This lack of coordination can be costly, particularly when allowed to continue long-term. “Finance is just a different kind of factory. I think the same is true for lean.” Old habits are hard to break. “It’s more about getting smarter about what you do.”. Banks that take on successful lean programs … The business component includes logical formation of the approach and the operating model. Standardization can also reduce errors. Cloud platforms enable companies to offer enhanced digital experiences to users without needing to invest in on-premises technology, according to experts from Wharton and SAP. For example, in cash reconciliations: “You’re basically taking two entries, trying to compare them, and lowering the bank’s exposure if there’s a mismatch,” Goyal says. As superfluous steps are managed away, the process becomes more efficient. Defining segment groups according to behavioral characteristics in the world of services. This includes interfaces to the branches, data system requirements, process controls, indicators etc. “I can’t help but see a pattern here,” he says. Often, lean thinking helps give executives a broader perspective on a process, making it easier to see possibilities for improvements than a more silo-bound view traditionally did. “The perfect lean team might get its processes right and do everything consistently, but suppose a customer wants to talk for 30 minutes before booking a flight?” The process may not allow for such lengthy conversations. Lean Six Sigma can also bring about significant results and breakthrough improvements in financial services, as demonstrated with four case studies from Dutch multinational insurance … This kind of creative thinking often exposes a great deal of waste. Now, four years later, those same organizations realize that they need a more comprehensive and strategic plan to cope with the business reality which has developed since that crisis. Lean tools and techniques can improve the customer experience by reducing unnecessary activities such as the number of call transfers and unnecessary IT processes, whilst also providing solutions to cut … At Acclino we know that transforming a process is both a science and an art. This should support the bank’s core operations, namely sales and customer service, with a view to maintain the bank’s profit goals and reaching a state of constant streamlining. Lean is a managerial approach which inspects processes, services and products according to their value from the customer’s perspective. Christian Terwiesch, a professor of operations and information management at Wharton, argues that human nature blocks progress. Formulate means of instruction and training for all branches and centers: concentrated training for employees / implementation teams in branches and centers, etc. For success stories in other industries, please visit our Lean Six Sigma Success Stories page. Notes Terwiesch: “They’ll say, `Well, lean doesn’t apply to me. In the average big bank, many small groups perform separate reconciliations, “using different technologies, processes and standards.” That can lead to mistakes. As a result of the 2008 economic crisis, most financial bodies made significant emergency cutbacks in order to keep afloat during turbulent times. “You might say it’s totally inefficient that these guys are getting paid to sit in the station 80% of the time. Nevertheless, to reap rewards from the process, even at the early stages, specific work packages for short term realization should be defined. While the basic idea of lean is familiar to many financial executives, getting them to follow through is another matter. “That’s why, intrinsically, the application of lean is harder in services.”. In a system with no slack, a single defect in one item can easily snowball into a much larger problem. But understanding what customers value isn’t always easy, he notes, especially when functional silos isolate employees from the front line or the marketplace. The Lab has incorporated all of the leading process-analysis and lean-implementation methods into a single and cohesive finance transformation project methodology. Lean middle-market banks … This article, part of a special report from Knowledge@Wharton and The Boston Consulting Group (BCG) on applying lean concepts to service industries, explores why the industry is dragging its feet, and shows what banks can achieve when they go lean. “Very often, employees get ideas about what’s important to the customer based on limited knowledge or an incomplete understanding of customer needs,” says Duthoit. “It’s incredibly important to do. The results of lean initiatives can be dramatic: Given this potential, why hasn’t lean made more inroads in the financial services industry? Gains in cycle time can be even more dramatic, with improvements of 30% to 60% possible. Others mistakenly think lean requires standardizing every part of a process. Update work plans and direct resources to where they are needed (recruiting more if necessary), Detailed characterization of work processes –, Inspect and analyze processes and topics transferred to centers and define optimal work process. Although the Lean methodology got its start in manufacturing, today it is widely used across the globe in every sector including logistics and distribution, services, retail, healthcare, … However, you also want to heavily involve front-line workers and encourage them to share their ideas. Lean Six Sigma is a process improvement programme that combines two ideas: Lean – a collection of techniques for reducing the time needed to provide products or services, and Six Sigma – a collection of techniques for improving the quality of products and services… Courage is required to break away from traditional paradigms, conceptions and clearly defined responsibilities are essential to ensure that the new “products” are developed correctly. “You need to focus first on some pragmatic, easily implemented and meaningful applications of change,” Duthoit adds. For process-oriented industries such as financial services, lean holds enormous potential. Reduce … We will walk you through the science, step by step, in a highly interactive, learning-by-doing workshop. Not only can they profit from lower costs and error rates, successful implementation of the lean approach can bring a 15%-25% improvement in efficiency and a 30%-60% increase in Cycle time. But old habits often die hard, and slowly. In addition to operating importance, this plan clarifies and presents the bank management’s commitment to the wider process. “They’re not just there to punch the clock and do what they’re told.” He warns not to overlook this need for change management. At Acclino we understand that Six Sigma and Lean Six Sigma (LSS) have a long history dating back to the 1990’s in the financial services … Another key principle of lean is to focus on what’s important, what matters to the customer, what delivers value, says Christophe Duthoit, a BCG senior partner who manages lean programs for financial services. Profits are maximized by concentrating on products and services which are valuable to the customer and costs are minimized by eliminating “waste” in the process and reducing operations which do not add value. “People are revisiting those partially integrated units, looking for next-generation synergies in operating models and work processes,” says Bartletta. The rest was frittered away on such unproductive activities as processing loans that were unlikely to be accepted by customers because the bank had taken too long to respond, or processing loans that should have been rejected because the applicant’s credit status was obviously too low, and trying – repeatedly but unsuccessfully — to reach customers on the telephone. Our most recent activity has been to help … Analysts using a lean approach in one investment bank reportedly gained 20%-30% in analyst productivity – and a 60% reduction in cycle time — by redefining credit processes. By Dikla Goldenbaum-Gaber, Director, Tefen IsraelRoy Rizenbach, Project Manager, Tefen Israel, The Lean Evolution: From Factory Floor to Service Centers - and Beyond/ WhartonBringing ‘Lean’ Principles to Service Industries | Published: October 22, 2007 | Author: Julia HannaLean Financial Services - Cutting Costs While Reducing Risks | Published : November 11, 2009 in Knowledge@Wharton Adopting Lean and Six Sigma for operational excellence in Services | Published: March, 2010 | Author: Coxswain AllianceExtending the Lean Enterprise | Published: February, 2008 | Author: Aberdeen Group, Tefen USA, 401 Park Avenue South, 10th Floor, Suite 912, New York, NY 10016, An AI Robot in the Service of the Stock Market, The Secret That Reduces Business Complexity, Capacity and Resource Management for a Financial Institution, I agree to receive marketing materials and newsletters from Tefen, Implementing the Lean Approach in a Financial Organization, Improving customer experience by strengthening the interface for the customer in all channels, Improving services and products and adapting them to customer needs. Maintain lean principles to create efficient and streamlined processes in branches and centers. Define training content for branches and centers, Reduce the physical size of branches and locate areas for new joint centers, Establish a body responsible for management, lead and control of progress, Establish a steering committee for key decisions, to include senior managers from all bodies, businesses and operating areas involved, Define a detailed work plan for implementation, management routines, control and escalation of progress, Allocate a body responsible for each mixed unit, Define areas of responsibility, functions and level of contribution required of each party involved. Because there were so many … Vastly improve service through lean business process improvement of customer-facing business units. Wouldn’t it be better to make sure that they’re always busy and that the fire truck is fully utilized? Becoming lean involves eliminating the “seven deadly sins” of waste in a process — overproduction, waiting, poor transportation/logistics, over-processing, sub-optimal inventory control, rework, and unneeded movement. People exposed to lean thinking are trained to see and remove these wasteful practices, he says. We call it Non … Lean thinking can even help management understand which customer groups are most profitable and where service can be enhanced most cost-effectively, says Amyn Merchant, a senior partner in BCG’s New York office. Tefen has led and managed many similar projects and has the experience and ability to implement large-scale projects in any organization which embraces the necessity of carrying out such a move. Analysis of customer needs for each segment, including product, means of approach, manner of providing service etc. Value to the customer 2. In this Blog… we look at the impact that Lean Six Sigma can have across the financial services industry. Otherwise, lean just becomes a project and a one-time event, and the costs and the risks will creep back in a few years.”, Lean does have its limits. In some cases, process inspection can lead to the entire process being removed. Parallel to defining work packages for removal of processes from the branches, a deployment plan needs to be developed to ensure that these processes are delegated to the correct centers. In a Lean service enterprise, processes are customer-centric, services flow smoothly, and employees work together toward operational excellence. The methodology is based on five basic principles. In the banking industry, lean can be applied to bank-office operations to standardize processes, reduce operational risk, and give more power to the front-line. You want to let them know that it’s okay for them to speak up, and that they should drive the definition, testing and validation of the new process.”, Done right, lean isn’t a one-off project but instead a pervasive approach to operations that brings lasting cultural change. John W. Rogers Jr., founder of Ariel Investments, talks with Wharton’s Stephanie Creary about his lifelong effort to get more people of color into boardrooms and key leadership roles. To deliver its value, the application of Lean Manufacturing to Financial Services focuses on: 1. Formulating USP (unique selling proposition) while taking into account the bank’s potential for profit, Detailed characterization of the operating model –, Define branch operations by process / sector / subject / customers / segment, Define joint center structure and work methods, Define branch interfaces and work methods in conjunction with centers, Plan and estimate number of employees required to perform operations in joint centers versus number of employees required in branches, where workload has been cut, Build plan for transfer of workforce from branches to centers, based on skills and bank’s needs, Formulate plans for early employee retirement where necessary, Find technological solutions and expertise for successful implementation of the approach and operating model. 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