Process variation as a determinant of bank performance: Evidence from the retail banking study

Frances X. Frei, Ravi Kalakota, Andrew Leone, Leslie M. Marx

Research output: Contribution to journalArticle

70 Citations (Scopus)

Abstract

This paper explores the relation between retail banks' branch-based processes and financial performance. There are 11 processes included in this study, which represent the bulk of the activities performed in a typical retail branch (e.g., opening checking accounts). The first finding of this study is that the financial performance of banks that perform better across these processes tend to be better than that of other banks. In addition to the variation in process performance across banks, there is also substantial variation across processes within banks. That is, banks that performed well in one process often performed quite badly in another. We present an analytical model that shows that improvement in process variation can be more important than improvement in aggregate process performance when dealing with certain customer segments. Empirical evidence from the Wharton Financial Institution Center Retail Banking Study of bank holding companies in the United States provides support.

Original languageEnglish (US)
Pages (from-to)1210-1220
Number of pages11
JournalManagement Science
Volume45
Issue number9
StatePublished - Sep 1999
Externally publishedYes

Fingerprint

Analytical models
Industry
Bank performance
Retail banking
Process performance
Retail
Financial performance

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Management Science and Operations Research

Cite this

Frei, F. X., Kalakota, R., Leone, A., & Marx, L. M. (1999). Process variation as a determinant of bank performance: Evidence from the retail banking study. Management Science, 45(9), 1210-1220.

Process variation as a determinant of bank performance : Evidence from the retail banking study. / Frei, Frances X.; Kalakota, Ravi; Leone, Andrew; Marx, Leslie M.

In: Management Science, Vol. 45, No. 9, 09.1999, p. 1210-1220.

Research output: Contribution to journalArticle

Frei, FX, Kalakota, R, Leone, A & Marx, LM 1999, 'Process variation as a determinant of bank performance: Evidence from the retail banking study', Management Science, vol. 45, no. 9, pp. 1210-1220.
Frei, Frances X. ; Kalakota, Ravi ; Leone, Andrew ; Marx, Leslie M. / Process variation as a determinant of bank performance : Evidence from the retail banking study. In: Management Science. 1999 ; Vol. 45, No. 9. pp. 1210-1220.
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