What We Actually Do
Analytics are driving the business world
Our Deliverable to You (Actionable Information)
The Kohl Full Activity-Based Assessment is primarily a service to determine the profitability of your loans and deposits. What makes us unique is our keen focus on your biggest cost area that most solutions gloss over. We utilize Activity Based Management approaches to identify which employees are spending time on specific activities by product to understand the employee operational costs per product. Employee costs can approach 50% of all costs yet most profitability solutions fail miserably in addressing this issue. Getting this right is the most difficult, yet most important part of your profitability equation.
Our employee costs analysis is among the best, yet we are just as diligent with everything else. As part of the process, we have you provide data files of all your loans, deposits, core transactions, and finally your financials so that we can be very detailed in our other cost calculations. For example, we utilize the detailed employee cost data and the detailed transaction data to determine precise employee unit cost per activity per transaction. Next, by comparing this information to our benchmark database you can see not only IF a product is profitable or not, but why and where the problems are.
And if you know why and where there is a problem then you can change it for the better and that's why our clients are so successful. They receive information which is clear and actionable as you will see in the steps below.
Operational Employee Analytics (Determine what your employees really do)
The core of the Kohl approach is our Operational Employee Analysis. Again, employee costs can approach 50% of total costs, but are commonly some of the least understood. That is because few organizations accurately measure what employees really do as traditional Operational Employee Analysis is typically very disruptive and time consuming. It is even harder when one considers that the simple act of observing people will change their normal behavior. In contrast, Kohl's method makes this analysis much faster, far less work on the clients part and more accurate than traditional approaches.
A substantial part of this process is our automated, web-based solution Kohl Direct. Kohl Direct enables us to collect time data from your loan and deposits operations people quite easily. It often takes your employees less than 15 minutes each to complete a customized survey of their specific activities from up to 100 of the most common operational activities. Once we have this data we can compare it to our industry database of the same activities to pinpoint where you are doing better (or worse) than average or even best practices.
Operational Process Cost Analytics (Understand how much employees cost to do it)
You can also extend the Operational Employee Analysis by adding employee compensation to the process. As stated before, we collect data files on on loans, deposits and transactions so we can determine processing unit costs using this data. This enables Kohl to determine not just the effort, but how much you are spending on each activity by product and/or channel etc.
Unit Cost Analytics (Determine what employees cost per transaction)
You can further extend the Operational Process Cost Analysis by adding operational statistics such as number of loan applications taken, number of applications book, number of teller transactions etc. conducted to the analysis. This enables Kohl to determine not just the effort & cost, but how much you are spending on each loan application taken, loan booked, deposit etc. and compare that to our benchmarks.
At this point, you have the cornerstone for a Driver-based / Activity-Based Management planning and profitability analysis environment. If you have an Enterprise Performance Management (EPM) software system, you now have most of the drivers, the unit costs of the and have the comparative benchmarks for that system. If you don't have an EPM solution we can help there too...
Funds Transfer Pricing
The Kohl Funds Transfer Pricing (FTP) Service is a further enhancement to the overall profitability equation. With a focus on practical, transparent FTP methodologies, Kohl's FTP service provides our core market of community banks and credit unions access to net interest margin information that larger entities enjoy at around 1/10th the cost. In addition, you don't have to hire expensive analysts to run it.
The FTP solution is not a high-level "pool" solution, although that's possible. It is a detailed instrument-by-instrument solution with multiple FTP methodologies depending on the characteristics of the loan or deposit. It even addresses complexities such as prepayments, ARMS and Fixed/ARM combinations, and balloon notes all at the instrument level thereby providing a very high level analytic of integrity.
Product Profitability Analytics (Current Portfolio)
Once the Operational Process and Cost Analysis is complete Kohl can then further leverage that work by then determining the profitability of your loans and deposits. We leverage the Kohl created Operational Process Costs Analytics, your financial information and the hard operational statistics from your loan and deposits systems to create a comprehensive look at your profitability.
When getting the hard operational data, we regularly set up direct data feeds from your core and supporting systems saving you much time, manpower, and cost. The cost saving only multiplies if you use Kohl on a regular basis. Here is a common response to our data processes:
"I've been involved with Kohl Full Assessments several times and know how much work gathering the data can be. However, the new data collection processes developed by Kohl have reduced our loan, deposit and transaction data gathering time from weeks to hours."
- Brad Tanberg, CFO Verity Credit Union
Product Profitability "What If" Analytics with Loan Pricing (Future Portfolio)
For those wishing to truly put the information to work, Kohl provides a financial model that facilitates the development and testing of product related strategies. The Kohl Earnings Enhancement Model (EEM) provides an impressive capability to "What If" existing products as well as design and test new ones.
The EEM includes a Loan Pricing Module using your actual cost information from the Kohl Profitability study to determine if your pricing is meeting your stakeholder/member value contribution goals. The Kohl study does the first hard part in simply determining what your revenues (including fees) and costs are. The second difficult part is properly recognizing those fees/premiums and costs (i.e., loan/portfolio purchase premiums, auto dealer fees, non-funded origination expenses etc.) during the pricing process. The model does this using the same advanced methodologies utilized in the Kohl Study so your core profitability analysis and your product pricing are correct and in sync.