Banking on process improvement

It is becoming ever apparent that Financial Services companies, and in particular banks, in the UK are adopting process improvement methodologies from the manufacturing sector.

One bank that I know well, specifically refers to its back office as “the factory”.  I was at another bank last week meeting the Director of Business Process Re-engineering (BPR).  The very appointment of this title at such a high level is an indication of the importance of process excellence in the financial sector.

Just about every UK bank I am aware of has some capability based around Lean/Six Sigma or similar flavour and many of the recruits are coming from manufacturing, retail, and other service companies.

There are big gains to be made since (although the banks wouldn’t like to admit it) they are horribly inefficient.  A further concern is the cost/income ratio.  Most senior executives have some target set around this ratio.  Major investments in technology can take years to pay back.  This increases costs in the short term and brings any benefits way down the line, which adversely affects the cost/income ratio in the short term.  Call me cynical but most senior execs will have moved on by that point, so they will not see the benefits in their bonus payments.  So there is a degree of short-termism and BPR fits the bill because it is about making low cost investments in continuous improvement.

I would argue that this actually benefits both the short and the long term, and you have certainly heard me argue before in favour of incremental rather than big bang projects for a whole range of reasons.

So it is clear to see why they are doing it.  What about how?

Most process improvement work starts by reducing defects.  Removing unnecessary steps in the process, reducing rework, and minimising non-value adding activity are obvious routes to achieving this.

My area of interest is in clerical processes.  When looking at the future state of such a process, once streamlined, there are frequently technical constraints on making the improvements.  These are usually caused by a lack of systems integration.  Bank staff are bound by manual processes that are demeaning, unnecessary and costly.

But if the option of major IT investment is ruled out, are there lower cost options?  Perhaps something that can deliver payback within the current budget cycle thereby keeping the cost/income ratio healthy?

Automating at a local level makes sense in this regard.  There are various ways of achieving this using UI integration, for example.  This serves a local purpose, is not a strategic IT investment and can deliver super quick results at low cost.  Most modern applications are easily interfaced with.  In designing such a system you will of course need to consider scalability, security, ease of use, ability to make constant change to the processes, code maintenance, technical resources needed.

Or you could use a product with all these features inherent.  Blue Prism has published a free white paper on Lean/Six Sigma and clerical process automation if you are interested further.

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