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Lean Thinking, a process-efficiency approach used successfully by other industries, can be applied by all banks

By Bohdan W. Oppenheim

Following extraordinary successes in services, administration, projects, engineering and health care, a new management paradigm called Lean Thinking is making inroads into banking. Lean Thinking, a method to achieve more efficient operational processes, traces its origin to Toyota’s just-in-time manufacturing. A key concept to grasp in adapting the process from manufacturing to the banking domain is that in manufacturing material is transformed and moved, while in banking information is created, transformed and moved.

The Lean Thinking approach has the following six principles:

  1. Capture the value of a task or process (that is, precise expectations) defined by the customer, who may be either external or internal (other bank employees). The importance of capturing the task value with precision, clarity and completeness cannot be overemphasized. The banks that fail to do that risk wasteful and costly rework and frustrations.
  2. Map the value stream (plan the effort) and eliminate waste. Organize work into processes and make the processes streamlined and predictable. Identify and eliminate all wastes, and streamline the remaining activities to flow without rework, backflow or stopping.
  3. Flow the work through planned and streamlined value-adding steps that do not stop or slow the work being performed.
  4. Let customer stakeholders pull value. The people working on a process schedule their efforts so that the downstream person signals the upstream person the readiness to receive the output. The pull principle has three important meanings: (1) the task in the planned effort must be justified by a specific need (no more “because we always did it this way”); (2) those involved should coordinate the task before its execution to eliminate rework; and (3) the task should be completed when the stakeholder needs the output.
  5. Pursue perfection in all processes. No bank can afford to improve everything on a continuous basis. Two features of Lean Thinking help prioritization: (1) making all imperfections in the workplace visible to all; and (2) prioritizing to eliminate the biggest impediments to workflow. In banking, when noticed early, process flaws tend to be easier and less expensive to fix; unnoticed early they tend to grow to crisis proportions and require extensive actions to mitigate.
  6. Respect the people. A Lean Thinking bank recognizes that its people are the most important resource. People are encouraged to identify problems and imperfections in real time, brainstorm root causes of flaws and corrective actions without fear of reprisal, and plan effective corrections to prevent a problem from reoccurring. Experienced and knowledgeable leaders lead and mentor, but also empower frontline employees to solve problems immediately.

    The ability to identify and eliminate wasteful operational steps is a critical skill for Lean Thinking, which categorizes waste into the following groups, with examples provided:

    • Waiting waste: People wait for information or a decision, or information or a decision waits for people.
    • Waste of defects: Defects result in costly rework.
    • Waste of overproduction: Information that nobody requested is created.
    • Unnecessary movement of people: Intervention is needed to compensate for the lack of progress.
    • Unnecessary movement of information: Excessive information is distributed (including unneeded emails).
    • Over-processing of information: Refinements beyond what is needed are made.
    • Inventory of information: More information than is needed is kept.
    • Waste of talent and enthusiasm: Creative and enthusiastic employees are turned into passive and frustrated minimalistic robots.

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When faced with stiff competition, many companies respond by brutally cutting costs, usually by making massive head-count reductions and by overworking the remaining employees and suppliers. Without addressing underlying systemic problems of inefficiencies, these cuts simply eliminate needed resources and therefore slow down the operations. This causes more frantic work pace, loss of quality and decreasing customer satisfaction. When this happens, additional customers and profits are lost, resulting in even more cuts and more layoffs. This spiral of failure can easily lead to collapse.

Further Reading
Bohdan W. Oppenheim is a coauthor with Marek Felbur of a book titled “Lean for Banks, Improving Quality, Productivity, and Morale in Financial Offices” (CRC Press, 2014), written as a primer on Lean Thinking for banking institutions.

Numerous industries have demonstrated that the results from adopting Lean Thinking can be dramatic. Productivity has doubled. Process times and errors have been cut by half or more. Using Lean Thinking, employees can transition from fighting crises to increasing both customer satisfaction and bank competitiveness. Work becomes more predictable, stable and pleasant. Soon management and staff discover how much more work can be accomplished in the same amount of time and with the same resources, simultaneously improving productivity, quality, cost, work morale and customer satisfaction.


Bohdan W. Oppenheim (bohdan.oppenheim@lmu.edu) is a professor of systems engineering at Loyola Marymount University in Los Angeles.

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