One of the process issues we see on a regular basis is that as an organization grows, it tends to perform incremental “bolt-ons” to its existing processes rather than rethinking them as growth and circumstance warrant. Admittedly, bolting on a new set of functionalities here, or a few new sets of decisioning criteria there, seems like the easiest solution at the time.
However, the more complicated and convoluted a process gets, two things begin to happen. First, it becomes more and more difficult to communicate the process to team members. Especially new team members that don’t have a history in the organization or with past iterations of the process. Second, the lack of overall simplicity in a process runs the risk of creating confusion with the entire team. Confusion leads to misinterpretation, which creates deviations from policy – which can be costly.
Both issues lead to mistakes and misinterpretation in process execution which will certainly create delays and could cost real dollars through delayed recognition of revenue, substandard quality, compliance issues or lost business.
We recommend that all our clients review their processes every two years or whenever an external event occurs such as an acquisition, a change in market conditions, and so on. Along with evaluating and updating the workflow, creation of appropriate metrics and scaling points – the process should be evaluated for simplicity and understandability.
Once you have redesigned a process, test it out through some small pilot exercises. The exercises will help validate the workflow and will also allow you to determine if you can effectively communicate the process to both experienced and inexperienced team members. Use the simple rule of thumb that if you must explain it more than once to a group, then it may be too complicated and could use some refinement. Successful completion of the pilot exercises will give you confidence to roll out the process with limited risk.
Consider using do-it-yourself tools to create video or multimedia training for the redesigned process. If choosing this path, remember to plan and budget for the maintenance of these training materials, as they are more difficult to edit than are the traditional written manuals. The task of maintaining multimedia training materials may be tedious, but it can send it a positive message to team members, e.g., “We care about people and processes here.”
We have spent time with many Banks who are looking to improve the performance of their credit processes. Often, they have explained that their overall performance is sluggish – analysis, objections and approvals simply take too long with no understandable root cause. Some think it’s their staffing level, some that it’s sub-standard performance in key positions or departments, and others that maybe there is a chokepoint in the process where one step takes too long because the work involved is primarily manual. But, the bottom line is that they are not certain because they don’t have metrics that they can completely trust.
Our recommendation to these Banks is that they look at their credit processes from the top down, compartmentalizing each step. The compartmentalization thought process, with the intent of being able to measure each step and maximize its efficiency, often leads to a different way of thinking about the overall process.
The key objective for breaking the process down is to be able to establish metrics for each step. For example, if you believe that your existing staffing levels should be able to support the originating, decisioning and boarding of a loan within 18 days, but it generally seems to take 30 to 35 days – having each step identified and measurable will allow you to validate that assumption very quickly.
You can then dial-in the efficiency of the steps that are causing the most significant delays in the overall process. If you choose to add to the resource pool, you can do it from a foundation of fact, rather than speculation and defend that decision. Or, there might be a less costly remedy such as changing the workflow, changing the criteria for the completion of a step, or introducing automation or deeper data integration into that step.
Robust workflow software will help compartmentalize the process for easy tracking. Even without workflow software, though, your bank can generate and track metrics by passing a virtual “token” between process steps that you define. Managers will feel the heat to move the token forward if they know it is being measured. This exercise may improve your metrics even before you set out to measure them.
Regardless of the path you take, a well-defined, measurable process gives you the tools you need to increase efficiency, profitability and support growth on demand.
You have lending and credit processes that have worked well for years. Growth has been gradual so you have not noticed, nor been able to measure, the cracks that have appeared in the foundation of those processes. Now, you’ve started an integration effort for a bank that’s been acquired, or you’ve been tasked by the Board to increase loan volume by 50% over the next 18 months while maintaining your current cost structure. Both events give you pause. Will your existing processes scale in a seamless manner? Or, will they break down under the pressure of increased workload and cause significant delays in processing; creating disruption in customer service and increasing your risk exposure? And, to potentially make matters worse, do you have a handle on how you will measure any potential performance degradation? Staff performance, monitoring and management will no longer be as simple as it once was when the team was smaller. What do you do? Immediately hire more staff, right? Or possibly shift responsibilities so your higher-paid, client-facing staff is taking on more steps in the process since they know the clients and opportunities best? We’ve seen this happen, and it’s probably one of the most expensive paths you can choose. While these steps might seem to be the easiest way to respond, they are not your best course of action for the long term.
We believe that now is the time whether you are experiencing rapid growth, an efficiency crisis or are in a steady state to evaluate and tune your credit processes from the top down. Our experience tells us that starting with well-defined goals and performance objectives is key. Creating processes that identify well-understood milestones, potential chokepoints, risk factors and key pressure points can give you and your team a firm, predictable set of metrics from which to manage your lending and credit processes. This will create clarity, so you are able to effectively communicate the processes and metrics to both the management team for buy-in and support, and to the teams involved so they can execute against a well-defined set of performance objectives.
Once solid metrics are in place, you can then apply growth, contraction or other resource models with confidence to predict how the overall processes will perform; measuring your level of responsiveness to your clients and accurately predicting your costs and profitability.
Global Wave Group is active in our local community, Orange County, California. Here is a great article from the University of California, Irvine about Global Wave’s sponsorship of a 2018 capstone project in the Department of Informatics. Happy Holidays!
After a new value proposition takes the market by storm, as with Salesforce’s SaaS model introduced in 1999, the value proposition will eventually be digested, taken apart and reconstituted.
Grant Miller, CEO of Southern California-based Replicated, rebuilds the SaaS value proposition in a surprising way, as detailed in a TechCrunch opinion piece.
Today, Miller argues, two of the original SaaS arguments are shopworn and are no longer compelling: “Go multi-tenant to save costs” and “Centralize services to ease deployment, maintenance and upgrades”
- With respect to multi-tenant, the cost of computing is low, whatever setup you choose. Security and control are paramount; cost savings on computing resources is somewhat less important. Thus the rise of the private cloud and the hybrid cloud.
- With respect to centralized services, software buyers have never been comfortable with having customer data on a SaaS provider’s servers. Containerization is a new technology that makes centralized services optional.
Containerization is the future of on-prem. “Enterprise software packed as a set of Docker containers orchestrated by Kubernetes or Docker Swarm, for example, can be installed pretty much anywhere and be live in minutes,” Miller writes.
Bankers, consider that private cloud / on-premises software can be served to users in a browser application (just like SaaS), with deployment, updates and upgrades provided in containers to your IT team. Private cloud / on-premises gains the ease-of-use of SaaS while retaining behind-the-firewall security and control.
The next time a SaaS vendor tells you that your ultra-sensitive bank customer data is safe with them, you could give them your best Office Space impression:
“Yeah, I’m gonna need you to containerize your SaaS, okay? Ah, I almost forgot, I’m also gonna need you to go ahead and deploy, maintain and upgrade behind our firewall. So, if you could do that, that would be great…”
As a fast-growing commercial and private bank with $4.5 billion in assets, First Foundation Bank was delighted with their procurement and implementation of Credit Track, Global Wave Group’s straight-through commercial loan origination system.