leveraging lean thinking in credit unions: a randolph-brooks federal credit union case study

Leveraging Lean Thinking In Credit Unions: A Randolph-Brooks Federal Credit Union Case StudyPresented by: Peter Farrow, Vice President & Chief Information Officer – Randolph-Brooks Federal Credit Union

Your Presenter Today

Peter Farrow, Vice President &Chief Information OfficerRandolph-Brooks Federal Credit Union

• Joined RBFCU in 2004 to establish a formal Project Management function

• Selected in 2007 to create a formal Process Improvement program

• Over 18 years of Credit Union experience • Masters in Technology and Masters of Business Administration

2© 2010 Guidon Performance Solutions, LLC. All rights reserved.

What We’ll Cover Today

• RBFCU Overview

• What is Lean?

• Why Lean in Credit Unions?

• 3 Case Studies

– Branch Channel Lending– Branch Channel Lending

– Call Center Member Service

– Branch Workforce Management

• Why Lean in IT?

• Getting Started


RBFCU General Overview

• Founded in 1952 by military personnel

• $4 Billion CU serving more than 325,000 members

• 36 branches– Ten underserved areas

– Three to five new branches being built per year– Three to five new branches being built per year

– Three in-school branches

• 1,000+ employees– Average tenure of senior staff = 15 years

– 5 or more years of service = 40% of employees

– Part time = approximately 10% of employees


What is Lean?

• Provides WHAT the member wants

• WHERE the member wants it

• WHEN the member wants it

• In the MANNER they want it


While utilizing minimum resources and minimizing member effort.

Specifies value from the standpoint of the member.

Why Lean in Credit Unions?

Membership is growing

Confidence and safety

Members expect superior service

Growing spectrum of products –

complexity and scale

Regulatory environment is more complex

Sound processes, controls, costsSound processes, controls, costs

Return on Assets for many Credit Unions

is stretched thin

Low interest rates, more members,

more services


The pace of change requires new thinking

LEAN is all about Identifying and Eliminating Waste

• “Waste” is seen differently in LEAN

• Traditionally, waste has been viewed as an object. It is very easy to envision a barrel of scrap metal or plastic and identify it as waste.

OverProducing

Work InProcess

Over Processing

Errors & Rework

Transportidentify it as waste. • In LEAN thinking, the term

waste actually refers not to the physical material but rather the relationship of the resource to the member.


Rework

WaitingExcessMotion

In LEAN, waste is measured as consumption of resources – time and capital

Examples of Waste in Credit Unions

• Member waiting for service

• Cumbersome transactions

• Duplication of information

• Searching for information to answer a question

OverProducing

Work InProcess

Over Processing

Errors & Rework

Transport

• Reports created, not used

• Transportation costs

• File maintenance and retention


It’s all about core member value

Rework

WaitingExcessMotion

Transport

Lean Improvement

Metric Benchmark Gains

25% 50% 75% 100%0%

Labor Capacity

Lead Time/Delivery

Errors and Rework

“Lean Adopters Identify More Waste and Operate More

Efficiently”

What others say about Lean


Revenue Growth

Errors and Rework

Decision Points

Handoff Reduction

“Lean Is Inexpensive and Generates Solid Returns”

Corporate Executive Board, Operations Council™2006 Study on Lean Manufacturing for Financial Services

Lean Projects at RBFCU

• Member Service Center: Outbound Calls

• Consumer Lending: Video Conferencing

• Human Resources: Recruitment

• Records and Research: Document Imaging

• Information Systems: Help Desk

• Branch Vision Planning Session• Branch Vision Planning Session

• Member Services: Asset Protection

• 5S Project

• Core Platform Process Review

• Resource Planning Model


Kaizen Breakthrough Experience

Day 1

• Introductions• LeanSigma®

Transformation• Lean

Production

Day 2

• Team Formulates Process Improvement

• MakeHands-on

Day 3

• Continue Hands-on Workplace Improvements

• Report Out:

Day 4

• Refine Improvements

• Continuous Improvement

Day…

• Future State

Team-based energy and creativity drives immediate process improvement


At the end of the week, the Kaizen team will have achieved dramatic operational improvements

Production System

• LeanSigma®

Tools• SIPOC• Site Tour • Observations

and Quick Kills• Analyze

Current State

Hands-onWorkplaceImprovements

• EstablishStandard WorkResult

• DocumentNew StandardOperation

• Report Out:

• Present Results

• Next Steps

• Celebrate!

Video Conferencing – Branch Channel Loan Origination

• Context and Challenge

– New video conference service for loan origination process at the branches

– Pilot results showed high member acceptance

– Demand for service was growing and threatened to exceed the loan officer capacity threatened to exceed the loan officer capacity

– Members experienced significant variation in the time to complete the process


Video Conferencing – Branch Channel Loan Origination

• Cross functional team from branches and Lending Department took on the challenge of eliminating waste and standardizing the process

• Team gathered for a 5-day “Kaizen” event to review the video conferencing process, specifically those that did not add value

• Reduced member wait/hold time by 30%

• Improved lending productivity by 17%

• Decreased forms/paper and associated printing (23 hrs/month)

• Developed training on new process for branches and lending center

Approach Results


those that did not add value

Kaizen – A collaborative Lean methodology to rapidly identify and eliminate waste. Typical event duration is 4-5 days. Improvements are implemented or tested during the week to evaluate impact.

Since then

• Expanded from 6 to 17 Branches with Video Lending

• Average number of video conference calls increased from approximately 250 to 3,000 per month.

Member Service Call Center


– The Member Service Center outbound transfer call volume had risen to 37%

– Service level objectives were not being met; the call abandonment rate was 8.9%

– Approximately 50% of the transferred calls – Approximately 50% of the transferred calls were due to training challenges

– The call center needed to reduce transfers, ensure capacity was available for growth while maintaining high levels of member service


A Kaizen team from including the Member Service Center, IT, Consumer Lending, Card Services and Accounting met for a 5-day improvement event. Key steps included:

Map/Quantify the member experience

Identify waste

Identify/Prioritize improvements

Metric Before After

Transfer Rate

50% 20%

Inbound Calls

Reduced 28%

AbandonRate

8.9% 5%

Approach Results

Member Service Call Center


Creativity before Capital$430K Savings

• “Just do It”

• Process change to reduce steps and improve flow

• “5S” to improve efficiency of work environment

• Leverage existing technology (simplify screens, IVR)

Simulate/Pilot best ideas to gage impact

Establish training document

Report Out and Celebrate

Rate

HandleTime

169 sec 150 Sec

Branch Workforce Management

• Context and Challenge – Due to e-technologies, branch volume is declining; however, transaction

complexity has increased

– Staffing per branch was relatively flat year-to-year

– New branches are opening and require additional resources and training

– We needed to identify opportunities to simplify processes and best allocate resourcesallocate resources

– Core objective was to increase transactions per employee while maintaining high levels of member service

• Results– Constructed a resource planning tool to better align resources to

transaction volumes while maintaining superior member service

– Projected savings of $1.5 million over the first two years


• Assessed branch processes, overall performance, and opportunities

• Launched a LeanSigma Workforce Management Project

Branch Workforce Management

• Simplified scheduling model that matches current scheduling outputs

• After 3 months, piloted the workforce management tool with 4 branches:

• Tool reveals potential savings of10-20%

• Managers can use the tool to match capacity to volume

• Currently testing the resource planning

Approach Results

• Developed models/tools to assist with allocation of resources by branch, day/hour

• Pilot and roll-out tool; adjust schedules and metrics


• Currently testing the resource planning model across remaining 27 branches

Anticipate 10-20% resource savings over the next two years while still maintaining member

service expectations.

Lean in IT


– Tighter budgets and fewer resources

– Ability to adapt to business and rapidly changing market

• Products and services

• Regulatory requirements • Regulatory requirements

– Project contention

– Competition for resources

– Delivering value to internal and external customers


Why Look For A Better Way?

• 32% of software projects are on-time and on-budget *

• 44% are challenged (late, over budget, lack of required features)*

• 24% have failed (cancelled prior to completion or delivered and never used)*


*Standish Group Chaos Summary 2009

Bottom Line

68% of all projects fail in some way

Traditional Waterfall Approach

Business Requirements

Technical Specifications

Development

System Testing

User Testing

Deployment


Problems associated with the traditional approach:

• Business needs change during the development lifecycle• High cost with delayed ROI• Lack of input from diverse user perspectives• Slow, ineffective and laborious feedback loops• Projects managed and evaluated based on “The Plan”, not value delivered

Deployment

Time

Escalating Cost of Waterfall

Problems Detected

Cost of Change


Problems go undetected until the cost of correcting them has escalated

Business Requirements

Technical Specifications

Development System Testing

User Testing Deployment Maintenance

LeanSigma Software Development Principles

1. Eliminate waste Do only what is necessary

2. Build quality in Goal is to prevent bugs from getting into the code base

3. Create knowledge Collaborative team based approach

4. Defer commitment Decide as late as possible when more facts are known

5. Deliver fast Small batch sizes maximize efficiency


6. Respect people Self directed teams achieve more

7. Optimize the whole Continuously examine the process to maximize velocity

All 7 rules contribute to a time based strategy –Saving time while increasing service and quality

How To Get Started?

• Pick a single pilot area or service – Branch Teller Transactions, Lending Processes, Branch Capacity, IT Help Desk, IT Application Development, Finance Reporting

• Develop a better understanding of member experience –initial contact, request delays, contact points, hand-offs

• Identify waste

• Eliminate the low hanging fruit with simple creativity• Eliminate the low hanging fruit with simple creativity

• Learn and leverage Lean Principles to drive out more of the waste and redefine the service

• If you cannot measure it, you cannot improve it

• Expand beyond pilots to encompass the whole enterprise –recognize that this can involve a culture shift


Questions?


Guidon Performance Solutions

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866-986-4414 or [email protected]

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© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
