Hey, it’s a new year, one for which we have all been planning – as usual. Business plans have been written and approved; budgets are in place. Right? Let’s go get ’em, right? Well, maybe. Given the vast and historic achievements coming from our elected officials, and the beaten-down condition of the average American consumer and small business owner, it would be reasonable to conclude that 2013 will be just another year of partisan politics, bad fiscal policy, slow growth and minimal results. Still, faced as we are with an uncertain climate, there are techniques we can use to help manage our environment. The way we approach our jobs, for instance, will make all the difference between treading water and moving ahead.
Having worked with numerous organizations, I find the one factor that has the greatest effect on actual results on an ongoing basis is internal discipline. Institutions that approach the new year in a more disciplined fashion will perform at a higher level, increase customer loyalty and realize better results. I recognize that discipline can be defined in various ways by different institutions, ranging from “don’t operate outside written policy” to “consistently and effectively improve bank products and processes to benefit customers as well as the bank.” I prefer the latter. I also allow that reading and applying these time-tested strategies may taste something like cod liver oil. So hold your nose and swallow.
I believe there are four major factors that set the truly disciplined organization apart from the rest. Broadly defined, they are 1) well-developed, multi-level planning; 2) formalized measurement, goal setting, scorecards and accountability; 3) continuous process improvement; and 4) collaboration.
1. A Well Developed, Multi-Level Planning Process
Many organizations are content to use the annual operating budget as the primary planning tool, with a focus on the immediate 12 months. More disciplined planning should include the following:
- An active, multi-year process that develops a longer-term roadmap for product and delivery channel innovation, organizational development and process improvement, which is reviewed and approved by the management team and the board;
- A written organizational plan outlining specific strategic objectives, tactics and initiatives that is supported by individual business plans developed by business and support function leaders, which is reviewed and agreed upon by the management team; and
- An annual business plan and operating budget that reflects the longer term strategic focus and outlines specific initiatives, goals and management accountability.
2. Ongoing Measurement, Scorecard-Based Goal Setting, Reporting and Accountability
At Cornerstone Advisors, many of our engagements require a fair amount of internal reporting and research in order to develop a clear strategic assessment of the organization. Often, I find that reporting outside the requirements of the ALCO, board or regulators is either ad hoc or non-existent. Cause-and-effect activities that produce revenue or manage expenses are difficult to find and, in many cases, are not organized to be useful. This is rarely due to the lack of the right software, just a lack of discipline. We have found that the best way to introduce some discipline is through the development of scorecards. The steps are simple:
- Each line of business or support function develops a set of key performance metrics that represent real activities that lead to desired outcomes;
- The process requires the setting of multi-year targets, which forces leaders to think and plan ahead and reflect technology and process improvement investments;
- Support groups must think about how their processes support line of business operations; and
- Strategic objectives should sound like personal commitments. Vague objective statements like “research new non-interest income sources” are not effective. A better statement would be, “We will increase non-interest revenue by 20 percent within the next six months.”
A word about formalized reporting: my preference is that the finance division collaborates with individual departments related to reporting needs and takes responsibility for report generation and distribution. Since ad hoc reporting seems to be the norm, most of the time reports are not shared outside the line of business, which adds to the silo effect. Reports should be linked to business plans, and progress should be reviewed frequently by the entire team.
3. Continuous Process Improvement
Process improvement tends to be part of every manager’s job description, and because it’s everyone’s job, it’s no one’s job. There is a way to get consistent and ongoing improvement that increases customer satisfaction and reduces operating costs: provide basic process mapping training and raise the level of expectation for staff to apply the knowledge. It isn’t necessary to go after a national award to build process improvement into the culture, but it is necessary to build in the expectation that it will happen and provide the training.
There are several things leaders can do to develop a culture of continuous improvement:
- CEOs and COOs can encourage team leaders to take responsibility for their own processes, especially as they relate to customer service delivery;
- Direct reports should be required build process improvement initiatives into their annual business plans;
- Line of business leaders should ensure their customer-facing processes are as streamlined and efficient as they can be;
- Support unit managers can find ways to improve service and support to customer-facing teams.
- Trainers can offer some simple instruction on process mapping and work with other managers to see the benefits;
- Measuring “before and after” process improvements will highlight the return on investment and increase commitment to future efforts.
Many years ago, I had the privilege of touring MBNA before the Bank of America acquisition. It was probably the best service culture I have ever seen. There were only two unbreakable rules: 1) all staff (CEO to janitor) was required to listen to incoming customer phone calls two hours a month, and 2) all staff was required to actively submit process improvement suggestions on a regular basis. Anyone who did not consistently do these two things was headed for the Aloha Room sooner or later.
4. Good Old Fashioned Cooperation
I have found that less disciplined organizations tend to have challenges with collaboration and communication. In these organizations, lines of business are empowered (by default) to make decisions on their own that negatively affect other functions, most often the I.T. group. Lending buys a new loan origination system without involving I.T. to make sure it can be integrated with existing systems. Marketing launches a major campaign with very little communication with retail or call center leaders. In some cases, the CEO likes to have one-on-one meetings with executives, but rarely brings the group together.
- Leveraging cross-functional communication will help ensure that new initiatives involve the right people up front;
- Advance commitments from colleagues can provide the necessary project support to head off anticipated roadblocks;
- I.T. should NEVER be left out of a technology purchase decision;
- A requirement for collaboration should be built into annual performance plans; and
- Making and keeping commitments to other managers will help change the culture from a reactive one to a proactive one.
In the interest of full disclosure here, I will admit that increasing internal discipline takes commitment and work, but it is so worth it. Projects start getting completed on time and with less internal friction. Better decisions are made. Training and effort turn into better results, which energizes staff. Customers can see the difference in a better service experience. Managers get used to setting goals and then blowing right through them. Everyone wins. It’s positively Gonzo.
Treading Water or Moving Ahead?
The financial institution that isn’t consistently undertaking a process improvement effort in several areas is giving up significant opportunities to recapture costs, gain market share and increase shareholder value.
Cornerstone Advisors helps organizations develop a disciplined approach to process improvement that can identify not only short-term financial improvement opportunities but, more importantly, improvements that are in alignment with the organization’s overall strategy.