In 2007, the CEO of a large national retail bank detected mortgage industry trends that led him to believe that recent growth was unsustainable. The CEO realized the importance of strengthening the bank’s retail division to better position his organization to weather a looming storm in the mortgage industry. Seeing an opportunity to fortify the bank through a Six Sigma strategy, he enlisted the help of ProcessArc, a consulting firm specializing in Six Sigma, to make the bank’s retail division as lean as possible by removing incremental cost and products that delivered minimal revenue.
Two improvement targets took center stage. First, the organization’s back-office personnel devoted 35% of their time to inspection and rework. Second, surveys indicated that customers lacked confidence in tellers’ abilities to execute transactions. Based on costs associated with non-value-added activities and potential increases in capacity via more effective training and fewer errors, the Six Sigma team aimed for project savings totaling just over $2 million.
The team, comprised of five bank employees led and trained by ProcessArc principals, began improving core processes to create a more stable environment using basic Six Sigma tools such as process mapping, fishbone diagrams, and failure mode and effects analyses, as well as tools for designing and implementing data collection plans. Processes were implemented to collect error rates for all retail transactions. Using the new error reports, the bank was able to track the most frequently occurring errors, which had positive impact in three areas: improving training, driving the concept of accountability, and giving a voice to back-office personnel.
Data collection efforts made it apparent that the process flow from the branches to the back-office operations was broken, which, in turn, was a root cause of back-office personnel spending 35% percent of their time on non-value-added activities. The Six Sigma team worked to recover 30% of that waste through process simplification and elimination of broken processes and unprofitable products.
By identifying and then simplifying ten high-volume core transactions, the team estimated nearly $1 million in cost savings for the organization. Further simplification was achieved by eliminating 18 products from the bank’s retail offerings. In addition to discontinuing unprofitable products, the team focused on reducing the number of processes used in the retail division, thus adding capacity to both retail and back-office operations.
By eliminating processes and products that had little value and by implementing a feedback loop between the back office and the 180 branch locations, the project quickly yielded impressive results. Overall, the Six Sigma project’s improvements provided $2.1 million in financial benefits in just eight months, primarily due to cost reductions.
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