As in the retail or manufacturing industry, the financial sector does not escape having a high volume of daily transactions. Each transaction is data that will become information for the business that has to be organized by processes for excellent and efficient management.
Business processes must be mature, innovative, and in favor of continuous improvement to guarantee a better customer experience. For a financial institution, applying methodologies such as the DMAIC cycle, which ensures a step-by-step team review of a process to be improved, becomes key.
The day-to-day can immerse us in urgent tasks, losing sight of the essential processes. For this reason, I invite you to follow the example of a banking institution, where we solve with the five stages of DMAIC one of their biggest pains and nonconformities from their customers.
- DMAIC Methodology
- Why DMAIC?
- Use case in a banking institution
DMAIC is a continuous improvement methodology. It is made up of 5 stages which are:
- Define: Current process with an opportunity to improve
- Measure: Indicators of how the process is doing
- Analyze: Knowing the root cause of the problem of that process
- Improve: Execution of improvements in the process
- Control: New changes and adjustments to the improved process
>> DMAIC Methodology: Define Stage <<
It is part of the Six Sigma philosophy tools. Each step is designed to follow a logical sequence in search of continuous improvement for a given process.
When we think about what can be an effective way to make our business processes more agile without letting it out of our hands, DMAIC is very attractive to apply because:
- It guides how you should approach the process improvement opportunity
- For each step, you get results
- It is easy to understand different areas in the organization
- It allows innovating
- It adapts to all processes
Use case in a banking institution
Today's use case is about a bank that offers several products. One of them and the one we will be reviewing is personal loans for their customers and potential customers. This type of loan should be approved within a couple of hours, and unfortunately, it is not generating the results established by the institution. In addition, they have received multiple complaints from their clients regarding the application's approval time (about 4 hours). Many of these customers get frustrated and switch to a competitor. Other banks take less than 2 hours to approve loans. Bank staff claim they do not know how to streamline the process as they are lengthy, complex, and lack clarity of execution.
Only 30% of personal loan applications pass on the first attempt, and processing the information will take up to 4 hours.
To address this issue, we will use the DMAIC methodology hand in hand with its step-by-step tools. I invite you to follow the step by step.
In the beginning, the whole team should meet and establish which process will be reviewed, what objections there are, bottlenecks, pains for the client and the staff, delimit the scope, etc. Question why you should attack this process and define the As-Is process; in this case, Personal Loan Approval Process. With the help of a SIPOC, you place the process with its inputs, outputs, suppliers, and customers.
You may be interested in reviewing this: SIPOC
Below is a flow chart of the As-Is process with its description of each current stage.
- The client completes the documentation manually. They fill in the fields on the form and attach additional personal documentation requested by the bank. Completing this information takes 15 minutes.
- The bank staff receives the form and, in various systems, reviews the customer's credit information, the complete document, and the information attached. Each review can take about 30 minutes.
- Within an internal system of the bank, the information submitted by the client is passed manually, and if all information is complete, the first approval is issued. This takes about 40 minutes.
- The bank executive informs via email to the management that the application is correct, attaches the files, and requests approval. Management takes about 20 minutes to corroborate that all the documentation is in the email and then notifies if the application was approved.
- Once management's response is received, the executive emails the client, notifying them that the personal loan has been approved; it can take up to 20 minutes to send the email to the client outlining the conditions and amount of the loan approval.
So far, the execution time for each stage is around 2 hours, but it is essential to consider the time it takes to move on to the next step. That said, being a manual process with outdated systems and assuming a high transaction flow, it is prone to human errors, reprocessing, and downtime, becoming complicated handling that adds approximately 2 hours more to the As-Is Personal Loan Approval Process. The total estimated time is 4 hours.
At this point, the problem is a long duration in approving personal loans to customers (therefore the loss of the same), so measure these critical variables and give a follow-up to validate the problem raised. Additionally, it is crucial to consider the values obtained and all the possible variants that feed this problem and give alarming results.
Some of the KPIs that we can measure are:
- The time of each stage of the As-Is Process
- The time between each step of the As-Is Process
- % of lost applications (lost customers)
Knowing the problem to attack and with the data that supports why you deal with it, an Ishikawa diagram is constructed with the team, showing the problem and its causes. Here is the image and the explanation below:
We must attack those causes that generate reprocesses, delays, do not generate value, where processes become more complex to execute and therefore result in a bad customer experience:
- Systems: They are old and not updated, so generating tasks in them is confusing. In addition, there are no modules that allow interaction between systems.
- Personnel: The staff is not trained to effectively manage the systems and processes. Everyone works in their way. When they support the client, they cannot listen to them and know how they can help them. Communication between areas is complicated (not assertive).
- Processes: There is no standard to carry out and find a way to work efficiently. Staff comments that they are complicated to understand and explain, resulting in slow execution.
In several work sessions, you must look for opportunities for improvement and how this can be a positive experience for your customers. Specifically, how do you decrease the approval time for personal loans? With brainstorming, for example, we can build the To-Be process of the Personal Loan Approval Process.
From the ideas generated and information from previous stages, the issue of manual processes from the beginning to the end of the As-Is Process is the one we should improve, change and adapt to new technologies. Therefore, it is proposed to invest in purchasing a system that allows us to manage the flow of the process and that this system takes care of the repetitive tasks. A system that helps with reminders and alerts. Versatile. In such a way, the bank's personnel can focus on adding value to their functions.
The To-Be Personal Loan Approval Process would follow this sequence:
- The client completes the documentation through a digital form from a computer or cell phone. The system validates that each space is completed, reminding them of the information to be attached. With all this assembled, the application arrives at the bank executive. Completing this information takes 10 minutes. The application reaches the bank only if all the information is submitted.
- The bank staff receives the completed application with all the documentation and validates the information under an integrated system. If the system detects any anomaly, it sends an alert. This should not take more than 15 minutes.
- As it is an automated process, the system will be in charge of the first approval. Generating a message indicating whether this stage is satisfactory and therefore continues.
- An email is automatically sent to Management, notifying an approval is pending. From the system, management reviews and approves, which takes 5 minutes.
- An automatic notification is sent to the client, informing them that the application has been approved.
The execution time of this process, Personal Loan Approval To-Be, takes approximately 40 minutes. Automate several manual tasks; the time between each stage is 0 minutes, except for the final approval (Management Approval) to the customer's email (Customer Notification). This is because Management has a work queue to give the final approval that takes no more than 10 minutes.
The bank's staff can more easily perform their processes and focus on the activities that add value. As mentioned, the bank executive receives the application only if the form is completed and the client attaches the documentation.
The new Personal Loan Approval process must run according to the To-Be proposal and be measured to control the variables and how they behave. Also, you must have dashboards with KPIs, where the control of the process is reflected, that it has been implemented and that the personnel executes it completely.
You can check: Employee experience design
It is important to emphasize that DMAIC, being a cycle, constantly seeks continuous improvement and therefore invites us to review business processes actively.
If you want to learn more about this methodology, its tools, and how to apply them, we invite you to visit www.imagineer.co, where we will be pleased to provide you with all the support from Strategy Consulting.