So here we are, half-way into 2011 and everyone is staring down the end of the barrel for meeting those year-end performance goals. Somewhere along the way during the first six months of the year, we were supposed to figure out how to automate our loan origination processes, or figure out why it takes 27 days to get the documents our customer signed from their hand to a box in storage, or improve that four-day turnaround time on our change of address forms.
While various companies have made great strides in improving their efficiency and creating real, tangible results in terms of productivity gains, financial organizations seem to have done this despite the fact that they continue to do a notoriously poor job of evaluating and improving their processes. But with all of the regulatory changes thrust upon us the past few years and the lost revenue that will accompany them, there has never been a better time to focus intently on what banks can control: how work gets done in our own shops.
Many bankers have made attempts at process improvement and reengineering, and many feel the results have been mediocre at best. At Cornerstone, we have found five key elements that consistently permeate process-driven organizations:
Process Organizations Despise Inconsistency. Ironically, most banks spend little time identifying and weeding out inconsistency. Case in point, we see clients all the time with back-office operations that are processing work differently for different branches, or different affiliate banks. This causes multiple processes, dramatically increases confusion and ultimately causes an unnecessary waste of both physical and personnel resources. This may seem minor until the impact of these minor processing variations on a processor’s job back-office are quantified. Simple tactics such as having all front-line staff use the same form or using e-forms to reduce workflow variation can end these issues quickly. Another common culprit here is the multiple printing, filing, scanning and saving of documents throughout the course of a process. Most of the time this is due to a lack of understanding as to how someone’s tasks fit into the larger picture; sometimes it’s simply CYA.
Process Organizations Formally Measure and Reduce Error Rates. With Six Sigma, error reduction has received more attention over the past several years, but oddly, error tracking is not approached pragmatically in most bank functions. Banks and credit unions are generally pretty good at creating fancy dashboards and error tracking logs, but it is typically for a particular function or step in the process. Such as, did we meet our service level on call center calls, or did we meet our published turnaround time on a loan decision. Rarely do we see it taken to the next level, where reporting is done to determine the reason these types of errors occur. These errors are typically not tracked at a level that allows for future proactive measures that would prevent such errors from occurring again. In addition, errors don’t get tracked throughout the full process. These types of errors are typically never linked back to their origin to understand, for example, that by decreasing “x” number of errors on the front end, the number of service calls on the back end could be reduced by “y,” leading to a productivity gain of “z.”
Process Organizations Use Common, Practical Tools. There are a wide variety of tools such as Six Sigma and Lean that can be deployed and utilized throughout an organization. However, if the tools are inappropriate for the staff that will be using them, they will ultimately be ineffective. Process organizations generally pick three to five universal tools that can be easily understood and utilized by those who will be deploying them. Some tools are more prevalent than others, and often not even considered to be “process improvement” tools at all, but they are more common because of their ability to be easily used and understood. The tools we most commonly see used in practice are cause-and-effect diagrams, Pareto charts, service level agreement reporting and value stream mapping. Even with this limited toolset, a project team can identify what is occurring in a given process, weed out root causes of errors and inefficiencies, brainstorm potential improvements and evaluate the performance of implemented solutions
Process Organizations Don’t Go Big Bang. I know that every certified Six Sigma guru out there with a double black belt strapped around his forehead will protest this, and I welcome the debate. But, outside of the famous manufacturing examples everyone has heard of, there are a limited number of case studies in which a companywide Lean/Six Sigma initiative has proven to be an effective method of transforming lackluster processes, particularly in the financial sector. Couple this with reluctance on the part of bank and credit union execs to execute an order to kick off an organization-wide process improvement project based on its lack of adoption in the financial services industry, and you have almost zero likelihood that such a project will be carried out. Focus instead on selecting key internal resources people who have the knowledge and skills to execute on identified projects, then enable them to act upon identified improvements to gain momentum with cumulative quick wins. Likely candidates will be internal resources, such as middle-level managers, project managers or business analysts that have a strong understanding of the organization’s operations and are able to lead a team. They should have a solid understanding of the process improvement tools and terminology to be used within the organization and how to achieve the end result without cramming formal methodologies down everyone’s throat. A small, dedicated and focused team with the right players can work miracles.
Process Organizations “Go to Gemba.” The Japanese have created this famous term to mean that truth and insight can only be found about a process if observation and feedback from the staff performing the work is used. Staff are closer to the day-to-day processes and are often much more in tune with what tweaks or improvements would have the greatest impact. It never ceases to surprise me how a 15 minute, detailed conversation with a person doing the hands-on work in a process can glean more information than I can get from management in two hours. Granted, this is sometimes the reverse, but typically, this individual is more in tune with what quick improvements can be made and which ones will have the best impact. For example, a form missing a critical piece of data (such as a signature or approval) adds a “rework loop” in the process; it does not show up on any reports, but it does have a material impact. However, workers may just continue to plow ahead, make it work, and do this over and over until there is a compounded list of inadequate processes taking place. In most cases, this occurs so gradually people lose sight of what they are doing, or they don’t feel empowered to speak up to get something improved. Therefore, proactively reaching out to these individuals for improvements to their process is a valuable and often overlooked step.
Granted, these examples of executing on a process improvement initiative seem simplistic on the surface, but, to be blunt, we rarely see anyone that has been able to put JUST these five pieces together. Doing so can mean improvements ranging from minor efficiency gains in a single department to 30%-40% overall productivity gains across the organization. So, before quickly dismissing these thoughts or breaking out the fountain pen to sign a project proposal for the latest and greatest system, GonzoBankers will take a good look at how they’re doing things today. Some of the best organizations we see aren’t performing exceptionally because they are comparing their processes to others – it’s because they focus on doing their internal processes the best way THEY can. -DJ
Passing up opportunities to gain market share and increase shareholder value?
How an organization designs and executes its business processes is an important competitive differentiator. Cornerstone Advisors helps organizations develop a disciplined approach to process improvementthat can identify not only short-term financial improvement opportunities but, more importantly, improvements that are in alignment with the organization’s overall strategy. Cornerstone can also provide training and tools to enable process improvements to continue with internal resources.