Lean Financial Services

The Wharton School and Boston Consulting Group (BCG) have released a special report investigating the reasons why the financial services sector is lagging in their adoption of lean tools and practices. The study finds that the attitudes are changing, albeit slowly. Apparently lower costs, fewer errors, improved efficiency and reduced cycle times appeal to bankers. Who knew?

Lean’s manufacturing origins are probably part of the problem. Non-manufacturing organizations have a difficult time making the mental adjustment between manufacturing and services terminology. I recall many years ago teaching a class where I presented a control chart of a manufacturing process. The data showed the diameters of truss rods. This was a public seminar and I had a mix of students from manufacturing, health care, insurance, services and other industries. These students were truly baffled as to how they could make this work with their businesses. Sensing the reason, I though I’d try something. I wrote the first few rows of the data table that was used for the control chart, but I didn’t put a title on the table. Then I went around the room one-by-one and asked the students some questions about their businesses. For the health care student I wrote the title on the table as “Infections per 100 Surgeries.” For the insurance student “Claims Processed per Worker per Hour.” For the service department student “Service Calls Requiring a Follow Up Visit.” As I addressed each student’s particular application, I could visibly see the light come on.

This exercise caused me to be somewhat disappointed in analysis presented by the Wharton/BCG report’s authors. Deepak Goyal, a partner in BCG’s New York office, commented “Finance is just a different kind of factory. It is a processing factory, and there’s a lot of waste.”  Another comment was “Becoming lean involves eliminating the “seven deadly sins” of waste in a process — overproduction, waiting, poor transportation/logistics, over-processing, sub-optimal inventory control, rework, and unneeded movement.” Yeah, sure. But I doubt that people in the financial sector know precisely what these guys are talking about. I suspect that a few specific financial sector examples of each type of waste would go a long way towards improving understanding. I mean, is it supposed to be obvious that sub-optimal inventory control is a problem at a bank?

Still, the report is a wealth of valuable information for those seeking to expand the reach of Lean to non-traditional areas. Those of us who are professionals in this area can glean a lot of useful guidance from the report, because we already understand Lean and Lean Six Sigma. We can add a great deal of value by translating the report into terms that our clients and employers understand so they can see exactly how these important process excellence philosophies and technologies can be applied to the processes in the financial sector.

Then, perhaps, the lines at the teller window and the waiting times for loan approvals won’t be quite so long!