Role of operational excellence in financial services industry

Jivana Y Brokolyn
Columnists

Role of operational excellence in financial services industry


Summary

  • When the coronavirus struck, banks, insurance companies and other financial service providers were immediately confronted with unforeseen operational constraints around business continuity.
  • The need to respond to fundamental changes in the business environment and customer behaviour made operational excellence a topic of great interest in the financial services industry.
  • Operational excellence, or OPEX in short, was first developed as a modern concept in the 1970s by Joseph M. Juran, a leading engineer and management consultan.

The Covid-19 pandemic has imposed previously unfathomed challenges on firms to maintain operational excellence including those in the financial services industry.

When the coronavirus struck, banks, insurance companies and other financial service providers were immediately confronted with unforeseen operational constraints around business continuity.

A new way of working — working from home — commenced that not many in the industry had tested culminating in productivity tracking challenges, diminished client responsiveness and the utility of face-to-face human interaction. This however quickly stabilised with intentional strategic interventions.

The need to respond to fundamental changes in the business environment and customer behaviour made operational excellence a topic of great interest in the financial services industry.

Operational excellence, or OPEX in short, was first developed as a modern concept in the 1970s by Joseph M. Juran, a leading engineer and management consultant, when he was teaching Japanese business executives on how to improve on quality.

Dr. Juran envisioned OPEX as a way of ensuring excellence, generating customer value and promoting continuous quality improvement. This requires businesses to nurture and entrench a culture of operational excellence in everything they do.

Simply put, OPEX is about ‘having a mindset of continuous improvement to achieve excellence’ but more importantly, focusing on delivering a superior customer experience at all times.

From a financial services perspective, operational excellence entails exceeding customer expectations while reducing operating risks by creating more efficient processes.

With the onset of the pandemic, financial services firms have had to innovate, scale and re-engineer their operations to remain relevant in an environment characterised by rapidly shifting customer preferences and loyalties.

Being a highly regulated industry, financial service providers cannot afford to ignore the role of operational excellence. Given the need for utmost fidelity to the client, nobody can argue with the need for sustained improvement of processes and the overall customer value proposition.

Operational excellence has therefore become the proper tool to drive this execution. With clearly defined objectives of customer experience superiority and cost management optimisation, the operational excellence toolkit of business process design, re-engineering, waste management, root cause analysis, among other factors, is now imperative.

To achieve a positive paradigm shift in the customer value proposition from an OPEX point of view, there is need for smooth processes and personalised products that speak to or even predict the need at hand. In addition, we have to balance risk management, business efficiency and revenue growth.

Often, these factors are at loggerheads. It is the work of the operations executive to discover their confluence in developing an appropriate Business Operating Model (BOM).

Proper metrics like lead times and cycle times will provide a view of BOM’s efficiency while Net Promoter Score (NPS) will give a measure of the customer experience. NPS are measures tracked using a scorecard and as part of the OPEX function with daily targets to cascade results.

One can therefore not over-emphasize the importance of operational excellence in a company that wants its finger on its pulse. Moreover, the customer value proposition (CVP) can only register a positive paradigm shift with enhanced, smooth processes and personalised products that speak to or even predict the need at hand.

Execution is paramount in operational excellence. Plans must be followed by action to deliver the desired results. This is where the discipline of execution as expounded by Frankline Covey in his 4DX or Four Disciplines of Execution Framework comes into play.

Discipline One speaks to focus and execution on the most impactful of goals by virtue of prioritisation. This ensures you are not lost in the whirlwind of business as usual. However, this should never be confused with tunnel vision considering that we exist in a volatile environment.

Discipline Two is aligned with the Pareto 80/20 principle whereby 20 per cent of your activities yield 80 per cent of results. Focus on these activities with the highest leverage. Just like the animal farm analogy, not all actions are created equal.

Discipline Three is arguably the most important because it carries the main tenet of continuous improvement (Kaizen) on its back. Keeping score of the impact of all initiatives and actions in the workplace would be the key factor in identifying your true north.

This is also where the data defining your decisions can be garnered. Also note the only defense against false positives is to have a proper scoreboard in place.

Discipline Four on establishing a cadence of accountability simply enunciates the culture of performance management based on ownership and accountability over a given period. Here, successes and failures are subjected to root cause analysis and correction.

Mr Kiplang’at is the head, operational excellence and analytics at UAP Old Mutual

https://www.businessdailyafrica.com/bd/opinion-analysis/columnists/role-of-operational-excellence-in-financial-services-industry-3751732

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