Category Archives: Systems Thinking and Financial Industry

BofA, Jackie Ramos and Customer Purpose

OK corporate America get ready for more of this as I suggested in my blog post The End of Buyer Beware.  Jackie Ramos, a former BofA employee is speaking out about the business practices of said bank (listen here).  I’ve listened to this video several times now and the mood of the nation favors her compassion over the “evil” business world.

Ms. Ramos was a customer advocate for BofA.  Her job was collections and she was told to do three things:

  1. Think of yourself as the customer,
  2. Do the right thing for the customer, and
  3. Do the right thing for the company.

She apparently did less of #3 and was fired for it.  Her crime was refunding fees and putting people that weren’t qualified for a “fix pay” (accommodating payment plan rather than 29.99% interest).

Jackie isn’t the first person to be fired for doing what she felt was right and certainly won’t be the last.

I am not here to debate the responsibility of debt (things like people should pay off their loans or who gave these people the loans in the first place) or even what corporations made bad decisions that started this financial mess.  And, I am sure there are many others including our lawmakers.  There is plenty of blame to go around.

My focus is on customer purpose.  Doing right by the customer always costs less.  Yet our organizations are built around business cost reductions and costs.  Few look to the causes of costs.

In the above BofA/Jackie Ramos scenario who is in a position to do what is right for the customer (in my world called who has knowledge).  Ms. Ramos outlines in detail some cases she had worked – a cancer patient and legally blind lady to name a couple.  These cases did not meet the criteria of getting relief based on policies (most likely) developed based on costs and not knowledge of the work.

What is the purpose of not working with a customer to help them.  The job of any collections department devoid of helping customers finding ways to make payments is to miss an opportunity.  The result of bankruptcy most likely ends in no payments to the bank, never mind the fallout of an angry customer or disenchanted employee.

The belief that helping customers costs money is one founded in the zero-sum mentality that there is a trade-off between costs and good service.  This is a fallacy.  Many times executives don’t see the costs of poor service until they get into the work and see for themselves the damage of bad policies and other cost-control decisions.

My business is to help organizations design their systems against customer demand.  This approach is powerful as the purpose of the work is not to submit to a policy or specification, but to serve the customer in the context of their demand.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Banking – 5 Ways to Make Your Operations Profitable

 

The banking industry has been through nothing short of hard times lately.  Many banks are in varying degrees of distress or will be.  So, what can banks do to help their cause.

Having worked with banks for almost 10 years performing bank management consulting, I see many opportunities to improve service and reduce costs.  Here are some ideas that may help.

(1) 

Functional Design. 

Every bank I have ever been has designed the work Frederick Taylor style (scientific management theory) separating the duties into specialties.  This has created the well-known front office and back office environment.  Many times this design has been locked in by technology that inhibits the flow of service and creates waste. 

(2)  Separating the Decision Making from the Work.

Banks are built on command and control thinking with the workers working and the managers managing this presents a missed opportunity.  Most bankers in management have “done the work of a teller” at one point in their career.  But things change and with out a thorough understanding of the work as it is done today, wrong or poor decisions are made.  Banking management needs to be on a constant vigil to understand the work and not abdicate decision-making to reports, vendors or anecdotal evidence.

(3)  Understanding Customer Purpose and Demand.

When I visited a bank, most executives and managers thought it was bizarre that I would want to start at the front-line.  The points of transaction for customers is where improving banking systems begins.  Understanding the what and why of current performance naturally leads us to where the customer touches the bank.  Contact centers, tellers, and loan officers offer a good opportunity to easily understand how well a bank is performing in the eyes of the customers.  Understanding “what matters” to customers and the types of demands presented can be a profound education.

(4)  Technology and Automation. 

When you combine making decisions about the work without knowledge, poor work design and technology you get huge amounts of waste in banking.  The use of technology and automation is over-prescribed in banks at great cost.  Technology folks and IT vendors running around looking for ways to use technology without questioning the design or understanding the demand.

(5)  Best practices, Copying, and Standardization.

All of these lead to increase costs and worse service.  The inability for standardization to absorb variety leads to failure demand demand caused by a failure to do something or do something right for a customer).   When workers find the need to standardize they can pull it in, forced standardization is never a good idea.  Copying and best practices (a form of copying) lead to much waste as all banks are different by culture, management, work design, structure, customers, etc. to copy is to miss opportunity for innovation and new methods.

Any bank looking to improve service and reduce costs should find plenty of ideas with each and all of these.

Some sample results are:

Measure

Before

After

Bank servicing

Failure Demand – 60%

First Call Resolution – 30%

Failure Demand – 10%

FCR – 92%

CD

Retention – 20%

Retention – 42%

Mortgages

Conversion – 21%

Conversion – 95% (and the 5% were ones the bank didn’t want)

Card Servicing

Failure Demand – 54%

FCR – 24%

Failure Demand – 18%

FCR – 86%

These results are from a bank management consulting engagement that resulted in a 20% reduction in expenses in one year.  You may be getting these results, if not, you may want to learn more about the 95 Method.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Bank of America . . . Tear Down that IVR!

My wife called Bank of America (used to be Countrywide) to make the last payment on our home and needed the payoff amount and arrange to be sure the correct payment was submitted (timing).  She was taken through an IVR (Interactive Voice Response) system that asked general questions:

  • Are you an existing customer?
  • Account Number (and annoyingly repeated by the voice)
  • Last 4 digits of Social Security# (she put in hers and they had mine even though the mortgage was in both our names)
  • Description of Issue (she explained the issue as best she could to the IVR system and it kept trying to give her options that did not fit the request)
     

She then requested to speak to a representative and the IVR told her it would take longer and that it was best suited to answer her question.  Can you imagine a machine telling you how to handle your problem with its standardized responses!

She insisted on a representative and was put through after a less than 2 minute wait.  Where she had to give out the same information to the “human” that she just gave to the IVR.  In another 2 minutes, the issue was resolved by the service rep.  Total time 15 minutes, 11 with the IVR, 2 minutes on hold and 2 minutes with the service representative.

Command and control thinkers only focus on costs, thinking somehow this system is saving them money.  No option out to speak to a service representative without arguing with a machine is simply . . . stupid.  The costs are “unknown and unknowable” as Dr. Deming would say.  However, they are there all the same.

A better customer management process would be to study demand before implementing an IVR and understanding that a customer doesn’t want to listen to an IVR for 11 minutes or  . . . argue with it.  They would understand that call center management could reduce calls by understanding and eliminating failure demand (problems, follow-ups, etc.) that represents between 40 and 75% of the call volume.

Bank of America, you inherited this system . . . now tear down that IVR!

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking.  Download free Understanding Your Organization as a System and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbitt.

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Dear Secretary Geithner

Dear Secretary Geithner:

All the regulation you are imposing will not stop the next crisis.  It will stop ones that look like this one, but not the next one.  I don’t fault your intent, but regulation because of the greed of some will cost us all more as increases in fees and taxes.  You see the American taxpayer will have to pay twice, once for the regulation and again for the financial institutions to comply with the regulations.  Talk about double taxation.

I have a different idea.  Let’s take all the organizations with command and control thinking that are inefficient anyway and have bonuses and rewards that facilitate greed be regulated more.  They love costly things like documented procedures, scripts, entrapping IT, outsourcing, shared services and in general . . . waste.  So regulating them will fit right with their thinking.

Those financial institutions that use systems thinking and understand rewards and incentives drive the wrong behavior and a defacto purpose like achieving financial targets can be regulated less.  The front-line worker of these organizations will call out any “funny business” because they will be involved in the decision making of their own work . . . no more Madoffs.  Not only that, these front-line workers will bring business improvement and business cost reductions that will actually create more profit for shareholders and the company in general.

Just a thought.  Let me know what you think.

Kindest Regards,

Tripp Babbitt

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J.P Morgan Chase Doesn't Get IT

There is an article from BusinessWeek On-Line titled JP Morgan Chase to Increase India Outsourcing 25%.  The comments attached to this article are damaging enough.  These comments are mostly related to the TARP money and losing American jobs overseas, people are outraged that their tax dollars ($400 million) are going to help India.  There are bigger problems with IT outsourcing than the heated and emotional ones.

The real issue to me is that it doesn’t make economic sense to have an IT outsourcing strategy.  Yes, Chase may lose some customers, but they are actually increasing their costs NOT decreasing them.  Let’s look at the reasons:

  1. The decision to outsource is made top-down, based on costs.  These are the command and control thinkers that don’t understand the work to begin with (ala AP Sloan) but see a huge savings in taking a transaction cost mentality to reduce transaction costs while driving up end-to-end costs.  Additionally, what about the contract that is managed, turnover, and communication which are all issues in outsourcing.
  2. IT is over-prescribed.  IT people can automate any process, the problem is most of it is done without understanding customer demand and the work that creates value.  This leads to IT that is not needed and usually institutionalizes waste.
  3. Collaboration is needed to produce value-added IT.  The production line mentality of the IT shop assumes that the IT work can be done by gathering requirements and than “sending” the work development work away.  This rarely leads to a good outcome.  Developers need to be with those doing the work to create value.
  4. Standard work and best practices don’t allow absorption of the variety of demand.  Outsourced IT demands standard work or best practices that can not let the bank absorb the variety of demand that customers demand leading to waste.
     

A better “systems thinking” way is to approach technology change management is to understand the customer demand, improve the work (without technology changes) and “pull” technology.  An IT outsourcing strategy can only prevent these things from happening and guarantee waste.

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The Bernie Madoff Scandal: Command and Control at Work

It is alarming, not just the Bernie Madoff scandal, but the “whole ball of wax”, the banking collapse, the economy . . . all of it.  As I read about the Bernie Madoff scandal in the Wall Street Journal this morning, my eye caught one important fact.  Madoff hired (allegedly) employees that didn’t understand the securities industry and directed them to “generate false and fraudulent documents.”  The command and control thinker has functional specialism (born from scientific management theory) as its mantra where tasks are split to where no one really knows what they are making or servicing.  The tasks are so diluted that only the executives or managers could know.  

My bank management consulting experience over the past decade saw the separation of duties into front, middle and back office and many times I was told this was for regulatory purposes.  It is a management paradox to me that the very thing that they are trying to prevent (by separation of duties) . . . fraud, may promote it.  It would take a lot for a group of systems thinkers (that understand the system end-to-end) to be morally corrupt for someone not to blow the whistle. 

An added benefit with systems thinking is you would be serving the customer as the center of activity.  This leads to business improvement, corporate cost reductions and better service. Boards of Directors would be wise to take this approach in any industry.

My fear is that we will take the inspection approach with banking, penalizing those banks that did no wrong (most of them).  This will add to costs as inspection and regulation are forms of waste.  Inspection is too late and regulation is too expensive, but these are things we can expect in the coming days.  Better work design through systems thinking would be a better approach.

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Collections: Better Thinking

My partners in the UK recently had a bank management consulting engagement in the UK. It was in their collections department. Just as with another UK bank, as soon as the customer misses a payment, the IT system starts a predefined lettering campaign. If this does not prompt the customer to pay then the computer pops the account onto an agent’s screen and the agent’s job is to get money right then and there over the phone. Details of the payment taken are fed into the computer and it decides when to make the next call with the same (‘collections’) purpose. What was most frustrating for customers was that if they called to say they had a problem paying before they had missed any payments there was nothing agents could do to help because the customers weren’t in the correct IT system.

You only had to listen to calls to learn how awful this was from the customers’
point of view. It wasn’t unusual for customers to avoid the call, knowing it
meant grief and in their words ‘to be treated like a criminal’. Agents were
measured on calls made, money collected and were incentivized to collect the
most money. No surprise there.

What had been completely forgotten was why customers were in arrears. The
reality was most of these people had experienced either a minor cash flow
problem or had a major life changing event (divorce, serious
illness, etc). Yet the system was designed to treat them all the same.

We helped them redesign the service, to make it work from the customers’ point
of view. The first contact was a problem-solving contact: Hi, you missed a
payment, is there a problem, can we help? Instead of following rules, agents
were to help the customer solve the problem, and there were no constraints;
they could re-structure debt, repossess the item bought (for example the car)
and so on.

The results were astonishing. The agents collected more money and the customers were happier – without prompting, many told the agents how impressed they were with the service. What’s more we showed this design could be delivered with only 30% of the agents. Delivering the service against customer demand meant the removal of massive volumes of failure demand and other types of waste. So, a major change: massive improvements in collections, vast improvements in
efficiency and huge improvement in customer service. Furthermore agents were
happier, for now they were doing a much more interesting and worthwhile job.

The only down side was the solution meant the computer system would be redundant, it meant managers would have to confess to their board that last year’s
multi-million pound investment in technology was a waste. What did they do?
Nothing. The redesign was dropped.

Deming used to say doesn’t anybody give a hoot about profit? All the customers
wanted was a conversation that would help them solve their problem. But banks seem to be designed on the assumption customers are delinquent.

The customer management process was improved without changing technology.  The move from a command and control environment to systems thinking can bear fruit and save on technology that is not needed.  However, this will require new thinking and innovative leadership.

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