Lean Six Sigma in Banking

Implementing Lean Six Sigma in Banking Can Reap More Rewards!

Lean Six Sigma in Banking aims to improve the customers’ satisfaction by reducing the process cycle times and making the processes faster for the customers as well as reducing the defects in banking products (cheque books, ATM cards, credit cards, fixed deposit certificates). The bank, which opts to apply lean Six Sigma in banking can provide totally a different customer experience lifecycle. 

Scenario 1 - Lean Six Sigma in Banking Applied

Let's imagine a scenario 1. You visit the bank’s branch, and you notice the proper layout as per the customer’s requirements. security cameras are in perfect places covering every angle. The number of teller counters have been increased. The electronic queuing system is in place. Every teller is spending only 4-6 minutes on each customer. Every account opening officer is already with ready documentation checklists and only requires 10 minutes to complete the formalities.  

Overall, customers’ save their time, the employees save more time, they are more productive. Bank staff is now able to serve more customers, or sometimes they have more free time for themselves. And when customers leave the branch, they carry very positive satisfactory feeling and immediately share it forward at home and with friends. 

How would you like to have such an environment, when you visit your bank branch next time.

Scenario 2 - Without Lean Six Sigma in Banking

Now let's imagine another scenario 2. Having painted the above scenario 1, practically speaking, most often it is the other way around. When you usually visit your branch, it is a crowded place, a lot of variation in serving each customer, sometimes, just 5 minutes, and sometimes, 20 minutes. Sometimes, staff is not sitting on the seat, and sometimes he or she is roaming around within the branch for some other errands like bringing the files, going for the photo copying and more stuff. Resultantly, it normally takes about half a day for a typical bank branch visit, and you may come back home with some bad taste in your mouth. But you could not do much, after all, they are managing your money.

Comparison – Before & After Scenarios

The difference between the first scenario and the second scenario is only because of the inattentiveness of the bank’s management towards the service quality issues and not fully able to investigate and fix the service quality issues for the bank’s customers.

To achieve the first desired scenario 1 (lean Six Sigma in banking), definitely it is no more a rocket science today. 

Applying lean Six Sigma in banking may be the panacea by improving the second scenario and the existing state of affairs.  The above two pictures clearly show the ‘Before’ and ‘After’ scenarios of having implemented the Six Sigma in Banking case. 

Now, we can see that how Lean Six Sigma in Banking can be implemented to improve the bank branch service quality.

Every Six Sigma project basically starts with the famous Six Sigma problem solving methodology DMAIC (Define, Measure, Analyze, Improve and Control).

It is important that we have to clearly define the problem areas with crystal clear clarity in a quantifiable way. That is considered the right start. The fuzzier and unclear you are about the project or problem definition; the results will also be less desired accordingly. So, it is good to spend some time at the definition stage to find out the right problem area first.

The first tip to find out the right problem is only through the customers’ eyes and perceptions (not from what the bank management feels). So, I would suggest that even if the management is not clear enough, Six Sigma consultant should offer them the services to identify the right areas for improvement for them. For this task, first he or she can become an actor customer first and should go through experiencing some transactions first hand. like a mystery shopper. This way, Six Sigma consultant would undergo the complete process yourself, and the Six Sigma consultant can easily observe and feel what customers can feel. From there onwards, the Six Sigma consultant can start it way forward, by suggesting the areas for improvement.

Now let’s get somewhat deeper…

Let’s rewind in some sharper detail analytically wearing Six Sigma hat, what you may have observed before.

When you entered the branch to open a new account. In totality, it took about 4 hours for you to complete it. 

The account opening officer was not sitting at the seat. You had to wait for her about 30 minutes. Then she had to ask you the account requirements (savings, current or others), then she started opening the drawers to pull out the required form set, but she could not find it easily. Then she went up to another officer to request for the form, but he was busy with another customer, so it took 10 minutes for her to return. Then she started asking the questions to help fill up the form, but after asking the name and father name, she had to attend the call, which was her personal call, and took about 5 minutes to end. Then she resumed. And you provided other answers to the questions about the occupation and means of income etc. Finally, she asked you about the required documents (your legal ID, occupation and address etc.), but you did not have it ready, so you requested to go back home and bring it next day. But for convenience you asked her for the written list of documents, which she did not have it, so you had to write it yourself on a piece of paper, but when you requested for a piece of paper, she again had to go to the next officer to pull out the writing pad, again she did not find it there, then she rushed to photocopier and pulled out the blank white paper, and gave it you. Though you only needed a half of it, so you tore it in half and wrote the required list of documents, which she mentioned. 

The account opening now got pending to the next day. Also after about 4 hours, you left the bank’s branch. And the next day you went again with the required documents but you had to wait for your turn, and after 2 hours, you again approached the bank officer and handed over the required documents.

When she started scrutinizing the documents, she found that the documents were not attested. She demanded the documents to be attested, well, you did not know about it, nor she told earlier, so there was some sort of argument and frustration in your voice, tempers going high... Finally, the customer had to return back home and for another two days, he could not go back to the bank branch due to other domestic commitments, and then he approached one of his acquaintances to get the documents attested and the next day he went back to the branch again.

She scrutinized the documents again after making him wait for 2 hours, and finally told him that it will take another 3 working days for the head office to approve the account. You thought everything was just completed. And when you asked about the cheque book and ATM card, she said that it can only be applied when the account gets approved by the head office. And then it will take another 2 weeks to get the cheque book and ATM card. 

After reading the above customer experience journey, I guess you are completely inside the story, and those who have experienced such bank branch’s experiences may relate to some extent.

However, the story may vary from region to region and from branch to branch, but my point was to provide a typical story of the ‘Before’ scenario.

Now let’s get to work with Lean Six Sigma in Banking to improve the account opening process with Six Sigma DMAIC methodology

Define

Based on the gathered inputs, the account opening process takes 2 weeks’ cycle time (in our above quoted example). The branch processing takes about 4 +4= 8 hours spread over two days.

The Lean Six Sigma project's objective is to reduce the account opening cycle time to 3 working days’ and the branch processing time to total of 3 hours  (2+1)

Measure 

Measure the past 12 months’ data of the account openings i.e. the total time taken, total visits by the customers and average processing time at the branch level. In addition, the average cost of the account opening (taking into account the staff salary, stationery, calls, etc. based on the ABC costing)

Calculate the Mean and the Standard Deviation

Determine the Customer expectations/requirements based on the Voice of Customer (VOC)

Get to know the Customers’ USL (Upper Specification Limit) and LSL (Lower Specification Limit) or simply the ‘Tolerance’ level.

Determine the DPMO, the defects per million opportunities. Defects should be something which is not conforming with the customer requirements or tolerance level.

Determine the current Sigma level or Z score of the process.

At this stage, suppose it shows you that the account opening process is at 2 Sigma level. Thereby you may have all the room to improve it with lean six sigma in banking and make it 4, 5 or 6 six sigma process.

Analyze

Now analyze the root causes of the process, what is causing it and what are the ingredients for this lack luster performance and the low customer satisfaction.

You can use now other Six Sigma tools and techniques like Breakthrough Equation Y = f(X) + e

You can use the Fishbone Diagram analysis to identify the root causes.

You can use the Scatter Diagram to see the relationship between two variables with each other.

In addition, you can also use the frequency chart and histogram to see the obvious trends.

Through the ‘Analyze’ stage, you will get to know the root causes of the bad outcome (Y). e.g. Staff is not properly trained, ready forms are not available, the electronic queuing system is not properly working, the proactive account opening procedure is not communicated, staff back-up is not in place. the rules for attending the personal calls are not in place, the rules of conduct and communication with the customers are not in place.

Similarly, at the back end, at head office, Six Sigma Consultant also has to look into the account processing and approval processes and issuance of the cheque book and ATM cards and also has to analyze its root causes at the head office level which is causing the 'undesired outcome'.

Improve

Based on the identified root causes, you can now proceed to fix the problems. You can develop the new and improved SOP for the account opening process.

You can install the electronic queuing system, if the volume is high.

You can train the staff to be precise and proactive in communication with the customer.

You can have the time limit for customer interaction with range of 20 – 40 minutes.

Staff should complete the customer’s visit in 2 hours.

After the front-end fixing, you will also have to work on the back-end approval processing as well. 

Maybe you need to reduce the sign-offs, reduce the wait time of pending files, improve the staff back-up schedules, as well as provide staff empowerment for quick decision making.

You may have to develop new SOPs and user-friendly account opening forms and then will have to communicate to the branches with notifications and also conduct the required staff trainings (where required)

Control

After having fixed the process by achieving the 3 hours’ branch processing time and 3 working days for account opening, now you have to ensure that it stays the same in the short and long term.

For this, you have to develop a ‘Run chart’, (just like an ECG) where you have to take the daily account opening data from branches. This has to be monitored by the responsible assigned staff and they have to report it on daily basis for any compliance issues. For all non-compliance with new improved SOPs, it should be escalated to the higher level and respective staff should be held accountable.

For the success of the Lean Six Sigma in Banking, it is important that the ‘Control’ phase should be properly managed. Many of the past improvement initiatives have been lost due to neglecting the ‘Control’ phase. It most often also happens in our personal lives.

Based on the human psyche, we tend to move back to our old habits. That is the reason, the ‘Control’ stage ensures that the new improvements stay and sustain for the long term.

Summing Up

Banking is a service industry. And there is a good amount of competition amongst the banks. Only those win more, who provide the best customer services and the service quality without any delays, with comfortable wait times and with friendly customer service staff.

The Lean Six Sigma in Banking is a real advantage and boon for the banking industry. It can completely overhaul the service quality and the remove all the defects from the banking products.

The best approach for Lean Six Sigma in Banking is to go for one project at a time. The ‘account opening improvement’ project may take 2 months to complete from ‘Define to Control’ stages. After having proved the savings and increase in the customers’ satisfaction, you can now move to the other problem areas and similarly define the project with Six Sigma project charter and start the Lean Six Sigma in Banking projects. However, you can also opt to implement Lean Six Sigma in Banking at a bigger level by initiating multiple improvement projects at the same time. But, that will require more Six Sigma resources to manage the parallel projects at the same time.

I do hope that banks will be able to use the Lean Six Sigma in Banking to their advantage, as many banks in various countries have already done it, and some are still implementing Lean Six Sigma. You can also read another article: Lean Six Sigma in Banking and Finance

Everyone bank wants the best customers’ satisfaction, more revenues and profits. Lean Six Sigma in Banking is one solid route to get it.