The Seven Wastes of the Banking Sector: Lean Banking

“Knowledge is something you can buy with money. Wisdom is something you acquire by doing.”

This phrase was used by Taiichi Ohno (1912–1990), to whom we owe the Toyota production model, the well known “Just-in-Time”. This is the process by which materials and products at an intermediate assembly point reach production at the time and quantity required. Ohno invented a simple and inexpensive signal system called Kanban (“card” in Japanese) based on cards held in the warehouse, on which the material and quantity requested are written on an ongoing basis.

Ohno was a restless and observant man. Even before World War Two, he wanted to know why American productivity was greater than Japanese. He went to the US to study the greats like Taylor and Ford. His inspiration came in a supermarket, where he observed how tasks were monitored by eliminating unnecessary steps in inventory management of stock, replenishment and customer satisfaction. His idea was to always eliminate everything that did not add value to the process or product.

If Ohno lived, it would be interesting to hear his opinion on productivity in some sectors. For example, what would the Ohno of banking say? Can Lean be applied to banking?

Let us talk about the Lean bank.

If we start from the basis that Lean seeks to eliminate waste in production processes, that is, elements that do not add value, how much could we eliminate from banking processes?

There is irrefutable data – banks that have implemented a Lean system in their processes have cut costs by up to 30% and delivery times and errors by up to 80%.

Ohno identified seven wastes applicable to any process. For banking, these would be:

1. Waiting: on processes that need authorization and on information that does not arrive. Operations are delayed or do not meet deadlines. In the end, the injured party is always the customer
2. Movement: sit in a comfortable armchair in any bank and observe bank staff with papers in hand who come and go or who search for documents on remote printers. Staff at the service window must leave that area to look for forms
3. Defects: what happens if we complete a form incorrectly? When it is reviewed, after a while, someone detects the error by confirming it, and then it needs correcting. This is a flaw in the process. Yet, when a customer delivers, the documentation is reviewed on the spot to identify possible errors and avoid rework
4. Overprocessing: duplication of some activity by custom or routine that has not improved any process. Perhaps, if the client wants brief information about a product, it is not necessary to make a presentation with graphics and color photos. The idea is to optimize time and resources and not make a simple process something unnecessarily time consuming
5. Inventories: accumulation of paper and obsolete products are excess raw material. A bank can offer a product, show you a leaflet and, in 15 minutes, it is out of date – there is already a newer product and a leaflet with more up-to-date information (including information that was not originally to hand). A bad inventory can also lead to errors
6. Overproduction: a campaign for a new product is offered to everyone indiscriminately. A well-designed campaign aimed at the typical customer profile would increase the likelihood of success and not create unnecessary customer calls
7. Personal skills: people are resources that are not used effectively. Surely, many employees in banking could contribute a lot to processes and propose improvements. Not taking advantage of the team’s expertise to identify, report and solve waste-filled processes is a waste in itself

What would happen if a bank were Lean? It could:

• Improve profitability by increasing productivity and reducing costs
• Increase revenue by creating more resources and time to carry out commercial actions and sales
• Reduce errors and customer response times
• Accelerate procedures and reduce risk by standardizing operational processes
• Create well-served and satisfied customers, creating a loyalty link that, in the end, helps to capture new business

These failures or shortcomings in banking systems that are not Lean are clearly seen during mergers or takeovers between banks. If these banks had well-defined, standardized and robust processes, the workflow would be more effective for the organization globally and for the human team, which could work with greater ease. Without a doubt, the profitability of banking today will depend on an improvement system. Continue without it, and banks will not innovate or gain greater participation in the market.

Ohno did not want anyone dedicated to tasks that did not add value. If you were to tour some organizations, you would not understand what they have done in the last 50 years.

What would Ohno say if he went to visit your company? “Learn doing” was his motto.

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