Want Process Improvement? Mandate It!

In an effort to be an obliging father, I recently took my daughter shopping for some new clothes. She is hitting her pre-teen years so clothes and music have suddenly escalated in importance. While trying to be a good dad I made the mistake of offering my suggestions on her selection in clothes, only to hear that they weren’t good enough. But as I continued to ask what was wrong with my selections, I kept getting the same answer: “mine are just better, Dad.”

Interestingly, my teen wanna-be couldn’t justify what made her choices superior and had no interest in trying to define this difference. This inability to describe exactly what “better” means is what I frequently hear from clients when discussing their operational processes. They want a better process, but cannot articulate what “better” looks like.

Bank executives who seek to make real improvements in their operating processes need to realize the great power they hold in defining a clear mandate for what the improvement initiative should achieve. Management will only struggle with sub-par results if they proclaim that a process needs to be improved but provide zero guidance in visualizing the endpoint. Whether the objective is to shorten the loan on-boarding process or streamline the steps and time required to on-board a new employee, the best process improvement initiatives come about from management mandating specific performance improvements. Without clear initiatives from executive management, process teams shoot for and miss moving targets and ultimately these initiatives run out of gas.

Think about how clear President Kennedy’s mandate was to put a man on the moon by the end of an opening decade. The best process improvement projects I have been involved with all had a similar clear endpoint from the organization’s leaders – ambitious, almost-crazy goals that put a lump in the throat of fractured business area executives who will be forced to work together collaboratively to have a chance at achieving the goal. In one case, when a CEO mandated that new customer checking accounts should take no more than 15 minutes, it forced the right kind of discussions and process definition from branch, operations, compliance, Information Technology and marketing stakeholders – moving everyone past their customary inertia.

For executives wondering what type of clear mandates they should set at their bank, I would recommend the following key areas:

Customer Expectations. There may be specific processes that are completely unacceptable to customers because they fail the “common sense” test. I frequently see banks that take days to respond to a customer’s loan application or make customers visit a branch to execute a request that can be transacted in a safe and sound manner online. Customer expectations established by competitors who are “raising the bar” can also be an important source of mandates. If a rival is issuing debit cards instantly, approving credit cards with the answers to five simple questions online or allowing mobile banking enrollment to occur without an existing Internet banking account, it’s time get the “clear mandates” defined. So, identify your bank’s most pressing customer expectations and set the bar higher in your organization.

Benchmark Metrics. Using industry data to benchmark the bank’s processes and efficiency can be an excellent source for executive mandates. If a bank processes 15 loans per mortgage processor per month when peers do 30 a month and high performers 45, a target to equal and then exceed peer numbers should be established with an ambitious timeline to achieve this goal. High-performing banks make benchmarking, measurement and improvement a major part of their operating cultures. Metric-driven performance measures or key performance indicators (KPIs) are easy to quantify and any managers worth their salt should have a clear set of these measures to manage their business.

Mandates from top management may be needed to get some managers out of their comfort zone, however. I recently saw a chief operating officer issue this mandate: “Given our customer base, I want us to be at least in the 75th percentile for new business checking accounts opened per branch each month.” Such mandates will often receive pushback from team members. Organizations are very good at explaining why they are “different” from peers, which often is used as a lame excuse to hold themselves to a lower standard than what’s been proven possible by peers. Every measurable goal in your banking organization should fall between the peer and high performing levels and this performance should be verified through external benchmarking data.

Innovation. Bank leaders can set effective process improvement mandates by asking, “What are the strategic differentiators I am trying to build and enhance in my organization?” Building mandates around innovative areas where the bank wants to be different from competitors can be highly motivating. Team members often react energetically to the idea of getting somewhere first and pushing the envelope against competitors. A CEO who gave the mandate to develop certificate of deposit products denominated in different foreign currencies illustrates the power of an innovation mandate. This organization had to push the boundaries in product development, treasury management, compliance, operations and marketing; in the end, the mandate made the organization more competitive. Ask yourself, “What innovation goals have I set as a bank executive and where should I be focusing such mandates?”

The beautiful part of quantifying performance is the ability to align internal resources to focus on and perform activities that directly support strategic initiatives. Studies completed by our team at Cornerstone Advisors reveal a great disparity in the performance of processes between banks operating at peer benchmark levels and high-performing banks. For instance, high performing banks generate nearly $100,000 in small business loans per branch per month while median banks generate only $31,000. A high performing wire transfer department is a remarkably 68% more efficient than peer median. Clearly, high performers show bankers the great upside that lies latent in their organizations today and the valuable learning that can occur from examining the processes of high performers.

As we enter a new era where business processes are driven by automation instead of fax machines and shuffling paper files to the next cubicle, it is more important than ever to clearly mandate concrete and specific performance metrics around each process improvement. Banking leaders owe it to their organizations to set the bar high and get their teams moving in achieving mandates that will help their employees grow professionally and take more pride in the areas they manage. So, mandate your processes – early and often.

Mr. Jones is a senior consultant with Cornerstone Advisors, a Scottsdale, Ariz., based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at [email protected].