Keys to Scaling Lean in Your Financial Institution
As the cost of banking increases and the post-crisis competition within the industry tightens profit margins, banks have become compelled to incorporate lean practices within their organizations.
More than just a cost management exercise, Lean banking is best defined as the process of identifying sustainable improvements that leads to multiple efficiencies. And applying lean principles to a branch can reduce time-to-market, improve customer service quality, reduce risk exposure and increase employees' quality of life.
For banks thinking about implementing lean principles, getting started can feel overwhelming. It doesn't have to be, however. There are some areas where institutions can focus in order to begin to implement and also scale lean.
Create organizational flexibility
To be competitive and responsive, lean banking calls for flexible and empowered leadership who are able to approach business holistically, as compared to in silos.
Some banks have had success in creating cross-functional management teams tasked to identify non-value-added processes. This strategy encourages managers to think outside of their kingdoms and work toward a common goal. For this to be effective, teams should be encouraged by senior management to make and execute the recommendations made by the group.
Once managers experience successes in this type of cross-functional environment, conscious efforts can then be made to allow for this thinking to “trickle down” throughout the organization.
Promote a mindset of continuous improvement
For lean banking to be successful, leaders must develop and maintain an intolerance toward needless processes, that is, those that do not add value to the end consumer, says consulting firm PriceWaterhouseCoopers.
These wasteful processes could include everything from the overproduction of marketing collateral and transport and build up of account applications to unnecessary processing time required at the counter.
To have the greatest impact, waste elimination through lean banking shouldn't be viewed as a fad or a temporary fix, but rather a paradigm shift required to foster continuous improvement for the short- and long-term. And leaders at all levels within the organization should be tasked to make the necessary decisions to eliminate waste where found.
Increase process efficiency
Even with the technological advances the world has experienced over the last twenty years, many banks are still inundated with archaic processes. When viewed through the lean lens, these outdated processes are areas of opportunity for bank leaders to lower their efficiency ratio.
By leveraging automation, institutions can scale quickly to improve productivity, cut costs and decrease errors, which will ultimately increase the bottom line.
Put clients first
By nature, banking is a very process-oriented. Processes don't keep the doors open, however. People do.
So possibly the most important step in the lean banking process is to determine who the customer is and what the customer values. Refocusing to a strategy of “people over process” will help institutions center their efforts on maximizing the perceived value of their clients.
For example, when a customer visits a local branch, he or she isn't just looking for a completed transaction that's fast and simple. Most are looking for interaction with bank employees, as well as the “branch experience.” Utilizing the time the clients are in the branch is incredibly important for banks and credit unions to deepen relationships and increase customer loyalty.
With cash automation, for example, tellers can the more of their time counting cash rather than interacting with customers. If banks and credit unions want to increase customer loyalty and improve the customer branch experience, the teller's focus should be on the client and not solely on handling cash.
And according to Bain and Company, harnessing customer loyalty can be substantial, to the tune of $10,000 or more in net present value over the lifetime of the customer.
Lean banking is not just another buzzword. Institutions that begin to adopt the mindset of lean banking will be better equipped to face the certain changes in the financial marketplace. Creating a more client-centric culture and continuous improvement mindset could also create new opportunities for financial institutions looking to pull ahead of the pack and become the bank of the future.
To learn more, take a look at the seven areas of waste that we have identified in today's bank branches.