Introduction
The companies of the 21st century are seen in the urgent need to modify their behaviors and structures to account for the new realities and those to come. The organizational structures, and what is even more complex, the mental structures in force in many companies, respond to a world and a technological - economic - political - social - demographic and cultural environment that does not already exist.
Indicated by certain paradigms, their thoughts as attitudes respond to a reality that no longer exists, thus losing the ability to adapt to new realities, as well as to take advantage of them.
In the current framework, leaders must continually test their paradigms, recreating them to put them in tune with the new and changing realities.
Among the aspects in permanent evolution, which are modifying the very bases and structures of the markets and organizations, we have:
- The accelerated advance in teleinformatics, which greatly increased not only communications, but also the amount of information available to society as a whole The higher levels of education and knowledge that both consumers and employees possess, with its effects In terms of demands, such as participation, the gradual increase in people's average lifespan, the acceleration of ecological problems and the environment, the fall of customs barriers, together with an increase in the globalization of markets. construction of large economic areas such as the European Union, NAFTA and Mercosur, among others. Within this new globalizing framework,With the crucial importance of infocommunication systems and international finance, the appearance of frequent financial volatilities marked by bank runs, capital flight, stock market falls and strong currency depreciations with worldwide effects can be seen.
Individuals, families, governments, companies and, among the latter, financial institutions must adapt to this new realities.
It is now worth asking to what extent or in what way do the aforementioned changes affect financial institutions; well, in many and varied ways, including:
- The higher level of information, knowledge and educational level of consumers leads them to demand every day better levels of quality and variety in the products and services offered. The advancement of teleinformatics requires banks to compete in the market based on each time more powerful and better services, such as ATMs and Internet services Increasingly faster and more economical information systems allow customers and consumers quick comparisons in terms of differences in services and costs Higher levels of staff training, It leads them to desire and demand a greater participation in working life. The increase in the average life span results in higher levels of savings, as well as new types of consumption and services.The increase in international trade leads banks to the need to operate both in money markets and foreign trade Globalization and increased international competition make it necessary for banks to improve their competitiveness day by day Volatilities require companies new skills and attitudes to counteract both the direct and indirect effects on their response capacity. The formation of economic blocs gives rise to the entry of banks from other countries, but also creates the opportunity to expand their markets by opening branches in other nations of the bloc.Volatilities require companies new skills and attitudes to counteract both the direct and indirect effects on their response capacity.The formation of economic blocs gives rise to the entry of banks from other countries, but also generates the opportunity to expand their markets by opening branches in other nations of the bloc.Volatilities require companies new skills and attitudes to counteract both the direct and indirect effects on their response capacity.The formation of economic blocs gives rise to the entry of banks from other countries, but also generates the opportunity to expand their markets by opening branches in other nations of the bloc.
These important and profound changes give rise to the need to generate new and appropriate structures and processes that allow rapid responses to changes in the environment, producing services of greater variety and quality at lower costs and response times.
Starting from what is changing in the world, we arrive at the effects that they have to generate in financial institutions, and from there we recognize the modifications that must be made in them in order to continue being competitive.
Every company pursues under the new trends of strategic thinking and marketing the firm will to fully satisfy the requirements of customers and consumers, in such a way as to make possible an optimal level of work quality for its managers and employees, a high and consistent performance for its owners, long-lasting and reliable relationships with its suppliers, and a full service for the community.
As a strategic objective, the proposal is to achieve maximum customer satisfaction, the highest levels of quality and productivity, the best costs, speed of response and continuous improvement in the products, services and processes of the organization, to the effects of achieving a sustainable competitive advantage.
Achieving that sustainable competitive advantage requires a culture and paradigm shift, both for managers and staff.
This change must lead to a different relationship with customers, continuously seeking their full satisfaction.
It must channel a new form of relationships between managers and employees, a form that eliminates the difference between those who think and those who only act.
This new cultural framework should lead to a focus on processes, eliminating the walls that separate the functions one from the other, which generates higher costs and response times, as well as disharmonies and inefficiencies caused by the lack of systems thinking.
A new environment must be generated based on mutual trust, creativity, teamwork and empowerment.
This cultural change must be the basis on which a new way of doing things is based, a form of discipline and work ethic that seeks both continuous improvement in terms of quality, productivity, costs, satisfaction and process deadlines.
Service organizations and banks among them, wishing to compete in global markets, must make a commitment to generate “World Class Services” a reality.
World Class Services
In order to qualify as a World Class Service Provider, it is necessary to meet certain requirements that not only address customer satisfaction, but also the company's ability to generate profitability and adapt flexibly to changes in the environment.
Achieving effective and efficient service provision with a high degree of competitiveness requires a positive qualification in the following practices:
- The implementation of a Total Quality Management that aims to achieve Six Sigma in terms of quality The implementation of the Just-in-Time System The existence of a system of continuous improvement Empowerment Teamwork Learning Organizational. Flat organization. Calculation of quality indicators - productivity - financial - economic - patrimonial - and satisfaction. Statistical Control of Processes. Command Board. Balanced Scorecard Quality Cost System Existence of Activity Based Costing Implementation of EVA.
Total Quality Management in the pursuit of Six Sigma
Conceived as the comprehensive and systemic participation of all areas and levels of an organization in the search for full satisfaction of the requirements of its internal and external customers, in order to provide the highest value to end users with the most efficient use of the resources.
Knowing the requirements of bank customers, establishing prevention and evaluation systems that ensure the lowest level of failures or defects at the lowest possible cost is a primary and strategic objective.
The establishment of a quality administration that includes both planning, organization, direction and control aimed at “getting it right the first time ” is still rare in banking entities.
The Total Quality Management goes far beyond the ISO certification of certain processes or services implies a philosophy and full commitment to quality and satisfaction.
Quality means meeting customer demand.
All employees, from the highest manager to the lowest level within the organization, must be engaged in meeting customer demand, as well as being vigilant to discover new non-quality characteristics.
Not only does it count not to make mistakes or failures in customer services, but to do it “the first time” and with the lowest possible cost and time.
Within this framework, it is essential to keep statistics of the different types of errors and their causes, in such a way as to allow both improving performance and finding or detecting the causes that motivate them.
In the new business context, it is essential to reach a Six Sigma level, which means having only 3.4 DPMO (defects per million opportunities).
Achieving this level of quality implies a notable reduction in costs, accompanied by increases in productivity and satisfaction levels, with which this implies both greater customer loyalty (lower level of turnover), and the acquisition of new service users.
All of this has a direct effect on the bottom line of the Results Chart and the profitability of the company.
Just think about the amount of work hours that are lost in a bank looking for accounting differences, or imputation errors.
Let's think about a Six Sigma goal and we will clearly see the significant cost reductions, as well as avoiding significant losses.
Achieving this implies significantly improving prevention systems, among which the design of services, training and staff training, the implementation of error-proof systems (poka-yoke) and the SPC (Statistical Process Control) are of fundamental importance.).
Improving quality means keeping customers and acquiring many new ones.
It is much more expensive to acquire a new client than to keep an existing one, in addition a dissatisfied client comments on average to nine people the problems suffered, commenting only to three of their approval for the services.
Banks absorbed in large numbers and in their economic potential generally put aside the dissatisfactions generated in their clients, ignoring both the losses of future income streams, as well as the loss for the investment in the acquisition of clients, which many times still they have not been amortized.
For all the aforementioned, it is that bank managers today more than ever must know and apply Deming's fourteen point.
Japanese companies apply it, including their banks, which are among the largest in the world today.
Achieving the highest level of quality implies less loss of customers, but also less loss due to bad debts by improving the quality in the analysis and granting of loans.
Just-in-Time System in Services
The just-in-time philosophy applies not only to the production of goods, but also of services, benefiting greatly from it when its operations are repetitive, and its volumes are relatively high.
The focal point of just-in-time systems is to improve production processes; therefore, some JIT concepts that are useful to manufacturers are also useful to service providers.
Some of these concepts, specifically suitable for banking services, are the following:
- Consistently high quality. In service operations it is possible to successfully apply concepts such as benchmarking, service design and deployment of the quality function. Standardized working methods. In highly repetitive service operations it is possible to obtain large gains in terms of efficiency, analyzing work methods and standardizing improvements so that all employees can apply them. Flexible workforce. The more personalized the service, the greater the need for a multi-skilled workforce. Automation. Automation often plays an important role in just-in-time service delivery. For example, ATMs provide various banking services, on demand, 24 hours a day. Line flow strategy. Service operations managers can organize their employees and their team to provide consistent flows throughout the system and eliminate waste when it comes to employee working time. Banks can apply this strategy in their check processing operations. Systematic waste disposal. It includes the detection, prevention and elimination of those activities and processes that do not generate added value only produce higher costs for the organization.
Continuous Improvement System
A company will be able to compete and aspire to success in current markets if it strives to vigorously improve its products, services, and processes that generate them, actively involving all of its staff.
It is essential to have the participation of those who are in the daily relationship with processes and customers, since they not only have a rich experience, but also a willingness to make their ideas heard.
This is achieved through an adequate Suggestion System, which not only increases staff motivation, but also leads to greater commitment and increased productivity.
Continuous improvement not only involves a work ethic, but also discipline.
But not only individual contributions count, the contribution of the work teams is of critical importance , among which are the Quality Control Circles, which have contributed in all those companies that have made their own significant cost reductions, improvements in quality and productivity levels, and higher levels of customer and consumer satisfaction, among others.
Continuous improvement must systematically seek to obtain improvements in all the organization's indicators, whether they are linked to quality, satisfaction, productivity, costs, profitability, job security and response times.
In an increasingly complex reality, doing things more simply every day becomes an important strategic advantage.
The message is do not complicate the users, do not do it with the employees either, reduce steps, eliminate what does not add value, simplify.
Simplifying implies reducing the costs of processes and services, improving the speed and quality of customer service, facilitating the use of services, eliminating the source of problems and errors, reducing stress for employees, managers, customers and suppliers, facilitating the Company address.
Empowerment
In any company, and in those dedicated to services with much greater reason, it is essential to empower employees to satisfy customers, solve problems and make decisions quickly and efficiently.
Empowerment, on the one hand, implies improving the motivation levels of the staff, and with it their productivity levels, but it also implies a lower need for levels of supervision (broadens the span of control), and solving problems more quickly and efficiently. customer requirements.
In an organization without empowerment, the employees aim to work to satisfy their bosses, in an organization with empowerment it is the bosses who must facilitate and give their all so that their employees can fully satisfy customer requirements.
This implies a total change in the conception and paradigm of business management.
The policy and philosophy of empowerment is directly related to the objective of the company when considering its staff as an asset, which is why empowering them makes better use of their knowledge, experiences and creativity.
Against this we have those companies for which their employees only represent an expense.
Just keep in mind that the successful companies of the 21st century will be the ones that best manage their Intellectual Capital.
Teamwork
A company that only adds individuals will not achieve the same results as those that achieve an authentic and deep interrelation between them.
Today we still have those entrepreneurs and managers who hire individuals to fill a position and fulfill a function, leaving aside their ability and vocation to work as a team.
Teamwork both at the sector level, as well as at the process level and in the organization as a whole in its maximum expression is what is called “ collective intelligence ”.
An organization with this characteristic will vastly outperform any company based on the simple sum of individuals.
In a present day where the copying of products, services and processes is the order of the day, what makes a company different and unique are its "internal relationships", that is, that conjunction of human and intellectual relationships that allow greater satisfaction of the individuals in the company and a richer sum of knowledge and experiences destined to achieve unique services in quality and excellence.
As a result, a company that works as a team achieves a whole that is much more than the sum of its parts.
Working as a team implies higher levels of productivity and quality, with lower costs, and a very high potential for continuous improvement.
“Collective intelligence” implies destroying the walls that separate sectors from one another, increasing costs, inefficiencies and deadlines.
"Collective intelligence" implies adding the creativity and experience of all individuals in order to achieve organizational goals and visions.
The methods for leading, motivating, communicating and rewarding staff must be adapted to this new reality.
In a highly competitive world, those organizations whose members have a high commitment and participation in teamwork will succeed.
Organizational Learning
In the Age of Knowledge, called by Toffler the Third Wave, Intellectual Capital takes on increasing importance regardless of the type of activities, since all of them are subject to advances in science and technology.
Thus we have in agricultural matters from satellite photos of both cultivated areas and yields, but also advances in biotechnology, as well as ultra-sophisticated machinery. However, in the banking sector progress has been very great as well.
We have from new products based on Financial Engineering, to services provided through teleinformatics. Having fully trained staff both in the provision of services, as well as their quality, characteristics and functionality is essential.
The new functions of the bank as advisers to clients and investment agents of own funds and third parties, requires more extensive and in-depth levels of training for its staff than those demanded until not long ago.
In addition to the future of the services, the continuous restructuring to which both organizational structures and internal processes are and will be subject must be taken into account, which must require both flexibility and continuous adaptation of personnel to the new schemes.
Conceiving a Bank as a stable structure, unchanged and offering traditional services is something of the past.
This type of structure conceptualized as mechanistic is giving rise to structures of an organic nature, which are more flexible, adaptable and faster.
Flat organizational structure
Reducing fixed costs, increasing adaptability, improving response speed, being closer to the requirements and needs of customers, improving internal communications and eliminating resistance to change in the middle levels today require flat organizational structures.
The best way to achieve this is through empowerment and teamwork, supported by training, better forms of communication and a new type of leadership.
Training staff in problem-solving and decision-making techniques, fostering their creativity and capacity for innovation, giving them the possibility of feeling totally comfortable with their work, representing a new motivation every day, is what allows achieve greater commitment from staff and less need for supervision.
The existence and communication of clear and precise strategic objectives, and in which the personnel have taken some kind of participation, makes them more clear about their north.
On the other hand, the new conception of quality management leads the staff to take a greater participation through self-control and the formation of improvement teams, which further facilitates the implementation of a flatter and more efficient organization.
Calculation of indices and indicators
To the already well-known and classic financial - patrimonial and economic indices required by the Controlling Entities (Central Banks) and developed by traditional finance, those new indicators of productivity, quality and added value must be added resulting from the latest advances in science. of the administration.
The systematic elimination of waste, the improvement in quality levels, the productivity of the different activities and processes, the monitoring of customer satisfaction levels requires new and special indicators.
If customers constitute an asset for the company, measuring their satisfaction and level of claims towards the company represents a factor of great importance. The same happens with the levels of satisfaction on the part of the employees.
It is enough to think and calculate the costs that have had to be incurred to obtain clients, and to select and train personnel, among other factors, to realize that old-fashioned financial ratios are no longer enough to know how well find a company.
It is also important to know the polyvalence rates of the personnel, their levels of rotation, their different levels of knowledge and acquired skills, among many other fundamental factors when it comes to properly assessing the company's ability to generate added value and income stream.
What will it be useful for a bank to know its current levels of profitability, liquidity and solvency, if it is unaware of the drop in confidence levels among its investors, if its most competent employees are dissatisfied and many of them withdraw, if customers are there every day more dissatisfied with the services and they go to the competition, if the levels of waste are higher than those of the main competitors, and if their indicators of both quality and productivity are pitifully low.
Statistical Process Control -SPC-
Today, despite the time that has elapsed, it continues to be unknown, and therefore not applied, in many manufacturing companies and in almost all of the services companies, and among them most of the financial organizations -whether they are Banks or Insurance Companies- the wonderful and revolutionary management tool developed by Shewart and called Statistical Process Control.
Although the use of this tool is common in Japanese, American and European companies and banks, it is not the same in Latin America.
Statistical Process Control is essential not only when it comes to controlling and improving processes in terms of their ability to generate failures or errors, but also in terms of their potential to generate acceptable levels of costs, productivity and profitability.
Controlling the evolution of the variations that are registered allows not only to detect changes in time, but also to adopt better decisions, thus avoiding errors made when acting on variations that are specific to the system, and not acting on those others that are special or outside the system.
Knowing the capacity of the system allows not only to know when the variables are out of control, but also to set the improvement in the capacity of the system as objectives.
The Statistical Control of Processes for all the aforementioned is of fundamental importance when it comes to monitoring the evolution of the quality, satisfaction, productivity, costs, response times, and even indicators corresponding to the evolution of both markets and the economy.
Command board. Balanced Scorecard.
The Dashboard conceived as an information system that, using information technology, allows each level of management to know how well the processes are developing, and if the results obtained allow the fulfillment of the objectives and goals set.
In this way, significant reporting costs are avoided, greater agility and speed of response are achieved, the information is more accurate, and time wasted in extensive and unproductive readings is avoided.
The information is by exception, making itself known or highlighting those aspects, or points that due to their significance deserve to be specially considered.
Within this theme and within the framework of Strategic Planning, the Balanced Scorecard allows the setting of goals and objectives for the different levels and sectors of the organization, in conjunction with different periods of time.
Thus, the various intermediate objectives should be subject to review to ensure the achievement of the highest-level and longest-term objectives.
Objectives regarding the level of sigmas, waste levels, and capacity of the different processes must be incorporated into the Dashboards and Balanced Scorecard.
Finally, it should be noted that the Balanced Scorecard does not only contemplate the classic financial indicators, but also indicators related to processes, customers and personnel.
Quality Cost System
Of great significance when it comes to monitoring the results obtained from quality management is the implementation and implementation of the system aimed at determining quality costs, which are composed of prevention costs, evaluation costs, and failure costs. internal and external.
The main objective is to increase the costs of prevention and evaluation, especially the first one, but in a lesser proportion than the reduction that should occur in costs due to failures as a consequence of this higher degree of prevention.
This will make possible a progressive and systematic reduction of costs.
Activity Based Costing (ABC)
The Activity-Based Costing system offers an alternative solution in the treatment of indirect costs.
He states that it is not products or services that consume costs, but activities. Based on this principle, this system deepens the analysis of activities, their usefulness and, above all, their cost.
The most remarkable thing is that the ABC method focuses more on the fact of eradicating unnecessary costs, than on limiting itself only to distributing them.
Traditional costing systems are especially concerned with inventory control and valuation issues rather than cost reduction and improvement.
And with the rise in indirect costs driven by variety and complexity, these methods were providing increasingly distorted results.
The ABC analysis presents a clearer picture of the costs of products and services, through better identification of the costs of activities consumed by products or services.
Using ABC, many indirect costs can be more clearly related to the products and customers who consume them, giving managers a more accurate picture of the profitability of products / services and customers.
The ABC's view of cost behavior challenges conventional wisdom regarding the approach and measures to apply in order to achieve cost reduction.
Western companies that audit their activities have come to discover that between 50 and 70% of the activities they carry out are not valued by their clients.
This data underlines the importance of the analysis of the activities.
Identifying the cost of an activity will make it easier for management to decide whether said activity is necessary, reducible and even eliminated.
Another important contribution of the ABC is to be able to achieve a better determination of the costs of the services and, with this, to enable a better setting of prices for them.
Economic Value Added
The Economic Value Added (EVA) is a tool that allows to calculate and evaluate the wealth generated by the company, taking into account the level of risk with which it operates.
Therefore, it is an indicator with a vocation for integration since it considers the main objectives of the company. In addition, the EVA provides elements so that shareholders, investors, control entities and other people with interests in the company can make informed decisions.
EVA can be defined as the amount left over after all expenses, including the opportunity cost of capital and taxes, have been deducted from income.
The EVA aims to overcome a good part of the limitations presented by traditional indicators. For this reason, the EVA to cover the gaps left by the other indicators achieves:
- Make its calculation feasible for any type of company. It can be applied to both a company as a whole, as well as to any of its parts. It considers all the costs that occur in the company, including the cost of financing provided by shareholders. It takes into consideration the risk with which the company operates Discourages practices that harm the company in both the short and long term It is reliable when comparing data with other companies.
Planning and Strategic Management
All the aspects previously developed should be focused within a Strategic Planning and Direction that serves as a guide and as inspiration.
Only the existence of clear and precise strategies will allow the participation of all personnel, as well as the success of the various implementations that are carried out.
Knowing where you are, what means you have, which are the strengths and weaknesses, recognize opportunities and threats in time, set the possibilities and clearly determine where you want to go, will facilitate the planning of strategies aimed at leading the organization from your current position to your target position.
Recognizing what business you are in, what customers are, what products and services are offered, and how they are generated and offered, are the key questions that managers must answer. Responding to them will imply a better focus, which will lead to more effective and efficient use of resources.
Even today most companies have not developed Strategic Planning and Administration.
This is even more true of the South American banks, serving in many cases to explain the collapse they have suffered in recent times. A total lack of foresight and contingency plans engulfed them in the face of tremors and runs in international markets.
Diagnosis and conclusion
If a bank is analyzed based on the application that it makes of each of the aspects necessary to be part of the organizations that provide " world-class services ", we will have so much capacity to generate added value for its customers, employees and owners has the same, both in the present and in the future.
Entities with high levels of waste, poor services and low satisfaction scores among their customers and users, high fixed costs, lack of continuous improvement, few and ineffective elements of analysis for their control and direction, low levels of loyalty of their staff and customers They are only the tip of the iceberg of the inefficiencies and dangers to which they have been exposed.
In recent years, there has been a strong concentration of attention and resources on aspects related to the marketing of financial institutions, paying less attention to optimizing the use of resources, such as information systems aimed at improving the management of financial assets. themselves.
They have neglected that better operational management implies both higher levels of quality, faster services and lower costs, all of which improve the value received by customers, while improving both profitability and the solvency of the organization.
It is very common to find tremendous contrasts between bank advertising and the services that they actually provide to users. The greater the promises and expectations created, the greater the margins of dissatisfaction caused by inconsistency in the services provided.
Quality is global and comprehensive, it must not only be understood by the number of failures and errors in the services provided to external clients, but also by the shortcomings in the analysis and administration of resources.
Lack of quality when analyzing the creditworthiness of clients, lack of excellence in the management of financial resources, and not doing things "right the first time", are some of the many serious shortcomings that not only produce important levels of waste, but they are also factors that generate the systematic loss of credibility, an aspect that is so expensive to the perception that customers and investors have of the bank.
An honest analysis of the South American banking entities will show us the absence or the little commitment that they have in implementing each one of the activities destined to improve the internal processes that lead in such a way to continuously improve their levels of quality, costs and productivity.
Over focused on financial and marketing aspects, they have left aside the deeper issues related to the operation of systems and processes. They have only given importance to technology and reengineering, not obtaining all the results that they could obtain with a better and comprehensive management of the processes.
Bibliography
Competing in the Third Wave - Jeremy and Tony Hope - Management 2000 - 1998
Service Management - John Shaw - Díaz de Santos - 1991
Quality and productivity for banking and finance managers - WJ Latzko - Díaz de Santos - 1988
Deming's fourteen points applied to the Services - AC Rosander - Díaz de Santos - 1994
The quality of the service - J. Horovitz - McGraw Hill - 1990
