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 Study
Presented by: Peter Farrow, Vice President & Chief Information
Officer – Randolph-Brooks Federal Credit Union

Your Presenter Today

Peter Farrow, Vice President &
Chief Information Officer
Randolph-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

© 2010 Guidon Performance Solutions, LLC. All rights reserved.
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What We’ll Cover Today
• RBFCU Overview
• What is Lean?
• Why Lean in Credit Unions?
• 3 Case Studies
– Branch Channel Lending
– Call Center Member Service
– Branch Workforce Management
• Why Lean in IT?
• Getting Started

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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 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

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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.

5

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, 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

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LEAN is all about Identifying and Eliminating Waste
• “Waste” is seen differently in
LEAN
• Traditionally, waste has been Over
Producing
viewed as an object. It is
Over Work In
very easy to envision a barrel Processing Process

of scrap metal or plastic and
identify it as waste. Errors &
Rework
Transport

• In LEAN thinking, the term
waste actually refers not to Waiting
Excess
Motion
the physical material but
rather the relationship of the
resource to the member.
In LEAN, waste is measured as consumption of
resources – time and capital
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Examples of Waste in Credit Unions

• Member waiting for
Over service
Producing
• Cumbersome transactions
Over Work In
Processing Process • Duplication of information
• Searching for information
Errors &
Transport
to answer a question
Rework
• Reports created, not used
Waiting
Excess • Transportation costs
Motion
• File maintenance and
retention

It’s all about core member value

8

Lean Improvement

Metric Benchmark Gains What others say about Lean

0% 25% 50% 75% 100% “Lean Adopters Identify More
Labor Capacity
Waste and Operate More
Efficiently”
Lead Time/Delivery

Errors and Rework
“Lean Is Inexpensive and
Revenue Growth Generates Solid Returns”

Handoff Reduction
Corporate Executive Board, Operations Council™
2006 Study on Lean Manufacturing for Financial Services
Decision Points

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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
• Member Services: Asset Protection
• 5S Project
• Core Platform Process Review
• Resource Planning Model

10

Kaizen Breakthrough Experience
Team-based energy and creativity drives immediate
process improvement
Day 1 Day 2 Day 3 Day 4 Day…

• Introductions • Team • Continue • Refine • Future State
• LeanSigma® Formulates Hands-on Improvements
Process
Transformation Improvement Workplace
• Continuous
• Lean Improvements
• Make Improvement
Production
Hands-on • Report Out:
System Workplace
• LeanSigma® Improvements • Present
Tools Results
• SIPOC • Establish
Standard Work • Next Steps
• Site Tour Result
• Observations • Celebrate!
and Quick Kills • Document
New Standard
• Analyze Operation
Current State

At the end of the week, the Kaizen team will have achieved
dramatic operational improvements
11

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

12

Video Conferencing – Branch Channel Loan Origination

Approach Results
• Cross functional team from branches • Reduced member wait/hold time by
and Lending Department took on the 30%
challenge of eliminating waste and • Improved lending productivity by 17%
standardizing the process
• Decreased forms/paper and
• Team gathered for a 5-day “Kaizen” associated printing (23 hrs/month)
event to review the video
conferencing process, specifically • Developed training on new process
those that did not add value for branches and lending center

Kaizen – A collaborative Lean Since then
methodology to rapidly identify and • Expanded from 6 to 17 Branches
eliminate waste. Typical event duration with Video Lending
is 4-5 days. Improvements are
implemented or tested during the week • Average number of video conference
to evaluate impact. calls increased from approximately
250 to 3,000 per month.

13

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
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

14

Member Service Call Center
Approach Results
A Kaizen team from including the Member
Metric Before After
Service Center, IT, Consumer Lending,
Card Services and Accounting met for a 5- Transfer 50% 20%
day improvement event. Key steps Rate
included:
Inbound
Reduced 28%
Map/Quantify the member experience Calls
Identify waste
Abandon 8.9% 5%
Identify/Prioritize improvements

• “Just do It”
Rate
• Process change to reduce steps Handle 169 sec 150 Sec
and improve flow Time
• “5S” to improve efficiency of work
environment
• Leverage existing technology
(simplify screens, IVR) Creativity before Capital
Simulate/Pilot best ideas to gage impact $430K Savings
Establish training document

Report Out and Celebrate

15

Branch Workforce Management
– 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 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

16

Branch Workforce Management
Approach Results
• Assessed branch processes, overall • Simplified scheduling model that matches
performance, and opportunities current scheduling outputs
• Launched a LeanSigma Workforce • After 3 months, piloted the workforce
Management Project management tool with 4 branches:
• Tool reveals potential savings of
10-20%
• Managers can use the tool to match
capacity to volume
• Currently testing the resource planning
model across remaining 27 branches

Anticipate 10-20% resource
savings over the next two years
while still maintaining member
• Developed models/tools to assist with service expectations.
allocation of resources by branch, day/hour
• Pilot and roll-out tool; adjust schedules and
metrics

17

Lean in IT
– Tighter budgets and fewer resources
– Ability to adapt to business and rapidly
changing market
• Products and services
• Regulatory requirements
– Project contention
– Competition for resources
– Delivering value to internal and external
customers

18

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

19

Traditional Waterfall Approach
Business
Requirements

Technical
Specifications

Development

System Testing

User Testing

Deployment

Time

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

20

Escalating Cost of Waterfall

Problems Detected
Cost of Change

Business Technical Development System User Testing Deployment Maintenance
Requirements Specifications Testing

Problems go undetected until the cost of
correcting them has escalated

21

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

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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
• 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

23

Questions?

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Thank You
Guidon Performance Solutions
866-986-4414 or 480-986-4414
contact@guidonps.com
www.GuidonPS.com

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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.

Leveraging Lean Thinking In Credit Unions: A Randolph-Brooks Federal Credit Union Case Study

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Leveraging Lean Thinking In Credit Unions: A Randolph-Brooks Federal Credit Union Case Study