Continuous Process Improvement & Kaizen in Bank Lending Operation

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Achieving Customer Service Level Requirements within Commercial Lending Operations

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Client: A Canadian bank with more than $350 billion in assets
Industry: Financial Services
Service: Future state vision, Rapid process improvement (Kaizen)

Challenge:

Cost and turnaround time to process commercial loans was increasing without a corresponding increase in revenue

Solutions:

Utilize Voice of the Customer input to understand service level requirements
Define strategic direction of the processing center
Redefine tactical workflows linked to achieving customer service level requirements
Transform the company culture to one of continuous improvement

Results:

Implemented new processes resulting in a $2 million annual reduction of operating costs (a 20% improvement)
Increased productivity by 35%
Reduced lead times by 75%

A prominent Canadian bank found itself in a precarious position: Its commercial loan volume was static, but the unit’s operating costs were increasing annually. Customer responsiveness was adequate for the industry, but not a competitive advantage.

Managers wanted to establish an on-going, continuous improvement culture – and that meant increased employee involvement in any process redesign.

Phase I – Guidon consultants facilitated a week-long session attended by senior management from each of the four regional operations centers along with internal business partners from IT, HR, and Sales. The team’s goal was to see the business through the eyes of their customers; determine which process steps actually added value and which were unnecessary; and develop the best future state for loan processing. At the end of the week, the group had a vision for the future operations flow and an agreed-upon roadmap to get there.

Phase II – After a few weeks of planning, Guidon led a series of rapid improvement projects. In each, a group of eight to 12 employees closely reviewed a particular segment of the lending process and applied primarily Lean principles to eliminate waste and improve the flow of work. Overall, six improvement projects were completed over a five month period, engaging about 30 of the 170 employees across three locations to design the new process.

Phase III – The next step was setting up a limited pilot to further refine and evaluate the new process. The two-week trial run involved one location and ten employees, who first set up the new process and then worked with Guidon consultants to debug details as needed. Then they began a seven-day evaluation period, collecting data and meeting regularly to discuss progress.

At the end of the pilot, there was a pleasant surprise. The target of 20 percent productivity improvement had been exceeded with actually a 30-35 percent gain. The turn-around time, or lead time, necessary to process a loan transaction also decreased from 4-8 hours to 20- 60 minutes. The Lean principles had helped the team decide how to create the new flow and how to manage in the new environment. Eliminating extraneous checking and re-checking of steps and multiple, unnecessary hand-offs clearly led to dramatic increases in loan processing speed and capability. The bank validated those results with pilots at two other sites. The project team and Management team had the confidence to plan the full-scale roll-out of the new process.

The new design and full implementation approach took ten months and the bank was able to reduce:

Process steps from 140+ to 70
Decision points from 20 to 14
Physical hand-offs from 46 to 11; and electronic hand-offs from 16 to 14
Operating expenses from $10 to $8 million
Delivery time from 4-8 hours to 20-60 minutes with fewer errors and rework