Process improvement in the banking sector

Abstract

Six sigma, operational excellence and lean are very popular tools, but their use in worldwide banking remains limited today. These tools are mostly used in other industries, and banking experts often question the value they hold to the banking sector. Process improvement is not industry-dependent, but it is not easy to translate production methods from manufacturing to services. Nevertheless, the results can be similar. Consistency is required in the application of process improvement principles, even if the economy is changing and senior managers are forced to adapt their business strategy. Flexibility in the implementation process is needed to find the best way in response to different market and economic conditions. When K&H; Bank in Hungary started its business improvement journey in 2005 it began as a rather bureaucratic institution that had paper-based process descriptions for its rules, more than 300 active IT systems, a functional organisational structure working in ‘silos’, complex end-to-end processes lacking sufficient cooperation and risk avoidance as the bank’s main target. The organisation was neither customer-friendly nor efficient. Changing the corporate culture has been a ten-year journey, using business-as-usual operational excellence and lean tools for process improvement, and continuously measure and manage process performance. Today, all internal staff communication from the CEO contains the same final key message, repeated for years as the most important cultural principles for all employees: ‘be the reference’ (meaning that all employees should work and act as part of the best bank in the market), ‘serve your customer’ and ‘simplify’. These messages are not empty words, the whole organisation is working on these goals every day. To achieve this result K&H; Bank needed to change its process strategy several times to enable it to adapt to the changing market requirements. This paper summarises the key drivers of the market and the different implementation strat­egies of the bank, including the toolkits, results and challenges at each stage, and the increasing levels of process management and improvement that were achieved.