If one were to track the trail the forms go through, it would probably start from a bank officer’s desk, then go up or down the elevator to every floor level until it reached the department for processing and approval, finally returning to the front office where a loan … Reduce project (product) size. “It’s more about getting smarter about what you do.”. It transforms the way employees view their work by encouraging them to continually think about ways to improve it, notes Bartletta. 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… 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 … 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. 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 … The first indicator is subjective. 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 … In a Lean service enterprise, processes are customer-centric, services flow smoothly, and employees work together toward operational excellence. “Imagine you’re running a travel office,” says Terwiesch. The methodology is based on five basic principles. 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. Lean and Agile ways of working, including Lean Portfolio Management for financial services, empower teams to deliver value quickly and efficiently by: Decentralizing decision making so that those closest … The benefits of applying lean methodology to … As more banks discover the benefits of lean operations — such as lower costs, fewer errors, faster cycle times and far greater efficiency — wide-scale adoption by the industry is just a matter of time. It’s just the $50,000 a year underwriter, the simple banker in the branch office who should do lean. So forget the assembly line approach. “With lean, you can standardize, you can homogenize, you can roll up uniform processes and significantly cut exposure,” says Goyal. In fact, getting lean often requires creative thinking. Lower costs and fewer errors are just the beginning. Process improvement … In effect, the customer is often the object moving through a service process, and that complicates matters immensely. The implementation of such a wide-scale process undoubtedly constitutes an enormous challenge. Like any major improvement effort, lean is not risk-free. “You need to focus first on some pragmatic, easily implemented and meaningful applications of change,” Duthoit adds. “You might say it’s totally inefficient that these guys are getting paid to sit in the station 80% of the time. This version of the Lean Six Sigma Black Belt course is a financial services version, focusing on process improvement on service-oriented processes found in financial industries, including facility insurance, … Lean middle-market banks … 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. Inventory. It includes an opportunity to thoroughly inspect processes, make processes leaner and more efficient, cancelling and reducing steps that do not add value for the customer, standardizing the performance of the process and preventing repeat actions, reducing/cancelling controls, etc. “It’s like your diet. To deliver its value, the application of Lean Manufacturing to Financial Services focuses on: 1. 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. But those attitudes are slowly changing. Competitive Advantage Through Business Process Transformation. But there’s a second stage of opportunity in higher-level processes, such as those that touch the customer in branches or the front-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. 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. • Implemented LEAN methodology, resulting in reduction of 30 FTEs • Member of Retirement Plan Services Operating Committee • Led implementation of new IVR system, resulting in $1.1M savings How Student Loan Forgiveness Could Increase Inequality, Why Diverse Boards Can Help Close the Wealth Gap, How Cloud Platforms Can Enhance Digital Experiences. The objective of a lean banking approach is to identify areas of waste and inefficiency within your organization and then apply proven methodologies to generate solutions. Nevertheless, to reap rewards from the process, even at the early stages, specific work packages for short term realization should be defined. You know what to eat, I know what to eat, it’s not that hard to know,” Terwiesch says. 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. Add to this the banker’s satisfaction and the message the customer receives from that banker. Our most recent activity has been to help … Speed improves and costs drop. “But you don’t eat it. This reality check has left companies facing harsh challenges, such as reduced profit margins, accelerated competition and greater consumer awareness. 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. You should also be aware that it will take courage to make what may be substantial changes for your organization, particularly in relation to its core sectors. In addition to operating importance, this plan clarifies and presents the bank management’s commitment to the wider process. In some cases, process inspection can lead to the entire process being removed. A few years later — perhaps after a competitor has shown some success with a lean approach — some managers concede that lean could work, but only in the back office and other lower-value parts of the operation. We cannot stress enough the importance of the communication channels and the management of change which accompanies this step, both in presenting the change and twice in giving the correct messages which reflect the lean approach to customers and bank employees alike. “The organization needs to share a common goal and set of expectations of value that the lean program will deliver, and have the executive commitment and appropriate governance to enable its success. Finally, years later, the whole workforce will reorganize. Most service companies tend to be in denial that lean applies to their industry, Terwiesch says. With a clear focus on process standardization, quality improvement, cost cuts and efficiency enhancement, the lean method has recently been gaining momentum and crossing over from its traditional base in industry to various branches of service organizations. While the basic idea of lean is familiar to many financial executives, getting them to follow through is another matter. 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. It’s a marathon.”, But analysis and implementation are extremely different. 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. “Lean is one of the very effective ways to actually mitigate operational risk, much of which arises from errors at the front line,” he notes. Building the infrastructure to support the process is complex and involves many channels: The organizational effort required to build an infrastructure in line with the work plan, as well as allocating resources and synchronizing individual elements demands good overall management of the process. According to an updated survey conducted among managers of U.S. banks and financial organizations, 43% of the respondents thought that bank managers should devote the next two years to initiatives for improving operational efficiency, reducing costs and inspecting their operative and organizational model. But Goyal believes that lean most often reduces risk. This involves: We then need to define an operating model. “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. “But the execution — getting to success — is complex.” One reason: “It’s a people process, and it requires a big change in the culture and in the way you manage activities.”. “Managing change and people’s behaviors is a continuous process that must be addressed from day one,” he adds. “I can’t help but see a pattern here,” he says. “You’re much more likely to be successful carving up and defining specific processes with a beginning point and an endpoint,” says Simon Bartletta, a partner in BCG’s Boston office. The challenge of using lean in a service business is that the customer is much more closely connected to what’s being produced. We will walk you through the science, step by step, in a highly interactive, learning-by-doing workshop. This article examines how this method has been implemented at one of Israel’s leading banks. The success of such a wide-ranging process will be measured by means of two main indicators – customer satisfaction and the quantity of resources saved. One of the leading approaches employed by Tefen is based on “lean“ principles. “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. Formulate means of instruction and training for all branches and centers: concentrated training for employees / implementation teams in branches and centers, etc. Lean management was created by Toyota in Japan and introduced into its factories in the 1970s. As shown in the next diagram, the optimum model for implementation of lean principles is composed of the following elements: The primary significance of this model is to remove certain operations from the branches to one of the supporting channels, so that branch employees have more time for focusing on value added activities. Lower costs and fewer errors are just the beginning. Process … “Finance is just a different kind of factory. I am special. But understanding what customers value isn’t always easy, he notes, especially when functional silos isolate employees from the front line or the marketplace. A lean audit of one North American asset manager uncovered ways to make product pricing 12%-20% more efficient by carefully identifying and eliminating non-value added activities. The best way to begin a lean program is to map an entire end-to-end process, then look for ways to streamline it. Defining segment groups according to behavioral characteristics in the world of services. While it might be tempting to simply issue an edict and try to order a lean program, Bartletta says that what works best is to engage workers early on. I think the same is true for lean.” Old habits are hard to break. But it just doesn’t work that way, because unless you’re the one causing the fires, a fire department needs to hold excess capacity.”, What’s more, he adds, “an extremely lean system is very vulnerable to external shocks to the system — strikes or traffic jams, bad weather, earthquakes, whatever messes up the system.”. The diagram below shows the various stages of the lean approach: We begin this stage with customer segmentation. In this Blog… we look at the impact that Lean Six Sigma can have across the financial services industry. Proper implementation of the methodology enables the organization to achieve constant longterm improvement. Mainly used in the automotive industry, … In fact, lean for manufacturing and lean for finance are not all that different, says Deepak Goyal, a partner in BCG’s New York office. 2 AGENDA •Lean Six Sigma Introduction •ASQ definition •DMAIC Methodology •Pre-requisites for DMAIC projects •Tools … The operations to be removed from the branches must be clearly defined and their value in the eyes of the customers understood. 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. 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