“But you don’t eat it. '”, Part of the reluctance may have to do with lean’s shop-floor origins. “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. Our most recent activity has been to help … 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. Reduce project (product) size. This process of transferring operations is not only technical. All large transformations start with small success stories. It is a processing factory, and there’s a lot of waste. 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 val… Notes Terwiesch: “They’ll say, `Well, lean doesn’t apply to me. Financial services businesses can improve by elevating their quality of service, reducing cycle times, improving productivity, reducing waste and eliminating rework. “You might say it’s totally inefficient that these guys are getting paid to sit in the station 80% of the time. Almost everything else should be cut. In particular, automatic systems must be watched closely to ensure that they don’t exacerbate a difficult market by, say, withdrawing credit at the wrong time. Most service companies tend to be in denial that lean applies to their industry, Terwiesch says. 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. Just as manufacturers that work on a lean, zero-inventory basis must have assurances from suppliers that their parts will have zero defects, banks with lean operations must put in place strict quality controls, Clemons says. 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. This involves: We then need to define an operating model. Wouldn’t it be better to make sure that they’re always busy and that the fire truck is fully utilized? 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. 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 … Formulate means of instruction and training for all branches and centers: concentrated training for employees / implementation teams in branches and centers, etc. “Once these are shown to be a success, you can build momentum. In detail, this schedule defines the pace of terminating branch processes and moving employees to the centers. But those attitudes are slowly changing. The challenge of using lean in a service business is that the customer is much more closely connected to what’s being produced. 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 like your diet. In this Blog… we look at the impact that Lean Six Sigma can have across the financial services industry. So How Will Acclino’s Lean Training Model Work for the Financial Services Sector? Like any major improvement effort, lean is not risk-free. Lower costs and fewer errors are just the beginning. Others mistakenly think lean requires standardizing every part of a process. It’s just the $50,000 a year underwriter, the simple banker in the branch office who should do lean. Mainly used in the automotive industry, … For instance, the lean principle of engaging employees in problem-solving means that workers involved in a process must be asked how it might be simplified or improved. 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. The operating component involves establishing the management team, implementing management routines, formulating a deployment plan, work plans, tracking and control.The human component focuses on transparency, routine communication of successes, matching human resources to operations, establishing centers with quality spearheading forces and including employees in the process right from the early stages. Banks that take on successful lean programs … Improve earnings by transforming the entire financial services operation. Although implementing lean begins as an operations issue, it quickly becomes a change management exercise that requires companies to deal with workers in new, unfamiliar ways. The first indicator is subjective. For success stories in other industries, please visit our Lean Six Sigma Success Stories page. As systems grow more efficient, warns Eric Clemons, a Wharton professor of operations and information management, quality control and risk management must improve along with them. “You can’t just say, ‘Let’s run this exercise and we’ll worry about the people dimension later,'” notes Duthoit. “In theory, lean tools and techniques are pretty simple,” says Bartletta. Process improvement … You come home, you’re tired from work, and you have a beer. For process-oriented industries such as financial services, lean holds enormous potential. We will walk you through the science, step by step, in a highly interactive, learning-by-doing workshop. Some executives may equate lean to dumbing down a job. We recommend using the following organizational infrastructures to: Implementation of the lean approach and the operating model covers a wide variety of operations and areas across units and branches. The following diagram summarizes the benefits which an organization can expect to reap after implementing the lean approach: The decision to implement the lean approach at your bank is a significant strategic step. “With lean, you can standardize, you can homogenize, you can roll up uniform processes and significantly cut exposure,” says Goyal. As a result of the 2008 economic crisis, most financial bodies made significant emergency cutbacks in order to keep afloat during turbulent times. But understanding what customers value isn’t always easy, he notes, especially when functional silos isolate employees from the front line or the marketplace. Add to this the banker’s satisfaction and the message the customer receives from that banker. Starting on … But it doesn’t, Duthoit says. The basic philosophy doesn’t really change.”. Lean management was created by Toyota in Japan and introduced into its factories in the 1970s. 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. “Lean isn’t simply about cost cutting, but about changing the way you work,” says Duthoit. Analysis of the bank’s customer population according to the defined segments and analysis of the “typical” customer in each segment. As superfluous steps are managed away, the process becomes more efficient. Tefen > Insights > Industries > Financial Services > Implementing the Lean Approach in a Financial Organization. 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. 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. Far more common is an attempt to cut costs without undertaking an actual lean program. 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, … It is a methodology that focuses on lean management. 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. 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 … For example: technologically oriented as too personal relations / VIP etc. “It’s incredibly important to do. Most major banks around the world have already begun to implement lean principles as follows: The implementation of this approach in banks is also expressed by performing customer segmentation and mapping the value offered in each segment. Terwiesch, in his recent operations textbook (Matching Supply with Demand, Gerard Cachon, Christian Terwiesch, McGraw-Hill 2008), notes that at one major consumer bank only 40% of the labor that went into loan underwriting added any value. It transforms the way employees view their work by encouraging them to continually think about ways to improve it, notes Bartletta. The purpose of the fourth of the Lean techniques, KANBAN, is to schedule production and minimize work-in-process while encouraging improvement in many areas.KANBAN establishes a small stock point (usually at the producing WorkCentre) that sends a signal when items are withdrawn by a downstream process. A commercial bank receives many loan applications, and these application forms are submitted to the consumer loans department. The Wharton School is committed to sharing its intellectual capital through the school’s online business journal, Knowledge@Wharton. Christian Terwiesch, a professor of operations and information management at Wharton, argues that human nature blocks progress. “We focused on demonstrating the value of Lean Six Sigma techniques – showcasing how it could deliver process efficiency and an improved customer experience. “People are revisiting those partially integrated units, looking for next-generation synergies in operating models and work processes,” says Bartletta. People exposed to lean thinking are trained to see and remove these wasteful practices, he says. 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. All materials copyright of the Wharton School of the University of Pennsylvania. Think more like a race-car pit crew, and process speed can improve dramatically. At Acclino we know that transforming a process is both a science and an art. The correct combination of these components, with the assistance of external support to help discard old paradigms and breaking through new paths, will help your organization build the infrastructure for constant improvement and for attaining the required efficiency objectives. By standardizing processes and empowering front-line people, managers can cut out a lot of that risk. Reduce … For process-oriented industries such as financial services, lean holds enormous potential. According to a recent survey, 17% of the organizations which have implemented this methodology over the past few years are service organizations.The potential of this method for process-oriented organizations, such as financial institutes, is enormous. 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. 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. 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. “Managing change and people’s behaviors is a continuous process that must be addressed from day one,” he adds. In the average big bank, many small groups perform separate reconciliations, “using different technologies, processes and standards.” That can lead to mistakes. Speed improves and costs drop. “Lean works best as a balanced top-down and bottom-up effort,” he explains. In effect, the customer is often the object moving through a service process, and that complicates matters immensely. We call it Non … “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.”. The results of lean initiatives can be dramatic: Given this potential, why hasn’t lean made more inroads in the financial services industry? But Goyal believes that lean most often reduces risk. It’s a marathon.”, But analysis and implementation are extremely different. In reality, customer satisfaction is measured in those “moments of truth” when the customer needs bank services. Sun Life Financial Application of Lean Six Sigma Methodology in 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. Still, many executives in those areas continue to deny that lean can improve their productivity. So forget the assembly line approach. But going lean would not be a good way to run a fire department, Terwiesch says. Lean in Financial Services We’re excited that we’ve been able to recently help Financial Services customers implement lean thinking in their businesses. “You need to focus first on some pragmatic, easily implemented and meaningful applications of change,” Duthoit adds. To deliver its value, the application of Lean Manufacturing to Financial Services focuses on: 1. In a Lean service enterprise, processes are customer-centric, services flow smoothly, and employees work together toward operational excellence. It is therefore important to clarify the factors influencing these channels and to review the situation with every central operation performed. Many banks that have applied lean to back-office processing have reached a steady state followed by diminishing returns. Below are Lean Six Sigma success stories in the Financial Services industry organized alphabetically. The diagram below shows the various stages of the lean approach: We begin this stage with customer segmentation. 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