will include a study of
all areas, such as branch, member service, loans,
accounting, human resources, computer center,
accounts control, phone center, administration,
staff training, CUSOs, partners and support,
storage, and filing areas. Your architectural
schematic design will delineate the building’s
interior partitions, entries and exits, horizontal
and vertical circulation, and code requirements.
At this phase, it is also best to develop the initial
color and material palette for discussion.
A word of warning: Many credit unions
employ architects with limited single or multitenant office design experience. We have seen
numerous occasions where occupancy efficiency
and future leasing and sale potential have been
greatly diminished. It is well worth the price of
working with an experienced commercial building
architect with credit union background, or gaining
the review of a firm that has completed millions of
square feet of shell and core analysis and space
planning in commercial buildings.
5) Consider “green building” desires.
Many credit unions would like to consider how to
include the specification of “green” materials into their
buildings and enjoy the tangible benefits of reduced
operating cost and less tangible benefits of being a
good corporate citizen and integrating “green” into
their brands. Our firm has a great deal of experience
integrating sustainable design into headquarters and
branches, helping credit executive teams and boards
weigh the costs and benefits, stewarding the LEED
bronze, silver, gold and platinum rating process, and
expanding the green initiatives to a credit union’s
culture, products and services, brand and community
involvement. Our clients tell us that going green is
very important in their future facilities. Read more in
Chapter 8, Going Green.
6) Integrate all technical areas and vendors
into the planning.
Gain planning input from systems specialists,
phone system vendors, technology strategists
and suppliers, security consultants, marketing
consultants, HVAC technicians, electrical and
mechanical consultants, and brand image
specialists. Additionally, every plan should be
closely scrutinized for compliance with the
Americans with Disabilities Act, and include an
ergonomic review of both the plans and elevations.
7) Apply value engineering.
Ensure that team members and the vendors
with technical responsibility have analyzed
the proposed plans and systems and made
recommendations based on short- and long-term
value for cost, operations, and maintenance.
8) Explain the benefits of the design elements
and gain staff feedback.
Review the site and space plans with
management and key staff representatives,
explaining the benefits of the concepts and
designs in terms of the business plan, member
service objectives, and enhancement of each
staff member’s job performance and individual
success. Gain their feedback, make the
necessary changes, and present the plans to the
building committee for approval.
9) Review schematic planning with
governing jurisdictions.
Prior to proceeding, review and gain approval
of interior layouts and exterior plans from
governing jurisdictions. If the project is within a
planned development, you will likely need to get
approval of development management.
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10) P
repare and analyze a detailed total
project budget and schedule.
This is the time to begin tightening the budget
and the schedule to ensure that the goals of
the strategic facility plan and the intentions of
the board of directors are being met. Because
they have a more detailed understanding of
the specifications, the design/build contractor
should be able to reduce the project financial
contingency further at this stage, often by 30
percent or more.
11) Valuing the “green” aspects of the project.
All of the green elements of the project should
be recognized and the associated costs and
benefits listed for building committee and board
review. Typically boards want to discuss the cost
of green before approving a project.
12) Finalize color, materials and furnishings.
Make final color, material and furniture
recommendations for the building committee’s
approval. Color, material and furnishings selection
will be discussed toward the end of this chapter.
13) Present all these items to the board for
approval.
Present the schematic planning package,
including site plan, architectural plans, and interior
layouts, elevations, renderings, color, material and
furnishings selections, and the analyzed budget to
the building committee for approval prior to starting
construction documents.
14) Complete construction documents.
The architect, interior designers, and
engineering consultants, under the supervision
of the design/build contractor, now complete
all required documents to gain permits. These
documents will take different forms depending on
the jurisdiction and method of contracting.
15) Gain final pricing and scheduling.
When the construction documents are complete;
the design/build contractor has a full view of the
proposed project and can provide a guaranteed
maximum price for the project. This GMP should
be checked against the original project estimate
completed in the schematic design phase and any
anomalies pin-pointed and resolved. The final GMP
will need to be approved by the board.
16) Submit documents for permits.
After board approval of the cost, construction
documents can now be submitted by the design/
build firm. Permitting may require from two weeks
for a tenant improvement project to five months for
a new ground-up headquarters, depending on the
jurisdiction’s workload and other mitigating factors,
such as reports for the state’s environmental
protection agency, design review committees, and
community presentation requirements.
17) Establish the final construction schedule.
Based on the permit process and the scope
of work, the design/build firm should establish
a final construction schedule. This detailed
schedule becomes the basis for developing all
the contractor and subcontractor, vendors, and
jurisdiction schedules for the project. Inform the
board and staff of the schedule and how it will
impact members, staff and the community.
18) Create PR strategies and tactics.
Building or renovating a large building is a big
event for credit unions in terms of cost, time,
energy and risk. It represents the success of the
credit union and board members. Completion
of the building will be celebrated, but this
is not enough. The process of developing a
headquarters can take up to 18 months from start
to finish and credit unions should take advantage
of this positive, giant and ongoing event to
promote their credit union at every opportunity.
19) Confirm internal budgets.
Every project holds budget items that are
carried by individual responsibility centers or
departments in the credit union. Your project
manager or internal project representative must
ensure that all departments have included all of
the related project items in their budgets. We find
that responsibility centers do not properly budget
for major projects and must be guided through
the process. Some of the missing elements are
cabling costs, computer changes and relocations,
phone system additions, furniture, file purging,
moving costs, and so on. These are unwelcome
surprises after the final budget has been
approved by the board.
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Bidding and Negotiations
The above checklist is based on a design/
build relationship. If you choose the traditional
approach of bidding or negotiations, you should
consider the following steps.
1) Determine community relationship concerns
and strategies.
Each community has its own characteristics
and sensitivities. It is essential that you consider
how the selection of an architect, design/build
contractor, or general contractor from outside
of the community might affect members’
attitudes. Union vs. non-union concerns also
should be addressed. Evaluate the capabilities
of local general contractors and subcontractors
vs. regional or national contractors. Gain
approval of the building committee and board
of directors on these issues before proceeding.
Constructing a new headquarters is a large
project that will attract community attention
throughout development and construction for
one to two years. With community and member
sensitivity, you can ensure positive publicity from
construction to grand opening. The headquarters
structure will then stand as a symbol of your
commitment to the members’ and community’s
values and interests.
2) Negotiate final construction costs with the
contractor (negotiated/bid).
If you selected the negotiated/bid process, the
contractor should have submitted its guaranteed
maximum price to you in writing based on the
final construction documents and specifications.
3) Send request for proposal to contractors if
the project is structured for bidding.
The list of contractors should include only
contractors qualified to do the work. This means
they must have experience constructing similar
financial institution facilities, be financially sound,
offer a project team that has specific experience on
similar projects, and provide excellent references.
The contractor should provide an itemized
breakdown of the costs based on a standardized
list of elements that can be provided by your
architect. The request for proposal should include
all requirements and relationship desires, preventing
surprises for the contractor due to evolving
qualifications. For instance, if you would like to
receive all cost savings or share in the savings,
this should be explained. If the work must be done
by union subcontractors, it must be stated now.
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If you plan to engage the services of your own
project manager to represent the credit union, the
contractors should understand their role.
4) Evaluate proposals using a spreadsheet and
conduct interviews.
Develop a spreadsheet based on the Construction
Specifications Institutes (http://www.csinet.org)
format to ensure the cost estimates are complete and
accurate. If the contractor makes a major mistake in
its estimate, you can be sure they will come back to
the credit union later to cover the additional costs.
It is better to find these errors before the contract is
signed than after work on the project has started.
By comparing itemized bids, we have been able to
catch many major errors which, undiscovered, would
have pointed to selection of a low bidder that could
not have performed as promised. Interviews should
be held with each contractor and the related team
members to ensure the superintendent and project
manager can meet the project requirements, will be
easy to communicate with during the project, and will
understand the process. The interviews also should
investigate whether a positive chemistry exists
among the contractor, the architect, and the credit
union. Call each of the references and ask specific
performance questions such as:
• Was the project on time and budget?
• Were there problems during the project and,
if so, how were they resolved?
• What are their strengths and weaknesses?
• Who was the project superintendent and
how did s/he perform?
• Was the project well coordinated with your
staff?
• Will you be using them for your next project?
5) Award contracts.
With the assistance of the architect and
attorney, develop a written contract using one of
the forms available from the American Institute
of Architects (http://www.aia.org). Typically,
the winning contractor is informed by the
credit union, as the contract will ultimately be
between the contractor and the credit union. The
architectural consultant or project manager will
contact the remaining contractors and explain
the situation. Each of the contractors went to a
good deal of effort to present its proposal, and
a good relationship should be created. They
are community members and you may want to
consider them for other projects in the future.
6) Establish expectations of the expanded
contract team.
Hold a meeting with the CEO, architect,
contractor, and other key consultants to discuss
each team member’s expectations and to
resolve any questions before proceeding. Every
process should be discussed and the channels
of communication and authority established. Do
you want the contractor to run all communications
through your architect or project manager so they are
fully coordinated with the team, or is it all right for the
general contractor to contact you directly to discuss
project elements? This may seem a minor decision,
but can become a major headache mid-project.
7) Check on the progress of the permits.
Are the permits on schedule? If not, what is
holding them up? Are there significant changes
required by the plan checkers? Does the
contractor have his ducks in order? Does the
CEO need to get involved with the city to elevate
the priority of the project via political means?
8) Report to the board.
Inform the board of the contractor selection
and how it meets the community relations
strategy and budget.
Construction Administration
This phase of work will be discussed in detail
in Chapter 13, Construction Delivery Methods and
Strategies. For continuity let’s look at a brief outline.
1) Establish construction and project
management responsibilities with the
design/build contractor.
Confirm responsibilities for construction and
overall project management, timing and method
of reporting. Establish regular meeting times and
reporting schedules.
2) Establish design/build oversight.
While under this scenario the design/build
contractor has oversight of both functions, the
credit union should ask that every variance to
the original plans and intent be reviewed and
approved. By doing this the contractor cannot
change specifications without notifying and in
some cases compensating the credit union for
the changes if they are less costly than originally
planned. If the project operates with a separate
architect and contractor, the architect represents
the credit union’s interest and should advise the
credit union of all changes.
3) Obtain the permits.
The design/build firm will acquire the permits.
The fees are typically paid by the contractor and
passed through as a job cost. A credit union can
pay the fees directly and save the up-charge.
4) Communicate the projects’ form, schedules
and intent to the board, staff, members, and
the community.
The purpose is to gain buy-in and cooperation
from the members and staff and celebrate the
credit union’s success with board members, staff
and the community.
5) Develop a phasing plan.
The development of a phasing plan is essential
to success if the construction project is the
remodeling of an existing space, adding adjacent
space to the building, or working in other occupied
areas. Because it impacts cost, a draft of this plan
should have been prepared before final budget.
This plan blends the construction schedule with the
operations and service schedule of the credit union.
It is intended to minimize the disruption to staff and
members, ensure life safety, provide the contractor
with reasonable access and work opportunities,
and provide the least possible disruption to
systems, all while completing the work at the lowest
possible cost.
6) Hold a ground-breaking ceremony.
This is the opportunity to kick off the
construction process. It is the time to celebrate the
credit union’s success in a very tangible way. Be
sure to invite all the members, community, and local
politicians. And be sure to acknowledge the efforts
made by individuals and groups to date, as well as
the team that will complete the construction phase.
7) Begin construction.
Be certain that all insurance is in place and
contractor bonds gained, if required.
8) Monitor the work in progress.
Regular project reports should be provided
in a weekly meeting with the design/build firm.
Monitoring the work means more than it did a
few years ago. Today we place video cameras
on site to track work progress, monitor materials
and work methods, and provide the management
team, board and consultants 24/7 visual access
to the site. At the end of the project, a time-lapse
video can be created that shows the construction
of the new headquarters within a few minutes and
becomes a community draw on Web sites.
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9) Audit cost.
Progress billings will come directly to you
from the design/build firm. If you are employing
a separate contractor, they will be processed
through the architect for approval, and then
sent to the credit union. These approvals
should be double checked by your CFO to
ensure compliance with agreements and proper
project billing retention (typically 10 percent of
each invoice held until project completion). It is
essential that signed waivers of lien from each
subcontractor accompany each request for
payment or the credit union could be held liable if
the general contractor goes under.
14) Prepare the disaster plan.
This is the time to develop a list of resources
in case of a disaster. Who can you call for a quick
response if the bus duct (an enclosed metal
unit for distribution of large amounts of electric
power) fails and your power goes out, the roof
is leaking into the computer room, a window is
broken, someone just drove through the planting
beds and so on? If you have used a design/build
contractor from out of state, you will need to
develop new local relationships.
10) Report to the board on progress.
Keep the board members informed on a
regular basis of the project process, schedule and
adherence to the budget. This establishes a method
to inform board members of issues that they may
need to address in the future and reduces the
negative surprise effect of budget changes.
1) Select a moving contractor.
The moving contractor should have been
selected at the start of the construction phase so
that the completion of inventorying, scheduling,
mapping, assisting with necessary file purging,
and developing of the credit union’s relocation
process and desired atmosphere can occur.
11) Begin relocation preparation (if required).
Determine who will be the relocation and
moving coordinator within the credit union, and
establish his/her responsibilities. Will the design/
build firm be supervising the move or a separate
moving contractor? The cost of relocation is low
in terms of dollars compared to the total project
cost, but poor planning, coordination, and event
promotion can have significant costs in terms of
staff frustration, missed vacating dates, down
time, and member dissatisfaction.
2) Establish new furniture and equipment
installation responsibilities.
Moving is much easier if new furniture/
equipment is purchased and installed. With new
furniture, there is substantially less coordination
and staff can leave their old workstations and
move directly into their new offices. In addition,
the installation can be completed while staff
work in existing stations, and new equipment
can be tested for proper operation without the
risk of failure during member service hours. If
existing furniture is relocated, take-down and
relocation will need to be done over a weekend.
Coordination will need to be very tight to ensure
an accurate inventory of existing equipment
is developed, additional components are on
hand, repairs can be completed quickly, and
the installers have experience with the specific
furniture system.
12) Complete the punch list for substantial
completion of the project.
Before move-in time the design/build firm and
credit union representative should prepare a list of
items that must be completed to ensure that the
space or building is ready for occupancy. Get a copy
of the occupancy permit from the design/build firm.
13) Obtain warranties from the design/build
firm or general contractor.
This includes warranties on all systems,
materials, roofing, plantings, and so on. All
systems must be inspected by the design
engineer and passed for conformance to the
design and operating specifications. Operating
manuals and other instructions must be provided
to the facilities manager.
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Occupancy Check List
3) Develop a responsibility matrix for
occupancy tasks.
Establish a responsibility matrix and integrated
schedule for the contractor and subcontractors,
suppliers, staff, and consultants to ensure that
the process works smoothly. If the project is
large, the credit union would be well advised to
gain the services of a move coordinator. Your
project management consultant may also be able
to provide this service.
4) Conduct a file purge and other
housecleaning.
Prior to the move, a file purge should be
completed to take advantage of this opportunity
to clean files, reduce the need for more filing
cabinets, and help promote digital imaging.
5) Present the moving package to staff.
Present the moving package to the staff,
including the schedule and their responsibilities
for the packaging and moving process, unpacking
and security. This should be completed by your
move coordinator.
6) Complete all systems wiring and testing.
Most projects require that the contractor
wire some systems, such as electrical, while
vendors wire other systems, such as phone and
alarm systems, and pull computer cabling. In
some cases the electrical contractor installs the
conduit and wire, the IT cable contractor pulls
the cable, the electrician places the outlet boxes
around the cable, the cable contractor places the
connectors, and IT plugs the computers in.
7) Install furniture.
Complete installation of the furniture to match
the construction documents and move-in plans.
Make adjustments as necessary to accommodate
any unforeseen changes that may have occurred.
Furniture systems installations often require the
coordination of an electrician to wire systems for
cabling and power. Be certain union issues are
handled ahead of the installation.
8) Install equipment.
Ensure that security is constant during
equipment installations and that test runs are
conducted. Some systems will require up to two
weeks for set up. This is one of the danger points
in the process where a systems breakdown
causes tremendous member difficulties and staff
frustration.
10) C
omplete the final decoration,
accessorizing, and messaging.
The icing on the interior’s cake often takes
place the last day of move-in, as artwork
is placed on the walls, plants are located,
and accessories are positioned at individual
workstations and throughout the facility. It is also
the time to create additional cultural and business
links with branching and move the credit union
toward an integrated culture. Merchandising
posters can be displayed in the call center or
lunch room to remind staff of key cross-selling
objectives and what is important to the credit
union to express to the members. In addition,
monitors can be located in meeting areas and the
lunch room so that staff can share culture events,
recognition and training
11) Ensure that all areas operate properly.
Conduct a final punchlist of the facility,
systems, furnishings, equipment, accessories,
merchandising, and security. Note any difficulties
and gain agreement from the contractor and
suppliers for correction within a specified period.
12) Pay final billings and contractor retention.
Review all billings to ensure they conform to
the contract, gain all waivers of lien, and pay the
contractor’s retention after final completion of all
punchlist items.
13) N
otify your members, board, regulators,
organizations, professional periodicals
and community publications of your
grand opening.
14) Complete special event planning.
This open house is a major event for the credit
union and it should be a major celebration and
opportunity to spread the word about the credit
union’s attributes and success throughout the
community. The event can also bring a boost to
branches as the event can be celebrated with
special offers or activities.
9) Relocate staff.
Assist staff in relocating and help with tuning
the space to their needs by adjusting chairs and
desk heights and modifying accessory locations.
This is often an exciting and tense time for the
staff, and it is beneficial to hold an informal staff
party at the end of the move. Nearly all staff
appreciates the presence of senior managers
during the move-in process.
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Architectural and Interior
Design for Headquarters
Architectural planning and design
There are two primary disciplines under which
a number of design steps are taken. Under
architecture we typically include the building shell
and core, building appearance, site planning,
and mechanical and electrical. Interior planning
and design includes interior facility layout, wall
elevations, interior lighting and ceiling details,
flooring details, colors and materials, cabinetry
details, signage, electrical and cabling, equipment
placement, security, and merchandising fixtures
and placement.
These questions must be answered before starting
the architectural design to save both you and your
architectural consultant a great deal of time, energy,
frustration, and money. The answers will also lead to
a more appropriate and stronger design statement
backed by brand rationale. Here are a few examples
of buildings that possess a branded exterior.
$583 million Fibre Credit Union (http://www.
fibrecu.com), Longview, Wash.
The driving forces behind every decision,
whether in branch or headquarters planning, are
the business objectives and the brand. The level
to which the brand is applied to a facility is based
on a number of factors.
• Is it important to project a strong branded
image through the headquarters to target
members and communities? Is the image
needed to promote small business banking?
• Does the site location provide high visibility?
• Should the building blend into the
surrounding community, include the best
elements of surrounding architecture and be
enhanced, or present a unique image that
will strongly differentiate the credit union?
$182 million Our Community Credit Union
(http://www.ourcu.com), Shelton, Wash.
• What are the regional or local environmental
characteristics that may contribute to the
design requirements (weather, climate,
seismic zone, topography)?
• Are there convenants and restrictions or
design guidelines that must be considered?
• Are there any biases about specific
construction types (e.g., flat vs. hip vs.
mansard vs. arched roof), materials (e.g.,
stone vs. stucco vs. brick vs. wood vs.
metal), windows (e.g., colored vs. clear vs.
reflective), and so on?
Kitsap Community Federal Credit Union,
Bremerton, Wash.
• What are the descriptive characteristics of
the credit union’s desired image? (Safe,
savvy, professional, home-town, world-class,
technological)
• What are the budget restrictions that will limit
the design pallet?
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$486 million San Francisco Police Credit Union
(http://www.sfpcu.org), San Francisco
Exterior walls/windows
• How will the brand be expressed in this large
surface?
• What type of window and wall systems will
be most resistant to weather and time and
maintain their appearance over the life of
the build?
• How easy is it to clean the exterior?
• Are there any issues about the views that will
be seen from the windows?
• How should shading be provided to decrease
heat gain and the need for air conditioning?
Can it be a brand feature?
• What color of glass should be used?
• How available are the materials, what is the cost
and are they easily installed and maintained?
$245 million Government of Guam Employees
Federal Credit Union new 45,000 square-foot
LEED-certified branch
• Is there a need for the material to be
indigenous or would a particular material be
offensive to target markets, such as a stone
type from another part of the country or
shiny metal?
• Will an annex be added to the side of the
building in the future that will require a joining
or a bridge connection?
Roof
• Are there roof shapes that the board does
not like?
• What is the best roof type for the environment?
• Will floors be added in the future?
Every element of a building’s exterior and the
site plan should be able to be described in terms
of how it supports the brand objectives. Why is
the traffic circulation and parking designed the
way it is? Why is the building positioned at this
specific location? Why is the entry where it is?
Why are we building a single four-story building or
several one-story buildings in a campus setting?
Why is the exterior designed the way it is and why
have specific architectural elements and forms
been selected?
There are a number of general guidelines
for building and site planning that should be
considered in building design work:
• What is the height restriction that could
impact roof height or cause fewer floors?
• Will heating or solar panels be mounted on
the roof and what will this look like?
Mechanical and electrical
• Does a generator need to be placed adjacent
to the building, how will it be screened and
how will fuel be stored?
• What is the path of the underground utilities
and how will this impact site planning and
placement of structures?
• Where will cooling equipment be placed and
screened? On the roof?
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Entries
• Does the entry need to be on the street as
dictated by code?
• How does the entry relate to the path
members and staff will have to take to the
building? Is it a safe path?
• What are the security concerns at this site?
• How does the entry relate to the building
core and the branch? Is it efficient in terms
of distance and can access be separated
after hours?
• Are the entries covered by security cameras?
• Is a loading dock required for the size of building
and how does this impact site planning?
Site planning and parking
• Is access to the site easy from both
directions on the street? Is there a chance
that a median will be placed to block left
turns in the future?
• Is the building highly visible from the street?
• Is site circulation efficient and easy
to understand?
• Is directional signage effective?
• Is there sufficient backup for the drive-through?
• Can a member easily leave the drive-through
and return to the branch without leaving the
site?
• Are there trees that must remain in the
site planning?
• Is there sufficient traffic to support an ATM?
• Are the plantings of a sustainable type that
reduces water consumption?
• Should it be placed on the outside of the
building or in the lobby?
• Is the site well lit at night and covered by
security cameras?
• If there is a drive-through should the ATM
and night depository be placed next to the
building entry or in the drive-through?
• Are there site amenities that should
be included?
ATMs and night depositories
• Is the walk-up ATM visible from the street
and lighted to state code?
• How will the sun impact site use, such as the
placement of a staff area or glare that may
be cast on drive-through tellers?
• Are there environmental concerns, such as
blowing and mounding snow, torrential rain,
freezing temperatures and slick surfaces, or
animal or pest concerns?
• Is there sufficient parking, not just to meet
code, for high occupancy offices like the
call center?
Leasing to others
• If space is leased to others, is it easy for
tenants to enter the building after hours?
• Does the entry feel like an office building or
do renters’ staff and customers have to travel
through a branch lobby?
• Is the building core correctly positioned
to make leasing to others efficient or does
it require too much circulation space that
cannot be rented?
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Interior planning
Interior planning should have started before
the architecture planning, as the purpose
of headquarters is to house the people and
equipment required to support the operation
of an efficient and productive credit union.
The strategic facility plan includes the basic
programming of people and space. It has guided
the selection of a site to accommodate current
and future needs and the location and layout of
the proposed building. Once the building plan is
finalized the interior planning can begin.
Like architecture every interior planning
decision must be in support of the business plan
and brand. In terms of look and feel, much of the
design can be led by the branch business model
and prototype design discussed in Chapter 4,
Prototype Development. If this work has not been
done, a similar process should be employed.
It is now time to translate the aggregate
space needs to individual departments,
workstations and support spaces. The
individual programming sheets are now
revisited to confirm the staffing numbers,
workstation sizes, support areas and specific
requirements within each. For instance, we
know that processers need a 64-square-foot
space. We now need to understand what
type of chair they need, whether they will
be working with one or two monitors, how
much filing space is needed, what type and
height of partition they need between them
and other staff, or what type of supplemental
lighting they should have. Let’s extend this
investigation of work area requirements to all
areas of typical headquarters. The key planning
characteristics of each area is presented in the
following by department. Remember that these
characteristics are generic. Every credit union
is different and has unique requirements.
Accounting
• CFO is typically in an enclosed locked office
that may be located with accounting or in the
administration area depending on the credit
union’s size and senior management culture.
Office size is typically 200 to 225 square feet.
partitions of varying heights.
• Need a few lockable files
• Need a work area for equipment and
minimal storage
• Can typically share a printer with another
department
• Should be in a secure area
Administration
• This area may be limited to the CEO, COO
and assistants or include all the senior
managers. Bringing this group together
can help move their focus from day to day
operations to strategies and tactics.
• The CEO’s office should range from 375
to 550 square feet depending on how the
office must function and the size of in-office
meetings. Often there is direct access from
the CEO’s office to the board room.
• Senior manager’s offices in administration
should be 225 to 250 square feet.
• The CEO’s executive assistant should be
separated from other offices in the open
work area or in a private office.
• Administrative assistants should be located
in workstations ranging in size from 64 to 84
square feet.
• A large copy room is needed for board
packet assembly, equipment and storage. If
the credit union is moving toward electronic
board packets, the room can be smaller.
• A small lobby should be provided with
seating for four. This area can double as a
board waiting area as well.
• Provide an executive lavatory that can be
shared with the board room.
• A conference room should be provided
at 250 square feet. Additional conference
rooms may be considered if an area for
board member use is required or if the
executive team will increase in size as the
credit union grows.
• Should be adjacent to the board room.
• Investment staff should be in enclosed
offices of 135 to 175 square feet.
• Accounting staff are in open work areas
ranging in size from 64 to 84 square feet with
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Card services
• Can be in an open work area unless card
stock is handled and then it should be in a
secure room.
• The supervisor can be in an office of 135 to
175 square feet or in a workstation with high
partition walls.
• The staff can work in open workstations with
lower partitions. These stations are often 64
square feet.
• A work, equipment and storage area should
be provided.
• A safe may be needed if card stock is present.
• A copier and conference room can be shared
with other departments.
Collections
• May need to be near the main entry or have
its own entry if members visit the office. In
a large office it may be best to provide a
conference room adjacent to the lobby so
that members do not need to pass through
the general office area.
• Manager is in an office of 135 to 175 square
feet.
• Staff may be in offices or, more typically,
they are in workstations with high partitions.
• Sound privacy is a big issue as collectors are
constantly on the phone. It must not sound
like a bullpen to the member on the other
end of the phone.
• A conference room should be provided if
members visit the office. If they do not,
collections can share a conference room
and copier.
IT/data processing
• The size of the computer room will depend
on the amount of equipment included and the
location of the cooling unit and power backup.
The room may range from 250 to 650 square
feet. Battery backup is typically in an adjacent
room sized to the backup needs.
• Provide a raised floor for cabling and cooling.
• The computer room should be central in
the building to reduce cable lengths to all
work areas. It should not be in the basement
because of the danger of flooding.
• The computer room will likely include the
phone switch.
• The IT manager should be in an office
ranging in size from 175 to 225 square feet
depending on the size of the credit union and
the management level of this staff person.
• All other staff should be in workstations
ranging in size from 64 to 84 square feet with
panels of varying heights.
• A work area should be provided for setting
up computers. The size may range from 80
to 200 square feet, depending on the size of
the credit union and branch network.
• Provide an area to stage computers. Often
this area is 100 to 130 square feet in size.
• Need a work and storage area for parts.
• The computer area should be enclosed for
security. Some credit unions would like the
IT room to be visible from the hallway. If this
is the case, a glass wall should be placed
between the staff and computer area.
• IT can share a copier with other departments.
• A few locking files are required, but most
files should be online.
Compliance
• Compliance is often adjacent to accounting,
but on occasion it is next to administration.
• Each compliance person should be located
in an office of 135 to 175 square feet. They
can be located in a workstation if the panels
are high, no one can see compliance staff
members’ work areas and sound privacy is
maintained.
• Compliance can share a copier with
other departments.
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Marketing
• The marketing manager should be in an
enclosed office of 135 to 225 square feet
depending on the size of credit union and
level of responsibility.
• If business development staff is located in
marketing, they should be in enclosed offices
for sound control of 135 to 175 square feet.
• All other staff can be located in workstations
with panels of varying height. The size will
range between 64 and 84 square feet,
depending on the type of work they do and
any need to accommodate visitors.
• A conference/work area should be provided
for the development of campaigns and
meeting with vendors. The size can range
from 135 to 200 square feet.
• A 100-square-foot storage closet should be
provided in the marketing space. Additional
storage must be provided in the building for
posters, giveaways and other marketing items.
• Marketing should have a dedicated copier.
Call center
• Locate away from other staff for sound control.
• In large call centers the manager should
be located in an office of 135 to 175 square
feet. If the call center is small, the supervisor
can be located in a workstation of 84 to 114
square feet.
• The workstations should be of ample size to
make staff comfortable. These may range
from 45 to 64 square feet.
• Partitions should be placed between staff for
sound control, but they should be able to see
over the partitions for messaging about wait
times, queuing, control, and products and
services.
• Sound control is very important and sound
absorbing materials should be used on every
possible surface.
• The growing use of video conferencing with
members will require new workstation types
that provide an appropriate back drop and
lighting control.
Consumer lending
• This is typically the central lending office
that includes the manager of lending and
centralized processing.
• The lending manager should be located in an
office from 175 to 225 square feet.
• Senior lending staff may be in offices or in
workstations with high partitions.
• General lending staff should be located in
workstations with panels of varying heights.
• A large two-hour fire file vault may need
to be located adjacent to lending as they
transition to digital files. These vaults can
range from 150 to 600 square feet.
• Provide a staging area for intake of files for
imaging of 50 to 100 square feet.
• Provide a work area for equipment and
storage of 100 to 150 square feet.
• If members are seen within the department,
provide a dedicated conference room of 175
to 200 square feet.
• If a branch is included in the facility, lending
may need to be in or adjacent to the branch.
Small-business lending
• May need to be located in or adjacent to the
branch. If there is no branch, it should be
located near the main entry to the building.
• The manager should be in an enclosed office
of 175 to 225 square feet.
• Small-business lending officers should be in
enclosed offices of 135 to 175 square feet.
• Staff should be in open workstations and
able to greet members.
• Provide a small coffee and waiting area for
four people if not directly adjacent to the
lobby.
• Provide a dedicated conference room of 175
to 225 square feet.
• Provide a work area for equipment and
storage of 100 to 150 square feet.
• The call center can share a copier.
• If the call center is large, over 15 staff, a
small conference room should be provided.
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Mortgage, insurance and financial planners
• If a branch is included in the headquarters,
these offices will likely need to be in or near
the branch lobby.
• If in a branch, they should enjoy high visibility
so members know of their presence.
• Senior staff should be located in enclosed
offices of 135 to 175 square feet. In large
credit unions, the manager of these
departments or CUSOs may need an office
of 175 to 225 square feet.
• Staff can be located in open work stations
for member contact, while those with nonmember contact can be in workstations with
partitions. Both areas can range in size from
64 to 84 square feet.
• Conference rooms can be shared by
these groups.
Training
• The training manager should be in an
enclosed office of 135 to 175 square feet.
• Staff can be in workstations with partitions
ranging from 64 to 84 square feet, the latter
needed if they have visitors.
• A storage area of 100 to 150 square feet
should be provided.
• Training should be located next to the
training rooms or training center.
• Training rooms vary significantly in size.
If a training room will be used for all-staff
meetings it could range from 1,500 to 3,500
square feet for a medium-sized credit union.
Training rooms for 10 people should be 250
square feet. For 35 people the room should
be 900 square feet.
• Most credit unions no longer include very
large conference rooms in their headquarters
for all-staff meetings and large member
events. Rather they rent space at a hotel or
conference center for periodic use.
• In large training centers, a kitchen should be
provided for convenience and to reduce the
amount of time taken for breaks.
• On occasion credit unions build large rooms
divided by movable panels. Be careful
using this strategy, as sound can still travel
between rooms and be very disruptive.
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• Computer training rooms need to be sized
according to the number of staff and
equipment specifications. Credit unions in the
future will be using battery-operated wireless
laptops for all training, reducing the need for
dedicated conference rooms. If laptops are
in your future, include a lockable room with
shelving and sufficient power distribution.
• Provide a storage area for equipment, tables,
chairs and materials.
• Provide a coat closet or rack area.
General office
All other facility needs are grouped under
general office, as they are typically managed by
administration. These areas include:
Board Room
The size of the board room will be based on
the number of board members plus supervisory
committee members and credit union
management. The occupancy will likely be a low
of 15 and a high of 30. The board table should
be configured so that all the directors, the CEO,
appropriate senior management and the recorder
can be seated and everyone can see each other.
Supervisory committee members should sit at a
side table, and staff in chairs.
It is good to build some expansion flexibility into
the board table seating. Mergers will continue to
ramp up over the next five years. Part of most merger
deals requires the addition of board members from
the merged credit union to the surviving credit
union’s board. In mergers of equals both boards may
come together, increasing the original board from
nine to 18 and then downsizing through attrition.
A small lounge area can be included with four to
six chairs. This provides a place for board members
to have casual discussions. A small kitchenette
should also be provided to the side. Provide a
nearby lavatory. Include a coat hanging area.
Additionally, it is important that board members
know the current retail direction of their credit union.
A display area just outside the board room can be a
place for posters and other branch messaging.
The room should include a large, flat-screen
TV and excellent video conferencing, sound
amplification in the room and sufficient power so
that laptop computers can be used. The room
should be completely sound proof and visibility
into the room must be completely controlled.
Columbia CU’s board room
Facilities department
Large credit unions often have facility
managers to manage both headquarters and
branch buildings. They also manage physical
security, couriers, the mail room and motor
pool. The facility manager should be located
near the mail room and loading dock. He or
she will need an office of 175 to 225 square
feet because of the need for a conference table
and large file storage for facility plans and
specifications. A copier and conference room
can be shared with other departments.
Mail room
As credit unions increase in size they often
create a room to handle the increasing volume
of mail. The mail room should be located near
the loading dock and the facility manager, as the
latter often manages the function. The size of the
room will be based on the functions, number of
staff and equipment. Most mail rooms are 150 to
250 square feet in size and include workspaces
for couriers.
Receiving dock and central storage
Receiving docks are required in large buildings.
Building codes will dictate the threshold. These
docks should be located at the back of the
building and truck parking should not block
traffic. The size should range from 150 to 200
square feet.
Fifteen years ago it was not unusual to see
a central storage area of 5,000 square feet in
a 50,000-square-foot building due to the need
for significant storage of paper, equipment and
files. Today credit unions are finding that less
paper, cheaper offsite storage and imaging have
reduced the need. Today it is more likely for a
50,000-square-foot building to have a central
storage area of 1,500 to 2,500 square feet. This
area should be located adjacent to the loading
dock and supervised by the facility manager.
All recycling passes through the loading dock.
A pre-pickup, recycling area may need to be
provided. A few large credit unions operate their
own trash compactors that must be located in the
loading dock area.
Lunch room
The lunch room should be sized to match the
maximum capacity of the facility at full staffing.
The location of the headquarters impacts the size
of the lunchroom as well. If the headquarters is in
an area with a number of restaurants, then it can
be smaller. On the other hand, if the headquarters
is located in the suburbs and not next to a mall,
the lunch room will need to accommodate most
staff at the same time.
Three types of staff areas should be included:
an area where staff can sit at large tables with
their friends and talk, an area where staff can
choose to watch TV, and a quiet area where staff
can read.
A kitchen should be provided with refrigerators
and microwaves to match demand. A dishwasher
should be included as well as trash compactor
and recycling bins. At least one drink vending
machine as well as a coffee machine should
be included. The inclusion of stoves is starting
to return in the design of lunchrooms, as
credit unions want to enhance the staff’s work
experience.
It is very important that the mechanical designer
and architect ensure that no smells will leak out of
the lunchroom into the workspace or hallways.
Cot room/lactation room
Provide a cot room with a lounge chair, couch,
side table and lamp. If the cot room is also used
as a lactation room it should be lockable and a
refrigerator provided. A sign should be placed
outside the door that indicates it is in use and for
how long.
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Conference rooms
A variety of shared conference rooms should
be provided on each floor at central locations.
Large rooms range from 300 to 400 square feet,
medium rooms from 225 to 275 and small rooms
from 175 to 200.
Exercise room
The size of this room will depend on whether
elaborate equipment or exercise or yoga classes
are provided. Typically, if just equipment is
included the room ranges from 250 to 350 square
feet. If classes are provided, it can range from
450 to 900 square feet. The room should be
adjacent to lavatories and showers and have
separate ventilation. The equipment should face
the windows or a full-wall mirror.
Showers
Every headquarters we complete today
includes showers as they are considered a must
for attracting and retaining staff in most markets.
Two showers should be included adjacent to the
lavatories. Remember, these showers will need
to meet ADA requirements. A single shower will
require an additional 80 square feet. Multiple
showers become more efficient. Space should
also be provided for staff lockers, matching the
capacity of the exercise room plus 50 percent.
Lavatories
Bathrooms are included in the building’s core
design. They should be central to the floor plan to
reduce staff walking time. An improvement in just
30 seconds over 20 years for all staff, two or three
times a day is a big cost savings.
Building lobby
Lobbies range widely in size based on building
design. Some buildings have large atriums three or
four stories high; others serve both a branch and
the headquarters office, while others have a small
secure entrance for staff into an operations center.
A 50,000-square-foot headquarters will often have a
lobby that ranges in size from 500 to 800 square feet.
Typically, headquarter lobbies include a
receptionist who monitors all movement in and
out. The receptionist can see outside the facility
and all public areas in the facility, including the
elevator lobby. In a large facility, you may want to
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include a lavatory that can be accessed without
having to go into secure areas. If the receptionist
receives a package or mail, there should be an
area behind the receptionist where these items can
be stored. If there are times when the receptionist
might be away from the desk, there should be a
phone with instructions on how to contact a backup
person. The reception desk should also include
an alarm button connected to staff work locations
for backup. All of the lobby areas and the building
exterior should be video monitored, including a
monitor placed on the receptionist desk.
A waiting area should be provided for visitors.
This area is an opportunity to communicate the
credit union’s culture, community involvement and
current marketing. Develop an expressive display
area that can infotain visitors while they wait.
Lobby interview rooms
Security is an issue at every headquarters.
This, coupled with the need to limit staff walking
time, drives the consideration of interview rooms
in the lobby. These are effectively used for
meetings with vendors, collections visitors, and
interviewing and testing potential new employees.
We find that conducting meetings off the lobby
reduces the length of meetings.
Recycling areas
Recycling bins on each floor are required. They
must be planned or they may block hallways or
be put in a location that will not get used. They
should be located in a recessed area of a major
corridor. An alternative is to provide recycling
boxes at each workstation that are emptied on a
weekly basis by the janitorial staff.
Coffee corners
Coffee drinking is allowed at workstations by
most credit unions. The trip to the coffee machine
is an opportunity for a break and some staff make
the trip at least once an hour, naturally creating
more lavatory trips. To save a significant amount of
time over the entire occupancy of the facility, coffee
corners should be placed in a central location in
the area of the lavatories on each floor. If the floor
plan is over 15,000 square feet and configured in
a rectangle vs. a square, two coffee corners may
need to be included. These areas often require from
75 to 125 square feet and include coffee machines,
drinking water, a refrigerator and supply storage.
IT closets
Every floor needs at least one IT closet for the
patch panels. The number of closets depends on
the size and configuration of floor plans so that
cable runs do not exceed maximum distances.
The closets may range in size from 25 to 100
square feet and should be central on each floor,
adjacent to vertical ductway penetrations and not
more than 200 feet from any terminal.
The inclusion of a branch in the headquarters
facility can bring a great deal of energy to the
lobby and the member and staff experience. It is
the most important branch for members as they
see it as the heart of the organization, the place
where all the decisions are made. The inclusion
of a branch also means that the design will be
highly branded, helping to converge branch and
headquarters cultures.
Emergency generator
Color and materials
In the past emergency generators were
located on the roof. The problem with this is the
small amount of fuel that can be located on the
roof, often five gallons, and getting fuel to the
generator in an emergency. A better solution is
to locate a generator on a pad at the back of
the building with screening. At this location a
substantial amount of fuel can be stored and
access for refueling and repairs is easy. An
alternative is to contract with a generator supplier
that guarantees it will deliver a generator to you in
an emergency. The problem with this is the time
it takes to drive there, and there might not be one
available when there is a real emergency.
Headquarters branch
Development of highly productive branch
business models is presented in Chapter 4,
Prototype Development. Branch size should
depend on the location of the headquarters in
relationship to target markets. If the headquarters
is close to an existing branch, a branch may
not be needed to serve members. But a branch
may be needed as a place to train staff and test
new branch concepts. It may also be a cultural
necessity to ensure that the headquarters and
branch staff understand each other’s mission.
A word of warning: Do not locate the
headquarters based on where a branch should be
located. The property may be high cost and the
location may not be market central. It is better to
locate a headquarters for operations needs and
then include a branch if it is market efficient.
If there is a branch, it can effectively share the
headquarters lobby. The waiting area would serve
both members and people visiting headquarters.
The receptionist then becomes the greeter and
takes on dual functions.
The interior of the headquarters should be
designed with the brand in mind. It should integrate
the colors and materials used in the branches if the
branch design has been updated and truly supports
the brand. If not, the brand translation process will
need to be conducted to ensure the colors and
materials reinforce brand objectives.
Developing workstation standards
We covered the development of generic
workstation standards in the previous chapter.
The next step in planning is to select the right
furniture system for your headquarters projects.
There are a number of things to consider:
• Should you reuse your existing furniture
system and purchase more? Or is
it outdated, unable to support new
technologies and your culture, the wrong
module for your building to maximize
planning efficiency, or difficult to purchase
and repair?
• What type of system will support how you
will work in the future?
• How efficient is the furniture system in
terms of sound control and wire and cable
management?
• Which system offers the greatest flexibility
and the fewest components?
• Is there a need from the standpoint of brand
image, quantity pricing or inventory control to
use the same furniture system as in a branch?
• Should you consider purchasing used
furniture to supplement your existing system
or for all new work areas?
• Should you use a modular wall system that
matches the furniture system?
• How will the furniture system work with the
flooring, HVAC and lighting system?
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• Are there limits on a furniture system’s
ergonomic flexibility?
Individual workstations sharing a
common cabling and electrical spine
• Should there be a design/appearance
connection between the furniture system and
case goods (furniture designed for storage)
that can be used in offices?
• What are the warranties?
• Who will maintain the furniture system and
are they located nearby?
• How does the installation time compare to
other systems? How easy is it to relocate?
• How long will the manufacturer guarantee
production and availability of materials?
There are near limitless planning options
depending on the type of furniture system selected.
Steelcase (http://www.steelcase.com), one of the
world’s largest designers and manufacturers of
furniture systems and case goods, has granted us
permission to use a few of its furniture lines to show
the possibilities.
High storage capacity
collaborative workstations
All images in this section reprinted with
permission of Steelcase
Private workstations with sliding doors
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Open work environment
Bird’s eye view of shared
workstation for mentoring
Two workstation types in paired relationship
Open, highly collaborative work environment
Selecting and purchasing furniture
Furniture and equipment purchasing can
be a major portion of a headquarters project
budget. Many credit unions have enjoyed very
strong growth over the past five years, fueling
growth in staff and facilities occupancy for both
headquarters and branches. New, refurbished, or
existing furniture is often a consideration as more
workstations are needed, ADA and ergonomic
issues must be resolved for staff welfare,
cultural evolution requires a more open work
environment, and productivity and space usage
efficiency is required to reduce aggregate facility
occupancy costs.
The basic practices of furniture and equipment
analysis have not changed drastically over the
past five years. What has changed is the cost
of equipment and furniture and some of the
opportunities presented by the economic difficulties
starting in late 2008. Whether purchasing a new
chair, furniture partitions, drive-through equipment,
vaults, security systems, supplies or technology, the
process is basically the same.
First, you complete a list of functional criteria
for the products needed. Then you evaluate the
efficiency and effectiveness of existing equipment
and determine if refurbishing or enhancements will
improve its utility and performance. The next step is
to gain an awareness of all products available and
select the best product to match your needs.
Finally, you must negotiate the best price or
gain bids, install the product, and continually
monitor the effectiveness of each item. While
the basic process may remain the same, each
product grouping has special characteristics that
must be understood to avoid pitfalls. Let’s look at
a few purchasing methodologies.
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1. Purchasing through the
architect or design consultant
ProsYou do not need to get involved with all
the dealers and manufacturers.
Consultant will provide you with a
recommendation and typically will
purchase the furniture on a
cost-plus basis.
The price may be lower.
ConsThere are very few consulting firms
in the United States that can directly
purchase the major furniture lines.
Consultants will offer you what is
available to them from a short menu of
possibilities.
Cannot represent your best interests in
the specification of a furniture system
when they are motivated by their own
profit and greater return from one
manufacturer over the other.
Consulting firms come and go much
more readily than furniture dealerships
or manufacturers. What happens if you
have problems with the furniture in a
year or two, and the consulting firm is
no longer in existence?
When you have a service call six
months after installation, who takes
care of the problem? Consulting firms
are not set up to maintain products.
Though consultants may be selling
to you on a cost-plus basis, they
may need to purchase the furniture
from a dealership that also adds a
charge onto the product. You can
probably negotiate a lower price from
a dealership and receive better shortand long-term service.
2. P
urchasing from the
design/build firm or contractor
ProsThe process is simplified by
rolling the furniture into the total
construction package.
If the design/build firm will work on a costplus basis, you my be able to purchase
security equipment for less than you can
directly from the manufacturer.
Total project responsibility is with one
firm. There can be no finger pointing
during installation about delays or lack
of coordination.
ConsA few United States design/build firms
can buy directly the major furniture
lines. Many can not.
May offer you what is available to them
from a short menu of possibilities.
Cannot represent your best interests in
the specification of a furniture system
unless they are open book and have
national contract relationships.
When you have a service call after six
months of installation, who takes care
of the problem?
3. Direct purchases from the manufacturer
ProsYou may be able to establish a national
contract with manufacturers if you have
a sizable order. This method may reap
substantial discounts that can exceed 45
percent to 60 percent off the list price.
National contracts can also be
arranged through dealers.
The dealer can often assist in
negotiating the best possible deal with
the manufacturer, representing a local
relationship.
ConsYou will need to work with dealers in
the future for maintenance and item-byitem product purchases. They may feel
coerced by the manufacturer into the first
relationship and be difficult to work with
in the future or nickel-and-dime you for
every service and non-standard item.
You will need to rely on dealers to service
a large manufacturer’s products, and the
service cost may be higher than it would
be if included by the dealer in the initial
purchase package.
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4. Purchasing through a dealership
ProsThe dealership is set up to receive and
hold the products if there is a delay in
construction or renovation.
Dealers offer factory-trained installers
so the furniture and systems go
together and operate properly.
Dealers understand the intricacies of
their particular products to a much
greater degree than most consulting
firms and can catch problems during
the specification process.
They are available for ongoing
maintenance.
They do not have to gear up every time
you want to order one more chair or a
panel or other items, and can provide
the receiving and installation without
your having to pay design fees.
They can be an important part of
your disaster recovery structure by
being prepared to quickly respond to
emergencies.
ConsYou may be pressured by the furniture
dealer to use its “free” or low-cost
design services for the interior planning
rather than those of the design
consultant. Warning: Nothing is free.
Dealerships pursue interior planning
services so that they can sell products
and control purchasing. Typically, a
dealership’s designers are well trained
in the application of the products
their company sells and general
design principles, but are not highly
experienced in interior design, planning
and architecture. In addition, they have
very little knowledge of the special
requirements of a credit union.
Over the past 10 years, dealers have
started requesting project management
fees. When an installation is particularly
difficult, it may be warranted. But too
often the dealers are trying to charge
for tasks normally provided in the
typical purchasing and installation
process.
The process for analyzing, specifying, and
purchasing furniture can be broken down into the
following steps:
1. Architectural or interior design consultant
develops a list of furniture criteria based
on the strategic facility plan, the standard
workstations developed, cabling and
electrical requirements, ergonomic needs,
building modularity, and aesthetic and
budget goals.
2. A furniture selection committee is
elected from the primary user groups,
facilities department, human resources, risk
management, and other interested parties.
This mix will ensure that all concerns are
heard and that buy-in is created.
3. Consultant researches all available products
and evaluates them against the criteria,
developing a short list of recommendations.
The three to four recommendations are
then presented to the furniture selection
committee for its review and approval.
Site visits are organized through the
manufacturer’s representative or dealerships
to see what the furniture looks like in use.
4. You may want to ask the manufacturers to
install a mock-up of a typical workstation
in your offices so staff and management
can conduct evaluation on site without
the pressure of time and personalities of
manufacturer or dealership representatives.
Remember that it is costly to install a mockup and a manufacturer’s or dealership’s
willingness to do this will be based on the size
of the project and number of competitors.
5. Your consultant develops a request
for proposal to send to each dealership
representing specific products to gain their
pricing, conditions and service offerings.
A typical RFP includes a description of the
product needs, including:
• Number of items or workstations
• Standard configurations and types
• Keyed floor plan(s)
• Color and materials specifications
• Electrical requirements
• ADA requirements
• Ergonomic requirements
• Alternatives for cost savings
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• Special working conditions
• Location(s) of project
• Special receiving logistics
• Delivery requirements
• Building owner coordination
• Contractor coordination
• Installation supervision
• Format for pricing presentation
• Pricing guarantees
• Manufacturing of product and materials
guarantees
• Project schedule
• Project contacts for coordination
7. Select the best product, best dealership,
and best price for the initial order and
subsequent orders and servicing.
8. Final specifications are developed and
purchasing proceeds.
9. The dealer confirms the specifications
and installation schedule and verifies that
materials are in stock or production.
10. M
onitor manufacturing to ensure that it
remains on schedule. Coordinate with the
furniture supplier, systems and hardware
suppliers, and installers and contractor for
installation. Oversee the installation and
conduct a final punchlist and tuning of the
furniture and systems at the completion
of installation.
• List of additional services required
• Request for special presentations or mock-ups
• List of general expectations and cautions
• Description of the selection process
• Insurance requirements
• Background of firm and project and
service teams
• Due date and time
• Contact name and phone number for
questions
Summation
Building a new headquarters offers a big
and often once-in-a-lifetime opportunity. You
can provide your staff with an experience that
helps make them successful and satisfied in an
environment where they spend a third of their
lives. And you can create a strong brand image
that celebrates the credit union and makes
members proud.
• Delivery address for submitting the proposal
6. R
eview the responses with your
consultant to ensure the dealerships
have correctly priced the product and
the information they offer is true. One
of the tricks in pricing is to change the
specifications, but mention nothing in the
proposal, just the bottom-line price for
the product. After the bid is awarded, the
error or misunderstanding is explained
as the dealer’s effort to save you money.
This tactic continues to be used by some
dealers because their clients would rather
work out the error than start the process
over or be embarrassed by calling the other
dealers back for a re-bid. Your consultant
should conduct a detailed evaluation of each
offer in a spreadsheet for your review. The
spreadsheet should address each of the
specific requirements of the RFP and be
accompanied by written recommendations.
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08
Going Green
By Brett Conway, AIA, NCARB, LEEDAP, VP/Architecture,
Chief Operating Officer & Director of Sustainable Design, EHS Design
Over the last few years there has been a renewed focus on global
warming, environmental conservation and sustainable building
design. This movement has been characterized as the largest
grass-root movement in U.S. history. The discussion of this issue
has evolved from a small fringe group
Should your credit union
“go green”?
If yes, how will this
strategic decision impact
facilities, brand, products
and services, vendors and
capital, and operating
costs? This is the question
that must be answered by
the executive team and the
board of directors for every
credit union considering
going green.
into the full embrace of “tree huggers”
to Main Street to soccer moms to NASCAR dads to Fortune 500
companies and even Wal-Mart.
Going green is now mainstream and an important cause for members,
staff and the target communities most credit unions serve. As a result
every credit union must evaluate its position and actions about going
green and determine its strategic approach. Many national banks,
community banks and credit unions have engaged this issue already.
In this atmosphere a non-statement or non-decision also involves
implications and in some markets repercussions. Smart businesses
are evaluating the issue of sustainability, in all its forms, and integrating
green business practices into their corporate philosophies and their
next facility projects.
Chapter 8 • Going Green
161
Why has sustainable design and construction
become so important? Primarily this is due to the
significant impact that buildings and construction
have on the environment for 10, 20, 50 and 100
years. Building design and construction play a
significant role in the overall effort for sustainable
living, energy independence and reduction in CO2
levels. Changes to our old ways of designing and
building are promising to yield significant results.
These results are being seen by a number of
financial institutions across the country.
For example, Columbia Credit Union, a best
practice credit union in Vancouver, Wash., recently
deployed a green prototype to its branching
program. Within the first year the first branch
achieved 50 percent lower electrical consumption
compared to other recently constructed branches
in the credit union’s network. Navy Federal Credit
Union designed a Leadership in Energy and
Environmental Design (LEED) Gold call center and
has reported a reduction in annual staff turnover
from 60 percent to 17 percent. Further discussion
and analysis of these examples will be provided in
this chapter.
system of scoring LEED performance provided
the first universally accepted third-party certified
green building program for owners, architects
and building managers. This system forced
the industry, press and public into creating
sustainable buildings.
This certification methodology provides
a reasonably clear path for credit unions to
integrate sustainability into their business
model for development of branches and
headquarters facilities. We will provide a greater
discussion on LEED later in this chapter as it
forms the tangible center of the green building
discussion. The following 10 points from the
pamphlet “Making the Business Case for HighPerformance Green Buildings,” produced by
the U.S. Green Building Council (http://www.
usgbc.org), frames the new paradigm and has
become the rationale for a scalable response
for building developers and owners:
Sources: *Environmental Information Administration
(2008), EIA Annual Energy
**U.S. Geological Survey (2000)
The ongoing discussions around sustainability
are framed by a complicated history with many
intertwined issues and solutions: tree-hugging,
solar energy, wind power, photo voltaic cells,
sod houses, triple-pane windows, energy
independence, capping CO2 emissions and
trading emission credits, sick building syndrome,
bio fuels, super insulated walls, computercontrolled HVAC, smart buildings, Legionnaires
disease, tinted windows, and net zero.
A paradigm shift occurred for sustainable
building practices in 2000 when the LEED Green
Building Rating System 2.0 was established. This
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1. Recovering up-front costs
2. Results in lower operating costs
3. Better buildings equate to better employee
productivity
4. Enhance health and well being
5. Reduce liability
6. Reduce tenants’ costs
7. Increase property value
8. Incentive programs exist
9. Communities will notice the effort
10. Utilizing best practices yields more
predictable results
It is clear from this list that the focus of the
green building program is broad and often
beyond “brick and mortar” into a holistic
approach to sustainable building design.
Throughout this chapter we will focus on
sustainable buildings within this
holistic approach.
What is ‘Going Green’?
While the concept of “going green” is understood
by the public to mean a company’s commitment to
saving the environment and making life better for
all, there are a number of ways and levels at which
each company can participate. Before going green
it is important to first understand what this concept
means, how to make the business decision, the costs
and process changes, the benefits, how to tailor/
calibrate your credit union’s position, the options for
fulfilling, how to gain consensus within the board and
management team, and finally how to deliver.
Sustainability…
“Meet the needs of the present without
compromising the ability of future
generations to meet their own needs.”
A Primer
Sustainability is about providing the best
outcomes for human and natural environments
both now and into the future. One of the most
formidable definitions of sustainable development
is development that “meets the needs of the
present without compromising the ability of future
generations to meet their own needs.” It relates to
the continuity of economic, social, institutional and
environmental aspects of human society, as well as
the non-human environment.
At most, sustainability is intended as a means
of configuring civilization and human activity
so that society, its members and its economies
are able to meet their needs and express their
greatest potential in the present, while preserving
biodiversity and natural ecosystems, and
planning and acting to maintain these ideals over
a very long term. “Going green” is shorthand
for integrating “sustainability” into the best
practices of any endeavor. Sustainable design,
development, investing, energy, communities, and
management practices are just a few variations
that live within the definition of sustainability.
The history of sustainability has its roots in the
Earth Day of 1968, the ecology movement, the oil
embargo of 1973 and the presidency of Jimmy
Carter. This period created a large movement
for environmentalism, wetland protection, water
quality, air quality, concern about pesticide use,
sustainable building, solar design, sustainable
design and energy independence. The U.S.
Environmental Protection Agency (http://
www.epa.gov) was formed in 1970 by Richard
Nixon. Significant elements of this movement
were accepted into the American lifestyle and
consciousness after this event while an equal
portion were marginalized as fringe, counter
culture and not adopted into the U.S. lifestyle.
One example is solar energy. Jimmy Carter and
his administration made significant efforts to
legislate the use of solar energy that were mostly
repealed by subsequent administrations.
reduce energy use and our reliance on foreign
resources. Following this a number of significant
events and revelations further fueled a popular
desire to reduce energy consumption and
protect the planet. These included the first Iraq
war, the Kyoto protocol, green house gases,
Arctic ice pack reductions, landfill issues, rain
forest depletion, CO2 levels, global warming, Al
Gore and the “Inconvenient Truth” (http://www.
climatecrisis.net).
In the design and
building community,
significant efforts
were made to
address its role in
this multidimensional issue.
New products and
methods, unproven
technologies and
unproven claims
began to flood the
professional and
public communities.
The term “green-washing” was even coined to
address the significant quantity of
misrepresentations that permeated the
marketplace. This was an important step in the
education, or reeducation of consumers. It also
promoted the creation of the U.S. Green Building
Council in 1993. The USGBC soon developed the
LEED rating system for buildings, which has
become the recognized standard for green
building. There are other programs and systems
in place that offer recognized credentials, i.e.
EnergyStar™, GreenGlobes™, and BuiltGreen™.
These other programs and LEED will be
discussed later in this chapter.
The adoption of green as a corporate/business
philosophy and the adoption of the LEED system
have been surprisingly fast. Every sector has
adopted, in some manner, this movement. As
awareness grew, penetration, acceptance and
tailoring to all appropriate aspects of the built
environment and corporate governance followed.
A rebirth of the sustainability movement
started in 1990. The impetus was the need to
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water, lowflush toilets, photovoltaic panels, low
volatile organic compounds, suburban sprawl,
wind power, wave power, fly ash, and more are
employed to describe single or collected issues.
“It’s the right thing to do.”
Parker Cann, CUES Member and
Former CEO/President, Columbia CU
Why Go Green?
Sources: *McGraw-Hill Construction, Green Building
SmartMarket Report, 2006
**McGraw-Hill Construction, Greening
of Corporate America, SmartMarket
Report 2007
***McGraw-Hill Construction, Education
Green Building, SmartMarket Report
2007 and Health Care Green Building,
SmartMarket Report, 2007
The evolution of green continued in
government agencies through the development
of green building methodologies into the “model
codes.” These are the building codes used
throughout the country by architects, engineers,
and building officials in designing, permitting,
construction and operation. The International
Building Code and other standard-setting
organizations such as ASHRAE, ANSI, and ICBO,
are all developing new green building standards
or benchmarks for future adoption. Many
federal, state and local governments require new
buildings to be designed to LEED Silver criteria.
In addition, one of the most significant drivers
of the adoption and growth of this movement
is the consumer. The consumer is factoring a
company’s or the product’s green characteristics
into their purchasing decisions.
The Lexicon
The language of sustainable design and going
green has gotten deep and complicated.
Green Building, BuiltGreen, High Performance
Building, Green Guard, FSC, carbon footprint,
zero net gain, EnergyStar™, LEED™, USGBC,
green-washing, 2030 challenge, global warning,
sick building syndrome, triple bottom line
:: people | planet | prosperity, mold spoors,
active and passive solar, alternative fuels, think
globally | act locally, corporate transparency,
recycling, cradle to grave | cradle to cradle, grey
164
How to make the right decision
To explore the idea of making “green”
decisions, it is best to view the process as
one would view any other high-level business
decision. Boards and management teams must
understand the green options, pros and cons,
cost-to-benefit and how each option supports
their business objectives and cultural initiatives.
By doing this, decisions can be made that are
both good business strategies and tactics and
altruistic choices for the good of the community.
Making green decisions requires the entire
management team because each of the options
likely has some bearing on their individual
responsibilities. HR, lending, branch operations,
marketing, facilities, IT, and purchasing can all be
impacted. The board of directors will likely need
education to raise the group’s common level of
understanding to be able to contribute to and
inform the decision making procession.
Seek out expertise to educate the board
and management team. The group will need
to evaluate a variety of different opportunities,
resource requirements and the resulting benefits
to the credit union. Going green will impact credit
union corporate philosophy, brand, membership
preferences, consumer, small business and
community preferences, product and services
and opportunities to implement. It is important
to understand what peer credit unions are doing
as well as other regional business and corporate
interests. Going green is certainly about doing
good, but it is also about elevating the positive
perception of a credit union.
Sustainability and brand:
It speaks to a positive, aggressive,
and enlightened commitment to the
betterment of the lives of members and the
communities in which they live.
Brand
Is Sustainability
… consistent with your corporate culture?
… linked with your community’s values?
… a leadership platform for you within the
community?
… a cause that must be adopted by your
credit union?
Implementing a sustainability position within a
credit union ideally is integrated into the mission
statement and core brand attributes. It should
be consistent with existing core values held
by the credit union and the leadership team. It
may already be present but in a slightly different
form. Many credit unions partner with local
parks departments, river clean-up/restoration
groups, re-treeing campaigns etc., that speak to
a connection and commitment between quality
of the natural environment and the values held by
the membership, community and the credit union.
This positioning already has the core elements for
evolving into a sustainability platform for a credit
union. Take for example, Columbia CU’s public
statement regarding its green position. It already
had a strong commitment to the community it
serves. It leveraged this position multi-fold as it
integrated a strong position on sustainability.
Going green will create….
“…tremendous goodwill among members
and the community. It’s hard to put a
price tag on that…”
Parker Cann
Who is going green—best practices?
Many credit unions have already adopted
green practices and many more are increasing
their level of commitment. This is relatively easy
to do and will have real return. Additionally, there
is a great deal of information and resources
available to facilities, purchasing and marketing
departments to help develop and act on green
initiatives. These can be leveraged into a brand/
service proposition, such as “no deposit slip”
branch environments, “e-statements over paper”
and so on.
Best Practices
82.7%of CUs are implementing energy saving
practices
78.0 % of all CUs recycle
26.7%encourage mass transit for their staff (62.5
percent have access)
93.3%offer electronic statements in lieu of paper
58.1% used less or recycled paper products for
marketing
Who is going green—products?
Developing green products and services is the
most tangible statement that a credit union has
gone green and values and rewards members who
do the same. There are also realistic concerns that
these products not just be a source of reduced
revenue. For example, compare a green office
building with a traditional office building.
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Green Credit Union Products:
5.5% offer preferred HELOC rates for “Green”
renovations.
20% offer preferred rates on hybrid cars
6.7 %
offer preferred rates based on MPG ratings
Green office buildings
• have greater resale value per square foot
• rent at a higher rate
• have lower vacancy rates
• have less “sick building syndrome”
• have significantly lower operating costs
• increase productivity
• provide less employee turnover
How does a credit union capitalize on these
benefits and reward members with better rates?
Insurance rates on green buildings should be
lower. Appraisal rates should be higher. Risk
levels should be lower. These green traits are
increasingly being recognized by appraisers. In
fact Shore Pacific Bank, which links its brand to
sustainable living, considers sustainability in all
real estate lending decisions. Innovation in green
lending products, such as hybrid car loans, will
continue to see significant growth as well.
Who is going green—facilities?
Credit unions and banks are very active
in greening their facilities at different levels,
as suggested by the inset data. The survey
responses indicate there is a lot of room for credit
unions to go green in the future and keep pace
with competitors.
Plenty of Room to Get Greener
58% of FIs are planning a facilities project
32.4% are deploying green branches
14.6% do not have a green branch program
75% of these are considering green initiatives
Historically the first financial institution to
aggressively approach sustainable design was
PNC Bank (http://www.pnc.com), in Pittsburgh.
In 2000 PNC developed one of the first LEEDcertified buildings in the country. PNC even
trademarked the term “Green Branch.”
166
The growth in adoption of LEED as a standard
has been exponential. The trend will likely
continue for the next five years and beyond.
Today going green provides a competitive
differentiator. Within five years it will become
common practice and an expected component
of corporate responsibility for everyone. This is
the same adoption curve experienced by the
Americans with Disabilities Act.
LEED Registered Projects
March 1, 2009, USGBC Web Site
(http://www.usgbc.org)
All Sectors
17,000
Banks
250
Credit Unions
50
Consumer preferences
Consumer awareness of sustainability has
evolved significantly over the last 10 years and
specifically in the last five to integrate “green” into
their decision making processes. This is clearly
what is driving retailers to stress the sustainability
of their products and stores in their marketing.
Savvy consumers are weighing the claims made
by companies and seeking leadership in this
area. They are willing to paying a bit more to
improve the environment with the power of their
purchasing dollar.
The Arthur Group (http://www.arthurgroupinc.
com) and its The Institute for Sustainable
Advantage, has developed the Eco-Brand
Monitor™, the first and only national, broad market
segmentation program that provides quantifiable
data on U.S. consumers’ purchase behavior,
brand perceptions and direct response to “green”
advertising. Understanding how to quantify and
view consumers with a green focus is important
foundational work to address whether and to
what degree green issues motivate consumer
behavior. The Arthur Group has broken the
consumer into seven segments: non-believers,
indifferent, passive concerns, active concerns,
enthusiast and alarmists.
The significant consumer skepticism that
exists about a company’s commitment to green
must be understood and engaged. The Arthur
Group’s research indicates that only 17 percent
of consumers believe their actions are making a
difference. In addition consumers believe only 16
percent of companies are working to address the
real problems of global warning.
The Arthur Group has also surveyed some
existing national brands and scored them
according to consumer’s “green expectations.”
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Surprisingly no businesses currently exist
within the “Exceeding All Expectations” zone.
This may be a result of decades of green-washing
and the natural skepticism the public has of
marketing messages. But will consumers pay
more for green? Their research indicates yes.
Employers
Employers are delving into the benefits of
green buildings and practices to enhance the
productivity and satisfaction of staff. There are
many elements to consider, including increased
air quality and temperature control, high
performance lighting and controllability, access to
views, natural day-lighting, support for alternate
modes of transportation (bus, rail and bike), and a
focus on low or no volatile organic compounds in
the environment. This yields higher productivity,
lower turnover, and a greater degree of employee
loyalty, according to a 1998 report, Greening
the Building and Bottom Line, from the Rocky
Mountain Institute (http://www.rmi.org).
It is often stated in the green research
publications that a 2 percent gain in productivity
can be achieved in designing green facilities.
Conservatively, if we reduce that expectation to a
.5 percent gain in productivity, the employer can
still see significant savings in its highest expense,
staffing. This savings alone typically pays for all
the sustainability features built into a project.
Obviously, quantifying these on a spreadsheet
can be difficult, but staff retention can be
factored in terms of what it costs to acquire, train
and gain full productivity from a new hire. Over 65
percent of professional job seekers will prioritize
a company’s effort towards sustainability as a key
factor in employer choice.
Case Studies: Increasing Productivity
• The main post office in Reno, Nev., a lighting
retrofit with a six-year payback that led to a
6 percent gain in productivity—worth more
than the cost of the retrofit.
• Boeing’s “Green Lights” effort, which reduced
its lighting electricity use by up to 90 percent,
with a two-year payback (a 53 percent return
on investment) and reduced defects.
The importance of this information lies in the
understanding that sustainability is an important
issue and the public is very savvy. If a credit
union desires significant community impact from
making a decision to go green, the follow-through
on the program must be real, thorough, verifiable,
and tangible to the members and community to
yield the greatest results.
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• Hyde Tools’ implementation of a lighting
retrofit with a one-year payback and an
increase in product quality estimated to be
worth $25,000 annually.
• Pennsylvania Power & Light’s upgrade of
the lighting system in a drafting facility that
produced energy savings of 69 percent and
a 13 percent increase in productivity, with a
25 percent decrease in absenteeism.
• Lockheed’s engineering development and
design facility saved nearly $500,000 a
year on energy bills and gained 15 percent
in productivity with a 15 percent drop in
absenteeism when its new facility was
designed to maximize natural lighting.
Columbia CU’s Green Door
• West Bend Mutual Insurance’s new building
yielded a 40 percent reduction in energy
consumption per square foot and a 16 percent
increase in claim-processing productivity.
• Wal-Mart’s new prototype Eco-Mart has
enhanced day-lighting through the use of
skylights in one half of the store. This led to
“significantly higher” sales than in the other half.
• ING’s new headquarters, which used one-tenth
the energy per square foot of its predecessor,
created a positive new image for the bank, and
lowered absenteeism by 15 percent.
Mitigating risk is also an important
consideration. Green buildings reduce the
risk of sick building syndrome due to the
extensive vetting that occurs during the design,
specification and construction phases and the
requirements for LEED certification.
Levels of engagement
It is very true that one size does not fit all when
it comes to adopting sustainability. Each credit
union should calibrate its business decisions
regarding “going green” to the culture of the
credit union, its board, staff, members and
target communities. Some communities are
very focused on green building and may force
a significant response from all businesses. This
is very similar to any other regional or sitespecific design constraint. Designing a facility
next to or within a historical structure mandates
a particular sensitivity and response. A credit
union can elect to engage sustainability as a core
mission statement and use green building as a
soap box demonstrating its commitment to the
environment. Another credit union may elect to
define a series of “best practices” from green
building methodologies and technologies and
deploy them throughout all of its facilities. These
can be publicly announced and displayed to the
membership and the community, if desired. Or a
credit union can elect a quiet path, integrate the
cost savings and smart best practice aspects
driven by green-building, yet not develop a brand
position around these actions.
Anti Green | Going Green | Silent
Repercussions
As with any business decision, there may
be negative and/or positive repercussions
within different groups in the community. This
understanding is important in the green decisionmaking process. A decision to not include
sustainability in the design of your buildings
could be damaging in some communities. It is
not uncommon for credit unions to have already
encountered this regional situation. In the
beginning these more discerning communities
were more liberal towns/cities, often with
universities and along the West coast. To assume
sustainable design is not an important issue in
your community may be an incomplete read on
this issue for consumers.
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Cost | Benefit
The cost of going green has always been
perceived and often reported as a significant
up charge to the baseline costs in designing
and building a facility. Likewise it is frequently
reported that going green does not add costs.
Both characterizations have elements of truth but
both are also incorrect. Understanding the cost
and benefit factors is crucial to the success of
sustainable building initiatives.
A national study has been released by Davis
Langdon (http://www.davislangdon.com), world
class project estimating and management
company. The company analyzed numerous
green and traditional projects across the
United States and in many business sectors to
identify whether green design costs more. Their
conclusion in the 2007 report, “Cost of Green
Revisited,” is that no relationship exists between
green facilities and increased costs.
A paradigm shift needs to occur for facility
owners and design teams to effectively engage
sustainable design. This is cradle to cradle and
lifecycle cost analysis. Cradle to cradle speaks to a
shift in thinking and integrates what the ‘next’ use of
the facility, in this case, may be. So after a product
has one useful life can it be designed/engineered
to have additional useful lives? In America it is often
rare for owners to demand and for design teams to
produce a vision for a facility that extends beyond
a very short view. Rarely will it align with the actual
lifespan of the structure. Designing a headquarters
facility with a 20- to 50-year view is rare. Our view
ahead is often closer to five or ten years. It seems
incredible that most new credit union headquarters
facilities are based on a 10-year plan, with little or
no understanding of how a building will be used for
the next 20 to 50 years.
This short-term perspective significantly impacts
the budgeting, design and construction framework.
One example that particularly impacts this
discussion relates to the approach and equipment
selection for the mechanical system. The American
perspective is often to heavily focus on the “first
cost” of the equipment. Sustainable design requires,
at its core, balancing the first cost and the lifecycle
cost of design approaches and equipment/
component selections. This may result in a higher
first cost for a facility, but it may yield a facility that
has lower operating costs, greater performance,
and increased controllability over the long term. The
owner plays a crucial role in setting the framework of
the cost model of a project, which ultimately drives
the design and material and equipment selections.
A second critical factor is to decide whether
applying sustainable design is an “added
feature” or a “core programmatic requirement.” If
sustainable design is included at the formulation
of a project as a key project parameter like
“provide a board room to accommodate a
12-person board” or “provide high-quality
lighting to ensure a productive and pleasing work
environment,” then sustainable design can be
integrated at low to no cost within the overall
project budget. Sustainable design has a huge
range of application from very modest to very
expensive, just like numerous other systems and
components in a facility. These can be “dialed
up” or “dialed down” in conjunction with other
design parameters and choices made by the
owner and the design team throughout the design
process. Adding sustainability design late in the
design process can be costly and cause it to
be considered a costly alternative that will be
considered a separate line item cost rather than
integrated into the entire budget/facility design.
Think of it this way: Good aesthetics would never
be a line item cost in a facility budget; neither
should be good energy design.
A New Lifecycle Cost Assessment…
Cradle à Cradle
vs.
Cradle à Grave
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Let’s review on a micro level some of the
budget line-items that change as a result of the
greening process and the benefits that can be
woven into the analysis. The scale of the line item
change depends on how green the project is
striving to be and which certifications are being
sought (LEED Bronze, Silver, Gold or Platinum).
• Land acquisition. No change in cost unless
brownfield development (re-using industrial
or commercial facilities) is proposed and
compatible sites available. The due diligence
analysis of a brownfield site may be greater
due to the technical review required.
• Design fees. Architectural fees may increase.
Sustainable design typically requires more
analysis and additional iterations of the design
to achieve maximum benefit. In addition,
the architect often is the sustainable design
coordinator/manager. This management is a
new element added to the normal services that
would typically be provided by the architect.
This expertise may be provided by a green
building consultant. Engineering fees may also
increase. Those that typically are impacted
by green building efforts include mechanical
engineers, electrical engineers, and civil and
landscape architects.
To pursue a LEED-certified project and
receive the benefits and recognition of this
credential requires consulting efforts beyond
those typically undertaken in the design
and construction of commercial facilities.
For example, LEED certification requires
daylight analysis of the windows, skylights
and artificial lighting systems. This analysis
would rarely, if ever, be undertaken for a
branch or even a headquarters facility. This
effort involves additional engineering fees.
All these additional consulting services/fees
are noticeable and required to achieve the
benefits of sustainable design for the owner
and occupant.
• Commissioning. Construction projects
always include a “testing” expense. With
green buildings it is often required and highly
beneficial to add supplemental testing. This
is called “building commissioning.” During
the design and documentation process a
quasi-independent entity reviews the design
drawings to confirm the intent aligned with
the desired results. After construction is
complete and before occupants move in,
additional commissioning is conducted
to review and confirm the products and
systems specified were installed and, most
importantly, that they are functioning as
intended. This commissioning effort has
been described as one of the most important
elements in achieving the energy-saving and
enhanced performance goals sought after by
the owner and design team.
• Certification. An owner can elect to seek
verification of the design and construction
process as meeting or exceeding the
requirements of a certifying entity. If an
owner elects to seek LEED certification or
EnergyStar labeling, there are some specific
costs involved. The actual certification cost
is relatively modest, but the certification
decision impacts other line items like design
fees, commissioning costs, and construction
costs to ensure certification is obtained.
• Energy savings. Reducing energy
consumption is typically one of the most
important singular focal points in designing
green buildings. It is typical to see energy
consumption decreased from 15 percent to
50 percent. In some sophisticated projects
where energy generation is included (wind
turbines, solar panels), owners can see
energy consumption approaching zero.
• Enhanced asset value. It has been clearly
documented that green buildings command
a higher price in the marketplace. The logic
is connected to the demonstrated lower
operating costs of a green building and the
higher lease rates available.
– Higher lease rates. In the competitive
market place for lease space, it has
also been well documented that “green”
lease space for retail and especially for
administrative use commands a higher
lease rate. Oftentimes credit unions build
headquarters with built-in expansion
space meant to provide growth space.
This expansion space can be designed to
be leasable.
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– Lower water and sewer costs. This
category is also a key focal point in green
building. Achieving a 30 percent reduction
in water use is common. Some projects are
being designed to use zero fresh water for
such non-potable uses as irrigation and
flushing toilets by collecting rain water and
storing it in a cistern. We have designed
two such facilities: a branch facility and
a headquarters facility. Water usage and
sewer costs are often linked and similar
savings in sewer costs are realized.
• Rebates/credits/incentives. Many utility
companies, state and federal agencies offer
programs for building owners to undertake
sustainable design. These vary from state to
state and may provide significant benefits
and offsets to owners in evaluating the
available choices. A branch may see from
$4,000 to $7,000 in these one-time credits/
benefits. Some of these measures are
focused on existing buildings as well. This
is to motivate building owners to make
energy upgrades. These include replacing
the lighting systems, replacing the main
air conditioning or heating plant, insulating
the building, and replacing windows. These
measures have significant impact in energy
savings and all significantly improve the
quality of the workplace.
• Brand continuity: In making a commitment
to sustainable building and making this a
core part of the credit union’s brand, we
have seen credit unions able to leverage this
great message through marketing and public
relations, and achieve enhanced recognition
and respect. This positive message coming
from a credit union often translates into
increased member pride. It can elevate the
credit union to be in a leadership role within
its community. While this has been placed
towards the end of this list, it is often the key
factor in making a commitment to design,
build and operate green buildings and to “go
green” as a credit union.
Additional benefits of going green
Health and community
• Improve air, thermal and acoustic
environments
• Enhance occupant comfort and health
• Minimize strain on local infrastructure
• Contribute to overall quality of life
Environmental benefits
• Enhance and protect ecosystems and
biodiversity
• Improve air and water quality
• Reduce solid waste
• Conserve natural resources
• Productivity increases. As discussed
earlier, increases in productivity have been
documented and 2 percent is an oftenmentioned benchmark. While a financial
institution may not be the best type of user to
leverage this factor, it remains an important
issue and benefit. Increased productivity can
often be seen and documented in something
as simple as quantity of sick days taken.
• Increased staff retention (less turnover).
Staff costs are often the largest single line
item in a company’s budget. Staff turnover
is very expensive. Some have identified
replacement cost for a lost employee to
equal three times the salary of the position.
This benefit, increased retention, should be
measured and valued when weighing the
value of going green
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How to ‘Go Green’
3. Educate. Educate your executive team
and board about green. If you work with an
experienced consultant you will discover
a wide range of opportunities, what works
and what does not, and how to gain the
highest LEED certification at the most
reasonable cost. Green building has been
in the press for the last few years and many
questions exist about what it means, what
it yields and why it exists. Through our
work at EHS Design we find that the green
team can be brought up to speed in a twoto four-hours session. This meeting can
produce a wide range of options and solid
understanding about the benefits and pros
and cons of a potential green initiative.
4. Obtain consensus. Board and
executive team consensus on potential
green initiatives is critical to success.
Every design project has opportunities
to integrate green. If the board and
management team provide concise, unified
green goals, the team then can respond
with green solutions that are timely and
cost effective and avoid costly change
orders. The sustainability expert can be
instrumental in creating consensus.
5. Holistic strategy | integrated tactics.
The green goals defined by the board and
executive team become the guidelines
for application of green to a variety of
opportunities. These opportunities include
the following:
• Brand dimension and mission statement
• Competitive positioning
• Products and services
• Community outreach
• Investment policies
• Corporate operations and purchasing:
best practices
• Facility Policies
• Best practices | LEED | EnergyStar
• HR policies
• Corporate transparency
• Global reporting initiative
Main concerns and issues?
The analysis and planning for going green
and the process to fulfill the selected direction
involves many different components within
and outside of architecture. For the greatest
discovery of green opportunities, the process
should be inclusive across the entire credit
union to determine how products, services,
culture and community support can be
integrated into going green. To assist in
understanding the process, we offer the
following example outline including the steps in
the process, all the significant components that
go into the analysis, and complete description
of LEED and other key certification options for
credit unions and their facilities.
Steps
1. Set the stage. Determine if going
green might be of value to your credit
union. Assess your internal capabilities
to analyze the cost-to-benefit of going
green in facilities plus products, services,
culture, brand and community support.
Set a general goal and timetable
for determining the form your green
initiatives might take. Determine who will
be on the initial team and how you will
select the green facilitator.
2. Engage a facilitator. This person
will lead the executive team and the
board through the green recognition
and evaluation process and may be an
essential resource when this expertise
does not live in-house at the credit union.
A growing number of architects and interior
designers have sufficient experience
leading clients through the process. (Be
very careful here; you want a consultant
that also has significant financial institution
experience or you could be missing
many opportunities.) Confirming past
experience and checking references is
recommended. This may be a separate
engineering firm hired in addition to your
architect or you may find a hybrid design/
build firm like Momentum Inc., that can
deliver “green” from strategic planning
to construction and operations of a new
headquarters or branch facility.
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Corporate Accountability: Vancity Credit Union
Accountability Report 2006/7
174
6. Schedule. Define a realistic schedule for
development and implementation of each
green initiative. Provide contingency time
for the innovation efforts required in the
design process as well as efforts the credit
union will need to address as it integrates
sustainability into its business practices
and marketing.
7. Build team. The credit union team may
include the CEO, CFO, COO, VP/marketing,
VP/retail services or delivery services,
VP/human resources, VP/facilities.
Sometimes one or two board members
may be included. Design consultants often
include an architect, interior designers, civil
engineer, mechanical engineer, electrical
engineer, landscape architect, and
structural engineer. The contractor is also
a critical component of the sustainability
team. Where possible, we recommend a
negotiated construction contract approach
or the design/build approach to deliver
green buildings in the most cost-effective
way. The complete team of owner,
contractor, and design professionals yields
the best results for the project when the
group works together from the beginning.
8. Eco-charrette. An eco-charrette is a
sustainable building design workshop.
Many sustainable design professionals
weave this effort into every project. It is
often a half-day to one-day session that is
conducted very early in the design process
after consensus has been reached and the
team has been formed. It brings together the
owner’s representatives, key users, design
professionals, and contractors to the credit
union and consultant team to collectively
develop an agenda for the green priorities
of a project. One of the key documents that
results from the eco-charrette is the “green
basis of design” paper. This document
defines the goals and objectives for a
specific project and identifies the tactics
the team will explore. This is also the point
where certification goals are tested in terms
of cost-to-benefit and woven into the project.
Elements of the LEED process start with
the first drafting of the LEED scorecard,
described later in this chapter.
10. Construction. The key facets of a green
building project range from erosion and
soil control measures, recycling, disposal
and reuse of existing structures and
construction debris, sourcing and tracking
key construction materials like certified
lumber and low-VOC products, to postconstruction commissioning to ensure the
systems have been installed as designed
and that they are operating properly.
11. Certification. Typically the certification
process with LEED or EnergyStar can be
completed at the end of the project after
the occupancy permit is awarded.
Eco-charrete: Columbia CU
9. Iterative design process. The design
process for creating a high-performance
green building relies heavily on an iterative
process structured to allow the design to be
conceived, developed, tested, and evaluated
against the project criteria and the Green
Basis of Design. The iterative steps allow
for key decisions to be tested to ensure the
goals are being reached before significant
design effort has been completed.
12. Brand story and messaging. Telling the
story of the green building effort to the
members, staff and community is often a
key aspect of the decision to go green. A
campaign can be developed that begins
with the purchase of a site and building
announcement, then continues with the
ground breaking, grand opening and
certification announcement. After opening,
operating benefits can be shared with the
community for many years to come such
as “XXCU’s power consumption drops 50
percent,” “employees rate XXCU’s facility
top in comfort and productivity.” Woven
into the story about a building can be any
of the other sustainability components the
credit union has underway, for example
green products and services.
Columbia CU’s Smart car courier vehicle
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Columbia CU’s green brochure
Columbia CU’s eco-tour for green branches
Leadership in Energy and Environmental
Design (LEED™)
Many owners are pursuing certification for their
green buildings, but wondering which certification
is best. The LEED system by far receives the
greatest amount of attention and participation.
Developed by USGBC, it is nearly universally
recognized throughout North America.
Here is the description of LEED provided by
the USGBC.
“LEED is a third-party certification program
and the nationally accepted benchmark for
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the design, construction and operation of high
performance green buildings. LEED gives
building owners and operators the tools they
need to have an immediate and measurable
impact on their buildings’ performance.
LEED promotes a whole-building approach
to sustainability by recognizing performance
in five key areas of human and environmental
health: sustainable site development, water
savings, energy efficiency, materials selection
and indoor environmental quality.”
LEED System = accepted green labeling similar
to uniform food labeling.
In this credentialing system there are four
levels of intensity. Achieving the different levels is
based on a 69 point and credit system.
Certified 26– 32
Silver 33– 38
Gold 39– 51
Platinum
52– 69
Most owners and public entities pursuing LEED
certified facilities are aiming for Silver. Some state
and local governments are mandating silver level
certification for their projects.
The LEED standards undergo major revisions/
evolutions every few years similar to the building
codes. The LEED system has developed different
rating systems for different applications. Some of
these are in the pilot stage and being evaluated
by the design community. The rating systems are
as follows.
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LEED Rating System
EB – Existing buildings | operations and
maintenance: This category addresses existing
buildings that undergo minor renovations and
building owners who wish to examine and revise
existing practices in the facility, such as janitorial
materials/methods or energy monitoring.
NC – New construction: This category is
the largest and applies to newly constructed
facilities and those existing facilities that undergo
significant remodels.
SC – Shell and core: This category addresses
high-rise buildings in which designing the shell
(roof, exterior wall, structure and foundations) and
the core (elevators, bathrooms, lobbies, etc.) are
addressed separately from the tenant spaces.
CI – Corporate interiors: This category
addresses tenant spaces.
ND – Neighborhood development: This category
looks at an entire neighborhood or subdivision.
LEED Scorecard to identify and track
sustainability features of the project
In addition there are the following rating
systems: Homes, HealthCare, Schools, Retail,
Multiple Buildings (campus).
The LEED system is administered through
USGBC and its subsidiaries. A project seeking
to follow the process requires a person trained
in LEED to guide the entire team and ensure
that certification is achieved. The certification
process ideally starts at the very beginning, even
before site selection. Required steps occur during
design and a project cannot achieve the higher
certification levels if obtaining LEED certification
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is integrated at the end of construction. Tools
have been established to assist the team
in tracking design efforts and achieving the
desired certification level. The prime tool is the
LEED Scorecard. This scorecard shows all the
available credits and those the project is seeking.
The credits are then identified as being easy,
moderate and difficult to obtain. Some of the
credits are quite easy to satisfy while others are
difficult and may require significant expense. This
provides the design team and the owner latitude
to meet LEED, improve the environment, while still
hitting project budget goals.
To meet the requirements of each particular
credit the USBGC has established, what
documentation is required and how it is to be
formatted? A series of well-developed Acrobat
PDF templates exist on line. All documentation
is submitted via the Web to LEED Online
(http://leedonline.usgbc.org). This Web-based
environment provides a virtual project team space
for seeing and fulfilling the particular steps and
processes for certification. It is also where the
status of the certification can be seen. This online
area is private and available only to those invited
to participate. The team’s sustainability project
manager, typically the architect, electronically
invites individuals to join and collaborate in
fulfilling the LEED documentation.
After the project is completed, the last of
the credits can be submitted for review and
approval. Often USGBC has some questions
on the credit documentation provided by an
applicant. An e-mail is sent to the LEED project
manager and the team generates a response.
This verification process can take anywhere from
three to nine months. The incredible volume of
projects seeking certification has slowed down
the process.
In addition to the certification process, the
USGBC also is a forum for the
sustainable design community.
This includes owners,
operators, designers, and
contractors. Companies can
join the organization and
become “Firm Members.” This
gives additional access to resources on the Web
site and the ability to use USGBC’s logo on their
own materials. A few credit unions and banks
have become members.
USGBC also has developed an accreditation
process for individuals wishing to obtain a
greater degree of knowledge in doing LEEDcertified buildings. The individuals that meet
the accreditation process through a test can
identity themselves at a LEED AP (accredited
professional). This accreditation is achievable by
anyone associated with the built environment:
architects, engineers, contractors, owners, facility
managers, building operators. As of March 2009,
there are 80,000 LEED APs in the United States.
Case Studies
Two case studies follow of projects
undertaken by credit unions to seek and obtain
LEED certification. Columbia CU started with
the development of a LEED prototype branch
concept. It was rolled out to three branch projects
at the time of this publishing. Columbia CU was
the first financial institution in Washington to
obtain Gold certification and the only LEEDcertified financial institution at any level in Clark
County, its field of membership. This leadership
role for Columbia CU was important and yields
valuable and tangible benefits. Government of
Guam Federal Credit Union’s new 45,000-squarefoot headquarters facility and main branch is
being designed to obtain Silver certification. If it is
reached, it will be the first LEED-certified project
on the island.
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Columbia CU –
Green Branch | Green Features
Vancouver, Wash.,
“We didn’t go green out of the blue.”
• Paint, flooring and finishes emit zero or low
levels of VOCs
• Fabric for workstation panels comes from
100 percent renewable corn based fiber
Charting the type of natural light available in
Vancover, Wash.
CUES Member Colleen Boccia,
SVP/Marketing Columbia CU
Green Building Strategy:
LEED | Gold
• Designed to meet strict green building
standards set by LEED
• Chain of custody forms utilized to ensure
materials come from the correct location and
collected in a sustainable manner
• 75 percent of construction waste was
diverted from landfills
• Porous concrete was used to reduce stormwater runoff
• A rainwater cistern harvests water for landscape
irrigation and non-potable indoor plumbing
• Native landscape materials are used requiring
less frequent irrigation and fertilization
• A pyramid shaped skylight is part of the
design to reduce need for artificial light
• Wood flooring is certified by the Forest
Stewardship Council ensuring it was harvested
in a way that protects the environment
• Vented windows provide natural ventilation
and reduce the need for air conditioning
• Automatic dimmers and compact fluorescent
lighting reduce electrical needs
Rainwater harvesting spout from roof of
Columbia CU’s Grand Central branch
• 100 percent of energy is purchased through
the local “Green Lights” program which
supports the development of renewable energy
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Columbia CU Wins Design Award:
Community Pride Design Award
Excerpts from citation text:
Interior view of Columbia CU’s
omni-directional skylight
Alternative means of transportation
Vancouver, WA – Columbia Credit
Union’s green-built Washougal
branch won a Community Pride
Design Award. The award recognizes
outstanding Clark County building
projects that enhance the livability
of the community and demonstrate
quality development. Project
nominations were evaluated on
a range of criteria including
aesthetics, pedestrian friendliness,
community involvement/enhancement,
environmental sensitivity, historic
character and sustainability.
“Columbia’s Washougal branch
exemplifies the spirit of these awards,”
said committee member Helen Devery.
“The committee was very impressed
by the thoughtful and sustainable
design of the building. The entire
community can truly be proud of this
new branch.”
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Government of Guam
Employees Federal Credit Union –
Headquarters + Branch | Green Features
Maite, Guam
LEED | Silver (in process)
• Designed to meet LEED Silver
certification standards
• Site selected is on previously developed land
with existing infrastructure
• Bicycle racks and showers are provided for
building occupants
• A rainwater cistern harvests water for landscape
irrigation and non-potable indoor plumbing
• A green roof at the drive-through canopy
reduces the island heat effect
• Exterior lighting limits nighttime light pollution
• A central atrium maximizes daylight in the
interior of the building
• Enhanced commissioning activities will ensure
all systems perform to the highest efficiency
• An overall 30 percent energy savings will be
realized due to high efficiency mechanical
and electrical systems
• Automatic dimmers and compact fluorescent
lighting reduce electrical needs
• Permanent exterior sunshades reduce
heat gain while maximizing natural
daylight for occupants
• Paint, flooring and finishes emit zero or low
levels of VOCs
• A comprehensive signage program will inform
visitors of the green features of the building
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EnergyStar
The second most popular green building
program is EnergyStar™
administered by the U.S.
Environmental Protection Agency.
We all have seen EnergyStar
computers and appliances. This
is a similar program for buildings
focused at energy savings and management.
Projects are evaluated through an established
program and results are rated and certified by a
professional engineer. Energy performance is
scored on a 1 to 100 scale. A score of 75 or
greater will achieve the EnergyStar label for the
building. This program is much easier than LEED.
It is not as holistic as LEED, but some say it may
yield better results for the environment in the area
of lowering energy consumption in buildings.
Generally EnergyStar buildings use 35 percent
less energy and emit 35 percent less greenhouse
gases than non-EnergyStar buildings, according
to EPA. More than 400 buildings in Los Angeles
and Houston alone obtained the EnergyStar label
in 2008.
is not required to gain a building permit today
and by itself only has value in the ability to
proclaim, via a third-party certification, that you
are in fact building sustainably. This becomes a
hedge against any green-washing suggestions or
claims. To proclaim your facility is “LEED Gold”
means something. In the consumer’s eyes and
in those of the media these certifications make
a strong statement. The certification process for
the design professional also yields universally
accepted results and benefits the environment.
The design team does not need “to make it up.”
Many companies, institutions and government
agencies are mandating LEED Silver without
certification. This equates to following the
process and quantifying the results without the
bureaucratic aspect of certification. This strategy
has great merits and is more often being utilized
by owners who have obtained LEED certification
on their first project and subsequent roll-outs are
not seeking full certification.
Best Management | Design Practices
The best practice approach involves
developing a green building criteria mandate,
process and result, and integrating them into
a standard course of designing and building a
facility. A surprising number of best practices
used by owners, architects and contractors
today are well-developed and support
sustainable building strategies. Many architects
and contractors are now integrating principles
strongly articulated in the LEED standards in their
practices. This makes sense as long as costs are
not significantly increased to meet these best
practice levels without the owner’s knowledge
and prior acceptance.
Implementing a best practices strategy is not
a certifiable approach and allows less ability
to broadcast the efforts and results into the
community. Certification of sustainable buildings
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Case Studies
Two case studies follow of projects undertaken
by a credit union and a private consulting firm.
Fibre Federal Credit union did not believe LEED
certification for its membership warranted the
additional costs, perceived and real. It elected,
with its design firm and contractor, to employ
numerous best practices throughout the facility
to achieve a high performance building. Weber
Marketing Group elected to relocate its offices
to a LEED Silver building, in which they are
a tenant. It also elected to deploy numerous
design features to achieve a high-performance
office environment. The Weber facility is the only
naturally ventilated modern building in Seattle. It
deploys a sophisticated array of green building
technologies and contemporary design attitudes.
Fibre FCU –
Headquarters | Green Features
Longview, Wash.
• Site selected is previously developed land
with existing infrastructure
• Heat islands are mitigated using light-colored
roofing
• Water use reduced by using low-water-use
plumbing fixtures
• Mechanical/electrical design complies with
energy efficiency standards established by
the ASHRAE codes
• Low-VOC paints and adhesives throughout
• Ozone depletion reduced with zero CFC and
HFC refrigerants
• Air quality monitored with CO2 sensors in
high occupancy area
• Recycling area incorporated in building
• Daylight is maximized by using shallow floor
plates, continuous ribbon windows and
permanent exterior shading device
• Outside views are maximized by placing
open office areas at building perimeter and
providing glazed walls at interior spaces
• A LEED-accredited professional was part of
the design team
184
Weber Marketing Group | Green Features
Seattle
• Tenant improvement constructed in a LEED
Silver building
• 30 percent energy reduction through the use
of a passive cooling system (no AC), natural
ventilation with operable windows, automated
louvers that control solar gain, and a central
courtyard acting as a heat chimney
• Workstations and seating are all
GREENGUARD (http://www.greenguard.org)
certified
Conclusion
In viewing a credit union’s desire to be an
industry leader, create differentiation within
the competitive marketplace and do the right
thing for its members and community, going
green might be the right thing to do. Going
green and adopting sustainable building best
practices make sense. It is a political and
some say, moral responsibility and statement
that can and should be calibrated to meet the
credit union’s desired level of green. But, it is
clearly a business decision as well that should
be considered, evaluated, and integrated into
an institution like any other top-level strategic
position. The adoption of these practices
can be announced and deeply integrated
into your brand position or it can be adopted
quietly. The decision can be positioned as
“smart business,” or it can be positioned
as a statement regarding the earth we are
leaving to our children. Both are true and
vivid. Going green with your facilities expands
the discussion beyond business practices
into the impacts of architecture as a human
resources tool, a morale tool, a brand tool,
and an expression of corporate citizenship
within the local, national and world economy.
The resulting brand equity alone is universally
positive and exponential.
• 98 percent of construction waste diverted
from landfills
• Low-VOC paints and adhesives throughout
• Bamboo floors at reception
• Carpet and rug institute-certified Green Label
Plus carpet (http://www.carpet-rug.org)
• Urea-free formaldehyde door substrates
• High percent of recycled content materials
used throughout
• Low voltage lighting used on daylight sensor
• EnergyStar equipment and appliances used
• Building located within walking distance to
public transit and bike trails
• Green janitorial staff used for building
185
“We believe that our sustainability
leadership sets us apart in the
marketplace as an innovative
organization. And, we hope our green
building efforts will inspire others
to consider sustainable practices
themselves.”
Parker Cann, Former CEO
Columbia CU and a CUES member
“We are seeking LEED® certification
and if successful, we will have the first
certified environmentally-friendly building
on Guam. We are doing this to show our
commitment to protecting our environment
and to pave the way for future developers
who are also committed to going green.
Building green added another 4 percent to
5 percent to our construction cost but we
feel it is money well spent.”
John Arroyo, President /CEO
of Government of Guam EFCU
and a CUES member
Links
186
USGBC
http://www.usgbc.org/
EnergyStar|EPA
http://www.energystar.gov/
Green Globes
http://www.greenglobes.com/
Columbia Credit Union
http://www.columbiacu.org/about_us/green/index.html
GGEFCU
http://www.ggefcu.com/
Weber Marketing Group
http://www.webermarketing.com/
Fibre FCU
http://www.fibrecu.com/
PNC Bank
http://content.pncmc.com/live/pnc/microsite/Green/index.htm
Global Report Initiative
http://www.globalreporting.org/Home
Federal Tax Credits
http://www.energystar.gov/index.cfm?c=products.pr_tax_credits
ShorebankPacific
http://www.eco-bank.com/
The Arthur Group
http://www.arthurgroupinc.com/main.html
“The Cost of Green—
Revisited”
http://www.davislangdon.com/USA/Research/ResearchFinder/2007-TheCost-of-Green-Revisited
Wal-Mart
http://walmartstores.com/Sustainability/
EHS Design, Inc.
http://www.ehs-design.com
Momentum Inc.
http://www.momentumbuilds.com
09
Site Planning and Design
In the past 20 years we have been fortunate to work with over 100
financial institutions and complete analysis of over 2,500 sites from
Florida to Alaska, California to Maine, and in Hawaii and Guam as
well. Our work has included completion of due diligence on many
of these sites for the application of full-service branches. Some of
the conditions are dramatic. In Alaska we must be concerned about
permafrost and foundations, wind direction and snow piling, and
moose attacks; in Florida a very shallow water table and high winds
are the issue; on the West coast it’s seismic issues and natural fires;
and in Guam it’s 250-mile-an-hour wind loads, humidity and the high
cost of materials. Every location has its pros and cons, but the wide
range of site locations, conditions, jurisdictions, cultures, codes and
costs we have experienced gives us a great deal of knowledge upon
which to build future site solutions and this chapter.
Chapter 9 • Site Planning and Design
187
Over the past five years we have seen the
demand for retail sites rise and costs in many
markets increase from $10 to $30 a square foot.
Simultaneously, the cost of construction has risen
between 7 percent and 10 percent every year.
Branch and operations facilities are a necessity.
There is no way to get away from the cost. If
you lease from others, you may save the initial
capital cost, but over the long run you will spend
substantially more for occupancy and have no
appreciated asset to show for it. This reality means
that every site and facility project must deliver the
highest benefit for the lowest cost.
It is no longer easy to find the best retail or
operations locations in most markets. Often they
must be created rather than waiting for the perfect
site to reveal itself. Today we still find many credit
unions that are frustrated by the unavailability at or
near their target locations. Site requirements used
by a Realtor are often very restrictive, causing the
Realtor and credit union to wait for perfection rather
than to create opportunities.
For example, a 35,000- to 40,000-square-foot
property may not exist in the target market, but
there may be a two-acre site that could be split or
developed and the unneeded land sold at a profit.
An eight-acre parcel could be available that a
developer might be interested in if one of the prime
sites would be purchased by a financial institution.
Or, there might be a building that could be
purchased and removed at a low cost, even if the
building is occupied. There are many opportunities.
Today it often takes creativity to find good sites,
particularly in large metropolitan markets.
Sample site plans
Headquarters and branch site plan
Free-standing branch site plan
Free-standing branch site plan
In our strategic branch and operations
occupancy planning work, we analyze markets for
the best placement of branches and locations for
headquarters and operations centers. As the target
markets are defined and delivery systems’ types
and sizes are selected to match market potential,
we recommend a specific market location by street
intersection. We then assist our clients in finding
the most productive and market efficient site. To do
this we develop a set of site criteria. As mentioned
above these must be tight enough to guide the
Realtor while at the same time provide flexibility and
options so opportunities can be recognized. For this
chapter we will assume that a specific site has been
selected, the purchase agreement has been signed
and due diligence has been completed and the
site purchased. We will first look at a few examples
of site plans that function within four different
circumstances and then look at specific site issues
that should be considered in planning.
188
End-cap site plan
Phased site plan
Multiple site options
189
Site issues
problems? Does adjacent land pose a drainage or
slide hazard?
Survey – As part of the due diligence process,
an American Land and Title Association survey
should be acquired to ensure a full understanding
of the site conditions and anything that might
cause the site to underperform. The site planning
will be based on the information in this survey, the
referenced title report and the engineering reports.
Car entries and exits – Efficient ingress/
egress to a piece of property is a primary
consideration, no matter how wonderful the
location. What are the set-back requirements
from a corner for your curb cuts, and do you
have sufficient frontage length to provide the
number of entries and exits you need? Will
the city require you to pay substantial traffic
mitigation fees for the impact your project has on
future traffic volumes and the associated costs
of accommodating this increase (sometimes
in excess of $200,000)? Is the city, county or
state planning any changes in the traffic layout,
direction of traffic flow, roadway widths, no-turn
zones, etc., that will affect your property during
the time you will be at this location?
A successful site plan is composed of many
parts to ensure that a credit union maximizes its
use of the site at the most reasonable price while
ensuring a sound long-term investment. Here is a
brief review of many site planning issues.
Title report – Has the credit union’s attorney
reviewed the title report? Are there any conflicts
with the survey? Are there any exceptions that
need to be removed by a certain date in the due
diligence process? Does the legal description
match that of the survey?
Engineering reports – An important step in
the due diligence process is the contracting for
engineering reports about soil conditions and the
environmental situation. You also may need traffic
mitigation and civil engineering reports to provide
assurance that the site will meet your needs and
as the foundation for site planning.
CC&Rs – If your site is within a planned
unit development, a condominium or part of a
shopping center, you may be subject to a number
of covenants, conditions and restrictions that will
dictate a portion of the site and building design.
CC&Rs may impact building location, height,
exterior design and color, location of parking,
drainage and signage. You will likely need to gain
approval of your site plan from the governing
organization.
Topography – How do the ups and downs of
elevation changes on the proposed site affect its
use? Is it lower than the roadway, which would
make the new building less visible and appear
less important than surrounding structures?
(We try to never develop on a site where the
building is lower than the roadway.) Is the land too
elevated, restricting visibility and street presence?
Will entries and exits be too steep for use when
roads are icy or when waiting to enter or exit?
Would changes in grade be expensive to fill or
reduce parking and make the traffic flow difficult?
Do any topographical advantages bring more
interest to the site, allow easy construction of a
basement, or provide a view? Is the site within a
100-year flood plain, suggesting frequent water
190
Access – Convenient access is among the
financial institution selection factors most often
noted on member surveys. In 2008 our study
on branch convenience found that 38 percent
of new members selected convenience as their
top reason for selecting their PFI. Will this piece
of property provide convenience now and in
the future? After entering the property from the
street, how will traffic flow? How does the traffic
circulate and exit in the parking areas? Can
access be provided through neighbors’ property
with mutual access agreements?
Drive-through – Is the traffic going the right
direction into the drive-through? This seems
obvious, but it slips by many an architect and
facility manager during initial site planning. Some
credit unions have based their purchase of a
piece of property on a reversed drive-through
plan and later realized that the correct traffic flow
into the drive-through makes the property less
efficient and of substantially less value. They can
solve the problem with video kiosks at the drivethrough, as this allows the placement of a video
kiosk on either side of a lane and observation of a
member through video rather than requiring lineof-sight observation from a teller window. All of
this should be understood prior to purchase.
Questions to ask: How is drive-through
stacking arranged? Is there sufficient stacking to
meet everyday requirements and heavy payday
and weekend use when 30 or 40 cars may be
waiting? Is there too much distance between
the drive-through kiosk and the exit, wasting
valuable land? Is drive-through stacking in front
of member parking, making parking unavailable
during heavy drive-through periods? Does
stacking meet code requirements? Is a bypass
lane provided so trucks can exit the drive-through
if there is a height problem with the top of the
truck and the canopy? This is not uncommon and
can create an additional job responsibility for the
branch manager, who must try to direct 30 or 40
cars backing into the street so an oversized truck
can exit without tearing out the underside of the
canopy. How will the Americans With Disabilities
Act affect this site? Where is the handicapped
parking in relationship to the front doors, ATM,
and night deposit?
Parking – Is sufficient space available to
provide the required number of parking stalls to
construct the size of building you need per the
local code or the CC&Rs? Do you realistically
need more parking spaces than required by
the building department? Have you included
the larger stalls necessary to meet ADA
requirements? Has a secure space been created
for armored truck deliveries? Where will your
delivery trucks be parked if you have a branch
network? Where will members find secure parking
for the ATM and night deposit after hours? Has
the architect provided compact parking stall
widths and turnarounds, which may make it
difficult for members driving pickup trucks or
SUVs to conveniently open their doors or make
turns? Our surveys find that most members hate
compact stalls. It is best to provide full-size stalls
in front of your facilities.
Pedestrian access – How easy is it for
pedestrians and people with disabilities to access
your property and building? Do pedestrians need to
cross heavy traffic areas and drive-through stacking
lanes? Is parking being provided across the street,
and will you need to add a crosswalk, signs, or a
stoplight? What will those additions cost?
Dumpsters – Most urban and suburban
planning jurisdictions dictate that trash bin
locations be away from a structure for fire safety.
Many also require that dumpsters or other refuse
containers be completely surrounded with
some type of solid fence or structure to hide
their appearance. Be certain to locate the trash
bin and provide an access route, approved by
your refuse collector, on the schematic and final
plans. An additional liability is theft of confidential
documents. “Dumpster diving” in pursuit of
account, personal identification, and Social
Security numbers is on the rise. All documents
should be shredded.
Required set-backs – What are the set-back
requirements on every side of the property? Do
the set-backs squeeze the buildable site to an
unusable size or configuration? Do set-backs
dictate height restrictions? Set-back distances
and building restrictions vary depending on the
zoning or adjacent property, street right-of-ways,
easements, and city or purchase/development
agreement covenants.
Other jurisdictional requirements –
Determine if the city or county has development
criteria for enhancing new site planning that
may conflict with your goals, such as roadway
widening, bus pull-outs, corner parks, easements,
or alley condemnation for pedestrian zones.
Plantings and green zones – What percentage
of the lot must be free of structures and planted
with shrubs, trees, or grass? How can you take
advantage of these requirements to improve the
appearance of the property, and how can you
reduce the impact on square footage? Would
trade-offs in the city or county code allow you to
concentrate a green zone in one area and improve
parking circulation, or allow you to construct a
larger building if a public plaza is provided? Can
biofiltration swales (shallow trough or pathway to
convey water) and storm water retention ponds be
counted in the total requirement?
Drainage – How will you drain the site, and
will the topography affect building placement?
Does code require a biofiltration swale that
can be worked into the green zone, or will it
reduce available space? Is a water retention
area required for runoff, and how can this be
accommodated above or underground? Are there
any springs on the site? What is the drainage on
adjacent property? Will you need a septic tank
and drain field? Will the ground perk in both
summer and winter?
Wetlands – Are there wetlands on or adjacent
to the property? Has the site been investigated
and recorded? What type of wetland is it? What
are the set-back or buffering requirements
and can they be modified? How much of your
property will be involved? Can the wetland be
used as storm water retention? Can it become a
feature? How will you control mosquitoes? Can
you build the facility you want on the site? How
do the wetlands affect the property value?
191
Trees – Can large trees be saved and worked
into the design of the property? Will the addition
of trees in planting areas eventually obscure your
building and signage, create security problems,
or drip sap onto parked cars?
Soil conditions – Is any area on the property
unstable due to previous fill or other problems
that will dictate a good or bad building location
on the property? Will the water table level allow
a basement? What is the soil’s bearing capacity
and will pilings be necessary? Was mining ever
conducted under the property? Was the soils test
based on the preliminary site plan so sufficient test
holes were dug at the location of the building?
Environmental condition – Has an
environmental assessment been completed on
the site? Has any previous use left hazardous
materials at the site? Has the site been used as
a dump? Have there ever been any buildings on
the site? Was the site once a gas station or repair
shop? Was manufacturing ever conducted on
the site? What is the direction of underground
water flow, and could properties within one or
two miles have contaminated the proposed site?
Does the plan in the environmental survey match
the ALTA-level survey (which aligns the survey to
the title) provided by the surveyor? You may have
lived in the community for 30 years and driven
past this vacant land every day. There couldn’t be
anything on the site or you would have known it,
or would you? It is surprising how many pieces
of property are purchased without completing
an environmental assessment. the cost of not
knowing can be very expensive.
Neighbors – Which community groups may
become involved in the planning and approval
process and potentially cause difficulties?
Would one particular design over another be
more sensitive to their needs and still meet all of
your requirements? Are the neighbors suitable
for a credit union? Is there a dump yard, adult
book store, or problem tavern or bar next door
that could cause problems for your members
and staff, make your building less desirable for
tenants, and reduce your building’s value? Can
you negotiate conditions with the developer
that allows you some control of your neighbors
within the development? Is the facility adjacent
to a positive traffic generator such as a quality,
high-volume supermarket, mall, business, or
employment center? What are the long-term
projections for the neighborhood?
192
Utilities and easements – Do utility or
other easements restrict building in a particular
location? Where are the utilities today and what
will it cost you to connect to them? We have
recently seen water and sewer connection fees
exceeding $75,000 in some growing areas. It is
dangerous to purchase property without current
and ALTA-level surveys. If the easements are not
understood and there are problems, development
costs could be high.
Generator – Most headquarters are planned
with back-up generators on the site. Some
branches that also serve as redundant IT sites
include generators as well. Generators should
be shielded with a surround to reduce potential
vandalism and increase visual appeal.
Going green – Are there green initiatives
that should be integrated into the site planning?
Do you plan to capture and store rainwater and
where and how will it be stored? Will you employ
a solar array somewhere on the site? Will you be
considering low-impact plantings that reduce
water use and maintenance?
Site lines – Are the site lines clear from the
street to the building and the entries? What is the
visual experience of members and others visiting
your branch or headquarters? What will people see
from your site? Is the ATM visible from the street for
security and to increase use? Will staff feel safe on
the property accessing their cars at night?
Region-specific issues – Most regions have
a few unique planning issues. For example, in
Alaska and other snowy regions, planners need
to consider where snow will pile up from the roof,
where snow will be piled from the parking lot
and where snow drifts may occur. Additionally,
in moose country it may be best to ensure that
members and staff have a clear view of the
area outside the exit so they do not surprise a
moose and cause it to attack. This has occurred
at locations across Canada. In Florida planners
must understand how the high water table and
potential high winds may impact the site. In
Guam it may be high winds of 250 miles per hour
and the location of a generator and fuel supply
sufficient to keep things running for months.
Future expansion – Are you planning to
construct a two-story building with a thirdstory addition later, if you need the space? If
the answer is yes, can you add this floor under
current codes, and will you be able to add the
floor in the future? If you are not planning to
expand vertically but horizontally, on which side
of the initial building layout will this occur? Will
you have sufficient parking and other amenities
to allow for this expansion? Do you have
enough property on that side of the building, in
consideration of set-backs and other factors, to
add on the space you may need? Will the addition
of horizontal space require substantial remodeling
to the exterior, interior, and site? Where should
you locate the vault to enhance planning
flexibility?
Security – Will your members, staff, and
tenants be safe on all areas of the site? Are all
site areas visible from the street? Will plantings
be held to between 18 inches to 24 inches high
and trees trimmed no lower than six feet? If areas
are not visible, how will you provide security?
Is lighting sufficient in all areas? Can smokers
and the staff stand outside away from the front
door yet remain sheltered and not exposed
to a potential hostage situation? Are all entry
doors clear of adjacent hiding places such as
dumpsters, columns, bushes, and insets, and are
they clearly observable? Can the night deposit
and ATM be located in a highly visible area? If
you were a bank robber, how easy would it be
to pull up in front of the credit union and wait for
your friend to exit after a robbery, hide around a
corner, or in the bushes next to an ATM or night
deposit, or gain access to the building?
Height and other building restrictions – Do
building height, width, or other restrictions limit
the configuration and size of the building by code,
CC&R, or other governing agreement?
Sun – Does the screen of your ATM face
south, west, or east, picking up sun glare in the
winter afternoons? Where is your ATM located in
relationship to the sun, and how will it reflect off
the screen? Where will the major window walls be
in the building, and how will its placement affect
interior heat gain and glare? How will the sun
affect your drive-through tellers? How will you
accommodate both retail planning and a clear
view into the facility with the energy code?
restrictions, planting requirements, or limitations
on sign or business use that may decrease future
development options? Is there a drainage plan
in place that will allow you to drain directly into
the PUD’s biofiltration swale and storm water
retention pond? Are there parking requirements
beyond those of local jurisdictions? Are there
height restrictions? Do any restrictions dictate
where you can build on the site? Must the
building design be approved by the jurisdiction,
developer, or existing major landowner? All
PUD requirements must be recognized and final
approvals gained before purchasing the property.
Signage – What signage can be applied to
the site? Do the signage regulations allow you
to provide sufficient signage and get your credit
union’s message out? Are particular types of
signage not allowed? Can you translate your
company’s sign and logo into an approved
sign? What type of lighting is allowed? Are
there height, set-back, or material restrictions?
Can you get approval of the signage before
purchasing the property?
Feng shui – Credit unions with Asian
members would be wise to consider a feng
shui analysis of sites prior to purchase. Many
traditional Asians consider feng shui in their
business and personal decisions. If a site
or building does not exhibit good feng shui
planning, some members of Asian descent
may be reluctant to do business with the credit
union. This blend of ancient Chinese wisdom
and practical decision-making is considered
crucial to personal and professional success.
Weather – Does it snow heavily in the winter,
making a steep driveway hard to negotiate? Are
the ATM and furthest drive-through kiosk protected
from the rain? How will you provide safe pedestrian
walkways when the ground is frozen? Where will
you pile snow in winter? Should a portion of the
drive or walkway be heated?
Planned Urban Development requirements –
Is the site within a PUD? How will the covenants
and restrictions affect your use? Are there access
193
Tasks for Site Feasibility Studies
and Planning
The process of developing site feasibility studies
and final site plans can be broken down into a
chronological order of tasks. Keeping in mind
the important planning elements in the previous
section, we can begin the studies and planning.
Shortlist all potential sites by analyzing each
site’s ability to meet the strategic facility plan and
set of site criteria. This will include locating all sites
on a map and then selecting the best site location.
Gain a copy of the plot plan from the real estate
agent or the governing jurisdiction’s records.
Visit the city and gain all available detailed
information concerning:
• Land use regulations
• Police department reports
• Comprehensive plans
• Natural systems reports
• Transportation reports
• Transportation and traffic studies
• Hearing examiner reports concerning
projects of similar type in the area
• Rapid transit reports and projections
• City’s statistical abstracts
• Building codes
• Zoning ordinances and maps
• Special city design requirements
• PUD requirements
Talk to the building department and find out
what studies it will require for preplanning and to
accompany the construction documents when
applying for the building permit. These may include:
• State Environmental Protection Agency
checklist
• Toxic and hazardous materials report
• Asbestos report
• Soils report
• Wetlands report
• Arborist’s study or landscaping layout
• Traffic engineering and mitigation study
• Drainage study
• Utilities study
• Community group reviews
• Design committee review
• ADA evaluation
Closely study the appraisal report to ensure
its accuracy.
Review the title report with the credit union’s
attorney to discover any exceptions and compare
to ALTA survey information.
194
Develop a list of consultants who will be
considered to provide the above engineering
studies and other services. Develop a scope of
work for each of the consultant’s tasks. These are
typically environmental level one, soils, survey,
and civil studies.
Develop a request for engineering proposals,
including the scope of work, asking for the
following information:
• Experience and ability to perform the work
requested
• Schedule for completion
• Experience in the area where the site is located
• Experience with the governing agencies
• Any preliminary knowledge of the existing
area that may help refine the scope prior to
submittal
• The cost of the studies as a fixed amount, or
as a range of service costs based on defined
variables (based on scope of work). Ask for
any additions to the scope of work required
to meet owner, city, and project requirements
along with the associated fees.
• Insurance coverage
• References
Send the request for proposals to the
required consultants.
Review the proposals and select the
consultants. Negotiate fees, schedules, and
expectations and sign the contract. Ensure
each consultant has sufficient liability coverage
to match your needs. You can contract directly
with the engineering consultants, or you can
have their work pass through the architect. If the
engineering consultants are working through your
architect, ask your architect to provide copies of
the consultant’s policies. The architect will require
you to pay an additional 10% to 15% over the
engineer’s billing to cover increased insurance
coverage costs, overhead, and coordination time.
Gain seller’s written permission to access the
site for testing and evaluation. Ensure the credit
union carries sufficient liability insurance to
cover the consultants while on site and working
on the project.
Direct the consultants to proceed with their
studies in an order that will allow the most important
elements to surface before buying subsequent
consulting services that may be unnecessary if the
property is found to be unsuitable. For example,
complete the site survey and preliminary site plan
before soils drilling so the holes will be located
where the building is proposed.
Closely review the site plan to identify potential
problems and then locate the building.
Review the schematic site plan developed by
your architectural consultant with the city to ensure
agreement with the concept and identify any
problems. City building and zoning officials will not
guarantee anything, but they can provide valuable
input. This meeting must be conducted prior to
purchase. Occasionally, a jurisdiction will require
20 to 45 days’ notice before they meet. This is one
of the reasons you need at least 90 days of due
diligence on new property or a building.
Develop a more refined schematic layout,
based on review of the information received from
the city and consultants.
Gain building committee approval of the plan
and inform the board of your progress.
Submit a copy of the plan to the governing
jurisdiction and request a pre-application review
date. This is an important step and will gain direct
input from code officials, fire marshals, traffic
engineers and others involved in the process.
Meet with the governing jurisdiction’s
preplanning group and gain its direction.
Revise the schematic site plan to reflect the
preplanning group’s direction and, if changes
have occurred, present again to the building
committee for approval.
The site plan now becomes a more accurate
prediction of how the site can accommodate
and meet your needs. The building location
reflects the best site positioning based on
code requirements, street frontage, set-backs,
wetlands, parking, drive-through positioning,
soils testing, weather and sun factors, visibility,
security, and retail planning objectives.
Review the refined site plan, traffic study, survey,
and all other required documented studies with the
governing jurisdiction and gain its blessing.
Develop a cost estimate with the assistance
of the consultants, contractors, and city to
determine mitigation costs.
Meet with community groups, design review
boards, or other organizations that may impact
your ability to develop the property. Assess their
reaction to your project.
contractor or design/build contractor to develop
a total construction cost for the site work, utilities,
building shell and core, standard interior finishes,
and special credit union construction, such as
drive-throughs and vaults.
Assemble a complete project report and
budget for presentation to the building committee
for approval. Your strategic facility planning
architectural consultant should assist you in your
presentation. The presentation is best received
when it includes the following:
• Explanation of how the property supports
the strategic facility plan
• Process for establishing the property’s value
• Advantages and disadvantages of the
property
• Brief review of important data gleaned from
city reports, consultants, appraisers, real
estate agents and neighbors
• City plan, plot plan, traffic study, survey, and
site plan
• Elevations and sections of the building and
property
• A rendering of what the building will look like
on the site
• A project schedule
• A complete budget approval request, including
a 10 percent to 15 percent contingency, for
authorization to proceed with the project
through the building committee without further
approvals of the board.
Gain facilities committee or board approval to
purchase the site and complete the project. Be
certain your state or federal regulator is aware of
your project and approves, if required.
Determine if your studies have found unforeseen
costs or problems that reduce the value of the
property. If so, attempt to negotiate a lower price
with the seller before final acceptance.
Complete the purchase transaction. Notify your
staff and members of the purchase and your plans.
Erect a sign on the site notifying the community
of your intentions to become a neighbor.
Determine if you will continue to work with your
current consultant or design/build contractor
through the remainder of the project, and ensure
that the necessary agreements and insurance
policies are in place.
Work with a trusted local or regional general
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Direct the completion of design development
and construction documentation and build your
new facility.
Planning for long-term use
If a site is being purchased to support the
long-range operations occupancy objectives
(five, 10, 15 and 20 years) of your credit union,
you will want to look at how the property will
support the occupancy strategy. You may want
to ask yourself a number of occupancy and
development strategy questions and then study
how the site can support each:
• Is the site just for a headquarters, or will a
branch be included?
• What size of branch will be included and will
a drive-through be needed?
• How big should the drive-through be in terms
of lanes and stacking?
• What are the five-, 10-, 15- and 20-year
occupancy needs?
• How much construction can we afford?
• How can your “green” initiatives be
supported by this site development?
• If we need to build the facility in phases,
what are they?
• Would it be better to expand the building up
or to the side in the future?
• Is the leasing market strong, suggesting that
we build a larger building than needed for the
first phase and lease the space to others?
• What do we do with the site and/or extra
space if the credit union does not grow as
fast as expected or we develop unexpected
efficiencies that reduce our long-term space
needs? How can we best employ or sell
unneeded space or land?
• Are there development trade-offs or
advantages to providing public amenities
that will give us development credits and
gain community accolades?
• If we grow faster than expected, what will
we do with the site and building if we must
leave?
• After completion of our development, is
the site and building highly marketable so
we can make a profit that can be used to
support our next facility evolution?
• What do all these options cost? How do they
affect our operations, and bottom line?
A credit union CEO must wear two hats when
purchasing and developing the credit union’s own
property. Every site must be analyzed from the
perspective of a credit union needing efficient
and productive operations and branch space that
expresses the brand image. Equally important is
the need to look at each site from the standpoint
of a developer motivated by profit. Is the site a
good short- and long-term investment? Will the
facility be an economically sound investment for
the short- and long-term? Is there a better use
for your money in the short term? How can your
financial return from the property be maximized
at the end of your need?
Purchasing a piece of property is a milestone
of success, and it feels good to be the manager in
charge. Many managers have been caught up in
the romance of purchasing land and have hurried
through the purchasing process. Unfortunately,
they often encounter problems that turn apparent
success into failure. Due diligence, working with
highly experienced consultants, and keeping the
strategic facility plan goals constantly in mind will
ensure that the first property purchased is the
right property for your new building.
• Should we consider a parking garage in the
future to allow us to develop more building
on less land?
• Can we gain a shared parking agreement
with a neighbor? (This is often done with
adjacent churches.)
• Can we, or do we want to, use the vacant lot
for car sales?
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10
Site Acquisition
Finding sites has not gotten any easier nor has the condition of
available sites become more conducive to building branches or
headquarters. Competition for great sites remains strong, even in
an economic downturn, but we are finding more opportunities in
terms of owners’ willingness to bargain. In this chapter we present
the players, steps and key issues in purchasing land and buildings
or leasing.
The process of acquiring property initially appears simple and
exciting, but can lead to costly problems if the board, CEO, or
other management staff do not have the right experience or do
not hire qualified consultants. The majority of problems result from
biases about location, lack of rational branching priorities, the lack
of strategic operations occupancy or branch location planning, or
the board’s perception that anybody can buy land successfully. It is
surprising how often problems occur. These problems can include
sites that cannot be developed as wished, poor branch locations
driven by lowest price, and surprises in the future that diminish use
and flexibility.
Chapter 10 • Site Acquisition
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It is difficult to know what you don’t know.
That sounds simplistic, but it is at the root of
most property acquisition failures. Too often, a
real estate agent will be asked for architect and
developer names. The names typically come
from developers and architects who work with
general development of office buildings, malls,
schools, and so on. They have limited knowledge
of the financial industry and the unique qualities
of a credit union. Before you follow this route,
get some high-level advice. It could save your
credit union millions of dollars and gain you the
admiration of the board and staff.
The process of purchasing property or land
always includes some risk. Large financial
institutions may have the advantage of an
experienced facility manager who understands
the dangers and opportunities and the process.
For most credit unions, the risk is greatly reduced
by continuing to work with the strategic branch or
headquarters planning team and hiring skilled site
analysis consultants and agents. Let’s look at the
people involved in the process.
Internal representative
This person represents the credit union in
every aspect of the project and will be the point of
contact for internal and external communications.
They may be the CEO or a senior manager. One
of the reasons credit unions often miss great
opportunities is their inability to keep pace with
real estate opportunities. Often every letter of
intent or purchase and sale agreement needs
board approval that can take a week, a month or
more, causing credit unions to lose opportunities.
There is a solution that is working for our credit
union clients. In branching, give the CEO approval
for a rolling budget for three years of branching.
Allow the CEO to pursue the best opportunities
as they arise. Additionally, give the CEO the
ability to enter into non-binding letters of intent
or purchase and sale agreements that require
final board approval. By doing this the CEO can
respond quickly to opportunities and the board
retains final approval. Although beyond the scope
of this manual, there are specific ways to write the
LOIs and purchase and sale agreements so this
tactic works perfectly.
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Strategic facility
planner/owner’s representative
This individual may have assisted in the
development of your strategic facility plan or
branch strategies, or has been hired as an
owner’s representative/project manager. He or
she should have a full working knowledge of
your strategic facility plan and business goals
and proven expertise in developing facility
locations, design, and construction strategies.
This representative must fully understand
site acquisition, analysis, negotiating, and
construction processes. Involvement is typically
limited to larger construction and remodeling
projects. Some of these services can be
supplied by an architectural or design firm in
lease situations. This person can help translate
the strategic facility plan into the new facility,
direct the analysis of how a piece of land,
building, or lease will meet your credit union’s
short- and long-range needs, provide input for
the real estate offer, write the work letter (which
will determine what the landlord will provide in
terms of construction or alowances), and assist
in negotiations.
Design/build or project manager
Design/build firms provide project management
within their contracting responsibility. Some credit
union managers desire the extra protection of an
independent project manager to represent their
interests by observing the work of the design/build
contractor or general contractor and consultants.
This may be necessary if the capabilities of the
contractors and consultants are unknown, but
hiring a project manager is expensive and, in
many cases, redundant. It is not unusual to pay a
project management firm 4 percent of the project
cost for a service that should be provided by the
contractor. If the facility cost is $5 million, the
fee to the project manager would be $200,000.
The exception is when the project is very large
and the CEO wants someone with significant
training to provide representation due to the
potential large-scale problems. For example, a
CEO building a $35 million headquarters would
be smart to consider a project manager. But
be warned that many project managers have a
preferred contractor or set of contractors that they
are friends with or have known for many years and
will do much of their work for them. Ensure the
architect and contractor or design/build contractor
selection process is open and unbiased.
Building committee members
The building or facilities committee should be
kept informed of all activities. During negotiations, a
small credit union may wish to include one of the key
board members on the committee to assist the CEO
in making on-the-spot decisions. The process of
negotiating a real estate deal is extremely frustrating
if the representing parties do not have the latitude to
make decisions and the ability to respond quickly.
The board should give the representatives the
authority to act within a set of guidelines.
CPA
If your CFO is not experienced or feels
uncomfortable with the details of real estate deals,
you would be well advised to hire a CPA with real
estate knowledge and expertise. Purchasing land is
fairly simple, but land and building purchases and
even leasing can be quite complicated. Analyzing
the real “effective rate” of competitive leases is
a difficult assignment when you consider the
variables of escalating lease rates, triple-net versus
double-net, caps on escalation clauses, and so on.
A knowledgeable broker and CPA can determine
which is the best financial deal and save many
thousands of dollars over the lease period.
Commercial real estate agent
There is typically a distinct difference between
the knowledge and expertise of a residential and
a commercial real estate agent. They work in
different arenas with different sets of problems
and dynamics. CEOs should resist pressure from
board members to use a residential Realtor they
may know. Look for a commercial broker active in
commercial real estate in your target area(s). The
broker should not have any affiliations in the form
of partnerships or representation of properties
with any sites you will consider.
• Do not let your real estate agent set up
situations that cause you or your board to
make decisions under pressure.
• Do not let your agent convince you he or she
knows the property and that it does not need
a full due-diligence evaluation. A good broker
will be willing to study your strategic facility
plan, become part of your site acquisition
team, and express an understanding of your
goals in a written proposal. Ask potential
brokers these questions:
– What is your fee schedule and structure?
– Can you provide a list of recently
negotiated leases that meet the credit
union’s goals?
– What is their leasing process?
– How do they see the market, and what
is the outlook for accommodating your
needs?
– What is your special expertise in land, land
and building, or lease negotiations?
– Do you have references we can call?
– Who/what are the developers/buildings
you currently represent or have
represented in the past?
– How will you ensure an objective view of
the market and real estate opportunities?
– Can you supply a resume of the agent who
will be our contact?
In many communities, Realtors handle
both sides of the commercial deal; in other
words, they represent both the seller and the
purchaser or, more often, the lessor and lessee.
This completely eliminates their ability to be
objective and strongly represent either position.
In reality, they are a third, profiting party to the
arrangement. Be clear and up front about your
fee and loyalty expectations. It is best to find your
own Realtor to represent your side of the deal.
The cost is the same to you and the landlord or
owner in most cases.
• Do not let your agent establish or change
your strategies.
• Never agree to a 30-day due diligence period
on a new piece of property. If you get a great
deal of pressure, there is likely something
wrong. A 90-day due diligence should be the
minimum, even if you need to pay for the last
month or two.
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Architect and design consultants
Professional architectural and design
consultants will assist in initial site analysis,
due diligence completion, building analysis,
space planning, and architectural design. These
consultants should not have any ties with the
owners of the proposed sites. The owner will
immediately suggest you use their consultants for
site analysis. If you agree, how will you know that
the interpretations made by the building owner,
architect, and designer are in your best interest?
In leasing situations, the building owner will
recommend that his or her architect or designer
complete the space layouts, design, and
construction documents. This may seem to be the
least expensive option, but often results in substantial
future costs. Why would a consultant working for a
building owner provide you with space pockets, the
best view, most efficient spaces, and most effective
layouts, and construction and furniture specifications
that would benefit you more than the building owner?
This person’s loyalty is compromised by the interests
of the person paying the bills and providing future
work. Owners will often pay your consultants’ fees if
negotiated in the lease.
Contractor
A contractor can be called in to analyze the cost
of mitigating problems on a site or requirements
needed to prepare the space for construction.
Pricing is sometimes provided by the property
owner, but be wary of low estimates that make the
site look more attractive. It is best to deal directly
with your contractor to ensure realistic pricing.
Engineers
Depending on the site, structural, mechanical,
soils, traffic, electrical, and other engineering
services may be necessary to analyze and
provide remedies for specific site problems.
Engineers can also provide surveying services.
Agency representatives
Each city, county, or state has agency
representatives who you may contact during the
process. During the site study phase, for example,
you may want to contact the traffic engineering
department to discuss any traffic mitigation costs
that may be incurred. You may want to discuss the
potential need for variances with a code official. If
hazardous materials were found in a building to be
demolished, you would need to discuss abatement
procedures to develop cost data.
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State and federal regulatory agencies
Credit union regulators are often consulted
prior to purchasing a large piece of property,
building or major lease, especially when
capital-to-asset ratios or fixed-asset ratios are
a concern. De novo branch location approval
must be obtained from the regulators prior to
opening a branch. Relocation of a branch, if in
the same market, is typically simple, consisting of
notification to the agency, agency approval, and
reporting in the monthly bulletins.
In-house project
management and design staff
Very large credit unions ($8 + billion) may
find efficiency and cost-savings in supporting
an in-house project management and design
staff. Constant changes in the industry and the
resulting organizational re-engineering projects,
staff re-allocations, technology implementation
strategies, and lease relocations have caused
credit unions to analyze the pros and cons of inhouse staff. Some feel it is best to have a small,
“lean and mean” group of facility managers;
very few others add space planners to work on
everyday relocations, while some large banks
employ a full complement of managers, planners,
architects, and engineers.
If you have in-house staff, be sure their
abilities are equal to the consulting market.
Over the last five to 10 years, most banks have
outsourced nearly all of their architectural and
design services. The cyclical nature of projects,
constant changes in branch operations planning
techniques, internal politics, and lack of internal
competition are a few
of the reasons.
A number of additional players are typically
involved in the process. These include credit union
staff who may be involved in analyzing a site to
meet their specific needs, such as ATM locations,
phone centers, and on/off site storage. Community
groups and local inspectors, fire marshals, and
other agency representatives may need to be
included in the process of changing use, reviewing
plans for building a commercial structure next
to a residential area, adding a drive-through or
increasing traffic in the neighborhood.
Purchasing and
Leasing Checklists
Each of the three types of site searches for land,
land and building, and leasing are most easily
managed by completing every task in logical order.
We have created checklists for each.
These are generic checklists developed to
provide a general guide to the process. You or
your consultants must develop your own checklist
before beginning your project, and add or
subtract steps from these lists as necessary.
Purchasing and developing property is an
expression of a credit union’s success and forward
thinking. At the same time the risks are high in terms
of cost, time, potential negative discoveries, and
member and community perceptions based on the
level of successful completion. Establishing the right
consulting and contractor relationships and using a
proven process for site and building evaluation and
design can help ensure the success of your next
branch or headquarters project.
Land Acquisition Checklist
❑❑ Complete your five-year business plan.
❑❑Complete your strategic facility plan (5-, 10-,
and 15-year) and/or branching strategies.
❑❑Gain approval of regulatory agencies for
de novo locations or branch relocations,
as required.
❑❑Locate the geographic areas you are most
interested in pursuing, evaluate their ability
to meet your strategic planning goals, and
select the most logical area(s).
❑❑Determine if any special zoning, or federal,
state, or local codes may prohibit you from
doing business in the way you wish.
❑❑Direct your leasing agent and strategic
facility planning consultant to provide
a long list of possible sites within the
selected area for your review.
❑❑Short-list the sites by determining their
ability to meet your specific requirements.
❑❑Physically tour the sites.
❑❑Determine the best site by analyzing its
ability to meet every one of your needs.
Will the property’s topography and other
features accommodate the proposed
structures? Will it adequately support
parking, a drive-up(s), and efficient traffic
movement? What is the effect of adjacent
property on the value? Is the site a safe
location? Is the site available to meet your
construction schedule? What are the traffic
mitigation costs? What is the real total
cost of the property? A typical checklist of
factors to consider follows:
• Location zoning
• Price
• Own or lease
❑❑Revisit your existing facility to be sure it
cannot be reasonably improved to meet
your needs.
• Availability (schedule of development)
❑❑Assemble your project team for the site
acquisition phase from the list of participants
mentioned earlier in the chapter.
• Jurisdiction covenants
❑❑Negotiate and sign a written agreement
with each of the outside team members
who will be providing contract services.
• Off-site work
❑❑Establish written expectations for each of
the team members.
• Projected traffic counts
❑❑Establish a schedule.
❑❑Communicate cost expectations.
❑❑Meet with the selected broker and SFP
consultant/architect to establish an
understanding of the common goals. This
meeting should produce a written set of
site selection criteria.
• Seller covenants
• Special purchase requirements or
considerations
• Estimated traffic mitigation fees and other
jurisdiction fees
• Projected traffic engineering changes
• Shared parking agreement
• Maximum building size
• Height restrictions
• Adjacent businesses
• Soils test
• ALTA-level survey
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• Surface water handling—retention,
conditioning, and storm drain
• Environmental impact review
• Hazardous materials or other conditions
(old mines, etc.)
• Community attitude
• Wetlands
• Flood zones
• Distance to fire hydrant and station
• Crimes and distance to police station
• Radon testing
• Location and availability of utilities
• Location of utility and other easements
• Due diligence period
• Aesthetics
• Other conditions which may affect free use
❑❑Review the appraisal to ensure the price
is reasonable and there are no obvious
conditions that would make the site
inappropriate.
❑❑Review the short-list of site options with the
building committee to gain their approval of
the best property.
❑❑Strongly negotiate through your real estate
agent, unless negotiations become mired
in detail. Then, you and your team should
negotiate face-to-face with the seller to
finally close the deal.
❑❑Conduct a complete site feasibility study.
The study may include, but is not limited to,
the following:
• Determine if condemnation proceedings
are pending or threatening.
• Complete a metes and bounds and
topography survey at ALTA level.
❑❑Gain approval of a price range and
potential term concessions to prepare for
making an offer.
• Determine if the property is free of
hazardous, toxic, or dangerous materials or
contaminants on or under the site.
❑❑Determine if your findings indicate that a
reduction in price is appropriate to mitigate
previously discovered problems with the
property, and attempt to negotiate the price
or modify other conditions.
• Determine if there are any underground
storage tanks.
❑❑Gain final approval of state or federal
regulators, if required.
❑❑Review the final price with the building
committee to gain agreement, and proceed
if the building committee has authority to
purchase within a cost range. If not, present
the package to the board for approval.
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❑❑Develop an offer that includes all conditions
necessary to ensure that your credit union is
protected, has only one contingency subject
to the committee approval or disapproval of
the purchase without reason, and stipulates
sufficient time to complete site feasibility
studies prior to agreeing to a purchase
(three to six months). [Recently, more credit
unions have been holding final purchase
approval until they receive a building permit, a
technique used by many fast food franchisers
to remove the risk of an unusable piece of
property due to changes in local codes or
community opinions. An outline of a standard
purchase agreement follows this checklist.]
• Determine if there are any underground or
overhead utility easements.
• Conduct soils testing to determine bearing
capacity and potential need for costly
pilings, if portions of the property are on fill
or have mine shafts, or if other excavations
have been completed.
• Complete an environmental survey.
• Complete a wetlands investigation.
❑❑Ask your broker, with your attorney’s
review, to draft the purchase agreement.
• Determine community group concerns that
may affect the project.
❑❑Begin the negotiating process by asking
your agent to submit an offer.
• Complete a traffic study and determine
potential mitigation costs.
• Conduct a civil/drainage engineering report.
• Review a detailed schematic plan with
governing agencies to gain their approval
of the building size and configuration,
parking, signage, and amenities.
• Complete asbestos survey, if there are
existing buildings or a suspected dump.
• Request an ALTA title and insurance policy.
• Ensure removal of binding leases and
contracts.
• Ensure that utilities are operating properly.
• Ensure casualty and liability insurance
coverage is in place.
• Ensure that any costs, expenses, liens,
leases, or other encumbrances will be
removed prior to closing.
❑❑Gain a ballpark cost estimate from a
contractor to construct the facility on the site.
❑❑Assemble a preliminary cost estimate for
the land, site development, shell, core, and
interior finishes of the building.
❑❑Determine all additional costs discovered
by the detailed site feasibility study
and attempt to renegotiate the price in
consideration of the reduced value.
❑❑Develop a total project cost estimate,
including all other project items, such as
fees, furniture, moving, bank equipment,
vaults, phone systems, and so on.
❑❑Present a complete analysis and
recommendation package to the building
committee and the board of directors for
approval. Include the results of all the studies,
proposed site plan with elevations, realistic
projected costs, pros and cons, and a
financial analysis of the project’s effect on
ROA, including a detailed risk assessment.
❑❑Begin the architectural planning process.
The Land Acquisition Checklist includes
the need to complete an environmental
Level 1 analysis and soils analysis. The
environmental Level 1 (or Phase 1) analysis
provides a visual audit of the site, review
of government records, and discussions
with past owners or contractors who have
worked on the site. Hart Crowser, Inc.,
is a well-known engineering firm in the
Northwest and provides environmental
and soils engineering services to a wide
range of clients. Julie K.W. Wukelic, a
principal with Hart Crowser, provided
some examples of the primary elements
that should be included in these reports in
a previous edition of this manual. Access
them at http://www.cues.org/repository/
facilities.pdf
After the survey is completed and a
schematic site plan approved, the soils
study is conducted. The reason for this
order of completion is that the soils
engineer needs to know where to drill or dig
the test holes or pits. A schematic plan will
show the proposed building location. This
saves on the cost of digging random test
holes and ensures that the soils bearing
capacity is known where the building will
be placed.
Again, Wukelic shares an example of a
copyrighted soils engineering report at
http://www.cues.org/repository/facilities.
pdf. Remember that these sample reports
will likely differ significantly from those
prepared for your project.
❑❑Close the deal and take possession of the
property.
❑❑Notify the press and place your “Coming
Soon” signs.
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Purchase and Sale Agreement
The purchase and sale agreement is the primary
written document in the land or land and building
negotiation and acquisition process. Every real
estate deal is different, and every detail should be
covered through the analysis and recommendation
of your broker, strategic facility planner, architect,
design/build contractor, attorney, and in-house
staff. The following details are basic to almost every
purchase and sale agreement:
• Parties defined as the purchaser and seller
• Address and legal description of the property
• Purchase price in dollars, trade property,
or other valuables
• Earnest money amount, where it is to be
held, and the form of earnest money
• Redemption of earnest money conditions
• Inspection of property granted to purchaser
• Warranty that there are no leases or
contracts that have not been presented to
the purchaser, and the seller’s agreement
to indemnify the purchaser
• Seller’s agreement to maintain insurance,
utilities, and operation of property
until purchase
• Seller’s warranties:
• No condemnation proceedings
• No hazardous materials or waste
• N o underground or aboveground
storage tanks
• No asbestos or other
hazardous substances
• No structural or mechanical defects
• Purchaser’s warranty that the credit
union is valid and authorized to do
business within the state
• Contingencies: Purchaser shall have 90,
120, or 180 days, or until building permit is
gained (contingency period), from the date
of mutual acceptance of the agreement
to conduct such studies and review as
purchaser desires. If purchaser decides
to terminate this agreement and provides
seller written notice of termination of this
agreement, then the agreement becomes
null and void and the earnest money shall
be immediately returned to the purchaser.
Said notice is to be served or postmarked
no later than x amount of days from the date
of mutual acceptance of this agreement or
until the building permit is gained. Purchaser
may waive such contingencies as purchaser
decides, subject to the sole discretion of
the purchaser.
• Requirement for ALTA: Purchaser’s
extended coverage policy for the property,
together with copies of all exceptions
• Closing dates, conditions, and location
• Fully executed and acknowledged statutory
warranty deed
• Fully executed real estate excise tax
affidavit, executed by seller
• Purchaser’s title insurance policy
• Bill of sale in a form satisfactory to
purchaser
• Originals of all contracts, leases, liens,
assignments, tenant estoppel certificates,
and other items in the form satisfactory to
the purchaser
• Mutual parking and access through
easement(s) agreements signed by all parties
• Covenants and restrictions that may govern
development and use
• Assignment of any applicable permits or
records
• Balance of the purchase price
• A capital Foreign Investment and Real
Property Tax Act (FIRPTA) affidavit,
executed by seller
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• Apportionment of utility, real estate, and
personal property taxes and assessments,
closing costs responsibility, brokerage, and
real estate commission responsibility
• Date of possession
• Election to terminate agreement if all or a
portion of the property is condemned, prior
to closing
• Notice of additional provisions which may
be attached to the agreement
• Brokerage commission and agency
disclosure, indicating who the real estate
representatives are, the fee amounts, and
the percentages to be paid to each real
estate group
• Notice that any agreement shall be in
writing and shall be personally served or
delivered by mail to the addresses listed at
the end of the document, within a specified
period of time
• Terms of forfeiture of the earnest money by
the purchaser
• Miscellaneous conditions concerning the
agreement’s entirety, succession and
assignments, and application within state law
• Agreement concerning attorney’s fees if
a lawsuit or arbitration proceedings are
pursued by either party
• A statement that timing is of the essence
• Invalidity of void or avoidable provisions
that shall not impair other provisions within
the document
• Seller’s warranty that it has no undisclosed
knowledge of any fact or condition which
would impair fair market valuation of the
property
• Conditions for termination of the agreement
prior to signing
• Signature of seller
• Signature of purchaser
• Signature of agents
• Exhibits
Land and Building
Acquisition Checklist
❑❑Complete your 5-year business plan.
❑❑Complete your strategic facility plan (5-, 10-,
and 15-year) and/or branching strategies.
❑❑Revisit your existing facility to be sure it
cannot be reasonably improved to meet
your short- and long-range needs.
❑❑Assemble your project team for building
and land acquisition. The acquisition team
will include a number of additional players
required by the need to analyze the building
in addition to the land. These will include
structural engineers for seismic and loading
concerns; abatement engineers to determine
if hazardous materials are present; a building
audit completed by a surveying company
or architectural consultant to determine
the condition of the building and any
improvements that will need to be considered
in the price; HVAC engineers to evaluate
the heating and air conditioning system;
an electrical engineer to review the power
quantity and quality; and other consultants
to ensure that you know what you are buying
and what is a fair price.
❑❑Establish written expectations for each of
the team members.
❑❑Negotiate and sign a written agreement
with each of the team members and
consultants who will be used.
❑❑Establish a schedule.
❑❑Communicate cost expectations.
❑❑Meet with the selected broker and SFP
consultant/architect to establish an
understanding of the common goals
expressing how an existing building will need
to function over the period of obligation. The
broker and consultant should understand
your long-range goals so they can determine
if an existing structure will need to be
expanded in the future and what the direct
and indirect costs will be.
❑❑Establish a set of site selection criteria
based on the strategic facility plan.
❑❑Locate the geographic areas you are most
interested in pursuing, evaluate against
your strategic plan, and select the most
logical areas.
205
❑❑Determine if there are any special zoning,
federal, state, or local codes that may
affect your credit union’s ability to conduct
business in that area.
❑❑Direct your real estate agent and SFP
consultant to provide a long list of possible
sites and buildings within the selected area
for your review.
❑❑Short-list the sites and buildings by
determining their ability to meet your
specific requirements as noted in the site
selection criteria.
❑❑Determine the best site and building by
analyzing its ability to meet all of your site
criteria concerning ingress and egress,
building-to-parking and other zoning
ratios, sufficient space for any drivethrough backup, new zoning and coding
requirements that may affect the land and
restrict its use, and so on. Refer to the site
analysis checklist provided above.
• Determine if condemnation proceedings
are pending or threatening.
• Complete a metes and bounds and
topography survey.
• Determine if the property is free of
hazards, toxic or dangerous materials, or
contaminants on or under the site.
storage tanks.
utilities easements.
• Conduct soils testing on areas of the property
where you may need to add floors, expand, or
add a separate structure in the future.
• Complete an environmental study.
• Complete a wetlands survey.
❑❑Determine if your findings indicate that
a reduction in price is appropriate to
mitigate the cost of discovered problems
with the building and property, and
attempt to negotiate the price down or
modify other conditions.
• Determine community group concerns that
may affect the project.
❑❑Gain approval of state or federal regulators,
if required.
• Review a detailed schematic plan with
governing agencies to gain their approval
of any additions you are planning, such as
more space, expansion to a third or fourth
floor, addition of a drive-through, or new
ingress and egress.
❑❑Review the final price with the building
committee to gain agreement, and proceed
if the committee has authority to purchase
within a cost range. If not, present the
package to the board for their approval.
❑❑Ask your broker and attorney to draft the
purchase agreement.
❑❑Develop an offer that includes all conditions
necessary to ensure that you and your
credit union are protected, has only one
contingency subject to the board’s approval
or disapproval of purchase without reason,
and stipulates sufficient time to complete
site feasibility studies prior to agreeing to a
purchase (three to six months) or until the
building permit is gained.
❑❑Strongly negotiate through your agent,
unless negotiations become mired in detail.
Then, you and your team should negotiate
face-to-face with the seller to finally close
the deal.
206
❑❑Conduct a complete site feasibility study.
The study may include, but is not limited to,
the following:
• Complete a traffic study and determine
potential mitigation costs.
• Conduct a civil/drainage engineering report.
• Request an ALTA title insurance policy.
• Ensure removal of any binding leases and
contracts. You should be able to review all
current leases or rental agreements.
• Ensure that removal of any costs,
expenses, liens, or other encumbrances
will be completed prior to closing.
• Ensure that casualty insurance and liability
insurance coverage are in place until
purchase is complete.
• Complete an asbestos survey of the
building and land.
• Complete an ADA study.
• Conduct a seismic study.
• Determine if your credit union business
will produce a change of use and restrict
your occupancy.
• Determine if the existing utilities are
operating properly and are sufficient to
meet your current and expansion needs.
• Conduct a complete audit of the building
to determine how well all of the electrical,
plumbing, and other services work.
• Have the HVAC system analyzed to
determine its projected life and whether
it can meet your heating and cooling
requirements.
• Determine what improvements will be
necessary to the site.
• Determine the useful life of the roof.
• Review life safety requirements. Note: A
complete building audit can be provided by
an experienced architect/engineer or audit
specialist.
❑❑Gain a ballpark cost estimate from a
contractor and other consultants for the
site and building improvements that will be
necessary to bring it up to an acceptable
level of use.
❑❑Assemble a preliminary cost estimate for
the building, land, and occupancy.
❑❑Determine all additional costs discovered
by the detailed site and building feasibility
study, and attempt to renegotiate the price
in consideration of the reduced value.
❑❑Develop a total project cost estimate,
including all other project items such as
fees, furniture, moving, phone system, bank
equipment, and vaults.
❑❑Present a complete analysis and
recommendation package to the building
committee and board of directors for
approval, if required. Include the results
of all the studies, proposed changes,
realistic projected costs, pros and cons, a
financial analysis of the project’s effect on
ROA, and a long-range risk assessment.
If considering the purchase of a new
headquarters, consider how the reduction
in capital will affect your ability to build
branches and support other delivery
systems strategies.
❑❑Close the deal and take possession of the
property and buildings.
Site and Building Evaluations
Many forms are used in the process of locating
and evaluating a site. The author would be happy to
discuss a checklist of these forms over the phone.
When evaluating a building and land for purchase,
engineers and other consultants are required for
environmental and soils analysis inspections. In
addition, if you are purchasing a building, it should be
inspected for any problems that may reduce its value
or indicate your offer should be canceled. Paul Way
is a professional engineer and principal with Schaefer
Engineering in Seattle. He and his associates offer
the following brief review of building and site systems
and components that require inspection and testing
prior to acquisition of an existing building. In addition,
a few common questions regarding each of the
systems and components have been provided.
Building shell condition
In what condition is the building exterior? How old
are the windows? Have they allowed water infiltration
that may have caused deterioration of structural
components? Do the surfaces need refinishing, and
can they be refinished economically?
Building roof condition
Does the roof drain properly? Have past leaks
affected the structure’s ability to support snow
and water loads? What equipment is mounted on
the roof and how easy is it to maintain?
Driveway, walkway and
parking lot condition and design
Does the parking lot drain? Is storm water
retention an issue? What materials were used as
fill under the parking lot? Does the driveway and
parking lot arrangement create traffic hazards?
Grounds condition
How old are the landscape elements? Do they
indicate a generally healthy site? Are they old and
dying? Are they brand-new, possibly indicating
site problems that create a requirement for
frequent replacement?
Surrounding area
Could old or converted gas stations nearby be
on the same underground drainfield? Is there any
problem with surrounding noise? Are there any
undesirable neighbors?
207
Heating, ventilating, and
air-conditioning systems
How old are the systems? What condition
are the heaters in? Are the piping and piping
insulation systems adequate? Is airflow
adequate? How good is air quality? How well do
the heating and cooling systems perform?
Indoor, outdoor, and emergency lighting
Do emergency systems provide adequate exit
lighting? Is the parking lot adequately lit?
Structural integrity
How good is the foundation? In what condition
are structural members? Does the seismic
bracing meet code?
Going green
What is required to enhance the building and
site in terms of supporting the credit union’s
green initiatives? Do the windows need to
be upgraded? The HVAC system replaced?
Insulation added? Lighting changed out and a
rebate gained from the power company?
Fire detection, alarm,
and suppression systems
Do the various systems meet current codes?
Do they serve to adequately reduce the risk of
loss in the event of a fire?
Electrical system design and condition
Does the utility service supply adequate power?
What is the condition of the internal distribution
system? Does the grounding system provide a
low-resistance path to ground for fault and lightning
currents? Are all non-energized conductive objects
properly bonded to earth ground?
Plumbing system design and condition
Do the materials used in the piping systems
present any risk of water contamination? Is there
any evidence of leakage?
Communications systems
design and condition
Are the communication systems and wire
ways adequate?
208
Life safety condition
Is there a sprinkler system and does it meet
code? Are exiting and area separation up to
code? Is the alarm system in good working
order? Are there hazardous materials in the
building? Are there ADA issues?
Leased Facilities
Acquisition Checklist
The lease acquisition process varies in
many ways from the land or land and building
acquisition process. Rather than buying a piece
of property you control, you are pursuing an
agreement with a building owner to occupy their
space, which brings a different angle to the
negotiating process and the hope of developing
a positive, long-term partnership.
There are some advantages to leasing over
purchasing space. You are not tied to a facility
over a long term that may not meet your growth
needs. You can create flexibility in your existing
and surrounding spaces by including space
pockets, first right of refusal, and “give-back”
arrangements in your lease. Additionally, you are
not using your credit union’s capital for a large
operations center space, reserving the funds and
a healthy capital-to-asset ratio to pursue branch
and other delivery systems strategies.
On the downside, you do not control your
environment. The credit union may be negatively
affected by adjacent businesses, and there are
typically more limited opportunities to promote
corporate and service identity unless you take
the major portion of a building. In a multi-tenant
building, you are subject to varying qualities
of management and it is often difficult to
accommodate a drive-through. At the end of your
lease, you may be forced to move from a desired
and member-convenient location. Additionally,
occupancy over six to seven years costs more
than ownership as yearly lease escalations raise
the occupancy cost substantially.
Leases are an excellent answer for small retail
locations in strip malls or in-store branches,
grocery stores, or shopping centers. First
mortgage operations may be best supported in
a geographic area where new homes are being
built. The importance of a particular mortgage
market may last only two or three years until
maturity. A short-term lease with minimum
leasehold investment offers excellent flexibility.
There are hundreds of varying lease situations,
and each lease must be tailored to your specific
needs. Two basic types of leases will concern
most credit unions: office and retail leases.
❑❑Direct the commercial broker and SFP or
architectural consultant to provide a long
list of possible sites, with a brief appraisal
of how each site can meet your needs.
An office lease typically includes all
mechanical and electrical that is below the
dropped ceiling, above the floor surface, and to
the surface of the demising and exterior walls. It
includes a work letter or allowance to construct
interior walls, complete cabling and special
detailing and cabinetry, and provide special
finishes to the negotiated level.
❑❑Short-list the sites to a maximum of four or
five.
A retail lease is usually limited to a raw space,
providing a finished demising wall and HVAC, with
electrical brought to the inside of the demising
walls. The credit union is responsible for internal
improvements and maintenance in a retail lease.
The following is a generic checklist for the leasing
process. Remember to customize the process to
your situation.
Site Acquisition List
for Leased Facilities
❑❑Complete the business plan.
❑❑Complete the strategic facility plan and/or
branching strategies.
❑❑Revisit your existing facility and lease
agreement to be sure that it cannot be
altered or improved to meet your needs.
❑❑Assemble the project team from the players
mentioned in the introduction to this chapter.
❑❑Develop written expectations of all team
members and complete written agreements.
❑❑Establish a detailed schedule.
❑❑Establish your budget goals.
❑❑Establish a set of site selection criteria
based on the strategic facility plan and/or
branching strategies.
❑❑On a map, locate the areas you are most
interested in.
❑❑Integrate the location analysis procedures.
❑❑Note any special operating requirements that
may be affected by the zoning requirements
of federal, state, and local codes.
❑❑Visit the governing jurisdictions and discuss
possible future changes to zoning, codes,
traffic, and other issues that may affect
your business.
❑❑Physically tour each site.
❑❑Gain building committee and/or board
approval of the short-listed locations, if
required.
❑❑If one or more of the sites offer equity
participation, gain an appraisal of the site(s)
and potential partners and talk with your
attorney.
❑❑Gain general lease terms and conditions
from each landlord and compare them on a
spreadsheet.
❑❑Let all the building owners know you are
looking at other facilities to establish a
sense of competition.
❑❑Send a letter of intent, drafted by your
agent and reviewed by your attorney,
to the owners of buildings you are most
interested in pursuing. The letter of intent
is simply to express your interest and
serious consideration of their buildings. The
landlord will try to get you to be specific
about the exact amount of space, the
amount of buildout, and a rental rate that
you are willing to pay. This is not the time
to be specific, only to convey the serious
nature of your inquiry.
❑❑Direct your architect or interior design
consultant to complete a detailed
schematic plan of each site under
consideration to determine the efficiency
of the buildings, how your needs fit within
the space, and how you will be able to
accommodate change and expansion.
The commercial broker and your
consultant should also provide you with
measurements for net rentable, usable,
and gross building space, to be sure the
landlord’s figure matches yours in the
lease.
Landlords typically pay for the development
of “schematic space studies” at a rate of
between 10 cents and 20 cents per square
foot. Even if the landlord will not pay for
these drawings to be completed by your
consultant, it is well worth the small cost
209
Figure 2.1 Work Letter Example
Item Description
Quantity
Unit Cost
Cost per SF
All areas
$12.40/s.f.
$1.50
One LF
$35/linear ft
$3.50
200 lineal ft
$60/linear ft
NA
Interior doors:
3’ 0” by 6’ 8” in. by 1-5/8 in. with matching wood transom to
8’ 6” inc., solid core oak door and trim, stained to tenant’s
specifications. Provide lock sets under 1 master key, butts,
and strike installed.
1 per 280 s.f.
$850 ea.
$3.03
Tenant-approved floor outlet
to accommodate 3 electrical circuits, separated
communications and data cable, and separated alarm cable.
1 per 100 s.f.
$500 ea.
$5.00
Acoustical ceiling:
2 ft. x 4 ft. mineral board in tenant-approved pattern,
including suspension and seismic bracing.
Drywall partitions:
3-1/2 in. metal studs with 5/8 in. gypsum wall board each
side, taped and sanded to underside of 8’ 6” ceiling, w/vinyl
base and 1 prime coat.
Demising partitions
of 3-1/2 in. metal studs, covered with 5/8 in. gypsum
wallboard each side, taped and sanded from slab to slab with
vinyl base and 1 coat of primer paint, containing fulllength
R11 batt insulation.
to determine how well each facility will
meet your needs. Building efficiencies
range widely, from the most efficient at
86–90 percent to the least efficient at
60–70 percent. A 10 percent difference in
efficiency in a 15,000-square-foot space
at a lease rate of $20 per square foot per
year over a 10-year lease period equals a
$300,000 loss that can be easily avoided
by a comparative efficiency analysis.
Do not use the services of the building
owner’s architect or designer. They are
motivated to create designs that sell the
owner’s space and are biased to the benefit
of the building owner. It is also difficult to
compare the efficiencies of a building when
each building’s analysis is completed by a
different firm.
❑❑Develop a work letter or an allowance to
establish a value of the work that will be
required to transform a particular building
owner’s space from its existing condition
to a condition useful to your needs. A work
letter specifies in writing all standard and
special construction, details, finishes,
and special features, such as demising
walls, interior partitions, doors, hardware,
flooring, ceilings, lighting, electrical
service and distribution, computer and
data cabling, HVAC, painting, cabinetry
and shelving, window coverings, signage,
occupancy procedures for “bake out” of
off-gassing materials, and so on. The work
letter becomes part of the lease agreement
and should fully define all of your buildout
expectations.
You may want to contact Jim Haack at
www.momentumbuilds.com for more
information on how to ensure accurate
pricing.
210
Work letters
The work letter, as initially written, has a value
based on a calculation of the cost and number
of elements, such as lock sets, lights, and linear
feet of walls. If possible, each of these elements
should be assigned an item value so that as
planning progresses you can add to or take from
the work letter and maintain a fair accounting.
In other words, if 100 wall outlets are planned
at $35 a piece, and you determine that only 80
are required in your final plan due to an open
office arrangement, you could receive a credit of
$700 in cash, rent abatement, or additional items
from the work letter. Above is an example of how
itemized values can be expressed.
❑❑A tenant improvement (TI) allowance
is often the simplest way to negotiate
improvements. The landlord can simply add
on a cost per square foot, let’s say $25,
and amortize the cost plus financing over a
5-year period. The danger: Is the allowance
sufficient to meet all of your needs? Pricing
from contractors, based on the schematic
plans, is typically the way allowances are
developed. The landlord may wish to gain
an estimate from his/her contractor, but it
is a good idea to also gain an estimate from
your contractor to ensure sufficient funds
are allocated within the lease work letter.
❑❑Analyze each of the responses on a
spreadsheet to determine the “effective
rate” at net present value. Net present value
calculations will render lease variables—such
as free rent, varying lease periods, and multiple
escalation dates—into one “effective rate” that
can be logically compared. This process can
be complicated and should be completed by
the commercial broker and closely scrutinized
by your CFO or consulting CPA.
❑❑Continue negotiating with the landlord
through your broker to gain the best deal.
of a professional review can eliminate
serious problems in the future. Typically, an
experienced space planner or architect can
review the lease in two to three hours.
❑❑Sign a lease. Be certain that the person
signing the agreement for the landlord
controls the property and his/her name
appears on such items as a title report. If
they are representing a corporation, a signed
lease document should include a corporate
resolution stating the board’s approval to
lease the facility to your credit union or giving
the landlord’s representative authorization to
sign for the corporation. If you are subletting
the space, review a copy of the primary lease
to be sure your sublease will not conflict and
force you into a surprise move.
❑❑Ensure that you have created a positive
relationship with your landlord. It is expected
that you and your broker will negotiate
hard to the benefit of your members. While
pursuing the best deal, it is also important
to develop a fair agreement that allows
both sides to win. You are entering into a
relationship that may last from five to ten
years, and it is better to spend the time
together as partners than adversaries.
❑❑Begin final design development and
construction documentation in preparation
for construction to begin.
The Language of Leasing
While leases may vary in length from 5 to 60
pages, most real estate leases follow a standard
form with common language that is important to
understand. The following list presents a number
of common terms and provides a definition and the
wording that will be most beneficial to the tenant.
❑❑Analyze how the lease rate and total lease
package will affect your ROA.
❑❑Present the options, analysis, and
recommendations to the building
committee for approval.
❑❑Present the package to the board of
directors for approval.
❑❑Gain a detailed review of the final lease
agreement by the SFP or architectural
consultant and your attorney. It is not
unusual to find 40 to 50 errors in the first
lease agreement draft, and the small cost
211
Description of the premises
All elements of the premises described
are defined in this section. Square footage
measurements will be stated in net rentable
square feet, based on calculations from the
Building Owners and Managers Association
(BOMA). Ask the landlord to define clearly what is
“common” space, i.e., not directly usable by you
and your staff or under your control. The premises
includes all other areas, such as storage, staff
lunchrooms, shower rooms, lavatories, parking
rights, hours of operation for HVAC, lighting and
occupancy, shared building conference rooms,
use of freight elevators, roof access to check
equipment, and wireways for cabling outside your
premises to microwave locations on the roof.
The lease will normally include a scale drawing
defining the lease location on a floor plan.
Lease term
Term of lease specifies the lease length and the
number and length of options—including space
pocketing, first right of refusal, and giveback
clauses. Create as many term variables as you can
to maximize the flexibility of your new space.
The term and conditions should mirror your
strategic facility plan. The term should also
allow you to abandon your lease if the building
conditions drop below an acceptable quality. If
you are a large enough tenant, you may be able to
negotiate a clause that requires your approval of
any new building owner or tenant.
Occupancy of the space may be at the time
the space is available for you to begin remodeling
in your retail lease, or occupancy may be at
completion of tenant improvements and move-in.
You will be making many decisions and
agreements based on the lease conditions and
dates. If the landlord does not perform, you could
be in serious financial difficulty. Gain and analyze
the landlord’s financial report and attempt to
negotiate clauses that allow you to cancel the
lease if the landlord does not perform to a
particular schedule or level of quality, if they are
providing the construction financing.
212
Tenant improvements
Improvements can cover whatever you negotiate:
building standard walls, doors, carpet and ceiling;
installing carpet, wood detailing, special lighting
and signage; and covering complete facility wiring,
custom cabinetry, free-standing furniture, and even
accessories, plants, and artwork. Of course, rental
rates will reflect the amortized cost and financing of
whatever you put into the improvements, and your
credit union’s access to funds will usually produce
a lower cost of financing and a lower aggregate
occupancy cost.
If the work letter is used to define the type,
quality, and quantity of items, it will become part
of the lease. Full definition of the improvements
in the form of item or unit costs provides the
flexibility to trade or gain credits for unused work
letter items as a project evolves.
A tenant allowance is included in the total lease
rate. It can be provided as a lump sum to a tenant at
completion of particular phases, at move-in, or used
in part for improvements with the remainder paid
directly to the tenant as a bonus or to offset rent.
The work letter or tenant improvement allowance
should be part of the lease document prior to
signing, not decided later. Verbal understandings
are notorious for causing misunderstandings and
costly problems, so clarify everything in writing
before the lease is signed.
Alteration rights
Be certain that you can make alterations to
the space after the initial move-in, typically with
the building owner’s approval. Your needs will
probably change in some form during the lease
period, and you should have the ability to change
the physical environment.
Forced alterations
Initial evaluation of the building should reveal
any code violations or other problems that need
correction, but codes and laws change. For
example, halfway through your lease, the building
may be appraised and alterations required by the
governing jurisdictions (as in the early 1990s with
the ADA). Your lease should specifically state that
you are not responsible to pay for alterations within
your space to meet changing code requirements,
unless your alterations caused the violation.
Rent
The rent is based on rentable square feet, with
“common space” clearly defined. If the common
space exceeds 14 percent in an office building,
there is something wrong with the calculation or
you are leasing in a very inefficient building. Try
to negotiate a lease without an escalation clause.
If there is a clause, it should be capped to some
index, such as the cost of living with a maximum
of 3.5 percent per year. Tying the lease to inflation
or prime interest rates can be dangerous. The
agreement may require that you pay a prorated
share of tax increases on the entire property. Prior
to signing, find out when the last tax assessment
was made and what the assessment was based on.
Is the current tax unreasonably low compared to
market value, which could cause your share of the
taxes to jump dramatically after reassessment? Are
taxes tied to an evaluation based on income? It is
possible to negotiate a cap on your tax burden.
Utilities
Small tenants of 10,000 square feet and less
often find that electrical, water, sewer, garbage,
and HVAC costs are included in their lease
payment, unless they occupy an entire small
building. Larger tenants typically pay their own
electrical. It is wise to include the installation of
your own electric meter in the work letter if you
are in a multi-tenant building so that you can
monitor energy costs.
A problem felt by even the largest tenants is an
8-hour versus a 24-hour operation of facilities. There
are many mid-rise buildings with only one cooling
tower, and high-rise buildings with just two. This
means that a tenant requiring 24-hour cooling for a
computer room will have to pay a premium over the
typical 8-hour operating window included in most
leases. It is not cheap to operate a cooling tower
for half of a high-rise building; costs typically range
between $40 and $90 per hour. Forty-five dollars
an hour times 16 hours per day over a 5-year period
produces an added lease cost of $1,314,000. When
this is discovered too late, tenants move quickly to
negotiate their own rooftop unit at a substantially
higher price than could have been agreed to prior to
signing the lease.
Try not to agree to increases in utility costs
based on the first year. If the building is only
partially occupied, utility rates could be at only
20 percent or 30 percent of what they would be
at 100 percent occupancy. Tie the increases to
actual utility rate increases and apply a cap.
Maintenance and repairs
A single-occupancy lease, a retail lease, and
a multi-floor tenant lease vary dramatically.
Your broker can help you determine what is a
standard practice in your area. As an example, a
credit union as a sole tenant of a small building
could be responsible for the grounds, plantings,
glass replacement, and all interior maintenance,
while a tenant in a multi-tenant building will not
be responsible for taking care of the grounds or
replacing the glass. The landlord should have
the sole responsibility to maintain common
areas, building structure, utilities, HVAC, and
other services within the space in a multi-tenant
building. If the landlord does not maintain or
repair specified items within a tenant’s space in a
timely and professional manner, the tenant should
have the right to repair the items and deduct
reasonable costs from the rent.
Interior maintenance is under constant scrutiny
by employees and members. Prior to signing the
lease, you may want to talk to other tenants in the
building and closely check the references of the
maintenance company. If they do not meet your
requirements, deduct the cost of maintenance
from the lease proposal and contract your
own services. The reality is that most financial
institutions contract their own maintenance due
to high security requirements.
Operating costs
Most leases require the tenant to pay a
prorated share of operating costs. Your broker
should refer to BOMA, which provides a standard
definition for these costs. The exact operating
costs must be clear, and you should only pay
for the actual increases in operating costs,
rather than a fixed percentage per year. The
definition of operating costs should not include
capital improvements to the building, legal fees,
brokerage fees, and other items that bring no
benefit to you. You should have the right to review
the landlord’s books at any time.
Hold harmless clauses
You should not be responsible for the
misconduct or the negligence of the owner’s
company or its employees. Limit your credit
union’s responsibility to only those liabilities that
might be caused by negligence or misconduct of
your employees.
213
Insurance
The building owner carries liability and
property damage insurance for the building shell
and core, operating systems, common areas,
and site. It is wise to get a copy of the landlord’s
insurance policy and updates of that policy at
renewal times.
Your lease will require that you carry liability
insurance for the area you lease and provide a
copy of your insurance policy to the landlord at
renewal times. Additional insurance is available
to cover fire, floods, and other losses, such as
documents and special valuables. Do not rely on
a landlord’s insurance to cover your property or
liability for your employees, guests, and members
because it typically won’t.
Destruction of property
In the event of a fire or earthquake, you may
be partially or totally put out of business at that
location. The lease should specify what steps the
landlord will take to return the space to your use
and the time frame in which the repairs must be
completed. If the repairs cannot be completed
within a reasonable time, you will suffer
substantial loss and should be able to terminate
the agreement. You should not be required to
pay rent during the repair period, except on the
portion of the lease space you can use.
Condemnation
You should have the right to terminate the lease
in case of partial or full condemnation. Partial
condemnation needs to be defined in a way that
expresses how condemnation will affect your
business operation, including loss of space, loss of
access, reduction in ingress and egress, reduced
parking, a hazardous condition(s) adjacent to
occupied space, vacant space that diminishes
property value and image, and so on. If the
condemnation requires modification to your space or
other costs, the lease should specify that the landlord
reimburse you within 30 days of the expense.
Subordination
Try to remove the subordination clause from
a lease agreement. At the minimum, ensure that
you are not required to subordinate your leasehold
interest to the lien of any mortgage holder, unless
the mortgage holder agrees in the lease to not
terminate at foreclosure on the property.
Subletting or assignment
Attempt to gain complete freedom to assign
your lease or sublet, if necessary. We all know
that things change and our environment today
may be very different in five or six years. Your
landlord should not be able to unreasonably
withhold consent. This clause caused a number
of bank headaches during “merger mania” in
the late 1980s and early 1990s. Nearly every
lease that was assigned required the landlord’s
approval to change lease ownership. Some
landlords had been turned down for loans by the
banks that sought to have the leases assigned to
them as the result of a merger. A few landlords
simply did not want to agree, and the delay
resulted in missed conversion dates. Today, credit
unions are just as likely to run into this problem.
Freedom to assign your lease could allow you a
great deal of flexibility in the future, particularly
if you are considering the potential of a merger
during the lease term.
You may also find that advances in technology
or market changes reduce your need for space.
Subletting can offset lease costs and produce
income in an escalating real estate market. The
landlord will often ask that all the profit from
subletting (the difference between your rental rate
and that charged to the subtenant) be given to the
landlord while you retain the lease obligation. If
you agree to give the landlord the profit, then you
should also get the landlord to agree to take the
space back and remove your financial liability.
The lease should include a clause that
provides you with a prorated share of any
payments that the landlord receives to cover
leasehold improvements, relocation expenses,
special tenant-paid items that cannot be
relocated, associated expenses for new business
letterhead, cards, member notifications and other
announcements, and a fixed amount to cover the
cost of disrupting your operation.
214
Notices
This seems like a minor issue, but it becomes
very important when determining if terms of the
lease have been met as agreed. Example: Is there
a condition that you notify the landlord three
months prior to termination? At three months,
you mail the letter at the post office to ensure the
postmark date. Five days later, you learn that the
landlord just received your letter and the notice
condition states that “receipt by landlord” and
not “date of postmark” is the agreed term. You
are now obligated to an additional six months’
rent. There are usually a number of dates for
action and notification by both tenant and
landlord throughout a lease period. The notice
requirements should be clear, indicating the
names of the parties to receive notices, their
addresses, terms for when a notice is considered
received, and methods of delivering the notice
(personally, by U.S. mail, by carrier, or by fax).
Managing the lease
We were once asked to review over 20 branch
leases for a large credit union. The retiring
facility manager had not developed a solid lease
management system and relied on the lessor to
call for lease actions. Seven of the leases had
fallen into month-to-month situations, placing the
credit union in very difficult circumstances. They
could be asked to move out in 30 days. A number
of the leases were coming due and no notices of
renewal or termination had been given prior to the
notice dates. We were able to renegotiate most
of the leases to match the strategic plan, but the
credit union suffered three 30-day demands for
renewal or termination.
Whether a credit union has one lease or 20,
a lease management system should be put in
place. The management system should be tied
to a calendar that indicates key notification dates
for options, early-outs, first right of refusal, giveback, subletting, expansion, and so on.
Often these dates are 90 to 180 days prior
to the action date. If they are missed, the credit
union loses the option. Additionally, this device
can be used to ensure payment schedules,
anniversary dates, maintenance inspection,
and so on. It is relatively easy to set up a lease
monitoring system and the benefits can be
substantial. National and local real estate firms
will manage real estate portfolios to ensure
obligations are met and the terms are worked out
to your advantage.
Negotiating the Lease
I have been involved in hundreds of purchase
and lease negotiations over the last 30 years.
Every facility, client, and landlord has been
different, and each situation has created different
problems, opportunities, and modifications to
the final purchase or lease documents. I offer the
following observations and suggestions:
• Allow enough time for the process.
Finding and purchasing a piece of property
and building a facility can take as little as
one year or as many as five years. As an
example, a $3 billion financial institution
began its site search in 1987 and completed
its 150,000-square-foot facility in 1992.
The property for the credit union’s new
22,000-square-foot branch was first pursued
in 1988, and the branch opened in 1994. The
delays were caused by difficulty in finding
the right piece of property at the right price,
wetlands and hazardous waste concerns,
changes in scope, building officials unfamiliar
with construction types, community
organizations, design review committees,
and so on. If you are going to lease a facility,
start looking at least one to 1½ years prior
to the end of your existing lease term. Every
lease deal is different.
• Familiarize yourself with current pricing
trends. Prices and conditions range widely
from one community to another and are greatly
affected by the market. In the mid-1980s,
Class A office space in downtown Seattle
cost between $25 and $38 per square foot.
In the early 1990s, the same space could be
leased for $14–22 per square foot, due to
overbuilding, huge blocks of space vacated
by banks, and a downturn in the economy. In
2001, the cost of lease space rose to $28–42
per square foot due to fast-expanding hightech companies. In 2004, the same spaces
could be leased for between $18 and $25
per square foot. In Portland, Oreg., Class B
building space could be leased for $16–18
per square foot, while the same space in New
York might have cost $35–45 per square foot.
Developers stop building during economic
slumps, and the process of development and
construction often follows a region’s business
occupancy needs by two to five years.
215
• Retail lease space can vary widely as well.
Five years ago, the average retail rental in a
strong mall ranged between $22 and $25 per
square foot. Today, it ranges between $34
and $48 per square foot.
• The first lease rate that is stated by the
landlord is often 10 –15 percent over what
he/she will actually agree to in the final
negotiations. A commercial broker can help
you understand the rates, and competitive
pricing will usually establish the low-water
mark. At the completion of the strategic
facility planning phase, specific site criteria
should be developed. However, your credit
union is a live entity and subject to change,
so therefore the site evaluation criteria
should be updated regularly to match the
most current and projected needs.
• Find out how the local government works.
Navigating building and zoning regulations
to buy land and construct a building can be
frustrating. In small communities, it is usually
easy to meet with the mayor and city council
representatives to discuss your project and
its benefits to the community, thus gaining
their early support while greasing the
bureaucratic skids. Early review of your plans
with the governing jurisdictions in small and
large communities will usually expose any
problems and let city officials know you wish
to cooperate and gain their assistance. Most
jurisdictions have a list of community groups
that can be contacted and presold early in
the process. This up-front work will save time
and money and reduce frustration.
• Do not use the owner’s architect or
space planners to evaluate lease space,
complete work letters, or provide
construction documentation and project
management. Their interest is in satisfying
the building owner’s needs, not those of your
credit union. Check on independent design
and architectural firms. Ask if they have
worked for or are currently under agreement
with any developers or building owners in
the areas you are considering. Even if you
pay for their services, long-term landlord
relationships, some going back 30 or 40
years, may overshadow their loyal support of
your interests.
• Do not agree verbally to any conditions.
For example, signage approval seems
simple, but catches many tenants by
surprise. An agreement often states that
mutual approval will determine the signage
type. “Mutual” rarely means that the tenant
gets major identification on a building,
effective placement on a kiosk, or parking
signs directing credit union members to
reserved parking stalls, unless it is in writing
and agreed to prior to signing the lease.
• Avoid the trap of leasing land for your new
building. Initially, leasing may seem to be
a low-cost alternative to purchasing land.
However, once the lease term is up, you are
trapped and must accept whatever rate the
landowner wants or abandon a location you
have developed and your members enjoy, give
away a substantial building investment, or try
to relocate your building to another site.
• Craft your lease to match your strategic
facility and marketing plans. Be certain
that you take advantage of space pocketing,
first right of refusal on adjacent space, giveback rights, and options to carry your lease
forward to additional terms. You want to gain
as much control and flexibility as possible
through your lease.
• Take advantage of the reputation financial
institutions have as stable tenants. Your
occupancy is a premium to the landlord. Do
not “personally guarantee” the lease, as many
small building or mall landlords may request.
• Be wary of offers for partial ownership of
a building in exchange for an agreement
to sign a long-term lease at a higher rate,
for more space than you need, or through
a down payment. If you do not acquire
over 51 percent ownership, the landlord still
controls the building, which leaves you with
very little ability to manage your physical
environment.
• Be sure to measure your own space
when leasing. BOMA provides definitions
of gross, rentable, and leasable space.
I have found a 3–5 percent variation in
space measurements to be common.
Miscalculations can cost you thousands of
dollars per year.
• Be sure to put caps on any escalation
clauses to control future costs.
216
• Analysis of any piece of property should
be complete, whether you are buying a
building or leasing a space. If it is not done
professionally, you may find heavy costs
in asbestos containment or abatement,
hazardous materials removal from soils,
seismic upgrade requirements, floor loading
that cannot accommodate your files or safe,
HVAC that only operates 8 hours a day (when
your computers run 24 hours a day), security,
or other problems.
• Try to separate yourself emotionally
during the site visit and negotiation
process. Leave most of the negotiations
and contact to your commercial broker. Try
to make time and competition work to your
benefit.
• Keep everyone informed of the process,
and gain the approval of the building
committee, board of directors, regulators,
and others at the correct times. Keep your
staff and members informed of the process
and the benefits they will gain from the new
facilities you are creating.
• Do not be pushed by your real estate
agent to agree to short due diligence
periods so the deal will close faster. If
you are getting a lot of pressure to close
quickly, there is usually some reason that is
not in your favor. Ninety days should be the
minimum number of days for due diligence
to be completed on a purchase with 30 days
for closing. It is better to walk away from a
deal with high pressure than accept a short
due diligence period and then suffer the
consequences.
• Use lease review services. How can a CEO
or CFO be expected to understand all the ins
and outs of leasing when they do it only once
or twice every five years? Don’t expect the
real estate agent to understand the specific
needs of a financial institution in operations
and branch situations. In addition, don’t expect
your attorneys to know all the ramifications
of lease conditions on branch operations.
Get advice from someone who reviews many
leases a year for financial institutions. The cost
is very low as it only takes a few hours. These
few hours can save you thousands of dollars
over the term of the lease.
Sage advice
My partner, Jack Emick, has been helping
clients through the leasing process for over 30
years. He offers eight rules for leasing.
1.Hire the best land use and real estate
attorney you can find to review your lease
or purchase agreement. Don’t use your
business attorney or in-house counsel
unless real estate is their specialty. If you’re
an attorney, hire another attorney. Brain
surgeons don’t operate on themselves.
2.Hire a nationally networked broker. Make sure
your broker is compatible with your attorney
and your architect. The right broker knows the
market and the listed and unlisted properties.
3.Make sure your broker represents you,
the buyer, exclusively. Request a written
agreement that allows you to terminate your
relationship while protecting the broker’s
fees in a transaction he or she introduced
and you completed, within a specific length
of time.
4.Don’t agree to an unlimited time of
representation.
5.Hire your real estate team (attorney, broker,
architect) early. Implement and adhere
to a schedule and define backup and
contingency plans.
6.Make sure your letter of intent to rent or
purchase contains adequate time for the due
diligence process.
7.Don’t allow the landowner to become your
developer, contractor, or architect unless you
never want to see a full accounting of the cost.
8.Have your accountant review the agreement
after your attorney reviews it. Then have your
attorney review everything.
Purchasing and developing property is an
expression of a credit union’s success and
forward thinking. At the same time the risks are
high in terms of cost, time, potential negative
discoveries and member and community
perceptions based on the level of successful
completion. Establishing the right consulting
and contractor relationships and using a proven
process for site and building evaluation and
design guarantee the success of your next
branch or headquarters project.
217
218
11
Mergers: Market Expansion, Branching
and Headquarters
By Glenn Christensen, Managing Director, CEO Advisory Group LLC
and Paul Seibert, CMC
Do you want your credit union to just survive or to thrive? This is a
question increasingly being asked in credit union boardrooms.
In strategic planning sessions, credit union boards and
management teams are recognizing the worrisome financial trends
and alarming economic shock to our credit union system. As a
result many credit unions are discovering the need to reinvent
themselves as credit unions, because the business models of the
past may not be appropriate for the future.
The goals among credit union boards are common: better service
quality for members, new branches, new technologies, initiatives
focused on younger generations, new products, membership
growth, efficiency, etc.
Unfortunately, for many small and medium-sized credit unions, the
cost and time to implement these initiatives in a meaningful way
is prohibitive. In fact, by the time they complete these projects,
many CUs will have an even greater gap to fill to measure up to key
competitors. These credit unions recognize that they can survive for
many years to come; but is that their mission? Or, is their mission to
build thriving credit unions that meet the needs of their memberships?
Chapter 11 • Mergers: Market Expansion, Branching and Headquarters
219
Larger credit unions are increasingly
recognizing the need to reinvent as well. There
is growing openness among large credit unions
to innovative and collaborative ways to expand
their footprints, increase efficiencies and invest
in technologies. These credit unions are keenly
aware of the importance of efficiency in their
ability to remain relevant. The threat of market
entry by other large and efficient credit unions
and banks causes these credit unions to look for
new ways to strengthen their market presence
and enhance their financial structural advantage.
Mergers have become a highly efficient way for
credit unions of all sizes to achieve their strategic
goals in a timely manner. In our work we often
recommend incorporating the right mergers as part
of credit unions’ strategic branching strategies.
This chapter will look at merger trends, the
economic factors impacting mergers, benefits of
mergers, the role of mergers in market expansion,
and the steps in the merger process.
Merger Trends
The number of mergers within the credit
union movement has maintained a relatively
steady pace for the last couple of decades of
approximately 300 mergers per year, or nearly a
merger per day as shown in the bar chart. As a
result, the number of credit unions has dropped
by two-thirds from its peak of 23,400 in 1968 to
8,176 at the end of 2008 (see table).
Number & Total Assets of Merged Credit Unions
Source: CEO Advisory Group & National Credit
Union Administration
220
The key difference in mergers from a decade
ago is the size of mergers. As shown in the chart,
the total assets of merged credit unions have
grown significantly since 1997. The combined
assets of merged credit unions in 1997 were $745
million. By 2006 the total had grown to $6.2 billion
in merged assets. In 1991 the average asset size
of mergers was $1.8 million, by 2000 the average
had grown to $4.3 million, and at year end 2008
the average peaked at $19.7 million.
Mergers of CUs with over $50 million
Year
Number of
CUs
Average Assets
2000
3
67,040,773
2001
8
144,742,137
2002
5
65,479,906
2003
14
116,555,768
2004
12
84,245,025
2005
11
112,909,854
2006
32
141,030,090
2007
12
139,042,025
2008
13
247,008,866
Increasingly larger credit unions are
acknowledging the benefits of mergers. The
number of acquired credit unions with assets
exceeding $50 million has increased steadily.
Likewise the average assets of these credit
unions have grown, reaching $247 million in 2008.
Conversely, the number of mergers by credit
unions with assets less than $10 million is
decreasing. In 2008 there were 186 mergers of
credit unions below $10 million—half the number
occurring at the beginning of the 1990s.
A few, mostly larger, credit unions have
completed mergers of equals (MOE). Annually,
about a dozen credit unions perform a MOE. In
2008 there were two very large MOEs. First Future
Credit Union ($982 million) merged into $928 million
California Coast Credit Union (www.calcoastcu.
org), San Diego. Additionally, T&C Credit Union
($605 million) and USA Credit Union ($600 million)
merged to form Genisys Credit Union (https://
www.genisyscu.org), Troy, Mich. Many more
MOE conversations have been started among
credit unions. In our experience, they often fail to
materialize due to cultural incompatibility, fear of
change and reluctance to compromise.
Total Number of Credit Unions
Growth Attributed to Largest CUs
Asset & Membership Growth Attributed to Largest CUs
All
CUs
Looking to the future, we can expect the pace
of credit union mergers to continue at the current
clip of about 3 percent per year. At that rate we
would have 6,000 credit unions in 10 years and
3,800 in 25 years. Currently the average credit
union is just over $100 million in assets. Ten and
25 years from now, the average asset size would
be $300 million and $1.5 billion respectively.
This is a very different competitive environment
than credit unions face today. (Read more about
merger trends in Recent Developments in CU
Mergers—see Resources section at the end of
this book for details.)
What are the factors driving consolidation?
A number of forces cause credit unions to
merge. Pending CEO retirements, downsizing
and closing of sponsor companies, regulatory
burdens, product limitations, and lack of growth
all factor into a credit union’s choice to merge.
There is compelling evidence suggesting
mergers will be fueled by the lack of growth within
the industry. As illustrated in Growth Attributed to
Largest CUs, the top 20 percent of credit unions
accounted for 94 percent of asset growth and 100
percent of all member growth the last three years.
The 25 largest credit unions generated 33 percent
and 28 percent of membership growth the last
three and seven years, respectively. This five
percentage point differential may be an indication
that the largest credit unions are becoming even
more dominant in generating member and asset
growth. The top 5 percent of credit unions gained
four-fifths (83 percent) of all new members in the
three-year period ending with 2008.
Top 25
Top
1%
Top
5%
Top
10%
Top
20%
Count
7,968
25
80
398
797
1,594
% Tot Asset
Growth 3 Years
100%
30%
44%
73%
85%
94%
% Tot Asset
Growth 9 Years
100%
25%
40%
69%
82%
92%
% Tot
Members 2008
100%
15%
25%
51%
65%
80%
% Tot Member
Growth 3 Years
100%
33%
51%
83%
91%
100%
% Tot Member
Growth 9 Years
100%
28%
43%
73%
86%
96%
Sources: SNL Financial & CEO Advisory Group
The membership growth situation is quite dire
for a very large segment of credit unions. In the
last five years, 54 percent of credit unions have
had negative membership growth and twothirds (66 percent) have averaged less than 1
percent annual growth as shown in Annualized
Membership Growth by Asset Size.
Smaller credit unions are particularly
struggling. Two-thirds (67 percent) of credit
unions below $10 million in assets have realized
a net loss of members from 2003 to 2008. The
situation isn’t much better for credit unions
between $10 million and $50 million, where
over half (54 percent) experienced negative
membership growth between 2003 and 2008.
221
Annualized Membership Growth by Asset Size
Five-Year Annualized Membership Growth
by Credit Union Asset Size
Percentage of Credit Unions
Annualized
Growth Rate
Total
Less than
0%
54%
$10MM–
<$10 MM
$50MM
67%
54%
$50MM– $100MM–
>
$100MM $500MM $500MM
40%
31%
14%
0%–0.5%
6%
6%
6%
7%
6%
4%
0.5%–1.0%
6%
5%
6%
7%
5%
4%
1.0%–2.5%
12%
9%
14%
14%
18%
15%
2.5%–5.0%
12%
7%
11%
18%
21%
28%
5.0%–10%
8%
4%
7%
11%
15%
25%
10% Plus
3%
2%
2%
4%
4%
8%
100%
100%
100%
100%
100%
100%
Total
Sources: SNL Financial & CEO Advisory Group
In the past five years, only 11 percent of credit
unions haven’t sustained a membership growth
rate exceeding 5 percent annually. The largest
credit unions, those over $500 million in assets,
have consistently higher growth rates. The
majority (61 percent) of this peer group grew over
2.5 percent annually.
Economies of scale also factor into credit
unions’ decisions to consider mergers. Industry
statistics clearly show that operating efficiency
correlates with size. Larger credit unions can
therefore provide members with more competitive
rates and fees.
Benefits of Mergers
Mergers are currently one of the most
significant strategic advantages credit unions
have over banks in that credit unions do pay
multiples of book value to consummate a deal.
From the perspective of a continuing credit
union, a merger with another credit union should,
in most cases, be considered inexpensive and
have negligible impact on capital ratios. Yet
these mergers can provide key branch locations,
easy new market entry, scores of new members,
trained employees and immediate low-cost
penetration into new fields of membership.
Branch expansion is one of the greatest
motives for many of our larger clients to consider
mergers. The exorbitant costs of acquiring land,
building a branch, marketing and staffing until
the branch becomes profitable make branching a
risky but necessary investment for fueling growth.
222
The alternative of partnering with a credit union
through a merger has the potential to provide
great benefits to both credit unions in fulfilling
their branch goals.
Mergers can also accelerate market share
growth that would otherwise take decades to
accomplish. In addition, there can be great wins
for the merged credit unions’ members, staff,
management, and the community, with access
to improved branch networks, new technologies,
career opportunities and charitable giving.
In the last five years a strategic shift has
taken place among many of our largest credit
unions clients. We are now routinely engaged
in conversations among billion dollar credit
unions that are debating the merits of merging
into larger or similar-sized credit unions.
These credit unions recognize banks as their
competition. In many markets, even at $1 billion
in assets, the credit unions do not have the
critical mass to effectively compete. Although
performing well, these credit unions understand
they can significantly alter the competitive
landscape and gain structural advantages by
combining complementary branch networks,
technology innovation, products and personnel.
Planning for Mergers
Your credit union’s merger stance should be
a central element of your strategic business,
branching and succession plans. You can be
sure your credit union will in the near future be
solicited as a party to a merger if it hasn’t already.
Your board should provide clear direction about
how it wishes to uphold its fiduciary responsibility
to the membership by outlining the due diligence
it will undertake in response to merger inquiries.
We are asked by credit unions to speak at their
board planning retreats to discuss merger trends
and assist them in developing their strategies.
These discussions often lead to the development
of merger plans that outline the criteria for merger
targets. Mergers are very much a marketing and
negotiation process.
Why Merge Into Your Credit Union?
In working with boards and management
teams, we help them position themselves to
be attractive merger partners, in many cases
developing a professional merger presentation
portfolio for them.
Courting and negotiating mergers with a credit
union peer is 80 percent emotional and 20 percent
rational. Disliking change, many seek similarities in
their partners be it cultural, financial or structural.
Yet at the same time one must contrast the
differences in key areas, as this becomes the value
proposition of the merger and the key benefits
to stakeholders. The credit union must convey
the exciting vision for the merger—to appeal to
aspirations of something greater. Throughout the
process there must be dignity, appreciation and
an attitude of partnership. We have seen many
mergers dissolve due to the display of the “acquirer
attitude” in merger discussions.
Your credit union will be evaluated on the basis of:
• culture,
• branch network,
• service quality,
• expense structure,
• technology, and
• community and charitable giving.
Positioning Your Credit Union for
Acquisition
Credit unions wishing to be merged should do
so from a position of strength. During strategic
planning sessions we assist boards in evaluating
how they can best position the credit union for
merger. An interesting observation is often made
in these discussions—the long-term goals for
merger are also in the short-term best interest of
the membership.
What makes your credit union an attractive
acquisition candidate?
• Asset size –It seems that the asset threshold
for considering a merger increases every
year. Medium-sized credit unions will only
consider credit unions with over $15-$25
million in assets. Larger credit unions are
only interested in mergers with credit unions
over $50-$100 million.
• Branches –Branch locations and the quality
of the branches often dictate the desirability
of a merger. Many credit unions would
rather build a branch and grow organically
than inherit a branch that is detrimental to
the CU’s image. Credit unions considering
mergers should ensure they maintain quality
facilities that reflect a very positive image.
• Field of membership –The field of
membership and membership base is a key
attraction to a number of credit unions. Often
credit unions are limited in their geographic
and SEG charters. Mergers can assist
these acquiring credit unions with entry
into new markets. A favorable demographic
membership makeup will also enhance the
credit union’s marketability. Credit unions
can improve their appeal by expanding their
fields of membership into adjoining lucrative
markets.
• Growth potential –Credit unions will assess
the growth potential of a prospective
credit union. Does the credit union offer a
market opportunity for further growth or
is the market already saturated? Will the
credit union be able to sell into the existing
membership base and increase cross sales
and product balances?
• Good culture –Cultural compatibility is
a huge issue for both the acquiring and
acquired credit union. The merging credit
union would benefit from instituting sales
and service processes into the credit union
to prepare staff for an eventual transition.
• Strong or retiring management team –One
of the keys to a merger is the ability to
acquire strong talent. However, in many
cases there is a reluctance to change within
the current management team. Therefore, a
transition in management is a very opportune
time for merger discussions.
• Capital –With the pressures being put on
credit union capital, finding a partner that
doesn’t dilute the acquiring credit union’s
capital has taken on new importance.
Furthermore, a credit union with strong
capital provides the credit union with more
options for negotiating member benefits and
executive severance/retention bonuses.
• Asset quality–Credit unions are
apprehensive about taking on a problem
loan or investment portfolio. Conversely,
undervalued assets can make the economics
of the deal much more favorable.
• Favorable contracts –Contracts with long
terms and large penalties can be detrimental
to negotiations. Contract penalties should be
watched closely at the time of renegotiation.
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Solicitation & Negotiation
Once your plans are developed and you’ve
created your presentation portfolio, you’re ready
to court your target credit unions. There is the doit-yourself approach or you can enlist the support
of professionals.
Finding credit unions to merge into
Evaluation and Integration
Once credit unions have negotiated the deal
points in a letter of intent, the credit unions will
be deeply involved in the due diligence process.
In this process the credit union will be assessing
member needs, human resources, financial
information, legal and regulatory compliance,
information technology, and operations.
We are frequently asked to assist credit unions
in helping find the best possible candidates for a
merger and to provide them structured guidance
in selecting among the candidates. The credit
unions enjoy the confidentiality of this process
and the perspective of someone who has been
through the process of developing and managing
a merger RFP. Additionally, these credit unions
are comforted knowing they have a trusted
partner that can assist them with understanding
deal points, member marketing, member vote,
regulatory filings and merger integration.
Courting merger partners
Credit unions use a variety of methods of
soliciting potential merger partners—from
waiting for an RFP to direct mail, phone calls and
networking. Others prefer a “white hat” approach
by working in partnership with a trusted advisor
that confidentially presents their credit union to
the target merger partners.
Planning and implementation will be underway
concurrently for developing merger agreements,
stakeholder communications and regulatory and
member approvals.
These credit unions rely on their advisors to
facilitate the negotiation process and address the
often sensitive issues of executive compensation
and organizational structure. With the immense
workload of mergers these, credit unions also
partner with their advisor to assist with marketing,
due diligence, regulatory filing, and cultural
integration and project planning.
The conversion process will begin as soon
as practically possible. A project manager will
be assigned to ensure all the various processes
are being monitored. Facilities are a key piece
of the integration. Consideration must be given
for strategic integration, signage, headquarters,
branches, sub-leases, improvements, and
retaining and divesting contracts and warranties.
Pitfalls in the Merger Process
Over the past 10 years we have closely
observed why some mergers are successful and
others fail. The down side to a failed merger can
be minimal and limited to just an idea that did not
work out. Or, the down side can be disastrous
for the credit union’s image in the community, the
board members, the staff and the CEO. Let’s look
at a few of the pitfalls.
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Wrong approach to introductions
Many credit union merger discussions are
started on the golf course or at lunch between
CEOs who know each other. This can be a
good approach or a bad approach depending
on the CEOs’ or credit unions’ reputations and
styles. We find that many small credit unions
are intimidated by a call from a large credit
union and fearful about losing control of the
situation to their demise. The first meeting is
the beginning of a long discussion and new
relationship. Like personal introduction, the first
meeting, if not done well, can be the last. A safe
environment must be created where the CEO
approached about a merger feels in control and
not threatened.
Lack of confidentiality
Lack of confidentiality can sink a promising
merger at any point during the process. A board
member may inadvertently share the potential of
a merger to a friend who tells another and then it
gets into the press with a story based on hearsay.
Publicity of a merger at the wrong time without
control of the news can be a disaster that follows
the smaller credit union for many years and
significantly affects member loyalty and credit
union growth.
Unreasonable expectations
Sometimes boards on both sides of a deal
have unreasonable expectations. They may be:
1.We want all our board members on the
board of the larger credit union.
2.Our name will not change.
3.Employees must only come from this or that
ethnic or religious background.
4.The only compensation for the CEO will be a
job in the future; we do not see why we need
to fund his or her retirement program.
No shared vision
Some credit unions approach a potential
merger partner with a vision of how their
combined credit unions operate when merged.
Boards may embrace this or they may feel a
lack of long-term benefits to members. Equally
important is the emotional value. Are we merging
to just increase efficiency and be more profitable
or do we believe in an exciting long-range vision
that amplifies the great work we have done over
many years and makes our credit union and the
service we provide to members substantially
better? Are we excited and emotionally moved by
the potential benefits of the merger?
Surprises
Surprises are great for birthdays and in a good
movie, but not appreciated during the merger
process. Such surprises as a risky loan portfolio,
a long contract remaining on the IT system,
substantial deferred maintenance, outstanding
lawsuits, high executive compensations and
negotiating points brought up late in the process
can kill a deal. The merger process must
methodically discover and address all issues
as early as possible. For the board this means
resolving all negotiating point issues early on and
establishing clear expectations, so both boards
have a clear understanding of each other’s
positions and concerns and can address them in
a timely manner without surprises.
Poor information management
Poor information management has sunk a few
merger deals. Often, it is not that a credit union is
trying to pull something over on the community;
rather incorrect information is published or it is
published prematurely before a decision has
been made. Confidentiality and complete board
and senior management team buy-in into the
seriousness of information management is the
only way to control public spin. If information is
handled well throughout the process, the merger
becomes a positive for all involved.
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Merger Summary
While most of the headlines focus on
credit union mergers as a negative or simple
consolidation of the industry, we believe
M&A competency will become a competitive
edge differentiating credit union success.
To scale rapidly into new markets for branch
infill strategies, credit unions will increasingly
consider mergers of credit unions and banks.
Furthermore we believe it will become common
for credit unions to purchase bank branches and
associated customers—and even other credit
union branches, as they spin off non-strategic
branches (and member groups) to other credit
unions. Additionally, acquisitions of check
cashers and payday lenders, insurance agencies,
mortgage banks and investment brokerages will
become even more viable ways to accelerate
growth and gain critical mass.
Mergers and acquisitions will become an
increasingly important part of the credit union
landscape in the years ahead. Credit unions
would be wise to develop sound merger
strategies, game plans and policies for responses
to merger solicitations.
For a detailed look at each step in the merger
process, consider CUES Complete Guide to
Mergers—Second Edition. See Resources
section at the end of this book for details.
Impact of Mergers on Branching
Mergers can have a positive or negative impact
on branch and market efficiency. After a merger,
credit unions with multiple branches often need
to re-engineer the joint branch network to ensure
high market efficiency and productivity for the
future. A few examples of situations that require
market and branch reassessment and alignment
with target markets are:
• If two credit unions with overlapping
branch convenience radii (branches too
close together) merge, there will be market
inefficiency that may require closing and
relocating of one or more branches.
• Two credit unions may merge that have
inefficient existing branch networks that
need to be re-engineered to increase ROI.
• Some merging credit unions must combine
different business or cultural objectives,
such as mortgage or small business lending
emphasis, or SEG vs. educational, regional,
organizational or religious affinities.
• Two credit unions that operate remote
branches may need to concentrate
resources in one contiguous market to
remain competitive.
A large credit union looking for partners should
understand the branching network of each credit
union it approaches and understand the potential
impact of a merged credit union’s branches and
headquarters facility. How will the additional
branches provide convenience to new target
markets? How will the addition of these new
branches impact our existing branches in terms
of deposits, loans and growth? Will some of our
existing branches or theirs need to be closed or
relocated? What is the cost impact and when
should the re-engineering take place?
In addition to potential location redundancy, look
at the brand image of the acquired branches. How
can you change the member and staff experience
and brand image of the acquired branches to
promote your brand or a new combined brand
and what is the cost? In addition to the member
experience and image, acquired branches may not
be able to support your level of delivery in terms of
products and services. Consider whether there is
enough space in the branches to support mortgage
and investment officers and promote small business
banking, for example.
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Impact of Mergers on
Headquarters
Nearly every merger results in an extra
headquarters facility. It may be a separate
40,000-square-foot office or the back half of a
10,000-square-foot branch. Operations staffing
efficiency is one of the gains enjoyed through
a merger. This typically means that the merged
credit union’s headquarters may not be needed
and can be sold to cover the capital cost of the
merger and re-engineering of the branch network
or to pay for a new headquarters or expansion to
accommodate the centralized staff.
Redundant headquarters can also provide
opportunities. They may be used for remote
operations, such as a call center in a market
with lower-cost employees who are less likely
to turn over as fast. The building may also be a
perfect location for a redundant computer site
or to house a regional mortgage, small business
or investment office. We have also helped credit
unions set up a repo sales office that sells cars of
other credit unions for a fee and, in other cases,
leased the vacant space and held it for future
appreciation and potential use as an annex.
Facilities are an important consideration in
merger discussions. It would not be unreasonable
for a $100 million credit union with $8 million in
capital to own a small headquarters and three
branches valued at $5 million. Understanding the
impact of these physical assets on the potential
joint financials of these credit unions in terms
of capital cost, operating cost, and support of
growth and profitability objectives is key to the
future success of the merger partnership, whether
an acquisition or merger of equals.
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12
Security Planning and the Rise
of SafeCatch
The events around 9/11/01 and the anthrax threats heightened
everyone’s security concerns. But, for the vast majority of credit
unions, these concerns are a long way away. The more immediate
threats are people, data, assets and facility security. While the
big security news is often about bank data that has been stolen
or accidentally leaked causing millions of customers to have their
private information exposed, this chapter is about physical security.
In the financial industry physical security is primarily divided into
operations facilities and retail facilities (branches, drive throughs
and ATMs). We cover both areas in this book with an emphasis
on the facilities with the highest exposure: branches. In addition
we will share the ground-breaking work we have done with Larry
Carr of the FBI in the development of SafeCatch and SafeCatch
Architecture, a process and set of design principles that are
reducing robberies, increasing perpetrator apprehension when a
robbery takes place and—at the same time—delivering a highly
effective member development experience. But first, let’s look at
the security issues in operations facilities.
Chapter 12 • Security Planning and the Rise of SafeCatch
229
Operations Facilities Security
Operations facilities do not hold cash and have
much less risk for robbery unless they support
a central vault or include a retail branch. The
majority of risk can be defined within three areas:
• safety of information,
• safety of people and
• safety of property.
Information security
IT managers are constantly concerned about
the safety of their data. In designing new facilities
or rehabbing existing ones, precautions must
be taken to ensure the path, storage and use of
data are protected. This means that cabling into
a facility must be protected along the path from
the service provider into the facility and from
connection points to users. Cabling pathways and
terminuses must be in locked rooms and closets
with restricted key access.
The computer room needs a high level of
security, meaning it can’t have windows or free
access from anywhere in the facility. Today,
backup is done electronically at remote locations,
so the need for physical data storage beyond
storage of programs is quite limited.
As operations centers become wireless,
there is a growing concern about the ability to
hack into a credit union’s system. In wireless
environments encrypting alone may not be
sufficient. Technology may need to be employed
to block signals in specific building areas, as well
as outside.
Internal security of information is a growing
concern. Credit unions are considering advanced
methods of tracking staff members’ whereabouts
within a facility at all times. For example, tracking
systems are now available that can recognize
who is traveling through which doors at what
times. And today, GPS systems can follow every
movement of staff. While GPS tracking may be
considered too much, one of the advantages is
knowing who is in the building to enhance work
efficiency and productivity.
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Safety of people
Are your staff safe at work? Standard
security devices can help ensure the safety of
your operations staff if the facility is properly
configured. More important is how you can
provide safety outside the building.
When designing a building, it is important to
understand how staff is protected from the time
they arrive via car or public transpiration until they
enter your facility. Ask: Is the headquarters in a safe
neighborhood? Is the path from the bus stop or the
remote parking lot safe? Is the adjacent parking
lot safe and well lit? Is staff safe if they leave late at
night? Are there places people can hide, such as a
dumpster adjacent to the door or path, tall bushes,
low-cut trees or corners next to doors?
When considering people’s safety, also consider
whether they are protected as well as possible from
physical issues. Has the building been seismically
upgraded, for example? Is the fire suppression
system adequate? Are the exits protected from
intruders and are they easy to move through in case
of emergency? Does staff know how to quickly exit
the building in case of fire?
Safety of people also has to do with the
equipment and furniture they connect with during
their work. Examples: Are the furniture systems
ergonomically correct and safe in an earthquake?
Are electrical systems sufficiently separated from
grounds? Are ceiling lights and systems tied to
structure?
Environmental security has been a growing
concern for many years. Are there any hazardous
materials in the building that should be removed?
Is the lighting appropriate for the work and not
harming staff vision? Or, is the environment too
loud, causing sound pressure?
Safety of facilities
Taking care of people’s safety takes care
of most facility safety issues. The primary
concerns are fire, earthquake, break-in and
damage from adjacent objects, such as other
structures, trees or a truck carrying hazardous
materials crashing into the building.
Branch security
Bank robberies and fraud have generally been
on the decline since 1999 to late 2008. In early
2009 bank robbery events started to increase,
likely due to the fast decline of the economy.
Whether robberies are in decline or escalating,
they present a real threat to the safety of
members, staff and assets.
In this section we will first present our work
with FBI Special Agent in Charge Larry Carr in
the development of SafeCatch and SafeCatch
Architecture and then provide general security
guidelines for the design of a branch.
Safecatch – robber suppression and
enhanced member development
At 2:25 on a Thursday afternoon, a man in his
mid-30s, wearing jeans, a white T-shirt, a short
jacket, a baseball cap, and dark sunglasses enters
a busy bank branch. He appears nervous and
stops momentarily inside the entrance, quickly
surveying the surroundings. Before he can get
much farther, a branch employee approaches him,
offering a handshake and asking how he can help.
“Good afternoon! I don’t think I’ve seen you here
before. My name is Mark—how can I help you?”
Mark has just taken the first step either in
delivering great member service or in foiling an
attempted robbery—or both. It can be hard to tell.
But that is the beauty of SafeCatch, a behaviorbased system designed to thwart attempted
robberies and fraud.
Carr, as special agent in charge of bank
robbery coordination in the FBI’s Seattle division,
developed the SafeCatch concept in 2006 in
response to an increase in robberies and a
decrease in the quality of robber recognition and
apprehension. Carr’s concept is founded on three
key principles:
• staff vigilance and safe, “friendly” action;
• clear suspect recognition and
• effective post-incident follow-up.
Since then, staff have been trained at more
than 350 branches—and these institutions are
already seeing results, with one large institution,
Bank of America in Washington state, reporting
a 70 percent reduction in robberies since the
program was initiated.
robbery and to teach staff to react appropriately
and safely in the event of an attempted robbery.
Yet robberies continue to take place, and in many
parts of the country, they are increasing. This is
because the “tried and true” practices adopted by
most financial institutions are simply ineffective.
Yet these techniques have become ingrained in the
practices of banks, credit unions and even police
authorities. There is a better approach.
Proactive security measures
Common wisdom in the financial industry
would suggest that the best way to respond to
a potential robbery is through compliance: not
approaching the person, activating a hidden
alarm, and handing over the cash. From this
perspective SafeCatch could be described as
taking a counterintuitive approach. The goal of
most bank robbers is to remain as anonymous
as possible when approaching a teller—to “fade
into the surroundings,” so to speak. By calling out
suspicious-looking or unfamiliar branch visitors,
employees take away that anonymity and take the
first step toward avoiding a potential robbery.
Branch managers and staff agree. Scott
Taffera, manager of a First Mutual Bank branch in
Ballard, Wash., was interviewed by Seattle PostIntelligencer writer Paul Shukovsky about his
experience integrating SafeCatch into his branch
operation. “Before we got trained, we had always
been under the mind frame to be defenseless.
The robber approached a teller, he comes to
you—you just have to be the victim and comply,”
he says in the article, “Bank Robberies Hit a
20-Year Low: Intense Customer Service Driving
Crime Away,” Jan. 4, 2008. Now Taffera feels that
his staff is empowered: “SafeCatch has done a
great job of giving us back that sense of security.”
(Read the full article at http://seattlepi.nwsource.
com/local/346090_bankrob05.html.)
“Many tellers have admitted they thought
something was suspicious, sometimes several
minutes before they were robbed,” explains Carr.
“With the traditional response, even though tellers
know they are about to be robbed, they have no
tools to deal with it other than simply to wait and
hope for the best. With SafeCatch, they no longer
have to wait to become a victim.”
For staff in the banking industry, the prospect
of being robbed is always a concern. Over the
years, much has been done to protect against
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Program design
There are two parts to the SafeCatch
program: “safe,” steps designed to deter
would-be robbers from moving forward with
their intended crime, and “catch,” the portion of
the program that is implemented if, at any point,
a demand has been made.
In this case, Safe is an acronym that stands
for Scan (for suspicious persons); Alert
(relevant personnel and help); Friendly, neutral
confrontation; and Escape, as in, escape by
the perpetrator should not mean the end of the
situation. SafeCatch does not rely on expensive
barriers, cameras, two-way glass, or other
devices. Instead, it is a set of principles that could
have a huge impact on branch security.
SafeCatch incorporates five key points that
make the program effective and sustainable:
1.simple staff training and alignment with
effective member development and service
principles;
2.technical branch architecture and design
that support SafeCatch principles cause
would-be robbers to act in predictable ways
and drive a powerful and productive branded
member service experience;
3.accurate placement of video technologies
to increase robber recognition and speed
suspect photo distribution;
4.restructuring of robbery procedures to
enhance response time and increase
safety—response times are dropping from
13 to 5 minutes on average; and
5.ongoing performance measurement.
Branch employees exposed to SafeCatch
principles have felt empowered by the process.
Unlike traditional robbery training, which tells staff
to passively respond to a robbery, SafeCatch
shows staff how to take control of their branch
environments. In the process, the program
increases staff and member safety, which is the
ultimate goal.
Training is a critical element of the program.
The initial session can be completed in about
90 minutes. It is important to note, however,
that years of ingrained banking habits cannot
be washed away in an hour and a half. Ongoing,
focused training followed with refresher training
can reprogram branch employees to the extent
that they will not forget the new principles and
turn back to the old habits in the heat and anxiety
of the moment. For this reason, it is important for
credit union and security leaders to understand
232
thoroughly themselves the philosophy behind
SafeCatch; only in so doing can a credit union
successfully retrain its employees to embrace the
new principles.
For credit unions, SafeCatch and the
supporting architecture offer not only a
deterrent to crime and a methodology for
quickly recovering if a robbery should occur,
but the elements of the program also serve
to support and strengthen member service.
More psychological than physical in nature, the
training that staff receives through the program
emphasizes staff-member contact more than
techniques for apprehension.
Development of the new approach
About three years ago, a presentation was
given on the principles that would become
SafeCatch to a group of bank security officers,
including Drew Ness, a representative of First
Mutual Bank (now Washington Federal Savings),
based in Bellevue, Wash. Some of the ideas Carr
suggested were a bit revolutionary for the ears
that were there, but Ness accepted an offer to
review First Mutual’s policies and procedures to
see if there might be opportunities to strengthen
its ability to suppress and apprehend robbers.
Noticing the potential benefits of these principles,
Ness worked with Carr over the next year to
“tweak some of the suggestions to make them
more palatable to retail banking.” First Mutual
became a laboratory of sorts for what would
eventually become SafeCatch. Not only did this
partnership result in a reduction in attempted or
actual robberies and fraud for First Mutual, but
there were important residual effects as well.
Anyone who has been a victim of a
robbery or attempted robbery knows that it
is psychologically traumatizing, regardless of
whether the perpetrator has a gun, because there
is the assumed threat of a gun. Before SafeCatch,
such an event might cause a traumatized
employee to miss several days, weeks or even
months of work. But with SafeCatch principles
in place, what is fascinating to observe is that
with the handful of successful suppressions
First Mutual had, none of the individuals
involved experienced that psychological
trauma. SafeCatch has been a benefit to bank
management and employees alike.
Understanding the benefits, First Mutual
retrofitted elements of the SafeCatch approach
in its 12 branches. For other banks building
new branches, though, there are even greater
opportunities to take advantage of the program to
build in security from the ground up.
Integrating safecatch principles
into facility design
North Shore Credit Union (http://www.nscu.
com) is a progressive and spirited financial
institution in Vancouver, British Columbia. The CU
operates much like an advanced bank, including
paying taxes under Canadian law.
Considering a new concept to differentiate
its branches from those of its competitors (see
case study in chapter 15), North Shore CU
wanted to create a member, staff, and target
community experience unchallenged by any other
bank or credit union in the market. North Shore
CU wanted a concept that would reinforce its
strong brand, connect with target members and
communities, and provide a highly productive
business model. In addition, it wanted a branch
design and operating concept that would ensure
the safety of members and staff.
North Shore CU’s member engagement area
Our firm, EHS Design, and Weber Marketing
Group developed the new brand image, message
and branch business model and prototype. This
prototype integrated SafeCatch throughout the
member and staff experience, elevating both the
performance of robbery deterrents and strong
member development at the same time.
North Shore CU grew from $750 million to
almost $2 billion during the time the new brand
image and branch concept, including SafeCatch,
was applied. SafeCatch and effective robber
deterrents do not get in the way of great member
development. The proof is that integration of
SafeCatch with strong member development
training can increase the impact of both.
North Shore CU positions a greeter station at
its entrances.
When visiting a North Shore CU branch,
members are greeted at the door and the
member engagement area (top and middle
photos), and are engaged by interactions with
highly trained relationship staff at transaction
pods (bottom photo) and throughout the entry
and exiting process.
North Shore CU MSRs conduct business at
teller pods.
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In addition to human contact and observation,
SafeCatch involves positioning visible and hidden
cameras to ensure clear capture of people
entering and leaving each branch. Positioning is
important because there is a distinct difference
between what a camera captures at different
heights. The problem with the standard location
of cameras at seven feet high or higher is that
when robbers enter a branch and approach
tellers, they typically lower their hats and bow
their heads so the cameras cannot see their face
as you will note in the two photos presented
below.
In the photos to the right you will note the quality
of photo provided by a hidden camera at a lower
level. Identification of the robber is significantly
enhanced to make future apprehension more likely.
The cost of these small hidden cameras is very low,
around $300 each. They can be placed in the exit
door jamb within the height recognition strip (a band
of tape vertically applied to an exit door frame to
measure the height of robbers as they exit) or in a
merchandising element or wall that is perpendicular
to the path of members approaching the teller
line. Cameras can also be placed on the teller
transaction counter to record every transaction.
SafeCatch recommends positioning hidden
cameras at a lower level to capture fullface images.
Video cameras are just one technological aspect
of SafeCatch. Cash recyclers are also employed to
protect cash while giving tellers more opportunity to
focus on member needs and building relationships.
And member photos are displayed on each staff
member’s monitor to help verify identities during
transactions. The member experience is enhanced
by the inclusion of these security measures and
staff is able to perform their service and sales
functions at a much higher level.
Traditionally placed security cameras allow
hats and hoods to obscure faces.
The first North Shore CU branch that employed
the new branch business model and SafeCatch
experienced a fivefold increase in member and
deposit development, which it continues to enjoy
today.
SafeCatch design concepts provide a common
ground for managers of security, facilities, branch
banking, and marketing to enjoy mutual benefits.
They empower staff to manage the member
branch experience and feel secure about their
actions before, during and after a robbery. The
principles of designing both high-performance
member development environments and applying
SafeCatch are so close in process and execution
that both objectives are attainable without
compromise. In fact, the sum of the combined
objectives is proving to be greater.
234
Catch Point 1, called “Eddy out,” is highlighted
in the second diagram. It is the entry location
where a robber is likely to turn out of the line
of traffic to try to observe the entire lobby for
danger. This activity causes a “tell” that can
be easily recognized by staff. 99.9 percent of
new visitors to a branch will first engage a staff
member before spending time looking at displays.
Let’s look at how SafeCatch operates in a floor
plan. Our first diagram shows a 4,500-square-foot
branch. We have noted the four catch points on
the plan. You will note that these catch points are
also the points at which staff should be engaging
members in the sales and service process.
The parallels between the member and robber
experience remain the same throughout the branch
experience.
Catch Point 2, detailed in the third diagram,
is called “Snap Shot,” the place where a entry
camera is placed low to capture a picture of a
criminal before he or she commits the robbery or
fraudulent act. The camera is best located facing
the entry door, as the robber is less likely to try to
hide his or her identity at this point in a robbery.
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Catch Point 3, “The Walk,” is shown in the
fourth diagram. In security parlance, this is the
“walk of shame” for the criminal. In member
experience talk, this is the “walk of recognition”
where members are again recognized and
relationships developed as they wait in line. This
walking and queuing area is also where teller and
member service staff can recognize suspicious
activity and address a suspected robber by
asking how staff might be of help in opening
an account. After this question, most would-be
robbers leave.
While facility enhancements can certainly
strengthen the elements of the SafeCatch
program, the most significant value comes
from behavioral and process changes staff
learns through a convergent training process.
In the traditional model, security and member
development training are separate. However,
SafeCatch can easily be combined with other
training due to the parallel nature of its process;
this integration elevates the importance of both
training initiatives, making them “stick” and thus
enhancing their level of success.
Impediments to adoption
SafeCatch is not an expensive proposition for
credit unions. The training is not expensive; other,
physical alterations to branches can be minimal
in the design of new branches. However, the
potential for more cost exists when retrofitting
existing branches to accommodate the type
of flow, camera placement, and interaction
necessary to make the program most effective.
But, compared to the cost of bandit barriers, man
traps or guards, the cost is relatively low.
The final diagram shows Catch Point 4, “Walk
Away,” referring to the teller’s/MSR’s ability
to walk away from a suspicious situation and
call 911. For example, as a suspicious person
approaches a teller, he or she can say, “I am
sorry, but my computer is not functioning. I will be
right back.” The teller then walks over to a phone
that is not in view of the potential robber and calls
911. A traditional teller counter does not work as
well as teller pods, because a traditional counter
traps the teller and makes the phone call obvious.
Despite the low cost, it has proved challenging
to sell. The training covers techniques and
methods that are often counterintuitive and fly
in the face of the traditional wisdom of handing
over the money and sounding an alarm when
it appears safe to do so. For some banks and
credit unions, the relative low number of yearly
robberies and limited amount of funds lost does
not warrant changing training or modifying
branch design. Because the concept may be
contrary to practices already in place, it can be
difficult to convince security managers to change
their policies and approaches and condone a
philosophy with which they are not familiar.
In fact, the innovative behavioral elements of
the program, coupled with the low cost, may
actually be an impediment to adoption. Many
organizations—and individuals—are a little
skeptical to jump on board with something that
is virtually free. Furthermore, SafeCatch training
is less tangible than a $40,000 bullet-resistant
shield at the teller line, a $50,000 man trap at the
entry, or a $150,000 replacement of tellers with
automated or remote teller technologies.
Existing branches may require some
investment in retrofitting to make the minimal
modifications necessary to change the existing
traffic flow or setup. But the cost is very low, and
the modifications are relatively simple.
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“It can be said that the first ‘costs’ to a
financial institution are a dose of humility and
the recognition that it needs to be open to new
ideas and suggestions. Whereas sales personnel
are generally more open to such feedback, bank
security officers tend to be on the conservative
side,” states Ness.
Positive results
Despite industry resistance, the concept is
catching on, and numbers are now available to
indicate that SafeCatch can make a significant
difference in robbery experience for
financial institutions.
Bank of America is one of the early adopters
of SafeCatch in Washington. Between 1996 and
2006, this bank averaged 50 robberies per year
in Washington. In 2007, there were only 15, while
robberies in Oregon were slightly higher. This
is a very dramatic reduction, suggesting the
significant positive impact of SafeCatch.
Statewide, 2008 robbery statistics paint an
impressive picture as well. In the late 1990s,
Washington bank robberies peaked at 350 in one
year. Branch tellers began receiving SafeCatch
training in mid-2006. In 2007, bank robberies
declined to 176, the lowest point in 20 years and,
in 2008, the robbery rate dropped even more, to
153. Additionally, the FBI’s Seattle Division solved
71 percent of the bank robbery cases last year,
compared with 61 percent of the cases in 2006.
This success is attributed to improved suspect
recognition and reduced police response times.
Banks and law enforcement agencies across the
United States can enjoy the same lower robbery
rates with the adoption of SafeCatch.
Conclusion
SafeCatch is not a highly physical or
technological solution. Rather, it is one driven by
human nature—the desire to engage with members
and the observation of people and activities within
one’s environment. It changes the way staff see
their roles in the everyday operation of a highly
effective branch facility. But most importantly,
the improvements enabled by SafeCatch training
directly benefit the security and safety of credit
union employees and members.
For those interested in implementing the
principles of SafeCatch in their branch business
model and design, the best time to integrate the
approach into the institution’s practices is when
a new branch business model and prototype are
being developed. New branch business modeling
can integrate SafeCatch principles with modest
modification to the plan. It is possible, though,
to retrofit existing branches with SafeCatch
components to enhance the application of
SafeCatch principles as well as the member’s
experience, as First Mutual has done.
One of the reasons SafeCatch should be an
attractive concept for credit unions is that it
delivers more than just enhanced security at a
modest cost. It also can deliver a significantly
heightened level of member development and
cross-selling, as well as share of wallet and high
net advocacy scores. Each member entering
a branch is addressed, creating a membercentered environment and providing opportunities
for development. This same focus causes staff
to address unknown visitors in a friendly and
nonthreatening way. A quick greeting such
as, “Hi, My name is Chris—I am the manager.
How can I help you?” works with both potential
robbers and new members.
To recap, what makes SafeCatch different and
more effective than standard security training and
branch design?
• The member and potential robbers’ physical
experience is exactly the same, but the
psychological experience is much different.
• SafeCatch empowers staff so they feel more
in control before, during and after a robbery
and the negative psychological impact of
experiencing a robbery is reduced.
• The process of greeting all visitors,
particularly those who may be suspicious, is
proving to reduce robberies.
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• Changing the process from first calling the
alarm company to immediately dialing 911
is reducing law enforcement response time
from 13 minutes to 5 minutes.
4. External telephone and electrical lines
should be underground or high enough
to discourage tampering. Exterior wiring
should be concealed in walls or in conduit.
All access panels must be locked and keyed
inside the branch and keyed to the branch
master. This is extremely important for data
security. Additionally, the terminal rooms/IT
closets must be locked. We audit hundreds
of branches a year and, in about 10 percent
of the branches, the doors to the IT rooms
are open to reduce heat.
5. Public services, such as water fountains
and rest rooms, should be located in public
areas. Access to these services should
not be behind the teller area, to the side of
the teller area or in an area where cash is
handled or moved. Most jurisdictions do
not require the availability of lavatories to
the public, but most credit unions provide
them for their members. In these cases
they offer separate lavatories for members
and staff.
6. All parking lots should be well illuminated
for the safety of members and staff at
night. Plants should be below two feet in
height and trees trimmed above 6 feet to
reduce hiding places in all areas of the site.
7. Branches should be constructed with the
minimum number of exits. There should be
only one public entry to a branch whenever
possible.
8. Cameras should be located with an
understanding of the possible movements
of interior elements. Furniture and
partitions will be moved, plants will grow
and merchandising elements may be
added. In addition to the typical array of
visible cameras, hidden cameras should be
installed 4-5 feet above the floor to capture
the face of everyone entering and leaving.
9. Tinted glass should not be used on
any windows.
• Lowering and repositioning cameras is
providing significantly enhanced recognition
and increases in apprehension.
• The cost of applying SafeCatch is much less
than other physical alternatives.
• SafeCatch training combined with member
development training is increasing member
and staff satisfaction, deposit and loan growth,
cross-selling and net advocacy scores.
SafeCatch Resources:
Visit ehs-design.com to view a presentation on
SafeCatch
Contact Larry Carr at the Seattle FBI office.
Branch Security Guidelines
The following guidelines are general and may
or may not be appropriate for your institution.
It is the responsibility of each credit union to
understand the level of risk, insurance and law
enforcement requirements for its own situation
and take the appropriate security measures.
General Security Considerations
1. The branch must be clearly visible from the
street. At minimum this means the front
entry and ATM should have clear visibility.
A clear view will also increase community
awareness of the branch and increased
ATM and drive through use.
2. Windows should be clear of obstructions that
would diminish law enforcement’s view into
the branch in case of a robbery. This does not
mean that merchandising cannot be displayed,
but the placement must be controlled.
3. The vault door should be visible from
the outside of the branch. This is a law
enforcement requirement to ensure
they have visibility to the vault during a
hostage situation.
10. The blinds should be fully open at all
possible times during the day.
11. Managers should have a complete view of
the branch at all times.
12. Staff must have full visibility of the entry to
recognize and greet members when they
enter and intercept those visitors they do not
know to determine how they can help them
or to thwart a robbery or fraud attempt.
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Points of entry
1.All doors and windows should have tamperresistant locks.
Vaults
1. The minimum standard for a pouredin-place vault is Class 1 or higher.
The minimum Class 1 construction
specifications should be three layers of
epoxy-coated 5/8-inch rebar in a 6-inchby-6-inch mesh, each layer offset to not
allow any opening greater than two inches,
and surrounded by 12 inches of concrete
with minimum 4,000-pound PSI rating.
Modular vaults of the same rating are fast
replacing poured-in-place vaults due to the
consistency of their security specifications,
ease of installation and expandability.
2. The vault doors should match the
classification of the vault.
3. An emergency ventilator should be provided
in every vault in case someone gets locked in
overnight or over the weekend.
4. If the vault is to be both a safe-deposit
and cash vault, a separate room should be
provided for each.
5. A day gate (the gate behind a vault door
that is used during the day to secure
the vault area while allowing key or
card access to authorized staff) must
be provided for all vaults. Use only
solid Lexan (a polycarbonate resin
thermoplastic) with a key-in and free
latch-out.
f. Ventilator shafts,
6. A vault alarm should be provided.
g. Basement doors and windows,
h. Air-conditioning intakes with restricted
airways into vaults,
7. The vault door should be illuminated on the
emergency circuit and be visible at all times.
8. The vault should be equipped with a holdup alarm button located inside the vault
and to the side of the vault door. If a cash
room is placed in the vault, a second holdup alarm button should be placed next
to the door. The door to the cash room
should include a 180-degree peep hole.
9. A motion detector and heat detector
should be included.
2.The branch entry doors should have two
locks. One lock should be keyed for the
general use of employees, while the other
lock must be keyed to the building master.
The building master should be able to open
both locks. The purpose of this key system
is to reduce the number of employees with
unsupervised access to the building.
3.All doors should have welded pins in the
hinges.
4.All doors designated by building code
as emergency exits should be equipped
with panic hardware that when activated
sounds an alarm, and have signs indicating
“emergency use only.” All emergency use
doors should be alarmed with an 85-decibel
buzzer with a battery pack and contain a
180-degree peephole.
5.The following points of entry should also be
secured:
a. Crawl spaces,
b. Roof hatches,
c. Second-story doors,
d. Skylights,
e. Second-story windows,
i. Sidewalk manholes that may lead to
underground access, and
j. Soffit and canopy access panels.
6.All exterior doors should be lit with a
minimum of 20 foot candles.
7.If the branch is located in a high crime
area, a man-trap may be considered,
but the significant member convenience
issues surrounding these devices must be
addressed.
8.All exit doors should display height markers
for 4, 5 and 6 feet to aid in identifying
robbers and fraud suspects.
10. Electrical conduit into a vault should not
exceed 1 1/2 inches in diameter and
should be offset in the walls, floor and
ceiling with at least two 45-degree bends.
9.Consider installing a pin hole camera at five
feet in the exit door frame.
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11. If you install a self-service vault, the card
or biometric reader should be placed in
constant view of the staff. A digital camera
should be placed in the entry foyer as well
as in the vault to reduce the risk of fraud.
As only one member can access their box
at a time, it is important to locate a small
waiting area adjacent to the vault lobby
entry so members can observe when the
previous member leaves. A call button
needs to be included in the vault foyer as
well, so members can summon staff if they
need help without exiting the room and
possibly leaving valuables on the table.
Burglar alarm system
Robbery alarm systems
6.Other locations, such as night depositories
and security vaults, should also be tied into
the alarm system. The alarm control box
should be located in the vault.
1.The robbery alarm system should be silent and
should terminate at both the police department
and alarm company. See SafeCatch section of
this chapter for the rationale.
2.At the alarm termination point, the system
should have the ability to produce an audible
and visual signal capable of indicating an
alarm condition (such as a break-in) or
tampering.
3.Each teller position should be equipped with
a bill trap to activate the alarm.
4.The manager’s desk should include an
alarm button.
5.The ATM room should include an alarm button.
6.The drive-through and walk-up windows
should be equipped with bill traps and
alarm buttons.
7.The outside alarm bell should not be activated
during business hours.
8.An alarm enunciator light should be located
in every room where staff may be located.
9.Tamper alarms should be placed on cash
dispensers and recyclers.
1.The vault and safe should be alarmed and
capable of promptly detecting an attack on
the door, walls, floor and ceiling.
2.The system should have a loud-sounding
outside bell that is audible inside the credit
union and at an exterior distance of 500 feet.
3.The system should be tamper proof and
have the ability to produce an audible and
visual signal if tampered with.
4.The alarm system should have an independent
source of power to operate for at least 80 hours.
5.The burglar alarm should be monitored 24
hours a day.
Safes
1.Safes should weigh at least 750 pounds empty
or be securely anchored to the premises. The
body of the safe should consist of at least 1
inch of steel on all sides. The door should be
at least 1 1/2 inches thick. Storage units for
currency, coin, and plastic card stock need to
have a security rating of at least TL 30.
2.Safes should be located in positions that do
not permit public observation of the contents
or associated processing activities.
Night depositories
1.A night depository should consist of a receptacle
chest having cast or welded steel walls, with top
and bottom at least one inch thick. An alternative
could be ¼ inch of steel rebar placed in six
inches or more of reinforced concrete.
2.Dual-control locks composed of a combination
lock and a key lock should be used.
3.Each depository should be equipped with an
alarm connected to the door and faceplate
and include a head sensor.
4.The depositories should be protected
against “fishing,” that is, from someone
using a steel rod with a clip, hook or
adhesive on the end to “fish” out money.
5.The exterior of the depository should be very
well lit for member safety.
6.The area where the depository is serviced
should not be visible to the public.
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Cash machines
1.All cash machines that take deposits should
weigh at least 750 pounds and be anchored
to the premises.
2.All cash machines should have a storage
chest composed of 1-inch thick steel.
3.The strength of the door should match the
walls. The door should include a dual-control
lock. If a single control is allowed, a security
camera must be placed to observe loading
and unloading.
4.The machine should be connected to the
hold-up alarm system.
Surveillance equipment
There have been significant advances in
surveillance equipment since the last edition of
this book was written. Video surveillance is now
standard among nearly all credit unions. Many are
looking at Internet protocol video solutions. Due
to the increased variety, complexity and constant
evolution of these systems, it is best to get the
most up-to-date information from vendors and
security advisors. Following is a brief review of
the general standards.
1.An adequate number of cameras should be
installed to cover where possible:
a. All teller stations,
5.Contents of the machine should be
protected from “fishing.”
b. Safe-deposit box area, merchant cage,
6.The service area should be out of public
view and lockable, with a 180-degree peep
hole in the door.
d. General lobby area,
c. All exits at 5 feet high,
e. Vaults,
7.The ATM room should include a duress
alarm, and alarm enunciator light.
f. Walk-up windows,
8.The exterior of the ATM and path from the
street or parking should be well illuminated
to at least minimum state standards.
h. ATMs,
9.Exterior ATMs must include an internal video
to record transaction activity and, where
crime is a problem, a 911 call button.
j. Parking lot for after-hours security, and
Cash dispensers and recyclers
1.Load and unload cash dispensers before or
after open hours.
2.If there is single access control, ensure
activities are digitally recorded.
3.Place dispensers so they are not
observable from outside the branch during
loading and unloading.
g. Drive-through window and lanes,
i. Cash dispensers,
k. Card production room.
2.Replace all old film cameras with digital
systems.
3.Access for repair should be easy.
4.Cameras should be placed at 7 feet
high behind tellers, but these must be
supplemented with lower cameras on the
teller surface or hidden cameras along the
member’s entry/exit path.
5.The video recorder should be hidden and
locked. Central backup should be provided.
4.Place burglar alarms on each dispenser.
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Teller area
Teller areas have changed significantly. While
many credit unions continue to use traditional
teller rows, many alternatives exist. These include
sit-down tellers, single and double teller/MSR
pods, and multi-height work areas. Let’s look at
the general security requirements.
1.Each teller should have a bill trap that can
activate the silent alarm. You may also wish
to include bait money, dye packs or tracking
devices. Seasoned bank robbers or those
who have shared a cell with one will often
instruct tellers to remove these items. In those
situations, tellers should certainly comply. A
few institutions provide bags with tracking
devices sewn into the seam at each teller
station. These bags are loaded for the robber.
2.In the past, all teller positions were constructed
to physically keep members and criminals from
getting access to the cash draw, particularly in
high risk environments. This meant we needed
to lock tellers into a teller area with locking
gates and hoods to restrict jumping over. In
the most serious situations, bandit barriers
constructed of 1 ¼-inch Lexan are placed
between the lobby and teller area. Today,
highly secure teller areas are only needed
in the most dangerous situations. In many
branches today, teller lines are giving way to
teller pods to increase staff’s ability to develop
relationships and cross-sell. The issue of
access to the cash draw has been removed by
the use of cash dispensers and cash recyclers.
3.For those credit unions continuing to use
cash drawers, a place for the cash draw cart
is needed behind the teller line.
4.Provide an area for processing cash and the
night depository behind the teller line. This
location should be out of sight from within
and outside the branch. It should only be
accessible through a locked door equipped
with a 180-degree peep hole.
Drive-through units
Some credit unions are surprised to learn that
drive-through windows can be robbed. Most of
these robberies are carried out through threats to
families at home or staff in the lobby, but there is
the occasional robbery with a gun. In most cases
the teller gives the robber the money even though
the robber does not have a firearm of sufficient
power to break through the bullet-resistant glass.
But it is always best to be safe. Let’s look at
today’s typical requirements:
1.Drive-through or walk-up windows should
be constructed of bullet-resistant Class 1
materials to protect tellers from persons
outside the building.
2.The wall directly below the window will be
constructed of bullet-resistant material equal
to the level of protection of the window.
3.If an exterior door is provided to the drivethrough, it should be of similar bullet
resistance and include a viewing port.
4.Pass-thrus or “boom boxes” (the means
of the member/teller exchanging materials
needed in the transaction) should be
constructed to block any gun shot and have
the ability to be locked on the inside when
the outside is opened and in reverse.
5.Each station should have a bill trap and
alarm button.
6.If cash is stored in this area overnight,
other than in a rated cash dispenser, it
should be held in a safe with at least a TL15
rating or higher based on your insurance
requirements. These safes must be alarmed
and secured to the building’s structure.
7.An alarm enunciator panel should be located
in this area.
5.It is best to provide double teller positions
whether you are using a traditional teller
line or free-standing pods. Studies show
that double teller positions are one-half
as likely to be robbed as a single; there is
the appearance of full staffing even when
just one teller is at a double position; cash
dispensers can be shared; and a senior teller
can work with a junior teller for training and
mentoring. Additionally, the double pods
better support cross-training of teller/MSRs.
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Sound and visual privacy
Sound and visual privacy in branches is a big
issue for most credit unions. The effort to make
branches more efficient in terms of space and
to move staff from low contact offices to high
member contact, open workstations, increases
privacy concerns.
Consider these questions: Can conversations
with members be overheard by other members
sitting with other staff, in line or in the waiting
area? Is the branch designed in a way that
members feel they are being overheard? Can
members make a choice about privacy by
standing or sitting in the lobby or sitting in a
room? Is the branch designed to provide these
options and make it easy for the members and
staff to transition into more privacy if needed?
We audit hundreds of branches every year.
Sound privacy remains one of the biggest issues.
It is not unusual for us to be able to hear the
account or Social Security numbers of members
5, 10 or 15 feet away.
Sound privacy can be handled in branch
planning by providing adequate distance between
members, barriers that create perceived sound
privacy, the use of white noise and the option to
move to more private areas.
Visual privacy is just as big a concern.
Examples: Can members’ papers be seen
by other members standing nearby? Can the
computer screen be seen by others inside or
outside the branch?
Blending security and retail planning
Security does not need to get in the way of
a highly productive and attractive branch. As
we have seen earlier in this chapter, applying
SafeCatch principles and SafeCatch architecture
can actually increase member development and
staff success. Merchandising, often the bane of
security managers due their inability to control,
can be designed to work with security and, in
fact, support some of the security devices.
A few key security elements that should be
considered when designing any retail branch
facility are:
• Provide high visibility to the building from the
street, adjacent sites and sidewalks.
• Provide controlled visibility into the building
from outside. Keep blinds open.
• Place screening or merchandising to partially
hide the teller line from the entry.
• Engineer the member path to go by
the greeter’s station or other staff with
responsibility to greet members.
• Locate the teller positions at the back of the
lobby, not near the entry doors.
• Provide only one entry to the branch.
• Place the member lavatory in a public area
where staff have a view of the door.
• Place hidden cameras at five feet high.
When planning a new branch it is critical that
all the potential sight lines be analyzed for privacy
and the use of screen protectors evaluated.
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Small business and merchant banking
Over the past five years, many credit unions
have added small business banking to their array
of member offerings. This has added new member,
deposit and loan potential to existing markets and
required development of new skill sets, operating
practices, marketing strategies and facilities to
support the small business initiatives.
The addition of small business services can
also add some risk. While credit and debit cards
reduce the amount of cash and remote capture
will reduce the need for trips to their credit unions
for deposits, small businesses—especially
merchants—will continue to make cash deposits.
This typically means members are arriving with
larger-than-usual deposits that can take some
time to process. If a branch is experiencing a
high volume of business clients, it may want to
develop a separate business service center. In
years past, these were called merchant cages.
A separate business teller area should include
the typical security devices, plus a drop-box with
a time lock so large deposits can be dropped for
protection from robbery.
In addition to a separate teller, credit unions
may want to consider the addition of automated
merchant banking machines that offer cash and
coin to business members. Coin alone can be
a big issue for credit unions as the processes
can be very expensive. Often, coin is sent to a
security company or large bank for processing.
Some credit unions process their own coin
in remote markets. For example; North Shore
CU operates two branches in Whistler, British
Columbia. Many of the members operate small
businesses and need to use coin as it replaces
lower paper denominations. North Shore CU
processes a significant amount of coin every day.
This is one of the many services that differentiate
it from its competitors. At this location the CU has
a highly protected merchant cage that accepts
large deposits and coin.
Future security technologies
A branch could be designed to provide
complete security if there were no staff, members
or information. The reality is that all these are
present. So, we must balance variable levels
of risk with operating a highly productive
branch. Fortunately as the risks rise, so have
the deterrents. Tracking systems are making
it easier to find criminals as long as they are
unaware of the devices. SafeCatch Architecture
can help reduce robberies and increase member
development through savvy planning.
Today we are seeing new devices that can
further protect staff, members and assets. RFID, or
radio frequency identification, is being introduced
into the retail environment, including some financial
institutions. RFID retrieves remotely stored data
when triggered by “tags” or transponders hidden
in credit or smart cards carried by members. The
technology automatically activates the information
file—similar to that collected by a customer
relationship management system—when members
are in close proximity to a member service
representative’s terminal, an information terminal
or even a display. These RFID units could also cue
staff when a member enters or alert them when a
nonmember enters. In the advanced stage, RFID
may be able to provide limited information about
non-members.
For the past 15 years, we have been talking
about hand geometry and fingerprint analysis, iris
scanning, retinal scanning, face geometry, voice
verification and dynamic signature verification.
Hand geometry and fingerprint analysis are being
used at ATMs and in automated vaults, and
dynamic signature verification is used in most retail
stores and banks. Iris scanning, retinal scanning
and face geometry will require significantly more
investigation. The primary source of advancement
in the latter three methodologies may be through
advances in airport security due to significant
funding for research. Equipment developers
and suppliers are good resources for further
investigation into these types of security solutions.
Summary
Security does not need to get in the way of
business. As we discussed, if properly integrated,
security planning can enhance the overall
performance of branches and operations centers
while protecting information and assets and
making staff and members be and feel safer.
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13
Construction Delivery Methods
and Strategies
By Jim Haack, CEO/President, Momentum Inc.
Credit unions are increasingly searching for methods to improve
cost, time and quality in the development and construction of
branch and headquarters facilities. In the current economic climate
every credit union is looking for the greatest value. Some are
making good decisions and others are making poor choices that
look good at the start but open these projects to failure during and
at the completion of each project.
Chapter 13 • Construction Delivery Methods and Strategies
245
The change in the economy does not mean
anything goes. Now is not the time to focus on
the lowest-cost solution over the best solution
in terms of facility, operating and productivity
value. While the economy offers a number of
very good opportunities to lower the cost of
facility remodeling and new construction in
terms of property, materials, labor and systems,
there is a threshold over which the pursuit of
savings actually increases the operating cost and
reduces productivity over time. A “lowest cost”
contracting and contractor relationship strategy
may return both near-term nominal savings and
long-term underperforming facilities and staff.
Credit unions are at an unprecedented point in
history where they have a unique opportunity to
compete against banks. The perception of credit
union safety is generally better. They have much
closer relationships with their members; they
are for the members rather than the investors;
product and service offerings are nearly equal
with big banks. The heightened perception of
credit unions’ financial savvy is causing the
previously small member segment groups of high
income, emerging wealthy and wealthy to also
see the tangible value of becoming a credit union
member. The future for credit unions that make
the right decisions going forward is very bright.
To take advantage of the opportunities to
save on construction and occupancy costs and
increase ROI, owners must be proactive in pursuing
innovative practices when planning and executing
projects. One area where many owners are realizing
success is innovation in construction delivery.
This chapter was written to help credit unions
understand the key aspects of construction
project delivery and, in so doing, understand
the options to consider. With a clear handle on
how construction delivery methods work and
how that impacts you and your project, you
can understand the best ways to achieve your
business objectives and gain the greatest reward.
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Construction Delivery Success
Many factors contribute to the success or
failure of new construction and remodeling
projects. Let’s look at them.
Time
Contract time of projects is one of the most
important aspects of the entire design and
construction process. Not only does it affect
such areas as budgeting, resource planning,
local economies, and delay claims, but also
expedited contract time may avoid higher costs
and decrease the possibility of disputes between
the consultants, contractor and the credit union.
Time efficiency means speed to market; a key
consideration in evolving communities.
Risk allocation
The single decision that will most greatly affect
relationships and risk allocation on a construction
project is the choice of a contracting strategy. The
“traditional,” low-bid, design-bid-build system
has resulted in quality projects when the work
is very well defined and constructed by capable
contractors experienced with financial facilities.
The process can, if well executed by experienced
staff or objective third-party consultants,
eliminate favoritism in procurement. However,
the design-bid-build contracting method may not
be the best method in many cases, particularly
when dealing with complex renovation projects,
technically demanding operations centers and
high-profile branch facilities involving cultural and
business process change.
Design-build delivery and similar “at risk”
methods, which integrate project planning,
program definition, design, management and
delivery, can provide significant advantages
if undertaken with a clear understanding of
terms and responsibilities and if delivered by
experienced and specialized teams. Single source
responsibility through a team with demonstrated
experience in the unique requirements of credit
union facilities can realize a savings in time,
reduce or eliminate gaps, and limit conflict for
which the credit union is traditionally the arbiter, if
not often the cause. The process of risk allocation
begins when the owner decides on the project
delivery methodology.
Goals and competency audit
Self-examination can also be key in
successfully meeting facilities projects goals and
board expectations, and effectively managing risk
and controlling cost. What type of management
style and culture do you have? Will your internal
decision-making team consist of a tight, fastacting group or will each milestone require
deliberation and input from a wider group of
people? How much experience exists on staff?
The last thing you want is to get into construction,
when substantial costs start to be incurred, and
realize the responsibilities you assumed would
be manageable, have gone astray or distract you
from your daily responsibilities.
Strategy or tactic
Space is strategic. Without question, the
successful realization of larger business
objectives for credit unions will involve a strategic
approach to facilities from a planning and delivery
standpoint. Operations space can be the single
largest capital investment a credit union will
make. Will it support your long-term growth and
staff objectives? Will it remain flexible over time,
accommodating organizational change and
market demands? Is it benchmarked against
your industry and your peers? Does it maximize
efficiency and ensure that your operating costs
and associated staff expenses are well spent?
How can you know in advance?
Operations facility projects, however, are often
few and far between. Unquestionably, branching
will be the primary facilities project focus of the
majority of management teams. According to
a national CEO survey, “branch convenience
remains one of the primary reasons consumers
continue to select one financial institution over
another. Additionally, branches are one of the key
drivers of new and existing member development
in terms of increasing deposits and loans,
promoting non-traditional products and services
while enhancing member satisfaction. Credit
unions that lead in member and asset growth are
increasing the rate at which they are expanding
their branch and ATM networks.”
Surprisingly, up to 49 percent of credit unions
are not utilizing a strategic approach to branch
expansion and lack comprehensive plans to
guide them. For those approaching facilities as an
implementation of strategy, delivery methodology
can be key to ongoing success of a plan.
When defining goals for project
implementation, ask yourself:
• Are our facility and operating goals clearly
defined?
• Are the Board’s expectations clearly
defined?
• Are there any membership or community
issues we should consider?
• What resources do we have on staff and how
will they participate?
• What specific risks do we know about?
• What risks can we define prior to expensive
commitments to property, a lease, final
project drawings or hard materials cost?
Construction project pre-design:
How do we get started?
As part of every construction project’s predesign process (a required planning effort
occurring prior to the final design phase), there
should be an implementation plan. As part of this
plan, there should be a recommendation for a
construction project delivery method.
Pre-design, or feasibility, basically means
developing a program of specific needs and a
reasonable expectation of the cost and schedule
associated with designing and building the
physical structure(s) necessary to provide for
those needs before actually doing the design. It’s
so obvious that it’s often overlooked.
For specialized facilities and especially
for those driving growth, internal change or
specific branding and market objectives, this
should already be done at a broad level. Savvy
management teams will have the strategic
questions of what, where, and when already
defined, and will have clear expectations
of the facility’s role in the larger overall
plan. This strategic process will also help
address membership and community issues
considerations that will impact how a credit union
approaches the delivery of facilities.
For example, in developing a strategic
approach to long-term operations occupancy for
a client, the need to remain central to the core
membership and to be a proactive participant
in the health of the downtown community was
identified. The subsequent selection of a specific
site next door to the existing operations center
and ultimately, the design and delivery of a
sustainable campus facility that rejuvenated
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a depressed block using local construction
resources, all became integral components of the
larger plan to support these foundational goals.
Long before a design was executed, every step in
the delivery process was mapped out to support
the big idea, including a clear understanding of
the cost anticipated.
The best planning, however, cannot eliminate
the unexpected. The site for a project we
completed on what had been farm was carefully
reviewed before construction began for soils
condition. Borings were done and the engineering
team was confident the risk beneath the ground
was well understood. No one expected the old
truck chassis, bed frames and buried brush pile
located just beyond the boring locations! The fact
is that the unexpected does sometimes happen.
In this case contingency had been allocated early
on for just such risk. The appropriate amount of
contingency will vary from project to project just
as the risk of unknowns will vary. An experienced
team will evaluate and recommend an appropriate
amount and then will return that contingency as
the project progresses.
Once a basic plan is in place, how will you
execute it?
• What are the construction delivery options
and what are the pros and cons of each?
• What related issues, if any, do I need to
consider? Is there a difference between
“Delivery” method and “Procurement”?
• Which consultants, contractors or design/
build consultants will provide the most
innovative or value oriented contracting
solution?
• How will the use of a specific consultant’s
innovative practices affect project cost,
schedule, and the quality of the constructed
facility? Can speed of construction mitigate
the impacts on my membership satisfaction
and staff performance?
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Project implementation—delivery
methods demystified
A construction delivery method is primarily
the assignment of responsibility for delivering
the design and construction. A variety of delivery
methods are available. Commonly, everyone
seems familiar with design-bid-build and designbuild.
A third method, construction management at
risk, is also now becoming increasingly common.
Traditional methods
The “traditional” methods are, ironically,
relatively new to the building arts. These include
design-bid-build and job order contracting.
Project delivery method: Design-bid-build
Description
Standard method of construction contracting with award
to the lowest qualified bidder.
• Three main players: owner, architect/engineer, and
general contractor. A construction manager functioning
in an agency role is sometimes utilized in this method to
assist owners with the organization and administration
of the process.
• Basic flow in three linear phases: design, bid, build.
• Contracts for services and construction awarded to the
lowest bidder.
Advantages
• Familiar, so much so that it is often expected
• Project scope and expectations are well-defined when
construction cost is established
• Aggressive competitive pricing
• Single point of construction responsibility
• Check and balance between general contractor and
architect/engineer
Disadvantages
• The linear process means a longer delivery timeline.
• The owner is responsible for design management.
• No pre-design or design phase assistance from general
contractor
• Firm price not established until after completion of
design and receipt of bids.
• No owner participation in subcontractor selection.
• Sub-contractor pricing lacks competitive visibility.
• Re-design and re-bid often required to meet budgets.
• Adversarial relationship between architect/engineer and
general contractor is common with owner responsible
for disagreements.
• Owner responsible for cost of gaps or errors in design
• Owner required to develop solicitation documents and
contracts, evaluate and compare pricing and services,
and administer individual contracts.
Design-bid-build is, by definition, low-cost
focused. Project cost is certainly important,
but the weight assessed to project cost has
become disproportionately high compared to
other necessary project requirements, such
as timeliness, durability, and quality. Owners
are increasingly aware that projects have costs
beyond the direct cost of construction, both
during project development as well as throughout
a project’s lifecycle.
The second traditional method is likely being
practiced by your organization now, albeit on much
smaller and more specific “projects.” It is, however,
used by very large organizations with internal staff
experience and capability, effectively establishing
these individuals as general contractors.
Project delivery method: Job order-based
contracting–owner managed
Description
Contracting method for the repair/renovation (and even
new construction) of facilities where the specifics of the
task are known or undefined and pricing is determined
using pre-negotiated pricing lists.
• Owner, architect/engineer, and job order contractor
• Contractor retained for recurring minor repairs,
renovations, maintenance, or services (the architect/
engineer could fit this role), on facilities of varying types
with indefinite delivery timing and varying quantities.
• Typically contracts are awarded based on unit price,
convenience, and perceived value.
Advantages
• Job order contractor, typically the owner, serves as the
general contractor, reducing fees and markup
• Fast response
• Reduced up-front time and cost
• Check and balance between architect/engineer and
contractor(s)
Disadvantages
• The owner is responsible for the design management.
• Owner required to manage contractors, develop
solicitation documents and contracts, negotiate pricing
and services, train and manage staff, and administer
individual contracts.
Clearly, for most credit unions, this
methodology is best suited to schedule-sensitive
work, maintenance, and similar tasks that are
relatively minor in size and cost or limited in the
number of contractors required.
Alternative methods
Innovative contracting strategies have many
impacts on project considerations such as the
allocation of risk and the compatibility with the
low-bid system. The determination of the best
project delivery method depends on the owner’s
objectives and priorities as to allocations of risk,
the project type, the quality of the project or
degree to which the project transforms existing
business practices, cost and time requirements,
and constraints.
• Qualifications-based selection
• Construction management at risk
• Design-build
Let’s examine each in more detail.
Project delivery method:
Competitive sealed proposal
Description
Contracting method that takes into account factors in
addition to price such as reputation and references,
experience, and quality.
• Typically three prime players: Owner, architect/
engineer, and general contractor
• Basic flow in three linear phases: design, propose, build.
• Contract awarded to “best value” proposer.
Advantages
• Often referred to as “quals-based” selection, this
method is easier to implement in that it does not require
expertise for evaluation or comparison of extensive costbased bids.
• Weights value in addition to cost.
• Project scope typically well defined when construction
cost is established.
• Allows for project scope “wiggle room” to meet budget
goals without having to re-bid.
• Single point of responsibility for construction
general contractor.
Disadvantages
• Linear process means longer delivery schedule
(compounded by a two-step process for first selection
of the contractor, then development of consensus on
construction cost).
• No feasibility or design-phase assistance by the
contractor.
• Construction cost is not established until the design is
complete.
• Re-designing and re-pricing are often required to meet
budget.
general contractor is common, with owner responsible
for disagreements.
• Owner responsible for cost of gaps or errors in design.
• Owner required to develop solicitation documents and
contracts, evaluate and compare pricing and services,
and administer individual contracts.
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Selecting a partner based on qualifications
with or without consideration of fees allows
credit unions to ensure that those companies
involved will meet a minimum set of capabilities,
experience or other criteria while acknowledging
the credit union’s need to develop specific project
requirements and solutions in conjunction with the
partner selected.
This method is a particular favorite of
municipalities seeking completion of large and
complex projects. Success in these projects
and creating an environment for the innovation
necessary to meet technical challenges demands
consideration of the team’s qualifications to
address the issues and the joint development of
specific solutions.
Project delivery method: Construction
management—“CM at risk”
Description
A construction manager is brought on early in the process
to assist the owner with project definition, assist with the
selection and the subsequent interface with such required
consultants as surveyors, engineers or designers. At a
pre-determined point in the project, typically after cost is
established, the CM assumes the responsibilities, and risk,
of the general contractor in completing the construction.
• Three primary players: owner, architect/engineer, and
construction manager-at-risk.
• Construction manager-at-risk typically selected on a
variety of factors rather than price alone.
• Basic flow is in three phases: design, contract, build.
Advantages
• Faster delivery schedule is possible in that early
contractor involvement can allow construction or
procurement, in preparation for construction, to begin
before design is complete.
• Can be divided into a two-part process limiting owner
financial commitment until project scope, cost and
timing are agreed upon.
• Encourages early team-building which can reduce conflict.
• Design-phase assistance from the builder.
• Early construction cost commitment.
• Competitive subcontractor selection process.
• Single point of responsibility for construction
construction manager at-risk
Disadvantages
general contractor possible with owner responsible for
disagreements.
• Owner responsible for cost of gaps or errors in design
• Owner resource requirements to develop solicitation
documents and contracts, evaluate and compare
pricing and services and administer individual
contracts.
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This method can also be well suited to
complex projects. Construction manager at-risk
gives the owner the advantage of specialized
pre-design input and representation, and by
assuming the responsibility for construction
as the project proceeds, continuity and team
trust are preserved. In addition, contract time
efficiencies are possible in that the construction
manager has the ability to begin portions of the
construction prior to completing the design.
Project Delivery Method: Design-build
Description
Construction method under which both design and
construction services are contracted through a single
source of responsibility. This can be through multiple firms
in joint venture, aligned strategically, or through a single
entity that retains both capabilities in house.
• Two primary players: owner and design-builder
• Design-builder typically selected on basis of expertise,
team continuity, experience and value.
•Basic flow is in two continuous phases: Design and
build, often with overlap and often including preliminary
pre-design or feasibility services.
Advantages
• Integration of design and construction can result in
the fastest possible delivery schedule in that early
contractor involvement can allow construction, or
procurement in preparation for construction, to begin
before design is complete.
• Can be divided into a two-part process limiting owner
financial commitment until project scope, cost and
timing are agreed upon.
• Integrated project team.
• Design-phase assistance from the builder.
• Early cost commitment.
• Can include open procurement strategies involving the
owner in sub-contractor selection.
• Simplifies owner responsibilities for multiple consultant/
contractor management.
• Single point of liability and responsibility for both design
and construction services.
• Eliminates conflicts and reduces change orders related
to gaps and/or errors in design.
Disadvantages
• Different process in front end of project that can require
management and board of directors education.
• Can separate owner from designer.
• Cost savings strategies can result in loss of
construction quality.
• Perceived loss of check and balance between
architect/engineer and builder.
Design-build and its recent cousin,
construction manager at-risk, both considered
“alternative” delivery methods, are ironically the
oldest forms of construction methodology. We
have all marveled at the grand cathedrals of
Europe or intricate fortified towns of the crusades.
Hundreds of years after the completion of such
structures, they continue to impress visitors and
serve their original purpose. When these fabulous
accomplishments were completed, those
responsible for the design were also responsible
for the construction. Specialists, master
craftsmen, and master builders were a unified
group of people tasked with project oversight
from start to finish.
Over time, as each industry has evolved,
these skills have become separate and more
broadly generalized. In an effort to save money,
owners often hire one team or another, keeping
them separate during the process. This trend,
while driving down the initial cost of each
discipline, can result in gaps. With the owner
ultimately responsible to the contractor for the
design product, often hired separately, gaps
and conflicts become the credit union’s problem
financially as well as procedurally. The cost of
changes to a given project due to gaps will be
directly proportionate to the amount of detail
developed or process completed at the time the
change is made.
As with any construction process, problems
will arise in the field. As these problems
arise, decisions must be made quickly. It is
a tremendous benefit to have a construction
team that is not only familiar with the design,
but the logic behind it. This scenario improves
the decision-making process. Owners should
strongly favor design-build teams with a
successful track record working together on
previous projects in the same design-build roles.
More so than in any other delivery system, the
success of a design-build project may hinge on
the initial selection process.
The overwhelming trend in today’s construction
market is toward integrated delivery. Government
agencies and private companies alike, for projects
large and small, are embracing a process in which
design, construction management and construction
activities are integrated under a single source
of responsibility. With prescriptive requirements
and performance expectations properly defined
through a collaborative feasibility process at the
outset, many industries, including credit unions,
are rediscovering the value of accelerated schedule
performance, decision making, reduced conflict,
and early cost commitment.
The primary consideration for the owner
with design/build is proper selection of a team.
Since the owner selects a team created prior
to selection, it may be difficult for the owner to
maintain proper balance of design expertise,
construction experience, and experience in
design-build team roles. Careful evaluation of
past project experience is necessary.
The most noted advantage of this method
is that design-build does an excellent job of
helping to control construction costs. First, the
contractors who are going to be involved in the
construction effort are available to the design
team during the design effort. This creates a
forum by which the contractors can share their
field experience and ideas with the design team,
ensuring that the most practical and costeffective construction methods are incorporated
into the design. Second, with the contractors
not only on board but, in fact, contractually
responsible for design and cost, the budgets will
be accurate and the need for significant design
changes following the bid phase will be limited.
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Related Issues
Many issues that are not unique to any one
construction project delivery method get mixed
into the discussion. We need to separate them
for clarity. These issues are associated with both
traditional methods such as design-bid-build
and alternative methods such as design-build. If
these potential issues are not well understood,
they can cause miscommunication and contribute
to misconceptions that can frighten boards and
management teams.
With a construction management agency,
the construction manager is not “at risk”
financially for the construction of the project
but rather serves as an owner’s representative,
organizational resource and advocate. Such
management methods are very closely related
to the construction delivery, but not unique to
any one delivery method. Similarly, procurement
(“bidding” at the sub-contractor level where
the majority of construction cost is realized for
example), can and often does happen multiple
ways within multiple methods. Therefore, it is
helpful to discuss these issues.
Selection or procurement type
The method of selecting or “procuring” the
design and construction team is often cited
as having a significant impact on the type of
relationship created and the ultimate outcome
of a project. The solicitation, advertisement,
bid or proposal form, the timing and basis of
the firm selection, the type of contract, and the
administration processes and procedures are just
a few examples of how the procurement method
affects the project delivery process.
Just as is the case with project delivery
methods, numerous terms are used to describe
the different procurement methods. The following
terms are the basic three selection types:
1.Low bid – total construction cost is sole
criteria for final selection (total cost is
weighted 100 percent)
2.Best value bid – total construction cost and
qualifications are both factors in the final
selection (total cost weighted between 0
percent and 100 percent)
3.Qualifications based selection – total
construction cost is not a criteria for the final
selection; qualifications are a factor in final
selection (Total cost weighted 0 percent)
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Available procurement methods
by delivery method
Procurement
Delivery Method
Low Bid
Best
Value
Qualifications
Based
Selection
Design-Bid-Build
X
—
—
CM At-Risk
(1)
X
X
Design-Build
X
X
X
(1) If the construction manager at-risk procurement is with the
“lowest bid” (total construction cost being the sole criteria),
you have, by default, design-bid-build.
By definition, procurement of the designbid-build delivery method is only with a low bid.
However, procurement of a construction manager
at-risk can be done with either qualificationsbased selection or best value selection. Design/
build on the other hand, can be selected with any
of the three procurement methods: lowest bid,
best value bid, or qualifications-based selection.
Hiring someone based on their providing the lowest
total construction cost vs. their qualifications
so dramatically affects the delivery method, it
essentially creates different delivery methods.
For example: with design-build you could hire
a design-builder based on its qualifications or by
providing some level of design criteria. You could
hire a design-builder based on the low bid. These
would be very different, right? However, they would
both be design-build!
When referring to a delivery method, it is
recommended that the method of procurement
be identified at the same time as the delivery
method. (Experienced members of the industry will
typically do this whether formally or not. They will
usually ask the questions to determine the basis of
final selection along with determining the delivery
method.) If not, you run the risk of substantial
differences in the scope of the work and the need
to compare apples to oranges when evaluating
proposals or bids.
Therefore, when referring to design/build, a
clarification of which of the following types being
used is recommended to fully appreciate how the
project is being delivered:
• Design/build—lowest bid
• Design/build—qualifications-based
selection, or
• Design/build best value
Additionally a delivery partner may be
selected based on industry expertise and
experience or perhaps because it can integrate
many aspects of a facilities program beyond
the building itself, such as development of
strategies, site analysis and due diligence,
merchandising and brand communications.
Price
Be very careful with the word “price.” Just
exactly what does “price” mean to you? Total
construction cost, for instance, breaks down
into at least three elements and often more
than three: cost of the work, the contractor’s
general conditions (often referred to as general
requirements), and the contractor’s fee (profit).
If you add the three together you get the total
construction cost, then you add the design fees,
taxes and the balance of the other project costs,
such as equipment, moving costs, and legal fees,
to arrive at a total project cost. “Price” could
mean any element of this total project cost or the
total project cost itself.
Does the price you’re considering include
support during the pre-construction portion
of the project? What kind of support? Are you
foregoing proactive, pre-construction advice from
a team with a track record for giving a periodic
price check to save a small fee? If this results
in additional time to redo bid drawings due to
cost overruns or results in costly changes during
construction what have you saved?
Knowing to which element of “price” you
or someone else is referring is critical to
understanding project delivery methods and to
comparing firms on an apples-to-apples basis or
when evaluating claims made by competitors to
win the work.
Now that you have defined the options
and leveled the playing field, how will you
finally decide?
• Which contracting method best suits our
team’s culture and staff experience?
Objective, self-examination should be
carefully considered when determining project
management priorities and when selecting
a delivery method. Given the size of capital
investment required to initiate real change and
the related investment necessary to support it in
terms of staff expense, marketing cost, etc., many
factors can influence your choice, and should.
First consider staff capability, experience and the
amount of change this is designed to support.
Larger organizations can often support a
qualified individual or team dedicated to complex
facilities issues. For smaller organizations,
however, this expense is just not justified on an
ongoing basis. At these smaller credit unions the
CEO or a key member of the management team
must deal with the process. How many times has
your management team found itself preoccupied
with the day-to-day details of a facility project,
even a relatively simple one, limiting their ability
to effectively stay on top of their “day job”?
Worse yet is the tendency to “make it easy” by
defaulting to past practices. In an environment
of increasingly intense competition, rapidlychanging technology and mounting need for
facilities to support achievement well beyond
traditional transactional demands, applying
great communication skills and organizational
experience to assembling the best team and then
getting the best from it can be your facility staff’s
greatest asset.
Is your project a “one off,” or are you executing
a long-term strategy that may require evolution
or additional flexibility? The complexity of a
new operations center needed to meet existing
demands much less potential future needs, for
instance, will be daunting. Is the project a new
branch or a remodel? While it may certainly
may make sense to approach repairs or building
upgrades using a traditional delivery method
such as job order contracting, more complex
initiatives involving organizational evolution or
even transformation will benefit not only from
specialized team members but can also realize
significant advantages in time and efficiency
when individual expertise is integrated. Ask
yourself “How different is this project from past
ones?” “Is this a typical branch or a new business
model…how much operational and cultural
change is required?”
During a recent prototype process for a
sizable client with a state-wide presence, I
was approached by the VP/operations who
confessed that the last prototype, completed
only recently, was primarily driven by operations
staff with traditional priorities. Developed
with the best of intentions, the branches
nonetheless reflected an emphasis on teller
transactions, workspace and convenience, the
most expensive and least profitable of branch
functions. Over 50 percent of the previous
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prototype’s branch area was dedicated to
back-of-teller-line circulation, break room, and
storage! “It’s no wonder our branches aren’t
performing like we hoped,” the VP confessed.
“We just didn’t realize what we were doing.”
Common assumptions…and
misconceptions—managing risk
There are many common misconceptions
about delivery methods. These typically revolve
around related issues of price and, by extension,
risk. As we discussed above, clarity not only in
terminology but also in expectations is important
to successfully select the right delivery method
for your organization. Perhaps the most common
assumptions surround the protection of the owner
specifically, who bears responsibility for cost during
the design process and then through construction.
Typically, a design-bid-build process will involve
budgeting developed by the design team. Most
owners do not realize, however, that while certainly
familiar with relative aspects of construction cost,
general designers are not cost estimators and the
contract often used by architects specifically waives
any responsibility for cost. This has left many an
owner scrambling when bids come in on a design
already approved by the board or showcased in a
recent member newsletter.
Additionally, in our experience, the cost of
the building itself can be as little as 60 percent
of the total project cost, especially if utilizing
retail environmental design or new technologies.
Equipment, merchandising and messaging,
furnishings, even taxes, bonding and permit fees,
can be substantial. If you have determined that a
design-bid-build process is for you, consider hiring
an independent cost estimator or paying an industry
specialist to develop a comprehensive projection of
program costs. Beware of “free” estimates offered
to win the work. We’re all familiar with the old adage
“you get what you pay for.”
Alternative delivery methods suffer from similar
risks and misconceptions. Many critics of the
design-build model, for instance, feel that the
collaboration of the design and construction
teams is not in the owner’s best interest. The
main fear is that the design and construction
teams will act in their own best interest, and
not the best interest of the owner. The fact is
there are easy ways to combat this fear and still
maintain the benefits of design-build delivery.
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First, ensure that your design-build team will
work on an open book basis. If you structure a
cost-plus or fixed-fee agreement, the profit will be
known to all parties and more importantly, permit
the review of actual costs submitted by suppliers
or sub-contractors. This improves trust between
the owner and the design-build team, allowing all to
focus on the best solutions without the fear that one
solution is preferred over another because it is more
profitable for the design-builder.
Second, ask the design-builder to bid the work
and be a part of that bidding process. Typically,
the design-builder will hire subcontractors for the
majority of the work to be performed. Demand
that the sub-contractors bid on the work and
insist on being part of the bid process. The need
to ensure participation by CU members and
community members owning qualified companies
as well as union labor-related priorities always
comes up. By demanding that procurement of
sub-contracted work takes place in an open,
competitive environment, you eliminate the
potential for favoritism and ensure everyone
qualified gets a fair shot at participation. In
addition, you can interview the sub-contractors
and develop a level of comfort on cost and value
before the final selections are made.
A good team will incorporate this process in
part, for key elements of the project in the predesign phase, giving your management team
the confidence to seek board approval on cost
before spending substantial dollars to develop final
drawings or getting a final commitment on a new
property. When it comes time to establish the final
costs, you will have the confidence that every effort
has been taken to ensure the members will receive
the best value for their investment.
You have defined your team and you
are confident that you have made a good
selection.
• What should you expect from your delivery
partner?
• How will you stay tuned into the project
during construction?
• Have you allowed for the unexpected?
• What if there are savings?
Wrapping it all up
We have examined the importance of strategic
forethought, planning in the pre-design phase
and the need to understand the pros and
cons of various delivery methods. The list of
issues related to project delivery is long and a
comprehensive discussion of every aspect of
design and construction planning is beyond the
scope of this chapter. However, a few additional
considerations our experience has taught us bear
special attention.
Your role
Regardless of the delivery method you choose,
you should pay special attention to your role in
the process. In a design-bid-build delivery, for
instance, the owner is responsible for the design,
independent of construction. While this can
provide a check and balance to ensure quality, it
also makes the owner the arbiter of conflict.
This responsibility is mitigated by construction
manager at-risk due to the early involvement
of construction resources, but the contractual
separation between design and construction
remains. Both owe directly to the owner. Designbuild aggregates these separate responsibilities
under one contract entity but to ensure equity
and value, the owner must participate in key
project phases related to procurement and have
access to the books.
But how will you participate during construction?
During this phase a few things will largely determine
the difference between a successful project ending
with great relationships and a poor experience
fraught with conflict. The first, and often least
considered, is quality site supervision.
Supervision
The nature of facilities projects for credit
unions is such that in most cases, the majority
of the work performed on site will be subcontracted. Organization and supervision of
these various subcontractors and in many
cases the ability to bond them into a cohesive
team can greatly impact quality, decrease
construction time, and eliminate change and
conflict. During the process of delivery method
selection and more importantly during the
selection of a delivery partner, pay special
attention to the individuals to be assigned to
the supervision of your project. Ensuring your
partner is an experienced site supervisor will
give you not only peace of mind but a solid
head start in exceeding expectations.
During the course of construction the build
team will hold regular meetings to coordinate the
ongoing work. This is an excellent opportunity for
you or your staff to stay up to speed. Attending
these meetings allows the team to quickly and
effectively address issues requiring your input. It
also builds a knowledge base for future projects.
Often times, however, projects are remote from
the main office or management team. Consider
a partner well-versed in electronic meeting
technologies and consider the use of remote
Web-based video monitoring cameras. We have
found these tools an excellent means to bridge
distance and provide a 24-hour “watchman.” With
a camera in place, mischief and vandalism are
deterred. On multiple occasions theft has been
prevented. Additionally this technology can be
linked to a Web site to let boards, members, and
management see progress. At project completion
this record can be made into a dynamic fastframe presentation of the project from start
to finish. Visit www.momentumbuilds.com for
examples of this simple but highly effective tool.
Savings and project incentives
Finally, mention should be made about savings
realized on projects. A hard bid-procurement
process establishes fixed cost. Whether at
the general contractor or the sub-contractor
level, the contractor, establishing a fixed cost
assumes the risk of potential cost overage. If
the project documentation is complete and free
from errors, cost overages will result mainly from
the unexpected, or from an underestimate on
the contractor’s part. Establishing contingency
and allocating it to specific unanticipated costs
equitably will mitigate the unexpected in most
cases. Underestimates are, of course, the
contractor’s sole responsibility. But what if there
are savings?
In most cases, unless specifically addressed,
savings will be retained by the contractor as
additional profit, particularly under a fixed-price
scenario. The designer’s role in design-bid-build
as check and balance will ensure that quality is
not sacrificed for the sake of profit (this should, in
fact, be the case regardless of delivery method).
But oftentimes, circumstances and processes
utilized can produce better-than-expected cost
outcomes. Sharing savings through a weighted
arrangement, with the owner typically receiving
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the majority percentage, is very common in
negotiated, cost-plus, or other alternative delivery
methods. The allocation of savings can become,
especially in these alternative delivery methods,
a strong incentive for both the contractor and the
owner to work together to innovate, economize,
expedite or otherwise exceed expectations.
Take for example a multiple-project facilities
program. By selecting an integrated delivery
partner and executing the projects with a
staggered delivery schedule, “prototype”
consistencies can be developed. The contractor
can buy in bulk for multiple sites. Negotiating
sub-contracts over multiple projects, efficiencies
in supervision and management, even the ability
to develop and implement a consistent subcontractor team from project to project, will all
generate value and savings at a surprising level.
Teams gain experience with the project and your
team; they get better and faster and as a result.
Costs go down. In our experience this certainly
happens over time, with experience gained. It
also regularly happens over the course of a single
project.
Finally…
Do you…
• Understand your options?
• Have an implementation plan based on
objective market analysis and solid strategic
insight?
• Understand the delivery and procurement
type that best mitigates your perceived risk,
benefits your community and matches your
credit union’s culture and expertise?
• Understand how the methods influence
the success and speed of your facilities
initiatives?
• Understand your role during delivery?
• Have a process in place to mitigate the
unexpected and incent the entire team?
Answering these questions before diving into
building, alone or with help of expert partners,
can mean the difference between just another
building and a valuable credit union asset
that drives success. Good planning and clear
objectives give you the insight going in necessary
to create a big win for your members, your board
and yourself.
If you have determined that a qualificationsbased selection, construction manager at-risk,
or design-build delivery method is right for you,
discuss savings with your delivery partner. How
can it be achieved? When will it be credited back
to the owner and at what percentage of the total?
Partnering on this aspect of delivery can, and
often does, produce surprising results.
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14
Evaluating the Financial Side
of a Branch Investment
By Glenn Christensen, Managing Director, CEO Advisory Group LLC.
Credit unions are facing unprecedented financial pressures on a
number of different aspects of their operations.
Competition from traditional banks, credit unions and Web banks
continues to intensify. More than ever, credit unions are closely
attuned to their operating expense ratios. They see competing
credit unions entering or preparing to enter their markets. In some
cases, these new entrants are coming to the market with lower
operating expense ratios and the ability to offer a better value
proposition to the consumers in the market.
Additionally, credit unions recognize the advantages increasing asset
size has in driving down costs, yet simultaneously freeing up more
resources to invest in expansion and enhancing member value.
Chapter 14 • Evaluating the Financial Side of a Branch Investment
257
Large-scale mergers have now become a
strategically acceptable way to dramatically alter
the competitive balance in the market. These
mergers instantaneously alter the expense
structure of the credit unions and enhance
their competitive position. As the competitive
advantage is enhanced, the other incumbent
credit unions in the market are under pressure to
rebalance their competitive position.
situation, the recession has caused consumers to
curtail their spending and, consequently, lending
is dropping off and causing loan-to-share ratios
to drop.
As though the long- and short-term changes
in credit union financial structure weren’t enough,
credit unions face an unexpected need to
recapitalize the corporate credit union network,
hampering their balance sheet strength and
earnings ability for years into the future.
These structural and economic pressures have
made it essential for credit unions to analyze
the return on their delivery system investments
and prioritize their investments accordingly.
This chapter describes the tools for measuring
financial performance, situations where financial
analysis can be applied, who is the audience for
financial analysis, and the process for projecting
and evaluating a branch investment.
Pressures for growth are mounting. Many
credit union executives and board members are
frustrated by the lack of growth. Month after
month, year after year, they see their membership
dwindle. As shown in the table, over the last five
years (2003-2008), 54 percent of credit unions
experienced declining membership. Only 11
percent of credit unions experienced significant
growth of five percent or greater. According to
CEO Advisory Group’s 2008 National Credit
Union Growth Study, those experiencing growth
were primarily credit unions investing in branch
network growth.
The intensifying competition has led to a
long-term compression of credit union margins.
Credit unions that were once price leaders in their
markets and had built their business strategies
around this concept find new credit union market
entrants and Web banks have a price advantage.
This is necessitating that credit unions reinvent
their business strategies and financial structure.
As credit unions’ traditional business models
have changed and growth has stagnated, operating
expense ratios have continued to climb as credit
unions reinvest in growth and service initiatives.
The current economic situation has also led to
deteriorating asset quality among credit unions.
Investments portfolios are less productive.
Delinquencies and charge-offs have been
mounting, and the collateral underlying loans
has seriously deteriorated in many markets.
Additionally, the market value of credit unions
investments in headquarters and branches has
fallen in many markets. Further exacerbating the
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Balancing Growth and Expenses
Credit unions are facing a very delicate
balancing act—how to build branches to fuel
growth and enhance market position and member
value, while simultaneously building a long-term
financial structural advantage with a strong
balance sheet and low operating expense ratio.
History has clearly shown that investing in
branches and headquarters can either be like a
ball and chain on a credit union’s performance,
or the springboard that launches a credit union
to a new level. As stewards of a credit union, the
management and board are obligated to ensure
funds are optimized in a manner that is in the best
interest of the membership. Rigorous analysis of
a credit union’s capital investment alternatives is,
therefore, of paramount importance to ensuring a
well-run credit union.
To set guidelines for ensuring a credit union is
well run in terms of facilities and otherwise, credit
union management and the board participate in
annual strategic planning exercises that outline
the institution’s strategic objectives for the
coming years. Management translates the broad
objectives into a series of tactical plans with
supporting programs and capital expenditures.
A critical element of managing this balancing
act is to apply a disciplined and rigorous market
and financial analysis of your current and
prospective delivery systems.
Delivery System Analysis
There are several elements to analyzing your
delivery system network.
Network Analysis
A credit union’s long-term strategic growth
planning efforts should include a network analysis.
This analysis assesses the resource allocation to
various components of your delivery system network.
The Branch Evaluation Matrix below llustrates
one methodology we use as part of a network
analysis. By evaluating branch profitability/growth
relative to market growth, we are able to assess
resource allocation by market.
other branches that needed to be consolidated
and repositioned to align with their target
markets, operating expense goals, and market
opportunities. We established very succinct
performance measures, including increasing the
percentage of profitable members and improving
the retention ratio of the top 30 percent most
profitable segments.
To maintain and enhance their relevance,
credit unions need to analyze and prioritize
their delivery systems. In the less than two
years since the study, the credit union executed
the recommendations, reduced its expense-toasset ratio by 34 basis points and slashed its
expense-to-income ratio by 240 basis points.
Capital budgeting
Financial analysis should be an essential part
of credit unions’ capital budgeting process.
The goal is to prioritize those investments that
generate the greatest long-term benefit to the
credit union. Different measures are used for
evaluating the relative importance of investments,
including internal rate of return, present value,
and break-even analysis. Frequently, a credit
union will establish a threshold IRR and only
consider investments above this hurdle rate.
Many credit unions, especially in today’s
economic environment, are having to ask very
critical questions of their current and future
branch network: Should they:
• close, consolidate or reposition?
• fix?
• invest?
• hold?
We were asked to conduct a strategic growth
study for a $600 million credit union while
simultaneously enhancing its efficiency ratios.
This credit union had an unfocused market and
branching network that had evolved in part over
time due to mergers and indirect lending. As a
result, the credit union had an inefficient branch
network with a resultant high cost structure and
little synergy. Through the network analysis we
were able to identify branches that needed to
be closed in some out-of-state markets and
Consider this example: A $200 million credit
union was the dominant financial institution
in a small town in a rural market. As the CU
had saturated its current market, its continued
growth was predicated on expanding its
geographic footprint. CU leaders asked us to
assist them in developing a delivery systems
strategy to evaluate and prioritize markets and
appropriate delivery systems in the surrounding
communities. We applied capital budgeting
principles in this analysis.
We estimated market potential for each
market. From this we developed demand
scenarios for various deposit and loan
products, based on market demographics,
over a multi-year time frame. This was in turn
used to determine the appropriate delivery
system—ATM, strip mall, free-standing branch,
etc.—and the associated staffing requirements
for serving the projected membership and
their product usage. On the basis of these
assumptions we were able to develop a highlevel financial analysis of each market. The
financial ratios were then instrumental for
prioritizing the markets under consideration.
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Capital analysis tool
Credit unions use a variety of tools for
evaluating capital expenditures; you’ll find
the most common methods in the Capital
Expenditure Analytical Tools exhibit. These
tools can be utilized for any capital expenditure
analysis facing the credit union, whether it be
a new headquarters, branch office or a new
information technology system.
The objective of these tools is to help the credit
Capital Expenditure Analytical Tools
Tool
Pros
Cons
The time required to achieve breakeven
status is often used as a parameter of
determining feasibility of investment.
This approach focuses on the point
when operating expenses are offset by
operating income. This tool is commonly
used within the credit union industry to
assess branch performance.
• Simple to measure and easy
to explain
• Indicates a project may be
subsidized only on a limited
basis before requiring it to
become self-sustaining
• Easier to achieve hurdle for
acceptable performance
• Analysis does not consider the
initial investment size.
• Since even large initial
expenditures are not
factored into the analysis,
the opportunity cost of the
investment are missed.
• Requires other investments
to be earning substantially
higher rates of return in order to
generate acceptable financial
performance for the credit
union.
Payback
Period
The payback period considers the length
of time it takes to pay back the initial
investment. Thus a $500,000 investment
earning a net positive cash flow of
$25,000 a month would take 20 months to
replenish the initial cash investment.
• Captures how long it would
take before the capital could
be put into productive use
in another investment
• Easy to calculate and
manage
• Does not effectively compare
relative return of investment
alternatives—an investment
with a longer payoff could
have significantly higher
returns but the cash flows
occur later in the cycle
Benefit/Cost
Ratio
Compares the financial benefits of an
investment to the costs of the investment
as a ratio. Projects can be selected on
the basis of the highest benefit/cost ratio.
The ratio is computed by dividing the net
benefits by the investment cost.
• Commonly used method
within industry to evaluate
expenditures
• Simple to administer
• Evaluates the relative
benefit of an investment
• Does not account for the
timing of cash flows
Analyzes the net income generated by
the investment divided by the assets
deployed. For a branch office the
numerator would be the sum of cash,
investments, loans and fixed assets.
Occasionally credit unions use the
deposits as the numerator in this ratio.
• The most common ratio
used to judge a credit union’s
financial performance
• Easy to interpret the return
relative to the overall
performance of the credit
union
• Does not reflect the lifetime
return on the investment
• Does not isolate the return to
branch investment
Internal Rate
of Return
Cash flows from the investment are
calculated to determine the internal rate of
return. The investments with the highest
rates of return are selected.
• Allows comparative
evaluation of investment
opportunities
• Focuses investments on
highest-return categories
• Does not explicitly account
for relative risks of investment
alternatives
• Can be more complex to
calculate
• Slight changes to the
terminal value calculation can
drastically alter results
Net Present
Value of
Investments
Evaluates the present value of cash flows
discounted by a risk-adjusted factor.
Investments with a positive net present
value are acceptable.
• Shows the dollar return of
investment
• Accounts for risk profile of
investment
• Does not show relative
return of investments—larger
investments should have
higher returns
Evaluates the impact of an investment
directly on a credit union’s financial
statements.
• Easy to see impact on
financial statements and
performance ratios
• Easy to test impact of
interest-rate sensitivity or
performance under varying
economic circumstances
• Does not isolate investment,
making success difficult to
assess
• Does not factor in time value
of money
Time Until
Breakeven
Return on
Assets
(Return on
Deposits)
Net Income
Simulation
260
Description
union’s leaders allocate resources to the investments
offering the greatest potential of meeting the
investment criteria established by the board. Credit
unions may select the proposals with the highest
rates of return until their available capital pool has
been expended. Alternatively, a credit union may
select all investments above a minimum rate of return
or that break even within a specified time frame.
Applying Financial Analysis
Credit unions’ investment decisions must be
made within the context of the overall financial
performance of the credit union. How will a credit
union’s financial ratios be impacted? How will ROA
look after the capital expenditures? Will the credit
union exceed the fixed-asset ratio allowable by the
National Credit Union Administration? Does the
credit union have sufficient liquidity, or are its assets
tied up in long-term loans and investments? Does
the credit union’s excess liquidity enable it to have a
low opportunity cost of capital, thereby enabling it
to improve its financial performance by moving from
a lease to a capital investment?
New branch
Financial analysis and capital budgeting can be
applied to a variety of different circumstances. The
most significant opportunities for analysis are IT and
facilities related. Following are a few of the types of
delivery system analyses that we have encountered.
New branches are multimillion dollar
expenditures in capital costs and operating
losses. Surprisingly many credit unions do
not complete a financial analysis or conduct a
very cursory financial analysis. Consequently,
poor decisions often result, with the credit
union experiencing protracted negative branch
earnings.
Frequently, we hear the frustrations of CEOs as
their boards of directors begin second guessing
the investment decisions, anxious to see more
immediate returns. One credit union engaged us
to help reshape expectations with its board by
performing a comparative analysis of the new
branch relative to incumbent credit union and
bank branches as well as start-up branches in
similar markets. Much to the delight of the CEO,
this analysis highlighted that the new credit union
branch was outperforming peer branches in the
market. However, this was a situation that could
261
have been averted altogether with a more robust
financial analysis based on solid market data.
An in-depth financial analysis accounts for
market dynamics, capital expenditures and
financial operating characteristics of the credit
union. A thorough analysis provides performance
ratios, such as break-even, IRR and NPV. A
sensitivity analysis, changing key variables in your
analysis, can then be performed using the model
to determine if the performance ratios fall within
an acceptable range. Credit unions generally
look for a three- to five-year break-even on their
branches and a return on investment exceeding 8
to 12 percent.
The results of this analysis may suggest
changes to some of the key variables. For
instance, is the credit union overbuilding relative
to the capacity of the market? Is the credit union
better off buying rather than leasing the facility?
Will the higher cost of a strong retail location on a
main thoroughfare be offset by increased visibility
and resultant higher demand for products?
credit union would partially terminate its existing
headquarters lease, maintaining only limited
branch operations. However, with the new HQ
facility, the credit union’s fixed asset ratio was
over 20 percent, significantly above the regulatory
threshold of 10 percent.
The new headquarters building was 45,000
square feet with retail and office space costing
in excess of $12 million. This investment would
increase the credit union’s fixed assets-tounimpaired capital ratio to over 20 percent. Key
to gaining regulatory approval was the existing
revenue flow from existing tenants; the building
was 85 percent leased. The alternative for the
credit union in this market was leasing facilities in
accordance with its future space requirements.
The analysis strongly supported the purchase
alternative, which generated a net present value
$3.8 billion higher than the lease alternative.
Ultimately the credit union achieved regulatory
approval to purchase the building.
Alternative delivery systems
Branch expansion
A branch expansion can involve a significant
expenditure and should be analyzed for its
impact on branch performance. Occasionally,
the branch expansion will include a sublease to a
third party until the credit union reaches capacity
and needs to assume the additional space.
This lease income stream helps to offset the
new construction costs. A key part of a branch
expansion analysis is the incremental business
that can be generated as well as the potential
appreciation of the property.
Investments in alternative delivery systems,
such as ATMs, kiosks, Web sites and home
banking, should be evaluated by credit unions.
Often we see credit unions that have not
stated goals and performance metrics for their
Web sites. Thus, the board and executive team
often fail to recognize the full, quantifiable value
of these sites. And, resultantly, Web investments
are not viewed on an executive level as a channel
for optimizing revenue streams. As a result, Web
site usability, content, design considerations, and
marketing are not evaluated from the perspective
of return on investment or break-even.
Headquarters facility
Headquarters facilities represent the largest
capital expenditure credit unions incur. As
outlined in the Chapter 7, the space planning
analysis in a headquarters construction or
acquisition often leaves the credit union with
excess space to accommodate future growth.
Often these costs can significantly impact the
credit union’s fixed-asset ratio, occasionally
causing the credit union to exceed the regulatory
fixed-asset ratio threshold, as was the case in the
following example:
We were engaged by a credit union to assist
in developing a business plan for acquiring
a headquarters facility and improving it to
accommodate operations and a retail branch. The
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Financial Analysis Stakeholders
A financial analysis provides credit union
stakeholders the opportunity to unite around a
common goal. The analysis creates a shared
understanding of what drives profitability.
Failure to perform an insightful and reasonable
financial analysis can cause unrealistic
expectations. We hear of CEOs lamenting their
boards’ and regulators’ dismay with the pace
of branch growth and profitability. Boards and
regulators that have become accustomed to high
earnings and strong capital often begin second
guessing when earnings drop and capital ratios
begin to erode as credit union growth accelerates
with these capital investments. Unfortunately, the
failure to fully communicate the impact of strategies
on short-term financial performance has led to
the dismissal of many CEOs through the years.
This is why we find it particularly important that
the credit union isolate the investment decision
from economic fluctuations, such as heightened
charge-offs and interest rate spikes. Credit union
CFOs should test their investment decisions under
different interest-rate scenarios.
The typical audience for the financial analysis
includes the board of directors, CEO, CFO,
executive team members, marketing, branch
management, consultants and regulators. Branch
management should have a clear understanding
of the goals for the branch and performance
measures aligned with branch profitability.
How – Building a Financial Analysis
A key part of a financial analysis is solid and
conservative assumptions. These assumptions
should be data driven so all the stakeholders
can understand and support the assumptions. A
reasonable timeframe should be established for
the analysis. In our engagements we typically use a
seven-year timeframe. Following is a basic analysis
for evaluating branch financial performance.
Market analysis
The first step in a market analysis is to define the
geographic region. Typically, we define the market
area of a branch to be in a three- to five-mile radius.
Depending on density and travel patterns, the
market area can be either larger or smaller.
The next step in the process is to size the
market in deposits and loans. Usually this can
be done on an aggregate basis, as detailed in
Chapter 3, “Strategic Branch Planning.” However,
you may want to apply more detailed information
than was performed in the preliminary market
analysis. This may be particularly relevant if your
credit union is serving a targeted market.
Competitor analysis
In this phase of the analysis, you will want to
understand the total deposits held by bank and
credit union branches in the market as well as the
number of branches. This provides the average
deposit per branch.
Additionally, the growth rate of deposits
in the market should be estimated. Historical
market growth provides a reasonable measure
of anticipated future growth. In evaluating the
market, consideration must also be given to
future entrants into the market. We typically
estimate the number of new branches that will be
opened in the market area within the seven-year
timeframe under study.
Armed with this information you now have a
reference point for what a reasonable branch size
would be in seven years. If the market grows by
six branches to a total of 20 branches and $800
million in deposits, will the credit union branch be
able to capture a proportionate share (5 percent
and $40 million) in seven years? Is a 5 percent
market share a reasonable goal? The credit
union’s experience in similar markets will help
validate this assumption.
263
Household & member analysis
You will want to understand the number
of households in the market as well as the
growth rate of new households and, if relevant,
employment in the market. These planning
projections can be obtained from local agencies
or consultants. These are households that
are likely making decisions on their financial
relationships. In addition to estimating net new
household growth, it is important to estimate, on
an annual basis, the number of households that
are in a decision-making mode with respect to
their primary financial relationship.
With this information in hand, a credit union
can estimate the market share of potential
new business on an annual basis. Additionally,
an estimate must be made of the number of
members in the market that would transfer their
business to the new branch.
The market demographics provide valuable
information on the future mix of loans and
deposits at the new branch. Together with the
membership growth, the deposit and loan profile
provides your credit union enough information to
project share and loan balances for the branch.
Financial assumptions
The credit union will need to make financial
assumptions in several key areas, including
capital expenditures and depreciation, occupancy
costs, staffing, other expenses and key financial
ratios, to project the branch balance sheet and
income statement.
There are generally four major categories of
depreciation for branch capital expenditures, which
include land, building costs, fixtures and branch
equipment. The land does not incur depreciation.
When acquiring land and projecting land costs,
the analysis should assume there is sufficient
land to accommodate the projected staffing well
into the future.
Branch facility size can be estimated on
the basis of space requirements to support
the projected staffing. Many credit unions are
264
suffering from having overbuilt relative to staff
requirements and member demand. Branch size
generally ranges from 350 to 450 square feet per
staff person.
In performing a financial analysis, one
must also estimate the increase or decrease
in the market value of the property and its
improvements. The market value becomes
significant when estimating the terminal value in
present value calculations.
Once membership projections have been
established, staffing levels and associated
costs can be projected. A variety of methods
can be used. A common one is to base staffing
assumptions on productivity ratios of members
per staff using a combination of industry
averages (such as those published in the CUES
Staffing Manual—see Resources section at the
end of this book for details), historical trends at
the credit union and standards that have been
established at the credit union. Alternatively,
credit unions with strong activity-based costing
(read more in “Learn the ABC Basics”—see
Resources section at the end of this book for
details), can use the more precise estimates of
man-hours to open accounts, book loans and
service accounts. Credit unions typically have a
minimum staffing requirement for branches. Once
the credit union grows, new staff are projected
based on productivity ratios.
In estimating staffing, credit unions will
frequently assume they are able to achieve
efficiencies over the planning period. Changes in
consumer behavior toward new access methods
and centralized lending initiatives are likely to
improve the member-to-staff ratio over time. New
product offerings, such as financial planning,
insurance sales, auto brokers and mortgage
lenders in the branch, could work to offset some
of the efficiencies being realized with credit union
core services.
Salary and benefits for branches can easily be
obtained if the credit union uses branch accounting
(read more in the CUES Branch Profitability
Series—see Resources section at the end of this
book for details). Alternatively, some credit unions
have a structured staffing template they apply
to each branch, which provides a very reliable
estimate of branch staffing costs. Other credit
unions may wish to utilize industry standards.
Marketing expenses are a cost often ignored
in branch financial projections. Often marketing
expenses are accounted for out of the general
marketing budget. However, it is important to
earmark marketing expenses for activating a new
branch. The branch launch event is of particular
importance. Many credit unions have failed to
recognize the importance of this event and never
gain momentum for their branch.
A strong branch accounting system will
provide significant insight into projecting fee and
operating expenses. Alternatively, most income
and expense categories can be projected by
calculating a ratio. Income/expense from another
branch can be divided by a driver, either member,
staff or deposits, to establish an income/expense
ratio. This ratio can be multiplied by the driver
(i.e. member, staff or deposits) for the branch to
establish the income and expenses.
Occupancy expense should reflect the
depreciation or lease expense of the new branch,
plus the costs of occupancy.
Evaluating the capital expenditure
The objective of this stage of the analysis is to
assess whether the expenditure for a new branch
is justified. The board and management will use
a variety of criteria to arrive at a decision. Of
paramount importance is the projected financial
performance of the branch and credit union.
Several benchmarks and analytical tools can be
used to evaluate the strength of an investment.
At a minimum, credit unions have a strong desire
that their investment in a branch will not be a
drain on their overall financial resources.
Risks and rewards
Because branching entails many risks, the
choice to invest should be made when the
rewards of the investment exceed the risks. The
rewards of branching are abundant, yet many of
these rewards are intangible. Credit unions strive
to serve their members as well as the bottom line.
As an alternative to high dividend payments, the
credit union may elect to offer members branch
convenience. In the end, this will likely result in
higher use of credit union products and more
members, which both can easily be converted
into economic rewards.
A financial analysis contains numerous
assumptions. The credit union’s actual
performance is certain to deviate from the
assumptions in the plan. The factors that can
most significantly impact the branch performance
include:
• compression of the interest margin due to
changing interest rates;
• higher charge-offs;
• competitive response from incumbent
banks or the possible entry of other financial
institutions into the market; and
• not reaching membership or product usage
targets due to poor market selection,
poor location selection, and/or poor
implementation.
Most of these risks can be modeled in
advance to test the impact on the credit union’s
performance. Performing this analysis allows
management to implement strategies to minimize
risks. A thorough financial analysis provides
management the detailed information needed to
ensure the best chances for success.
Management should use capital analysis tools
to evaluate the strength of the investment. Does
the branch investment reach the break-even
point within a desired timeframe? What is the net
present value of the investment? Is the internal
rate of return above the hurdle rate?
265
266
15
Case Studies in Retail Branch and
Operations Facilities Solutions
A fair question to ask after reading all these chapters about
strategic planning and design for branches is “What are the results
of applying these strategies, tactics and design methodologies to
retail branching and operations occupancy needs?” In this chapter
we will present a number of short case studies—direct from our
client files—for a wide range of credit unions across the country
and into Canada and Guam.
While fields of memberships, regions, populations, cultures,
asset size, capital, and origin of these credit unions may vary,
they hold a common characteristic. They all were willing to look
closely at their situation, brand image, threats and opportunities,
and risk change. The result for every one of these credit unions is
enhanced market and branch productivity and efficiency, elevated
brand image and significant differentiation, improved operations
occupancy, attraction and retention of the best staff, increased
member use of products and services, and new member growth.
Chapter 15 • Case Studies in Retail Branch and Operations Facilities Solutions
267
The level of work for these credit unions
depended on their immediate and long-range
needs and may have included branding, name
changes, strategic growth, branch or operations
planning, development of merchandising and
messaging standards, creation of new branch
prototypes and application to specific and
multiple sites, operations facility planning,
construction management, site acquisition, and
due diligence services and measurement. Many
of these credit unions we started working with
five, 10, 15 or 20 years ago and we continue to
work with them today, helping them to apply the
branching and operations occupancy strategies
and navigate the full range of market, facility, real
estate and merger issues.
268
Case Study
Red Canoe Credit Union
Puyallup, Washington
Honorable Mention
Chain Store Age
magazine Retail
Stores of the Year
Situation
This credit union (formerly Weyerhaeuser Employees’ FCU) had
recently taken on a bold, new, Northwest-inspired name and brand.
With a name not to be forgotten, it needed a new retail branch identity
that was equally as memorable.
Description of work
EHS and Weber Marketing Group developed a new prototype and
business model to support the new brand and identity. Inside, strong
elements include a “grove” of birch tree lined up near the waiting area
and palette that incorporates its namesake red along with pale icy blue
to create a distinctive modern Northwest feel—different from any
mega bank.
Retail merchandising and signage support key products and services as
visitors are greeted by a “host” upon entering.
The exterior plays off the curvature of a canoe and creates a unique,
branded element that can be incorporated into all future branches.
In addition to developing this award-winning branch prototype, EHS
provided building architecture, interior design, and subsequent roll-outs.
Benefits
EHS Design created a retail environment that breaks down the real
and perceived barriers of a traditional teller line, enhances the member
experience, and captures the Northwest spirit of the Red Canoe brand.
Each new Red Canoe branch utilizes regionally appropriate materials
in subtle, non-traditional ways. A combination of dry stack stone,
heavy timber, and stucco creates a textural building exterior that
transitions seamlessly to an interior that is as untraditional as it is
refreshing.
“We are thrilled with the functionality and
unique design created by EHS Design. They
have allowed us to provide convenient service
through a lively atmosphere with modern
appeal. Our members have responded
favorably toward our branch design and
interior finishes. Our 16-year relationship with
EHS Design continues to pay us dividends.”
-Bob Kane, CEO
EHS Design, Inc. T 206 223 4999 W ehs-design.com
269
Case Study
fibre federal Credit Union
Longview, Washington
Situation
Fibre FCU was out of operations space and needed a strategic
operations plan to accommodate its short- and long-term needs. EHS
Design analyzed all options, pros, and cons to develop a plan that
called for a new headquarters that would generate lease income and
provide expansion opportunities well into the future. A location was
found across the street from the existing branch and operations center.
Description of work
EHS and design-build firm Momentum carried out the design and
construction of a new three-story headquarters building and campus.
The 40,000-square-foot building’s upper two floors accommodate
Fibre’s operations center and leaves the remaining ground floor
available for lease as “A” grade retail and office space.
The environment indoors, air quality, and convenience for employees
and members acted as a yardstick throughout the planning and design
process. Throughout the design and construction, green strategies
included: a 90% daylight approach during construction, reusing
existing site materials, recycled disposal of demolition debris, locally
sourced sustainable materials, and environmentally friendly finishes.
The building features a sophisticated HVAC system to maximize
indoor air quality, and the
“Our employees are ecstatic
exterior has water-efficient,
low-maintenance landscaping. about the new building and it
Benefits
gives a big return back to our
members in positive outlook.
And, people are proud of
having a showpiece building
downtown.” -Larry hoff, Ceo
The new operations center is
a renowned success for the
credit union, its employees,
and members. They are proud
of the building describing it as the “nicest building in town.” It's a
win for all—it centralizes operations, enhances the staff and member
experience, and helps to revitalize the downtown area. It provides
a long-term expansion space for the next 20 years while generating
lease income and lowering operating costs in the short term. The new
Fibre facility just won a Best Practice Award from the Credit Union
Journal; because it demonstrates environmental sensitivity, thoughtful
planning and design, and benefits the surrounding community.
270
Case Study
gov’t of guam employees federal Credit Union LeeD® candidate project
Maite, Guam
Situation
The credit union had grown out of space for its headquarters and hired
EHS Design to complete a full strategic operations analysis of options.
Since completing the strategic and space planning, full architectural
and interior design services are underway for a new, expanded
headquarters and flagship branch on a 3.7 acre site. This progressive
credit union is located on the small island of Guam with limited
resources, so they wanted to build a new green headquarters facility
with the goal of attaining LEED® certification.
Description of work
Leading a team of architects, interior designers, engineers and a LEED
consultant, EHS Design developed a green basis of design for the
facility that includes key sustainability features such as maximizing
natural daylight and minimizing the heat effects of the tropic,
harvesting water for irrigation, and reclamation of site materials,
all of which are common score card items. But implementing them
on an island, in the middle of the Pacific, in a tropical environment,
7,000 miles from Seattle, where the only local material is concrete,
has posed a unique set of challenges to the design team. Among
them are: designing to withstand typhoon-strength wind loads of 170
MPH, using concrete for the structural system, integrating HVAC
systems and features that manage tropical parasites and incredibly high
humidity, and considering sun angles in managing light energy.
Specific green features will include: permanent exterior sunshades
to reduce heat gain and maximize natural daylight; a 50,000-gallon
rainwater cistern for irrigation; a central atrium to maximize daylight
to the interior of the building; a “green roof” to reduce the heat-island
effect; and exterior lighting designed to limit nighttime pollution.
Benefits
The high performance building is expected to achieve an overall
30% energy savings due to high-efficiency mechanical and electrical
systems. The Guam headquarters aims to become the island’s first
to achieve LEED certification; it will thereby transform their brand
and community position. It will instill pride and demonstrate an
environmental responsibility to the employees, members, community,
and island—and the future.
271
Case Study
north Shore Credit Union
Seymour Parkgate Branch, Vancouver, British Columbia
Situation
This multi-billion-dollar financial institution located in Vancouver,
B.C. wanted a branch experience so distinctive as to be unrivaled by
any other in Canada or the U.S. It needed to translate its brand focus
on “Member Wellness” into a truly unique and dynamic retail branch
environment that connected with its Vancouver-area target market’s
community and lifestyle.
Description of work
The result is a “West Coast Financial Spa” or “iBranch” a breakthrough
branch prototype and new business model that complements the
many ways the credit union improves the quality of members’ lives.
Upon entry, a “concierge” greets and welcomes members and ensures
they are directed to the most appropriate person, creating a personal
and intimate member experience that supports a five-star service
experience.
a financial
wellness
destination
It creates a distinctive brand image that reflects
a dynamic West Coast, Vancouver lifestyle with
subtle Panpacific hints. Traditional tellers are
eschewed for “teller pods” in front of a zen bamboo forest wall with
plasma screens. It provides the service quality of a spa combined with
the ruggedness of the local environment—a truly different banking
experience. The latest Seymour Parkgate branch evolves the “iBranch”
concept to a new level. Artisan crafts are placed on display to support
local artists and craftsmen in the community.
Benefits
The fresh and vibrant concierge-style approach helps to bolster North
Shore’s standing as a premier boutique financial institution on the
West Coast delivering comprehensive and highly tailored financial
solutions and advisory services.
“The design has enhanced our members’
experience by allowing us to address their
financial needs at all levels, from daily
transactions to investment advice, in an
environment that is at once innovative,
imaginative, informative, inspiring, and intimate
as it takes our iBranch concept to a new level.”
fred Cook, Chief information officer.
272
Case Study
Columbia Credit Union, LeeD® gold
Washougal, Washington
Situation
Already eco-conscious, Columbia CU sought to go a deeper shade
of green with its branches. They wanted to take the lead in building
the first-ever LEED certified branch in its community that would
ultimately benefit employees, members, and the community—
while setting them apart as a distinctly “green” financial institution.
Description of work
As its architect and interior designer for over a decade, EHS Design
developed a new green prototype for each branch to achieve the
certification goal of LEED Gold. The Washougal branch is just the
first of multiple rollouts to follow.
The protoype design leverages the abundant local resources;
harvesting the abundant Northwest rainfall, maximizing natural
daylight with an iconic pyramid skylight, and interacting with
the temperate climate through auto-sensor controls and operable
windows. A cistern collects rainwater for reuse with irrigation and
non-potable indoor plumbing. Other green features include: a
high-efficiency HVAC system; innovative stormwater management
with pervious concrete; FSC-certified lumber floors; and low to
zero VOC paints, finishes, and flooring. Overall, a whole array
of interior design features and component specifications are
responsive to the sustainable
“We’ve created a healthy
strategy for the facility.
Benefits
environment for our members, a
productive atmosphere for staff,
and invested in a sustainable
future that benefits everyone.”
-Parker Cann, Ceo
The long-term savings are
significant; each branch will
save up to 13,500 gallons of
water and 50 percent in energy costs each year. By gaining LEED
certification, it shows they’re not just “saying” their branch is
green, but they have rigorously documented and proved it. As the
area’s first green branch, the credit union has garnered much local
attention and interest from the community. The green story has
added an important dimension to their brand in the community.
The Washougal branch recently won a Community Pride Design
Award for being an outstanding building that enhances the
livability of the local Clark County community.
273
Case Study
arizona Central Credit Union
Phoenix, Arizona
Situation
Having served families across Arizona for the last 60 years, this fastgrowing credit union was adding an eleventh branch location to a
new leased site in Phoenix. Its current network of branches serving
eight different communities were a mismatched collection of looks,
styles, and layouts that did not truly represent the credit union’s brand
or support a sales environment. The new lease space and branch
provided a key opportunity to start from scratch and develop a new
prototype and business model that could then be applied across its
branch network as it continued to expand throughout the state.
Description of work
EHS Design and Weber Marketing Group collaborated with the
credit union in a one-day charrette session to create a new “look and
feel” and business model for the new branch that could be used as a
go-by for all future branches. The Phoenix and Arizona region helped
influence the color palette and material choices along with an “Active
Southwest Lifestyle” concept. The logo tagline, “For Every Stage of
Life,” is woven into the merchandising and the design as a progression
of stages that visitors experience walking along an engineered path in
the branch.
The logo’s stepped cubes are subtly used throughout the design of the
new space and within the merchandising displays. The Information
Center, a suspended three-dimensional cubic display, showcases the
credit union’s community and charitable work for organizations like
the Children Miracle Network.
Benefits
The branch went from a transaction based model to a new retail
relationship model that looks and feels modern and professional.
The merchandising, branch design, and layout all work cohesively to
support a savvy and professional credit union that reminds visitors
of the service offerings it provides--creating a true retail experience.
New private offices help provide increased privacy to support member
services and products, and a greeter station welcomes visitors upon
entry. The new professional-looking color palette and design now
provides a consistent image and business model that can be applied to
all its branches.
274
Case Study
air force federal Credit Union
San Antonio, Texas
Before
Situation
Air Force FCU had outgrown its 30-year-old headquarters on Lackland
Air Force Base (LAFB) and was facing increased visitor restrictions due
to heightened security. They needed a facility operations occupancy
plan that would meet their space needs for the next 5-20 years, be
conveniently located, and prove to be a profitable financial investment
in the long run. The new facility needed to handle a round-the-clock
international call center; host meetings; improve productivity and
morale; and support the brand, values, and mission of the credit union.
Description of work
EHS Design developed the projected growth and space standards
required for the credit union’s operations; then analyzed various
options to buy, lease, and build before the client purchased a
property 20-minutes off the base that would provide leasing revenue,
convenience, and room to expand. EHS provided due diligence,
programming, architecture, and interior design to re-adapt one of the
site’s warehouses into a new sophisticated headquarters operations
center. A partial second-floor mezzanine was expanded into a full
30,000-square-foot floor to house the new headquarters and operations
center, reserving the first floor’s 30,000 square feet for leasing. A
complete interior and exterior concept was implemented integrating
sustainable design practices, lighting, furniture, ergonomics,
technology, building systems, and exterior brand enhancements.
Benefits
The new operations headquarters provides a good short- and longterm return on the investment. The feedback has been overwhelmingly
positive from the employees. Air Force FCU’s Bob Sherwood describes
it best saying:
"Interdepartmental synergy, cooperation,
and cohesiveness have increased
exponentially, employee morale is higher
than ever, and productivity is off the
charts—all attributable to the efficiencies
and comfort provided by the superb
environment created by EHS Design."
-Bob Sherwood, evP/Coo
275
Case Study
aloha Pacific fCU
Honolulu, Hawaii
1st Place Winner
CUNA’s Diamond
Award - Retail
Merchandising
Situation
Aloha Pacific FCU serves city and county employees and their families
in Honolulu. It was facing strong competition from banks and credit
unions vying for these same households. In order to maintain growth
and competitive positioning, it enlisted the services of EHS Design and
Weber Marketing Group to create a new, highly productive branch
business model and prototype. It sought a distinctive branch that was
unlike any “Mainland” branch and embraced the unique values and
needs of its target members. The new branch environment needed to
embody its brand statement “Building Lasting Relationships.”
Description of work
Several key concepts helped to drive the new branch model and
environment including: a local “Ohana style,” innovative, comfortable
and professional, a club feel, and a focus towards the creation of an
intimate “living room” that embraces a multi-generational family
structure. A new branch model was developed to deliver familystyle service that values relationships for now and future generations
of Hawaiian families. A new member experience was created that
shifts away from old teller services; replaced with new, high-visibility
advisory services via Kalabash Financial private offices, Remote Teller
Systems, and “concierge-style” quick service desks.
An “Ohana-style” interior scheme and merchandising concept were
developed to reflect a traditional Hawaiian style re-interpreted into a
modern new style for the 21st century. Warm, medium-tone woods,
lava rock, and board-and-battan interior walls are mixed with modern,
life-size branded merchandising feature walls, plasma-TV-driven
video communications, and new Web and cash delivery technologies.
Benefits
The new, branded branch is a bold, high-service environment
with an intimate Hawaiian feel - not typical of mainland banks
and is a memorable, distinct difference from competitors. The
new coordinated merchandising program and interior signage
program make the member experience and flow within the branches
easy, logical, and supportive of a full-service, multi-generational
relationships. The new branches promote an increased member
use of key products and services, technologies, loan products, while
supporting member and staff satisfaction.
276
Case Study
our Community fCU
Shelton, Washington
Situation
With a headquarters location in downtown Shelton, Washington
no longer satisfiying its growing operations needs; Our Community
Federal Credit Union required additional space. It also wanted to
serve the branching needs of the critical North End market and
maintain a presence in the city’s downtown core, but found the
downtown costs and land availability prohibitive. Therefore, a site
was selected in the rapidly growing north end retail market, to build a
facility that could support the 15-year operations needs. This location
provides a tremendous opportunity to build a strong community
presence, identity, and provide convenience to members with a
location near major regional shopping with convenient access to Hwy
101. Visually, the new Mountain View Branch required a design
that would stand out from the sea of surrounding “big box” stores;
expressing its quality brand and care for members and the community.
Description of work
EHS Design designed the new 16,053 square foot full-service
Mountain View Branch with four drive-through lanes, a walk-up
ATM, a night drop, call center, training offices and facilities, and an
investment and mortgage center. It provides expanded services to
members, and is designed to to accommodate additional office space
for possible future expansion.
It has large windows, to let the community in; uses easy-to-maintain
materials; and enjoys full-integration with outside landscaping and
systems. Through high-quality materials and design the new branch
makes a strong statement about its long-term commitment to the
Shelton community.
Benefits
CEO Joe Robertson sums it up best in this letter of thanks:
The EHS Design ProsAnother first-class job and experience working with all of you.
We are “the talk of the town” because of the beautiful building – it
is viewed by city leaders as a great first impression of our town
when people enter our city from the north end. Thank you for
everything.
-Joe Robertson, CEO
277
Case Study
north Shore Credit Union
Vancouver, British Columbia
Situation
The “Thinking OUTSIDE the bank” tagline captures the innovative,
progressive spirit of this financial institution. It’s no surprise that
they were looking for a branch so distinctive as to create a financial
experience unchallenged by any other branch in Canada or the U.S.
Furthermore, the new branch concept needed to reinforce its strong
brand; connect with target members and communities; provide
a highly productive business model. The idea was to create an
engineered member experience that creates top-of-mind awareness
of products, services, and alternative delivery systems; help make staff
successful; delight members; and increase ROI in measurable ways.
Description of work
EHS Design and Weber Marketing Group developed a new branch
business model and prototype and merchandising vision and program.
The resulting approach was a hospitality-style of service focused on
creating “Member Wellness” more akin an intimate, tailored West
Coast spa - rather than an impersonal, mega-bank. The environment
celebrates the unique beauty and powerful identity of the region
and the ways NSCU is working to improve the quality of member’s
wellness on several levels.
The exterior and interior environment transition to create a warm and
vibrant sense of hospitality. A 3-D engagement wall functions from all
four sides - projects through the window wall to the outside to present
NSCU’s image into the community while providing flexibility for
messaging, graphics, and technology and creating visual interest in a
new way for members entering the branch.
Benefits
The new dramatic concierge-style approach delivers a personal and
intimate member experience - that bolsters NSCU’s position as the
premier, West Coast financial institution tailored to its members.
When members enter they feel a sense of familiarity and welcome
tailored to them - unlike any other.
278
Case Study
Before
Sf Police Credit Union
San Francisco, California
Situation
SFPCU was growing well in the Bay Area from their one headquarters
and branch facility in north San Francisco. Their asset growth projects
coupled with the addition of new products and services required
expansion. They could not expand their existing facility due to
extremely tight zoning and building codes. Additionally, their existing
building did not express the desired brand image in the most positive
way. They wanted to understand how to make their existing building
more efficient and significantly improve the exterior image while
gaining a new highly-productive branch environment.
Description of work
EHS Design was asked to analyze their existing markets for branch
expansion and to gain an understanding of the member’s relationships
with the credit union. Analysis was also completed to determine the
most effective use of their existing building and small sites nearby.
Our work resulted in a strategic operations and branch occupancy
plan for the next 5, 10, 15, and 20 years that was approved by the
board. We then created a new exterior brand image that expressed
the savvy nature this strong financial institution, connected with
members’ values and interests and fit perfectly within the surrounding
community
Benefits
The new headquarters received great reviews from the membership,
staff, police department, and community. The credit union gained
a more efficient operations facility and the branch received a
significantly more productive service and sales environment.
279
Case Study
Catholic Credit Union
Yakima, Washington
Situation
Catholic Credit Union was out of space in its existing headquarters and
main branch. With a growth rate of 7-10% per year, Paul Regimbal
knew they needed to invest in a new headquarters and branch that
would serve its needs for the next 15-20 years. CCU also needed a new
image that would position it as a premier financial institution in the
region, express its commitment to the members, community, and city,
and convey its understanding of members’ interests and needs.
Description of work
EHS Design reviewed member and household account relationships,
the competition, member surveys, and the target communities to
determine what CCU’s position and most productive brand image
should be. This research and work led to the acquisition of a strategic
market location and the design of a new 24,000 sq. ft. headquarters
building.
Benefits
The new headquarters building has won acclaim from members, staff,
the board of directors, community groups, and city officials for its
strength of identity, positive community presence, quality appearance,
and high functionality. CCU is positioned to serve the needs of its
members, both now and in the future.
A few years after the headquarters completion, CCU sought to
expand its market presence into Ellensburg, WA with a new 5,000
sq. ft. branch consistent with the brand and image developed for
the headquarters. The new branch was designed as a smaller-scale
rendition of the successful headquarter’s image. It has won high
acclaim in the community, and is positioned to capture high market
share and grow target membership throughout the region.
280
Case Study
yolo federal Credit Union
1st Place Winner CUES’
Golden Mirror Awards
Davis, California
Situation
YFCU was starting a branch expansion program. The existing image
did not effectively represent it in each of its communities and was
not communicating its evolution toward a very savvy, professional
financial institution. Configuration of the branches drove efficient
transactions but lacked strong member development characteristics
or tools. Additionally, the appearance of the existing branches did not
differentiate the credit union from competitors or provide a theme
from which to build marketing campaigns.
Description of work
The first step was to develop a new branch business model and
prototype. This work analyzed the divergent characteristics of YFCU
markets, current and evolving staff culture, member service and
delivery preferences, product and service goals, and the competition.
A full-day “charette,” or envisioning session, was held to clear away
old views of how business is done and then develop new member
experience, work flow, design, technology integrations, service,
development, and profitability. The first branch was finished in Davis,
California and the standards applied to future branches in existing and
new markets.
Benefits
Members’ responses from all sectors was overwhelmingly positive.
Staff expressed how well the branch supported their individual and
team goals while helping to inform members about key products and
services and enhancing cross selling. Competitors also took note
as many of them visited the branch to see what an advanced and
community-focused branch could look and perform like.
281
Case Study
TwinStar Credit Union
Chehalis, Washington
Situation
The market was poised for high employment and household growth.
The competing financial institutions where doing little to increase
market share and relying on the status quo to grow. TwinStar
determined this market offered high potential in terms of new member
acquisition and high growth in deposits, loans, and business banking.
They realized they needed to make a powerful statement in the
community in terms of a new full service branch.
Description of work
After studying the market characteristics and potential membership
in great detail, EHS Design presented several thematic design options.
TwinStar determined that the “urban/agri” design concept met
important branding goals, while planning and use of advanced delivery
and information technologies met delivery and operating goals.
EHS worked with TwinStar to create a highly branded facility that
captures the values and interest of the community while presenting an
institution that is savvy, warm, and progressive financial partner for
both consumer and business needs.
Benefits
The benefits to TwinStar and the community were numerous. The
community gained a new facility at the south gateway of the city that
expressed the direction the community has headed. Completion of
the facility caused the other adjacent financial institutions to complete
improvements to their facilities. TwinStar gained a good deal of
positive notoriety for the facility in both the local and regional markets.
Community members were visiting the branch just for the experience
and signing up to become members. Additionally, as planned, the
branch operates with a small initial staff while maintaining a high level
of member service and development and cash handling. TwinStar’s
future branches will express the same successful characteristics.
282
Case Study
Lockheed federal Credit Union
Thousand Oaks, California
Situation
LFCU converted to a community charter and required a new brand &
prototype for its branches to create one clear, distinctive architectural
identity/image depicting its progressive and savvy nature, interests
and cultural connections, and the value it creates for each members.
The branches needed to retain important characteristics of the LFCU
parent brand of quality, innovation, and speed while also conveying
its openness to all members in a wide range of communities. It also
needed to blend high-tech with high-touch service options, increase
member awareness of key products/services, improved cross-selling,
improve visibility of key services and products, and help insure the
success of both its members and staff.
Description of work
EHS Design and Weber Marketing Group conducted an onsite brand
development & retail prototype branch design charette with the
LFCU management team over two days to launch initial planning and
development of new brand and branch concepts for their distinctivelybranded, next-generation retail branch. The result was the creation of
a powerful new branch image and business model that will help LFCU
effectively manage and benefit from the charter conversion and new
opportunities.
Benefits
Lockheed has demonstrated its commitment to a new 21st century
vision for branching through advanced planning, shifting staff roles,
integration of new technologies and effective promotion of the
most beneficial products and services to its members. At the same
time, expected ROI has been accelerated. This new branch concept
combined with a new strategic branching plan will help propel LFCU
toward continuing success.
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Case Study
Spokane Teachers Credit Union, nora Branch
Spokane, Washington
Before
Situation
STCU was enjoying fast member, deposit, and loan growth in a
quickly expanding market. They had been headquartered in the center
of Spokane for many years and were out of space in their 30,000
square-foot building. We assisted in the acquisition, remodeling, and
subletting of an existing 115,000 square-foot building to accommodate
operations growth. This left significant space in a large facility in the
center of the market which needed to be renovated and turned into a
profit center.
Description of work
EHS Design assisted STCU in converting the old headquarters into
their regional branch. This required changing the exterior appearance
from the appearance of a corrugated box into a modern building
that would appeal to target market groups. Additionally, the branch
interior was updated and stylized to strongly promote products and
services and create a variety of opportunities for member development
at this high volume branch.
Benefits
STCU was able to recycle their old and outdated building into a
modern financial center at a reasonable cost. The surrounding
community was at the threshold of re-development and this work
initiated a number of adjacent site enhancements. Members responded
very favorably to both the branch design and the centralization of
services.
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Case Study
american first Credit Union
Mission Viejo, California
Situation
A huge market opportunity existed for American First Credit Union.
Having lost its primary SEG through a corporate merger and now
pursuing a community charter for Orange County, AFCU wanted
to expand its field of membership and pinpoint the most productive
markets. Next, they wanted to create a new retail branch image and
business model to maximize penetration in each target market, and
increase PFI status, accounts per household, and profitability.
Description of work
We analyzed the membership base and market and were able to define
target household delivery preferences, prioritize markets based on
projected performance, and establish key factors that would drive
the new branch image and business model. After this, we worked
with AFCU’s to develop a new retail prototype, brand image, and
merchandising standards. Furthermore, we were able to assist in
the development of AFCU’s short- and long-range headquarters
occupancy strategy for the next 15 to 20 years.
Benefits
The consensus among the board of directors, management, staff, and
members was that the new image and market strategy was right on
target. In addition, two new branches have been located in toppriority markets and the results are excellent. Each location is growing
faster than anticipated, the staff enjoys the supportive sales and service
environment, and member development is enhanced by the targeted
design concept.
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Case Study
american first Credit Union
Mission Viejo, California
Situation
A huge market opportunity existed for American First Credit Union.
Having lost its primary SEG through a corporate merger and now
pursuing a community charter for Orange County, AFCU wanted
to expand its field of membership and pinpoint the most productive
markets. Next, they wanted to create a new retail branch image and
business model to maximize penetration in each target market, and
increase PFI status, accounts per household, and profitability.
Description of work
We analyzed the membership base and market and were able to define
target household delivery preferences, prioritize markets based on
projected performance, and establish key factors that would drive
the new branch image and business model. After this, we worked
with AFCU’s to develop a new retail prototype, brand image, and
merchandising standards. Furthermore, we were able to assist in
the development of AFCU’s short- and long-range headquarters
occupancy strategy for the next 15 to 20 years.
Benefits
The consensus among the board of directors, management, staff, and
members was that the new image and market strategy was right on
target. In addition, two new branches have been located in toppriority markets and the results are excellent. Each location is growing
faster than anticipated, the staff enjoys the supportive sales and service
environment, and member development is enhanced by the targeted
design concept.
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Case Study
financial Partners Credit Union
Newport Beach, California
Situation
Financial Partners Credit Union (previously Rockwell Federal Credit
Union) selected its new name to benefit from a new community
charter. A new brand image needed to retain existing members
in the aerospace industry, while at the same time representing its
understanding of each community’s interest to appeal to new members
without expressing a direct references to the aerospace industry.
Additionally, the credit union wanted a new way of doing business
with its members and to express the savvy nature of FPCU.
Description of work
First, we developed the credit union’s new branching and ATM
strategy by recommending a dramatic shift in new member focus
and then establishing a set of market priorities and locations with the
highest probability of success throughout Orange County. With the
strategy approved, the management team spent two days with our
concept development team to analyze how FPCU would be serving its
members differently, what new products and services would be offered,
and how current and future information and delivery technologies
would be applied. This required development of a detailed product,
service, and delivery metrics and then the early development of
measurement criteria to establish specific goals.
The process resulted in the development of new job functions, new
relationships between staff, members and technology, new cash
handling methods, new education and information methods, staff
training, and a creative merchandising and messaging system.
Benefits
The benefits can be measured in members’ very positive reactions
to the new environment, the staff’s great satisfaction with the new
layout and relationship-building tools, management’s pleasure with
the numbers, and the board’s pleasure with member satisfaction and
growth.
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Case Study
northwest Community Credit Union
Medford, Oregon
Situation
Northwest Community Credit Union had grown well over the years,
but the decline of the timber industry and the increasing competition
from banks and credit unions was a big concern. NCCU wanted
to enhance its position in all ten of its markets across Oregon and
rejuvenate its growth and profitability potential.
Description of work
We analyzed all of the markets throughout the state and member
profiles, which resulted in the development of a comprehensive
retail branching strategy. This strategy pinpointed opportunities and
priorities for increased ROI and member service and then provided
capital budget recommendations and a timetable for implementation.
The plan included the recommendation to create a strong and
distinctive brand image at all its branches and the new headquarters.
Working with the management team, we developed new methods of
doing business in each branch - methods that would improve staff
success and satisfaction while increasing member service and sales.
These changes included new ways of using information and delivery
technology, the implementation of new merchandising and messaging,
and the integration of Web sites, on-line applications, cash handling,
and card distribution, etc.
Benefits
NCCU created a new image in the market. Built on its old reputation,
the fresh image communicates NCCU’s knowledge of its members’
values and interests and how to help them with all their financial life
cycle needs. The new merchandising and messaging system helped
create top-of-mind awareness and measurably increased cross-selling.
288
Case Study
orange County’s Credit Union
Santa Ana, California
Situation
Orange County’s Credit Union received a community charter in 1999.
By 2001 the credit union was looking to further penetrate its existing
markets and expand into high potential territory. The executive team
and board decided that the most effective way to grow was to develop
and implement a powerful strategic branching plan.
Based on a 2009 CUES/EHS survey, only about
half of credit unions have a branch plan in place,
yet it is a critical tool for growth, profitability, and
maintaining a competitive edge.
Description of work
To create their seven-year strategic branching plan, OCCU partnered
with EHS Design and Weber Marketing Group. The OCCU executive
team didn’t believe it had the in-house resources to analyze a highly
competitive market with more than 30 cities and three million people.
They knew that EHS Design had helped other credit unions create
highly productive branch networks and knew they could do the
same for them. They needed a plan that selected from and prioritized
hundreds of potential locations and determine the characteristics of
each branch to maximize the ROI of the branch network.
“ You could say, ‘I like Yorba Linda (Calif.). Let’s put
a branch there.’ But that doesn’t take into account
where our members reside and where they work. So
we chose a partner [EHS] who could do the proper
analysis for us. They took a very objective look at
our market areas and helped us prioritize them. EHS
helped us determine where we would branch as well
as what those branch facilities might look like. ”
- Lynda Savoit, SvP/Coo
EHS used OCCU’s member data, blended it with sophisticated market
analysis which predicts consumer and business member preferences
and performance, and helped the credit union prioritize ten market
areas to target. The plan included a combination of relocating
existing branches, adding new branches in new target markets, and
recommending the size of each branch, down to the square footage,
staffing, and estimated cost.
Benefits
Based on its strategic branching plan, OCCU relocated three branches
and remodeled and downsized other branches. The credit union has
also opened four new branches which have exceeded the performance
of all other branches. When the strategic branch plan was
implemented in 2003, Orange County’s CU had $520 million in assets;
in 2008 it had grown to $919 million or 77%. Its membership base
has expanded even beyond Orange County into neighboring Riverside
County and they continue to employ the strategic plan and grow.
Strategic branch planning is helping credit unions across the country
increase branch and market productivity and efficiency, reduce
operating costs, and deliver more revenue to the bottom line.
289
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Glossary
ADA - Americans With Disabilities Act - This
act was nationally legislated to make buildings
and sites equally accessible to persons with
disabilities. It requires accessibility enhancements
when facilities are renovated and provides
detailed design and operating guidelines for the
design and management of new facilities. Most
local and state jurisdictions have adopted the
design guidelines and integrated them into their
planning and construction codes.
AIA - American Institute of Architects This organization is the national professional
society for architects. It guides the practice
of architecture by establishing professional
guidelines, recommending and lobbying for laws
and regulation, and developing and distributing
industry standard contracts.
Architectural Rendering - The illustration of a
building or other constructed feature.
As-Built Drawing - Also known as Record
Drawings. Construction drawings revised to
show significant changes made during the
construction process. Usually based on markedup prints, drawings and other data furnished by
the contractor or the architect. As-built drawing
completion is typically a supplemental service to
the architect’s contract.
Automated Merchant Banking - The
automated processing of such merchant banking
activities as accepting, counting, and dispensing
coins or currency.
Bake Out - The partial removal of chemicals
through evaporation. The process consists of
heating a newly constructed and furnished space
to activate chemicals in the interior materials.
The materials then off-gas chemicals in one or a
number of procedures to limit the natural offgassing during normal operating conditions. After
the interior is heated, fresh air is moved through
the space to remove the airborne chemicals.
Billing Retention – Also known as Retainage
– A sum withheld from the progress payments to
the contractor in accordance with the terms and
conditions of the contract between the owner and
contractor. The sum is paid after a given time upon
completion of a project. It is typically held until all
punch-list items are completed by the contractor.
Biodiversity - The tendency in ecosystems,
when undisturbed, to have a great variety of
species forming a complex web of interactions.
Human population pressure and resource
consumption tend to reduce biodiversity
dangerously; diverse communities are less
subject to catastrophic disruption.
Block Group A subdivision of a census tract
- Block groups generally contain between 250 and
550 housing units, with the ideal being 400 units.
Block Numbering Area – Small statistical
subdivisions of a county used for grouping and
numbering blocks in nonmetropolitan counties
where state agencies and the census bureau
have not established census tract definitions.
BOMA – Building Owners and Managers
Association – Organization of professional
building managers.
Glossary
291
Branch Business Modeling – The development
of business, operating, product and service,
human resource, technology, communications
and physical standards into a standardized
method of delivering branch services to members
and supporting staff success.
Branch Prototype Development - Creating
a standard array of delivery elements or “kit of
parts” that can be applied to all branch locations
no matter the size or configuration. Includes
complete integration of the branch business
model and technologies and translation of the
brand image into a comprehensive concept.
Bubblegram - A diagram to express the
adjacency requirements of specific functions
and activities.
Build Code - The local code that directs
design and construction within a specific
jurisdiction. Most local planning and building
codes are based on the Uniform Building Code
first enacted by the International Conference of
Building Officials in 1927. It is updated each year.
Building Stacking Diagram(s) - Two or more
floor plans that show how a single tenant will
occupy multiple floors in the same building. It is
also used to show how occupancy will evolve
over the term of occupancy.
Bullet Resistance – Refers to the resistance
of materials to specific projectiles and their levels
of energy, speed and mass.
Branding - The process of developing an
image that clearly translates the true mission
and culture of a credit union in strategies,
actions, products and services, communications,
marketing and advertising, branches and
headquarters facilities.
Break-Even Analysis – The financial analysis
of a delivery system, such as a branch, ATM or
loan center to perform in a specific way over a
period of time, that provides a return sufficient
to meet and exceed the capital and expense.
Typically “break even” is the time required for the
cost of operation to match the return, such as 18
months after opening for a leased branch facility
or three years for a free-standing owned branch.
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CAD – Computer Aided Drafting - Over
the past 15 years, most architects, designers,
planners and engineers have converted to CAD
electronic files. It is the electronic creation, filling
and manipulation of drawings. The drawings can
be transmitted electronically. Managers of large
facilities or complexes use CAD to manage the
facilities, track furniture and equipment, establish
demising walls that separate one tenant from
another, and archive documents.
Call Center - Also known as a phone center.
This back-office function provides the central
answering for all phones, member service, and
the sale of products and services. Additionally, it
may provide collections, outbound calling, e-mail
contact, video conferencing and backup for
such automated delivery systems as automated
lending, account information, ATMs and so on.
Cash Dispenser (Teller) - A machine that
dispenses exact cash based on computer
actuation. Some are rated to hold cash overnight.
They are typically located in the teller area, drivethrough teller room or between MSRs. A cash
dispenser significantly reduces the time required
to balance at the end of the day and increase
cash protection.
Cash Recycler (Teller) - The same as above
with the advantage that bills are received,
recycled and then re-presented to staff and
members. Significantly limits the need for storing
cash. Also, these machines separate bad bills
that can be sent back to the Fed.
Cash Room - A room where cash is
processed or stored. This area may be at the
back of a vault or in a secure room. In large cash
processing vaults, it is the work area outside the
primary cash and coin vault, but within the secure
perimeter of the secondary vault.
CC&Rs - Conditions , covenants and restrictions
are rules that govern development of a site, such as
how many parking stalls are needed.
Census Tract - A small, relatively permanent
statistical subdivision of a county, defined by the
U.S. Bureau of the Census. Census tracts are
delineated for all metropolitan areas and other
densely populated counties. Census tracts usually
have between 2,500 and 8,000 persons and, when
first delineated, are designed to be homogenous
with respect to population characteristics,
economic status and living conditions.
Change Order – A request to increase the
amount of a contract for cause.
Cluster Codes - The number or name used for
classifying households or individuals into mutually
exclusive groups or segments. The segmentation
system may include 40 or more distinct groups
based on demographic and geographic
characteristics. Household segmentation is
often combined with survey research results to
associate household characteristics with product
usage and preferences.
CMC – Certified Management Consultant –
National associations certify professionals with the
CMC designation. Certification means the individual
has been investigated for proof of education,
employment, responsibilities while employed, and
the nature and level of their professional practice. A
number of projects are reviewed with the applicant’s
customers to ensure the consultant provides the
highest level of professionalism and is the sole
provider of the designated services. Each individual
must pass a written test. A panel of three certified
members interviews each applicant and contacts
their references. To retain the certification, each
member must exhibit continuing performance at a
high level, attend professional seminars and further
education, and provide community service.
Common Area Maintenance – Often used in
leases as the CAM rate. It is the cost of maintaining
common building and grounds areas shared with
other tenants in multi-tenant facilities. It is typically
added to the lease rate and is often based on a
tenant’s prorated share of the total facility.
Conceptual Estimate - An estimate prepared
by a contractor or construction estimator based on
conceptual drawings and preliminary specifications
of materials. These estimates typically carry a 10
percent to 15 percent contingency.
Construction Specifiers Institute – CSI
-. This is an organization of professional
construction specifiers that established
a standard organization for categorizing
elements of construction. This format is used
by the majority of contractors and architects to
communicate construction elements and costs.
Contingency / Contingency Allowance
- A sum added to the estimated cost to cover
unpredictable or unforeseen items of work, or
for changes that may be required by the owner
during the construction process.
Glossary
Contractor - A corporation, firm, joint venture,
or individual undertaking the execution of the
work under the terms of the contract and acting
directly or through its agents or employees;
a person or company that agrees to furnish
materials and labor to do work for an agreed-to
price and schedule. Contractors are required to
be licensed in most jurisdictions.
Convenience – A customer’s ease of access
to a credit union’s staff, facilities, products and
services. Convenience remains at the top of most
customers’ reasons for selecting their preferred
financial institution and should be one of the
primary considerations in selecting a delivery
system location or type.
Convergent Branding - The process of creating
and managing a powerful brand image through all
communications and delivery channels.
Coupon Booth - A small room originally used
to clip coupons. The coupons would then be
turned in for cash. The rooms are now commonly
called safe deposit view booths. They are located
close to the vault door.
Curb Cut - A cut in the curb for a vehicle to
access a site, such as a driveway.
De Novo - In the financial industry this Latin
term means a new branch in the market.
Deal Plate - The common work surface
between a teller and a customer on the teller line.
It is usually flanked by teller hoods.
Delivery System - A physical, electronic, or
other method of delivering services and products
to customers, including branches, ATMs, home
banking, etc.
Demising Wall - A wall separating two leased
spaces. It draws the line between two physical
areas under separate obligation.
Design-Build Contractor - Also known as
design-construct contractor. A single contractor
or point of responsibility used to provide both
design and construction management services.
Detex Alarm - A brand name for a type of
door alarm. It is typically applied to an exit door.
When the door opens the alarm sounds unless
shunted with a key.
DP – Distributive Processing - This definition
can include the computer center, imaging, and
proof operations.
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Drive-Through Canopy - The canopy that
overhangs the drive-through lanes. It provides
protection from the weather. The minimum height
is 11 feet.
Due Diligence - The process of analyzing a
real property for purchase and then determining
its condition, how it can be developed, and
the value to the purchaser. At a minimum, due
diligence should include an American Land
Title Association (http://www.alta.org) level
survey, level one environmental analysis, soils
analysis, site plan, approval of use by local
jurisdiction, and a legal review.
Duratran Panel – An internally illuminated
light box that projects light through a plastic
merchandising or messaging graphic to internal
or external space.
Dwell Zone - The area in a branch where
customers spend most of their time. These areas
include the queuing line, lobby, and waiting area.
End Cap – The end unit of a retail strip mall
that has increased exposure and may be able to
support a drive-through.
Effective Rate – The real square footage cost
of a lease space including such factors as lease
conditions, cost, escalations, free rent, common
space, fees, prorated expenses, CAM rates, and
other elements.
Efficiency Ratio – A method of measuring
facility performance using a variety of ratios such
as staff, accounts, deposits, loans, members
per square feet or the number of square feet that
can be used for a specific purpose. For example,
the retail efficiency ratio of a branch is what
percentage of a branch can be used for member
development, service and sales compared to
back office space. 65 percent is poor, 85 percent
is good. The term can also be used for market
efficiency, such as member household, deposits
and loans per branch or square mile and cost of
marketing per square mile, per eligible household
or new member and so on.
Egress - Exiting by driveway (curb cut) from a
site or exiting from a building.
Enunciator Light - A light connected to the
alarm system that is activated when an alarm
button is pushed. The light warns staff of a
robbery in progress in areas in or near a branch.
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Ergonomics - The study of how humans are
accommodated by their surroundings and what
is needed to maximize comfort and performance.
For example: Workstations are studied to
determine the best chair heights, work surface
elevations, equipment and resource placement
for a variety of body sizes and shapes.
Exception Worker – The engineered evolution
of workers that focus on processes to workers
that monitor technological processing and take
action only to deal with exceptions.
Facility Audit - The physical review of a
building or group of buildings to determine
existing conditions.
Facility Management - The planning, design,
operation, acquisition and sales of owned or
leased facilities.
Facility Manager - The individual responsible
for managing facilities.
Facility Planning - The short- and long-term
planning of facilities. Includes strategic facility
planning for operations space and branches.
Floor Plate - The plan of a single floor in a
single or multiple floor building.
Forecast and Analysis Zone - A common
geographic unit used by regional planners to
organize such statistical data as updates and
projections of housing units, households, population
and employment. These areas frequently are
larger than a census tract and are not necessarily
consistent with census boundary definitions.
Foyer - An area between a building entry and
the lobby.
Feng Shui - Literally translated as wind and
water. Based on the principle of Ch’i or unseen
energy, that exists in all things animate and
inanimate. Millions of Pacific Rim consumers
and business financial institution customers
believe that the degree to which a bank or
credit union successfully applies feng shui
principles significantly affects their individual
and business success.
FSCC - Financial Service Centers Cooperative.
(http://www.fscc.com) is a shared branching
network. More here?
Geo-Demographics - The relationship
of population, product and service use
and preference, household, and business
characteristics to specific market geography.
Going Green – The integration of sustainability
into a credit union’s brand, culture, marketing and
messaging, products and services, operations
and facilities.
GMP – Guaranteed Maximum Price - Also
known as guaranteed maximum cost. The
amount established in an agreement between
owner and contractor as the maximum cost of
performing specified work on the basis of cost of
labor and materials plus overhead expenses and
a fixed profit.
GMP Bump - An increase in a percentage
design or construction management fee due to an
increase in the GMP used to estimate the fees.
Green-Washing – An overstatement or untruth
about a business’ commitment to sustainability or
going green.
Greeter - A staff member assigned to greet
members as they enter, offer information and
direction, conduct cross-selling, provide security
observation of the facility, and be the coordinating
point for all retail activities.
Growth Planning – The 360-degree analysis
of a credit union’s situation and opportunities to
discover what may be restricting growth and how
to accelerate growth through the development of
integrated strategies and tactics.
Highball Estimate - A cost estimate that
contains an excessive contingency or profit.
High Touch - Used to define how customers
are treated in the branch. Customers know they
are the center of attention. Staff is relationship
oriented and knows members’ names. The
interior layout and colorations are easy to
understand, warm and friendly. It is often used to
define the opposite of high tech.
Hood - The raised cabinetry on either side
of the deal plate in a teller line. They are used to
provide transaction privacy, restrict robbers from
reaching or jumping over the teller line, and to
hide the teller’s workspace.
HVAC – Heating, ventilating and air conditioning.
Ingress - Access into a site through driveways
(curb cuts) or access into a building.
In-Store Branch - A financial institution
branch that is located in a grocery or department
store or a mall. Typically, no direct access from
outside the store or mall.
Glossary
Interior Finish - A term applied to the total
effect produced by the inside finishing of a
building, including the materials used and the
manner in which the trim and decorative features
have been handled.
International Association of Chiefs of Police
- IACP – (http://www.theiacp.org) There are more
than 13,000 professional and affiliated members
of this organization worldwide. Professional
development, employment connections and
networking are provided. A prospective member
must be sponsored by a current member who is a
chief of police. Why is this here?
International Facility Management
Association – IFMA – (http://www.ifma.org) This
is the leading organization for facility mangers
in the United States. It offers professional
development and a network for the members.
Jurisdiction - The geographic area or area of
law in which a governmental body has authority.
Retail Kit of Parts - The physical elements
of a retail branch concept that deliver a
branded experience to members and staff and
can be applied in a variety of quantities and
configurations.
LEED Certification – Leadership in energy
and environmental design accreditation of a
facility project based on the degree to which
sustainable design elements have been integrated
into the building and site development.
Lien Release - A document designating that
materials and services furnished to a project have
been paid for. Required prior to payment to a
supplier and contractor.
Lien Waiver - An instrument by which a
person or organization that has or may have a
right to a lien against the property of another
relinquishes such right.
Lifecycle Cost - The cost of lifetime ownership
rather than just initial or first costs. Lifecycle
costing is used to compare the long-term cost
of owning and operating different systems. For
example, comparing a low purchase price and
high energy cost of an oil heating system vs. a
high purchase price and low energy cost of a
natural gas heating systems.
Lowball Estimate - A cost estimate that is
intentionally low so that a contractor or consultant
can win a contract. The fees or costs are then made
up by applying for change orders during the project,
once the client has committed to the price.
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Man Trap - An entry security device used to
recognize people entering a facility with a large
amount of metal. Composed of double doors
that require a person to enter a small room with
a locked door, be scanned for metal and then
allowed into the facility if not large metal objects
are detected.
Member Service Representative - MSR –.
Say more?
Merchandising - Communication and
promotion of products and services in the form of
posters, collateral, reader boards, brochure racks,
display areas, kiosks, back-lit Duratran panels at
branches or other physical locations.
Merger - The joining of two or more credit
unions to gain economies of scale, reduce
operating cost, increase ROE, and enhance
member service and rates.
Morning Glory Robbery - A robbery situation
in which robbers enter a branch building during
the night, capture the first employee to arrive,
and then wait for the remaining employees so the
vault or safe can be opened.
Multi-Tenant - A building that is occupied by
more than one business entity and located in
spaces separated by demising walls.
Negotiated Bid Contract - This contract
employs a contractor selection process based
on a fixed cost for overhead and profit plus
credentials. The contractor agrees to provide
construction management services, a portion
of the work, and contracting of subcontractors.
The contractor provides value engineering and
cost estimates through the design development
process and a final GMP at completion of the
construction documents. This is one of the best
alternatives to design/build.
Net Present Value - NPV – The value of an
item, building, or service that will be used in the
future based on the current value of money.
Occasio - A Greek term loosely defined as the
occasion of commerce. Washington Mutual Bank
used this word as the name of its new branch
concept in 2001. An example can be seen in
Chapter 3, Strategic Branch Planning.
Outsourcing - The contracting of an external
support or customer service that could be
provided by a credit union, but can more
effectively or less expensively be provided by an
outside company.
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Owner/Architect/Bid Contractor - A design
and construction project structure in which the
architect designs a facility and then completes
the construction documents. The owner relies
on the architect’s, estimator’s, or consulting
contractor’s estimate of the project cost for
approval of construction documents. The project
is then let Is this the right word? to a selected
or community of contractors. The contractor bids
may be within budget. If not, the project must
be reduced in scope and the drawings revised
at owner expense, or the owner agrees to the
higher price. The bid process typically produces
the greatest number of change orders over other
methods.
Owner/Architect/Negotiated Contractor
- A design and construction project structure in
which the architect works with the contractor
through each phase of the design to ensure
the project remains on budget and receives the
benefit of value engineering. The contractor
is selected based on an agreed-to sum for
overhead and profit and acts as a construction
management consultant to the owner. When
the construction documents are complete,
the contractor gives the owner a guaranteed
maximum price and the project is completed.
This project structure produces the fewest
change orders. Because the team has worked
together from the beginning, the negotiated
contractor process is the favored method among
a growing number of financial institutions.
Owner/Design-Build Contractor - A design
and construction project structure in which the
contractor provides the design of the facility
as well as construction. The contractor also
may sell the furniture, phone system, security
system, bank equipment, and artwork in a “turn
key” agreement. The advantage to a financial
institution is the limited amount of involvement
required to complete the project and the ability to
have single point of responsibility.
Plan Drawing - A drawing of a facility. An
architectural plan drawing will include all walls,
doors, windows, floor elements and other
features to scale and with noted dimensions. The
architectural plan is prepared to the level needed
to gain a building permit. An interior plan drawing
will include the basic architectural plan and the
furniture, furniture system, cabinetry and other
elements necessary to occupy the space.
Platform Area – An old term for the location
of financial officers or customer service staff in a
branch, bordering on the lobby.
Pony Wall - A partial height wall that does not
extend to the ceiling.
Preferred Financial Institution - PFI – The
bank, credit union, or alternative service preferred
by a customer. The PFI often holds the majority
of a client’s deposits and conducts the greatest
number of transactions.
Primary Service Area – PSA – This is the
area where a credit union conducts most of its
business. It may be defined by the convenience
radius of a branch or alternative delivery system,
physical boundaries, city, county or state borders,
community characteristics and so on. It is often the
area that returns the highest profit per household.
Punchlist - Also known as an inspection
list. A list made near the completion of work
indicating items to be furnished or work to be
performed by the contractor or subcontractors
in order to complete the work as specified in
the contract documents.
Queuing Line - The location and line created
by customers waiting for teller service. It is
usually defined by ropes and stanchions.
Re-Lite - An interior glass wall that lights
interior spaces from external light sources.
Remote Capture – The ability for a credit
union to capture deposits from a remote location
using technology.
Request for Proposal – RFP – A letter or
invitation to consultants, contractors or suppliers
requesting proposals to provide services,
construction, materials, or a finished product.
Retail Planning - The process of producing
floor plans, designs, graphics, videos, and other
devices that integrate merchandising and sales
into physical delivery systems.
Retail Zones – The definition of an area by
retail banking functions such as member service,
member education and cash handling.
SafeCatch – A new low-cost and highly
effective security process that is reducing
robberies and fraud and increasing apprehension
while supporting a highly effective member
development experience. Developed by Larry
Carr of the FBI.
Glossary
SafeCatch Architecture – The supporting
architecture and design required to delivery the
greatest benefit of SafeCatch as developed by
EHS Design and Larry Carr.
Schematic Design - The process of translating
the owner’s data and goals into a set of preliminary
plans, elevations, perspectives, color directions and
material selections for review with the owner. It is
the first step in the design process.
Setback - Also known as setback line. A line
established by law, deed restriction or custom,
fixing the minimum distance from the right of way,
property line, adjacent buildings or features to
the exterior face of buildings, walls and any other
construction form.
Shared Savings - A percentage split of the
savings in construction cost that goes to the owner
and contractor after a project is closed out.
Sick Building Syndrome – SBS – According
to the EPA, sick building syndrome is defined as a
situations in which building occupants experience
acute health and/or comfort effects that appear to
be linked to time spent in a particular building, but
where no specific illness or cause can be identified.
The complaints may be localized in a particular
room or zone, or may be spread throughout the
building. Occupants experience relief of symptoms
shortly after leaving the building.
Sustainable – The condition of being able to
meet the needs of present generations without
compromising those needs for future generations.
Achieving a balance among extraction and
renewal of environmental inputs and outputs, with
the goals causing no overall net environmental
burden or deficit. To be truly sustainable, a human
community must not decrease biodiversity,
must not consume resources faster than they
are renewed, must recycle and reuse virtually all
materials, and must rely primarily on resources of
its own region.
Site Feasibility Study - The structured
evaluation of how a specific piece of property meets
the short- and long-range needs of a credit union.
Space Planning - The process of planning the
use of space within an existing facility.
297
Standard Industrial Codes - SIC - A
numerical system defined by the U.S. Office
of Management and Budget for classifying the
entire field of economic activity for the nation.
It is a hierarchical system, which at its broadest
level divides the economy into 10 divisions.
Each division is subdivided into two-digit major
groups, three-digit industry groups and fourdigit industries. This is the system used by the
U.S. Bureau of the Census for organizing the
economic censuses.
Strategic Facility Planning – SFP – Translation
of a credit union’s business plan into a set of shortand long-range strategies that will meet a credit
union’s space needs over five, 10, 15 and 20 years,
within all economic and growth scenarios.
Subcontractor - A contractor who is under
contract with a general contractor. For example,
if a 10,000-square-foot building were being
constructed, a general contractor would be hired
to complete the work based on the contract
documents. The contractor’s firm would directly
provide some of the work, and subcontract
plumbing, electrical, HVAC, and so on.
Substantial Completion - When a space or
building is sufficiently completed to receive a
certificate of occupancy from the
building department.
Supplemental Services - Those services not
included in an original agreement.
SWOT - Strengths, weaknesses, opportunities,
and threats. Say more?
Systems Furniture - A furniture product that
is made up of standard components, such as
partitions, cabinets, desks, files, support units,
and accessories that can be arranged in a variety
of configurations to meet specific job functions.
Target Market - As defined by three sets of
characteristics. 1) Current member household
characteristics in each market, such as deposit
and loan balances, number and types of
accounts and profitability. 2) General market
household characteristics, such as age, income,
home ownership, education, unearned income,
housing values, banking and product and service
preferences. 3) General market characteristics
such as number of households, historic and
projected growth, economic trends and
competitor positioning.
298
Target Member - As defined by three sets of
characteristics. 1) The type of member relationship
being pursued, such as consumer, small business
or underserved. 2) The relationship each member
has with a credit union today, such as deposit
and loan levels, accounts per household, and
profitability. 3) The general characteristics of each
member or household and their potential to use
specific products and services, such as upscale,
credit driven or middle income.
Technology Integration - The integration
of technological, physical delivery and
operations platforms, software, and processes
with people in branches, operations areas and
virtual environments.
Teller Pod - A single or double teller station
that is freestanding and utilizes cash dispensers
to enhance security and deliver a more memberfocused experience.
Transportation and Analysis Zone, TAZ
- A common geographic unit used by regional
transportation planners to organize such
statistical data as updates and projections of
housing units, households, population and
employment. These areas frequently are smaller
than a census tract and are not necessarily
consistent with census boundary definitions.
Underserved Market – Typically defined by
regulators as a low-income market underserved
by banks or credit union branches. It is
occasionally used to mean target markets that
are underserved by a credit union or financial
institutions in general where the number of
households per financial institution branch is high
relative to other target markets.
Value Engineering - The process conducted
by the architect, engineers, contractor, and credit
union to determine the value of each project
element in terms of short- and long-term benefit
and ROI.
Vu 1 - A group of engineers, scientists and
executives that joined forces in the development
of a new type of light bulb that is mercury-free,
energy efficient and affordable.
White Noise - Sound that has constant
energy per frequency and is employed to limit
voice recognition by overlapping specific spoken
frequencies.
Resources
Bankston, Karen. CUES Branch Profitability Series: Assessing Current
Performance and Reaching for Better Results, May 2009, http://www.
cues.org/branchprofitability/.
Fredrickson, Carl, Ph.D. CUES’ 2009 Staffing Manual, June 2009,
http://www.cues.org/staffingmanual/.
Kohl, Michael J. & Pagano, Thomas G. “Learn the ABC Basics:
Improve returns through activity-based costing and product
profitability management,” September 2000 Credit Union
Management, http://www.cues.org/fyi/learntheabcbasics.
Kohl, Michael J. & Pagano, Thomas G. “Add on to the ABC Basics:
Use activity-based costing to better understand and manage product
financial performance,” October 2000 Credit Union Management,
http://www.cues.org/fyi/addontotheabcbasics.
Krudys, Kent M., Esq, & Luse, Eric, Esq. Recent Developments in
CU Mergers: A CUES Director Briefing, December 2008 (CUES and
CUES Director members, download a copy at http://www.cues.
org/mergerdirectorbriefing/; e-mail [email protected] for password
assistance. Non-members, may also download an executive summary
at this address).
Styskal, Wiese & Melchione, LLP. CUES Complete Guide to Mergers,
June 2008, http://www.cues.org/mergers/.
Resources
299
300
The Credit Union Executives Society
is a Madison, Wisconsin-based
independent membership association
for credit union executives worldwide.
Its mission is to educate and develop
credit union CEOs, directors and
future leaders.
P.O. Box 14167, Madison, WI 53708-0167
5510 Research Park Drive, Madison, WI 53711-5377
Tel: 800.252.2664 or 608.271.2664, ext. 3400
Fax: 608.441.3346
E-mail: [email protected]
cues.org

CUES Complete Guide to Credit Union Facilities

Transcription

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