Driving growth with operational excellence
Many banks have attempted to apply lean principles to their operations to reduce wasteful activities and inefficiencies. In these operations, management applies lean techniques to a problem area and then charters a team, which uses brainstorming, technology or other approaches to address the issues. The team presents its plan to management for approval, then implements the ideas. Concurrently, management selects another area of the business to improve and the cycle repeats. Some of the improvements made are sustained, while others are not.
While this traditional approach can yield incremental improvements, over time, the result is an endless improve-sustain-improve-sustain pattern to eliminate waste. Recently, however, new approaches to the improvement process have enabled organizations to realize results in months, not years. Instead of a never-ending journey of continuous improvement, these companies have set a destination of operational excellence (OpEx) for their lean efforts. A good, practical definition of OpEx is when “Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”
Rather than the traditional lean approach to improving performance through waste elimination, achieving OpEx enables banks to focus on business growth by designing a robust flow of information that delivers the service to the customer seamlessly, eliminating management intervention. The result is that managers can focus on activities that lead directly to business growth in the short- and long-term.
The Importance of Flow
In banking, information needs to flow for two reasons: to avoid any reverse flows, stoppages for clarifications or meetings, or rework in providing the service to the customer and to capture knowledge to eliminate duplication of efforts and to use in future product development.
When flow of information is in place, all employees working in it know what the office should do when it receives a request from a customer, meaning how (along what physical pathway) and when (at what preset times) information will flow to provide the service. Each employee knows what to work on next, how long it takes to complete a request and return it to the customer, and if the service to the customer is on time, all without the need for meetings, phone calls, emails, or management intervention.
While traditional lean thinking teaches that companies should create flow to eliminate waste, in OpEx, organizations strive to create flow simply so they can see when it stops. That way, employees in the flow can visually identify abnormal flow and correct it on their own before it disrupts the delivery of the service to the customer.
To design this type of autonomous, self-healing flow in banking operations, an operation should follow the following principles:
- Design lean value streams;
- Make lean value streams flow;
- Make flow visual;
- Create standard work for flow;
- Make abnormal flow visual;
- Create standard work for abnormal flow;
- Have employees in the flow improve the flow;
- Perform offense activities.
Within the first principle – design lean value streams – there are guidelines for designing flow in the office that must be applied to achieve OpEx. To start, offices must identify takt or takt capability, or the rate at which the service should be completed so that employees can tell whether flow is on time. Employees know what to work on by relying on either physical folders or an electronic inbox for a first-in, first-out method. Information then follows a preset physical pathway at preset times, with each activity connected to the next one in flow. If there’s a change in demand, employees have predetermined ways to address that change before it affects the delivery to the customer.
Organizations apply these guidelines to each service in the office that goes through similar processing steps and has similar work content. What results is end-to-end flow that begins when the customer requests a service through its delivery.
Red Zone Flow
Next, the goal is to make the flow visual so employees can see problems as they occur and fix them on their own before they become catastrophic and impact the customer. To help employees see abnormal flow, the organization defines the boundaries of normal flow and shows abnormal flow through “red zones,” which tell employees they need to react. Employees apply a “top ten” list of standard responses when flow is in the red zone so they do not need to see a manager or have a meeting to figure out what to do.
For example, say a final step in preparing a rate for a customer happens during a workflow cycle that begins at 1:00 p.m. and is completed by 2:30 p.m. each day. If work backs up to a predetermined point during the workflow cycle, workers will see that the flow is becoming abnormal and know how to make adjustments to ensure the customer gets their rate when promised.
An autonomous flow in the office will help reduce expedited work, shifting priorities and meetings to handle abnormalities, all of which disrupt the integrity of the flow and lead to a gradually increasing dependence on management rather than letting the flow dictate what everyone works on next.
When management is freed from this type of oversight, it can spend time on offense, or activities that grow the business such as better understanding the services the office can provide, meeting with customers or potential customers and spending time on product development and innovation.