Throughout the year, readers of this publication have been advised by various authors that revenue growth is easy if banks reorganize their sales processes; that improved innovation is possible if banks leverage internal talent; and that customers will be retained if banks can deliver services more focused on specific customer needs. Further, while the banks are busy delivering these valuable new capabilities, they will also need to ensure that they improve their efficiency ratios – i.e., reduce costs. And one more thing: all competitors will be pursuing the same goals of increasing productivity and delivering more with less.
As usual, the executives in charge of these bank improvement projects will turn first to technology to improve productivity. Technology is an expected – if slow and costly – source of productivity gains. But how about trying something different? Why not look at one of the most “unexpected” sources of productivity improvement imaginable: the bank’s “knowledge workers” (KWs).
KWs “toil with their minds” in such departments as mortgage, compliance, underwriting, call centers, finance, marketing and Information Technology (IT). They are a company’s most costly workers. And yet, the work they do and the way they do it has been unchallenged for generations. Perhaps that’s because precious little scholarly research has been done in this area. An exception occurred in 2009 when The Work Foundation, published findings from its survey of KWs in England. The researchers found that across all KW segments, an average of 42% believed that their skills were underutilized. For the survey’s most knowledge-intensive subcategory, “Experts and analysts,” this underutilization figure fell by only 7 points to 35%, the lowest of all categories of KWs. The highest segment, “Servers and sellers,” registered 55% underutilization.
Employees at banks will fall into all categories of the survey. Research examining daily work activities conducted by our firm over the course of more than one hundred engagements across multiple operating areas reveals that as much as 40% of total organizational capacity is consumed by avoidable rework, over-service and needless variations in similar tasks. No wonder KWs feel their skills are underutilized; the business’ best-trained, highest-paid employees are consumed by low-value tasks. While nobody gives it much thought, this represents a vast, untapped source of economic value hiding in plain sight.
Conventional management methods fail to detect these squandered resources because they are designed to capture value in expected places. Travel vouchers are monitored down to the penny, but just about anyone in the organization can order up costly analyses from the finance department. Errors in the tellers’ cash drawer are tracked to two decimal places, yet nobody questions error rates of 30% in new loan applications. As long as business value is lost in unexpected areas, it can leak like a sieve and nobody notices. More importantly, nobody will believe it.
How to tackle the problem? All aspects of the processing of a product or service purchased in retail banks should be scrutinized as carefully as the teller drawer and the travel vouchers. The review should also include support areas such as the customer contact center, the finance group and compliance functions such as fraud and anti-money laundering.
This review should be conducted in a manner that is the polar opposite of the conventional, laser-focused review of an “issue” or obvious problem. By comparison, underutilization is a non-obvious issue, requiring an unconventional approach that is fundamentally different, and perceptually challenging, in three ways:
Organization-based scope. Target one or more organizations and map the business processes within and across these organizations.
Non-technology focus. Exclude improvements that involve technology, capital investment, or strategic changes to products, services and distribution channels.
Micro-targeted. Document work activities at the 10- to 15-minute duration level; plan on identifying hundreds of small, activity-level improvements.
The leader of the organization being reviewed must also actively sponsor the initiative from discovery through implementation. Everyone in the organization should be exposed to the findings, particularly the activity-level maps, creating a fact base with a broad based consensus. The analysis/implementation team should be dedicated full time to the effort and a time limit should be imposed. Typically, six to eight months is the maximum to avoid “perpetual” initiatives that deliver few results.
Since the effort is a journey into the “heart of darkness,” i.e., the daily work activities of the business’ most elite employees, the sponsor’s leadership is critical to success. Sponsors must create an atmosphere of safety – no harm, no foul – while simultaneously insisting on measurable, meaningful results. New performance measures and capacity models must be installed. Uncomfortable at first, these will come to be an indispensable source of clear communication up, down and across the KW organizations.
The effort will pay off if bank management is willing to view past complacency as a business opportunity and recognize the value inherent in tackling “sacred cow” inefficiencies that have long been dismissed as simply “the cost of doing business.” Senior executive sponsors of these efforts at banks can expect to reduce the number of sales administration tasks, shorten end-to-end service levels, streamline task sequencing and standardize tech workarounds. Perhaps the only real surprise will be in the potential benefits to be gained: reductions in operating costs, annual savings of tens of millions of dollars, a break-even point in only a few months, a ten-fold return of investment in a year and an increase in sales uptime.
As the old comic strip character “Pogo” often said, “We have met the enemy and it is us.” The same is true in banking but it doesn’t have to be.
Holly Hughes, BAI CMO, will share BAI’s latest banking channel research and host a conversation with Colleen Wilson, Vice President, Product at MANTL, on what the trends mean for financial services leaders....
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