Three important factors are modifying the very foundations of the financial system, they are the globalization of markets, the deregulation of activity and periodic financial crises at the international level.
Regarding the globalization of the markets, this has created strong competition from financial institutions worldwide, both in the placement of funds, as well as in foreign trade and currency operations.
The crucial improvement in the information systems with the consequent reduction of their costs, and higher speeds and levels of security in communications have allowed the dispersion of banks and their activities on a planetary level, allowing both the management of funds and the provision of countless financial and insurance services, and advice and information.
The deregulation that began in the United States of America during the presidency of Ronald Reagan was extended to other countries, resulting in, on the one hand, a greater number of services offered by banking entities, on the other hand, greater freedom when designing These services, and the competition in credit matters with corporations engaged in other main activities, call them companies in the automotive industry, the media, and large hypermarkets.
As a product of the important evolution in teleinformatics and deregulation, and within the framework of globalization, there has been an important development in the international business linked to the stock, currency and commodity markets. Banks actively participate in the placement of sovereign bonds of various emerging countries, the administration of mutual funds with strong placements in the aforementioned countries, as well as loans to Third World governments, among other activities.
Under such circumstances and in view of the constant devaluation runs, and in view of the ease of the international transfer of foreign currency, the volatility of the markets suffered a significant increase, both in the periodicity of the crisis and in the depth of these, affecting the evolution in The price of currencies, rates, commodities and securities.
This resulted in effects at the level of international trade, and as a consequence, banking activity was subject to greater credit risks, as well as significant losses caused by both the drop in the price of its loans, as well as the important decreases in their activities in various parts of the world.
These great competitive pressures, added to the international crises, lead banks to set as their objective the maximum effectiveness and efficiency in the use of their resources in order to remain in the market. Thus, many entities needed to merge to strengthen themselves, both to reduce their operating costs and to increase their market share.
Every company nowadays needs to undergo a continuous improvement process in order to increase its competitive levels, generating new businesses, reducing its costs and increasing its profitability levels.
One way to achieve continuous improvement is to apply Kaizen.
Kaizen comprises a philosophy, a strategy and a methodology aimed at continuously and systematically improving levels of quality, customer satisfaction, reducing costs and increasing productivity, all pursuing a fundamental objective which is to increase in the added value in the activities of the company.
Achieving cost reduction, increasing quality and improving response times (CQD) has become the primary objective of Kaizen applied to gemba (the site where the company's activities take place).
Kaizen systems
Kaizen implies for its continuous development the putting into operation of six systems:
The Total Quality Management (TQM), which applied to banking activity requires knowing the customer's requirements, measuring their levels of satisfaction and carrying out both preventive and evaluation tasks aimed at achieving the highest level of satisfaction of both external customers and internal.
This total quality management will allow the bank not only to provide high-level services, fulfilling the promises and expectations of its customers, but will also make it possible to achieve these services at the lowest possible cost, a higher level of productivity and safety in both operations. as in daily decision making.
Total Productive Maintenance (TPM), aimed at achieving a level of zero failure, in the equipment and systems that the entity uses. Today more than ever, where banking services depend on the full operation of both computer and telecommunication systems and the good response of their ATMs, performing tasks aimed at preventing damage has a high benefit both when it comes to retain customers, as regards operating costs, and have information in a timely manner for decision making.
The Just in Time, (Just in Time in Spanish) implies making use of resources at the required time, reducing to the maximum both the levels of stocks as well as the times involved in operating cycles.
Applied this in the banking activity means to avoid the monetary stock or unused credit capacity, with the implication that this has in the opportunity costs, as well as in any other resource that conforming an excessive inventory increases the costs of the entity.
Just in Time tends to eliminate seven large wastes which cause lower levels of quality and productivity, as well as higher costs.
Small group activities. Which take place with the tasks developed fundamentally by the Quality Control Circles, and whose objective is to increase the active participation of the personnel in the solution, detection and prevention of problems.
Today more than ever it is necessary for the employee to make available to the bank both his hands and his brain, and his knowledge and experiences. Who, if not the employees who are struggling day by day with the problems, to recognize in time the appearance of the same, and find an effective solution to them.
The Suggestion System is an effective way by which staff express their knowledge, experiences and creative capacities in order to improve both the processes and the design of the services.
And finally we have in the Deployment of Policies, the way in which the Directorate makes the rest of the organizational structure participate in the conformation of the operational plans and the design of the policies.
In search of the CQD
To reduce costs, improve quality and achieve timely and accurate service delivery, Kaizen uses three tools: standardization, the application of the 5 "S" and the systematic detection, prevention and elimination of waste.
Standardization. Consistent in the search for the best way to carry out a task or process and its corresponding documentation in order to give it continuity and allow continuous improvement. Through the process called EREA (standardize-perform-evaluate-act) processes and activities are standardized, trying to avoid deviations and maladjustments in their development. Once this standardization is achieved, the process known as PREA (plan-perform-evaluate-act) continues, by which the Quality Circles and other technical groups, using different management tools, are able to identify all those activities that are subject to elimination, improvement, combination or alteration. in their order of development, in order to improve the different indices or ratios.
In the Standardization process, the application of Statistical Process Control is of fundamental importance, being unfortunately a tool that is rarely used by Financial Institutions.
Applying the 5 S implies carrying out work aimed at improving both work discipline and the self-esteem of the staff. The first task is to separate those elements and necessary working tools from those that are no longer current. The second step is to give each item in use a place and order. Thirdly, the offices, machines and furniture are cleaned. The fourth is personal discipline, which implies both work uniforms and personal health safeguards. And finally the systematization that continually leads to repeating the previous steps in a systematic and permanent way.
Developing this type of activity allows improving the health of the staff, reducing the levels of occupational accidents, significant savings in physical spaces, recycling of elements and materials, reduction in the consumption of stationery, improving the disposition of the various documentation, with which makes your search easier and avoids wasting time.
And finally, a better conservation of the building, facilities and other assets is achieved, facilitating its maintenance, and creating a better appearance before people outside the bank. All this contributes to a notable improvement in the mood of the staff, as they are in a safe, orderly, well-lit environment with space for their travels.
Detection, prevention and elimination of waste. Banking entities are subject to three major wastes, which are:
- The unused monetary capacity, with its corresponding opportunity cost. Excesses in the capacity of services, with their high fixed costs, wasted. And the waste resulting from errors, failures, high response or cycle times, high stock of supplies, unproductive activities, and other problems regarding breakdown costs, lack of training, and problems with the information system.
Different tools need to be applied; such as inverse analysis, poka-yoke, negative analysis, and statistical process and management control; for the purposes of generating a preventive attitude, but also knowing how to find the means for a rapid and effective detection and elimination of the various types of waste that may take place.
Unused monetary capacity
Constituted by the ability to place funds either in credit operations, or in quick-completion investments. Failure to place these funds in profitable operations constitutes a high level of waste for a financial institution. Therefore, it is best to permanently monitor the unused monetary capacity, having for it both technological means and personnel that allow rapid decisions to be made. For this purpose, even intelligent systems can be used for the automatic placement of funds given certain conditions, regulations and risks.
Unused operational structures
IT investments are very expensive, and fixed operating costs are high. For this reason and for the purposes of fully utilizing service capabilities, since costs remain fixed and therefore greater utilization will generate significant increases in benefits, it is important to provide services such as insurance and collection services (the which are automatically debited from bank accounts), activities for which banks charge a commission, electronic funds transfer services, advice on financial and stock market matters, calculation and settlement of taxes for their clients, sales of: travel, shows, online financial information and advice system, among others,making use of the teleinformatic systems and automatically debiting these sums from the clients' accounts.
The seven classic molts
Belong to:
1. Inventories. Excessive amount of printed forms, something characteristic in banking activity given the high component of administrative-bureaucratic tasks, not only involve unused money for a better purpose, but also occupy important furniture and office spaces, also generating high handling and stationery management. The issuance of forms just in time, and / or the use of various types of kanban allow a significant reduction in inventory levels.
2. Overproduction. In the case of service activities, this type of waste does not take place, which does occur in companies that produce material goods.
3. Failures and errors. Reprocessing tasks. The reduction of failures and achieving an optimum in terms of quality leads to an optimal cost of "non-quality". Greater preventive work implies fewer needs for evaluation tasks, as well as lower costs related to internal and external failures. In the latter case, with a significant reduction in customer loss and a significant increase in satisfaction levels. The implementation of the TQM with the accompaniment of the Statistical Process Control allows to minimize the levels of waste or waste caused by failures or errors in the various processes and activities.
An important method to avoid failures is the application of the Poka-Yoke (error-proof method) whose fundamental ideas correspond to Shigeo Shingo; thus, with automatic recalculation systems or with checklists, a significant reduction in operational failures can be achieved.
4. Movements. Constituted by all the losses of time and energy due to errors in the ergonomic conception of the tasks. In the case of employees dedicated to data recording, correcting these shortcomings significantly increases productivity levels, and therefore reduces data processing costs.
5. Transportation. Bringing bureaucratic activities to “Zero Papers” although difficult, the mere reduction of stationery significantly reduces not only transport costs, but also the processing times of operations. The improvement of the layout and the reordering of tasks in group work avoids both the unnecessary transport of papers, as well as downtime in waiting trays.
6. Wait. Poorly designed processes and excessive amount of activities without added value generate high downtime in paperwork and stationery with its consequences on the levels of customer satisfaction, and longer waiting time in the collection of commissions, and even in the danger of loss of commercial operations.
Another factor causing loss of time, or increase in waiting times, is given by the preparation times and those caused by the breakdowns and their corresponding repairs. For the preparation times, the SMED method created by Shigeo Shingo is used, aimed at reducing these times (this method is very useful in everything related to the printing of documentation and forms). Regarding breakdowns, the use of Total Productive Maintenance in equipment and facilities allows for better service, with low levels of repairs and loss of time, and therefore with maximum customer service. Very important for the purposes of reducing waiting times or total cycle times are the tasks of layout, and work in groups (work cells).
7. Processing. Duplication of processes, layout problems, poor preparation of personnel, lack of empowerment in the personnel of attention to the public or branches, activities without added value, and badly designed forms / lists, among many others, cause high waiting times, waste of human, building and financial resources.
Statistical processes control
The Statistical Process Control (SPC) constitutes an essential tool for monitoring the various phases of a process through the statistical treatment of the data collected, in order to reduce variability and control and improve said process.
The SPC allows addressing and solving the two key problems that arise in the implementation of the processes: improvement and quality control obtained. For this, the tool based on the statistical control of variability is used: the control charts, which will be described in this chapter and which basically try to represent the variability of the quality characteristics within the corresponding limits; Along with this tool, the rest of the so-called seven basic quality tools will be used together (Ishikawa Diagram, Scatter Diagram, Histogram, Pareto Diagram, SPC, Stratification and Data Collection Sheet).
Benchmarking
Obtaining competitive advantages is the priority objective of the companies' strategy and total quality management. Companies have the obligation and commitment to incorporate total quality as a basic strategy for all their management, since quality involves doing things well, quickly and at low cost.
Framed within the business strategy based on TQM, and in order to achieve the greatest possible competitive advantage, we have benchmarking. The concept of benchmarking comes from the English term benchmark, which can be defined as "brand used as a reference", that is, it sets a standard on which to make the comparison. In this way, benchmarking constitutes comparison and learning with respect to the leading companies in the sector and which will be considered as an example to follow, achieve and overcome.
Applying benchmarking in a bank implies: knowing yourself, knowing the competition, applying what you have learned, and achieving excellence and leadership. Knowing yourself means that each banking institution must analyze its way of operating and thoroughly study all its processes and methods.
The objective will be to discover the strong points and, above all, the weak points. In this way, those aspects that must be corrected through comparison, understanding and learning with respect to the leading companies in the competition will be known.
Knowing the competition means evaluating and knowing the rivals perfectly in terms of results, ways of operating, practices, strengths, among others. It is necessary to select the leading banks in the sector considered or in certain aspects or functions in which they stand out for their excellence, starting to consider them as a reference in learning.
Applying what has been learned implies putting into practice the processes, methods and systems learned from the best banks (making adjustments based on the characteristics and culture of the institution and the market in which it operates). Achieve excellence and leadership. The idea is not to become as good as the competition, but to obtain superiority over other financial institutions.
Hunting waste
One way to streamline the improvement process is to create Waste Hunting Groups (GCD), aimed at identifying, preventing and eliminating or minimizing the various types of waste mentioned above.
For this, the first step is to make managers and other staff aware of the characteristics of the various types of waste / waste, their magnitude and critical importance. Then, as a second step, personnel should be trained in: teamwork, applied statistics, management tools, problem solving techniques, concept of waste, ways to detect them, and systems for their elimination.
Thus, both through the Quality Control Circles and the Suggestion Systems, it will be feasible to fully involve all the personnel in the improvement of the systems and processes.
Among the various types of waste typical of administrative-bureaucratic activities and processes we have:
Duplication of tasks, partly due to lack of shared information
Excessive movements and transfers, partly as a result of physical ill-disposition
Stationery downtimes (procedures that actually last 5 minutes have waiting times at desks or bins for hours up to days or weeks).
Excessive subdivision of processes and / or activities. Lack of work in groups or work teams.
Inefficiency of internal control, which causes 4 types of problems:
possible external fraud against the company, possible internal fraud, unreliable or inaccurate information for decision-making purposes, and lack of compliance with regulations of official bodies
Excessive number of forms, with duplication of information and / or unnecessary
Poorly designed forms
Excessive inventory / forms stock
Unnecessary tasks, processes and / or activities
Complex activities or processes
Lack of information, and administration by exception
Computational listings: unnecessary and / or poorly designed
Information out of time and / or inaccurate
Organizational over-structure. This may be the result of excessive manual activities, too short stretches of control, lack of empowerment, lack of clearly defined organizational objectives or an over-employment policy.
Software: inadequate, non-parameterizable, slow to run, not adapted to the characteristics of the company or business.
Bottlenecks caused by: concentration or centralization of decisions and / or authorizations, excessive number of authorizing signatures, quantity of critical elements that are scarce depending on the needs - call them: computers, printers, photocopiers and computer processes.
Breakdowns and lack of maintenance in computers, printers, lighting system, telephones.
Lack of safeguarding computer data.
Poor supervision, lack of leadership and lack of motivation.
Poor staff training
Excessive levels of standardization or internal regulations
Excess internal reporting
Excessive internal meetings and / or external interruptions
Unproductivities due to excess of specialization or division of labor
Slowness of printers, photocopiers or computer processes
Inefficiency due to excess or defect of work tools
Lack of systematization in documentary files, and the time required for locating documentation
Conclusions
New technologies, market needs and economic, social and cultural changes lead to the need to change the paradigms with which financial entities have been operating for a long time.
Facing new competitive realities and consistently generating added value for customers, at a reasonable cost, implies the need to implement a continuous improvement system that, based on a radical change in philosophy and way of operating, allows to reap results favorable in the financial field.
This continuous improvement system is not only feasible to apply successfully to industrial activities, but also in the field of services, and among them, of course, in the banking industry.
Bibliography
Continuous improvement applied to bureaucratic administrative activities and processes - Mauricio Lefcovich - www.monografia.com - 2003
Kaizen Strategy - Mauricio Lefcovich - www.gestiopolis.com - 2004
Kaizen. Philosophy - Culture and Ethics of Continuous Improvement - Mauricio Lefcovich - www.ilustrados.com - 2004
Kaizen - Mauricio Lefcovich - www.gestiopolis.com - 2004
The Strategist's Mind - Kenichi Ohmae - McGraw Hill - 1997
Strategic Benchmarking - Gregory H. Watson - Javier Vergara Editor - 1995
