lean banking industry

What Is It Like Using Lean in The Banking Industry?

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Lorenzo Del Marmol

August 29, 2017

lean banking industry

Lean is not a program, it is a total strategy. – Alex Miller, Professor of Management at The University of Tennessee

There is often doubt and confusion as to whether lean can be applied to the financial services industries or not, since it was initially introduced in the manufacturing world. The flow of information is quite complicated in the banks and the entire business is quite process-intensive. Therefore, by applying lean in such a business, you can expect great outcomes in the form of operational improvement because it will help eliminate process wastes. There can be multiple types of process wastes, including unnecessary verification points, process loopbacks, repeating the process due to errors, duplicates of information storage, information getting physically dispersed, and delivering unwanted services to the clients. If you eliminate these wastes, you will be able to spend more resources in taking actions that create more value for the customer. This is the reason why many banks have now started applying lean for better operational performance. So, how exactly is lean applied to the lean banking industry?

How Is Lean Applied In Banking?

In banking, the focus of lean is mostly bank-office operations, but it can also successfully reduce operational risk when applied in front-offices by standardized processes and by giving more power to the front-line staff.

A lot of times, lean is thought to be and implemented as a methodology that improves operations, and the original aspects of it are mostly ignored or forgotten. This is the reason there are only a handful of companies that can be called “Lean Enterprises”.

A major aspect of the lean culture is that every team member, on each level, puts effort to perform better in his work environment with each passing day. Most of the times, there is a certain level to which the overall performance needs to be raised, so a project team leads the lean process by creating a planned approach towards the goal.

In the final stages of the project, there is nothing that ensures that the initiatives taken for improvement will be followed in the future and that old conducts will not resume once the project ends.

Communication plays a key role in the step by step changes made in any management technique. Banks need to establish a unified goal and milestones that they want the lean methodology to deliver and share them with their employees.

In order to establish a sustainable lean culture in the office space, it is a crucial investment that employees be taught and coached lean techniques extensively.

Departments that do not face the customer directly, need to be introduced to the idea of internal customers. This will allow you to create a customer centric environment at all levels in the bank.

Lastly, it is important to note that any skilled lean manager will spend most of his/her time on the ground observing and innovating ideas for improvement.

The lean methodology has been proven time and time again to increase both quality as well as efficiency in multiple aspects. Let us now take a look at the benefits of applying this methodology in the banking industry:

Finding Waste:

Using lean analysis, crucial resources like manpower and processing capabilities that got used to getting wasted can now be analyzed. Having to redo work that has already been done and having to do unnecessary work can be eliminated once identified by lean analysis techniques.

Choke points in which a department has to sit idle waiting for the prior group to release work for it can also be identified in this way. The department can then be utilized in a better manner by reassigning some other work during that period.

With the help of lean methodology, you will be able to reduce the cost and time required for completing a task by making use of your available resources in the most efficient manner possible.

Eliminating Variances And Improving Workforce:

Better and efficient employee capacity planning can be carried out by identifying and eliminating discrepancies and variances in levels of staffing and arrival to work.

Overstaffing can be avoided by managing accurate staff levels in accordance with the anticipated work. In certain cases, the working process has been found to be inefficient which can be reengineered to smoothen out the process.

When you make use of lean in the banking industry, staff performance improves, both on a departmental and individual level. With consistent and practical data, transparent discussions regarding individual performance can be conducted between staff members and managers.

This will ensure better work quality using the best practices possible. Lean practices also highlight the comprehensive view of production, hence every staff member will feel like they play a critical role in a big, important process.

Quantifying Cost And Value:

Cost-to-value analysis can also be performed with the help of the lean methodology. The metric can be measured in numbers so you can accurately analyze the results of process changes or other actions taken.

Collect experimental data so that the effect of the changes that have been made to processes or services can be modeled with a high confidence before the decided actions are actually executed.

This makes experimentation more convenient and cost-effective since testing out the solutions and process changes is much easier with lean.

Takeaway:

  • Despite being introduced by the manufacturing industry, lean can be applied to financial institutions including banks to great effect.
  • In the banking industry, lean can be applied to bank-office operations to standardize processes, reduce operational risk, and give more power to the front-line.
  • The benefits of applying lean methodology to the banking industry include finding waste, eliminating variances, improving the workforce, and quantifying cost and value.

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Be Lean, be happy! Thank you!

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