Business Management Articles / Banking
WHAT BANKS CAN LEARN FROM OTHER INDUSTRIES
Rene T. Domingo (email comments to email@example.com)
A bank desiring to be world class competitive
can benchmark with other banks to continuously
improve its services and operations. This
process known as competitive benchmarking
has however its limitations. Companies which
achieved breakthrough results and performance
in some bank operations may not belong to
the banking industry. To reengineer and reinvent
itself, a bank may have to do "functional
benchmarking" or finding and adapting
the best practices of any company in any industry.
One of the earliest application of functional
benchmarking was done by John Reed of Citibank.
He likened the bank to a factory that converts
inputs or raw materials into useful outputs
or finished products through a series of value-adding
processes. Instead of raw materials being
converted to finished goods, he envisioned
the bank as a paper or information factory
that converts documents or data into useful
information, like bills, certificates, passbooks,
checks, etc. With this analogy, the bank can
benefit from the techniques production managers
use to improve and optimize over-all efficiencies
like capacity planning, line balancing, efficient
layouts, inventory control, quality control,
and job sequencing. The ISO 9000 certification
which started in the manufacturing industry
to document and improve the quality management
systems of factories is now generating interest
among many banks worldwide. They banks see
their operations similar to factory processes
that have to be managed in terms of quality,
cost, and delivery performance. An example
is Standard Chartered Bank which got an ISO
9002 certification for its trade finance and
private banking service. Another world class
manufacturing practice that banks can emulate
is the JIT (just-in-time) system pioneered
by Toyota of Japan. The JIT principle is to
minimize wastes and inventory by producing,
processing, or purchasing only can be consumed
and used by the next process which can be
an internal or external customer. Banks can
use JIT to eliminate tons of unnecessary files,
forms, supplies, and filing cabinets.
A critical process banks can functionally
benchmark with other industries is the "customer
contact" or the "moments of truths"
during which the bank and its employees directly
meet or interface with its customers and clients.
Non-manufacturing companies and service companies
like hotels, credit card companies, casinos,
convenience stores, and fast food restaurants,
airlines, and supermarkets offer a lot of
lessons and practices banks can learn and
adapt to enhance frontline customer services.
To manage customer queues, banks can learn
from McDonald's. Queues in this busy fast
food chain may be long but they move fast.
In some banks, even short queues can be irritatingly
slow to most customers. In front-line employee
training and customer service, banks can adapt
the SAS "moment of truth" policy
of celebrating every contact with passengers.
Every employee is required to make each of
the millions of "moments of truth"
that occur daily a memorable and delightful
experience to the airline passengers by showing
the right attitudes, greetings, courtesy,
and deportment. It is rare to see and experience
this excitement in banks where customer contacts
are treated as mere transactions accompanied
by the tellers' rude stares and indifference.
Banks suffering from late, incorrect, and
lost statements of accounts can benchmark
with American Express world renowned for its
timely and accurate billings. It is surprising
that many banks do not give much importance
to this very vital "moment of truth".
Late statements give the impression the bank
does not care for its clients.
There is now a move to reduce red tape and
bureaucracy in banks to streamline processes.
Elimination of unnecessary documents is being
done to achieve almost paperless transactions.
But progress is slow because of the bank's
concern for control, audit trails, and paper
trails. The ultimate benchmark for paperless
transactions is of course the casino, symbolized
by Las Vegas, where millions of dollars in
cold cash are exchanged daily without incident
and without documents. Casinos have managed
to achieve maximum control with the minimum
inconvenience to its customers. Surely, banks
can adapt some practices of the gaming industry.
Another industry that have achieve control
without sacrificing service is the convenience
stores, led by 7-11 with its 24-hr 7-day a
week full customer service. The 24-hr ATM
banking facility is limited in the range of
services bank customers can avail of. AMFB
of Malaysia have started "Sunday banking"
by operating from 10 am to 12:20 pm every
Sunday in its 27 branches. Banks can learn
from 7-11 how its can operate profitably and
securely up to the wee hours of the morning
- truly a convenience store. We have yet to
see the arrival of a fully-manned 24-hour
There are precautions to take when doing functional
benchmarking. Banks should study and adapt
best practices, not blindly copy them. For
instance, big banks have copied the big lobbies
and luxurious sofas of 5-star hotels in an
attempt to impress and provide comfort to
incoming clients. However, sofas and chairs
may send the message that service time is
too long and these are just measures to reduce
suffering and irritation due to long waits.
Actually what banks should adapt is the hotel
practice of "standing-up" check-in
of guests. Guests can finish registration
while standing up in just a few short minutes.
Compare this with most banks in which one
has to sit down to open an account in the
new accounts section. Can we not open accounts
quickly while standing up?
Another wrong benchmark is the express lane
of supermarkets. This concept of "6 pieces
or less" lane makes sense for groceries
since each item take more or less the same
time to process. In banks, a client with 2
transactions can take much more time to serve
than one with 12 transactions, because the
nature of bank transactions widely vary in
scope and requirements. I have not seen any
successful "2 transaction or less"
express lane in banks. In fact, since most
clients have 2 or less transactions, they
all queue in the "express" lane
for a long time, while the regular lanes are
Benchmarking should be done with care. If
done properly and continuously, it could bring
dramatic results to the banking industry.