Lean Quality - Megyesi Gábor - Return on_service_quality_investments
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Lean Quality - Megyesi Gábor - Return on_service_quality_investments

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Lean Quality - Megyesi Gábor - Return on_service_quality_investments Presentation Transcript

  • 1. Return on Service Quality Investments - Some reason to invest in Service Quality in BankingGábor MegyesiErste Group Bank AGGroup Service Quality and Complaint Mgmt.
  • 2. A Bank is ...A Bank− is a place that will lend you money if you can prove you don’t need it. Source: Bob Hope actor & comedian (1903 - 2003)Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 2
  • 3. Banking is ...Banking− is the business activity of accepting and safeguarding money owned by individuals or entities, and then lending out this money in order to earn a profit. Source: www.InvestorWords.comErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 3
  • 4. Service Quality is ...Service Quality− is the measure of how well the delivered service matches the client’s expectations. Source: WikipediaErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 4
  • 5. Erste Grouphttp://www.erstegroup.com/ | Gabor Megyesi Erste Group Quality & Complaint Mgmt. 19.10.2011 Page 5
  • 6. Group Customer Experience UnitOur mission is: To help Erste becoming the Bank of choice on its markets.The way we work: at Business Deliver Improved Complaints services Client view on Erste Business delivers service failures. new service. Research Improvements Client view on Erste Actions taken to at Marketing and it’s services. improve Erste Measurement services. Communicate Inside view on Educate Clients on Erste services. our improvements.Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 6
  • 7. Why would any CEO finance my qualityprograms?− „Because it would be good for the Client!”− To ensure a long term profitable relationship with their Clients.− To reduce losses due to operational risks.− To improve their Cost to Income ratio.− ....− Because he/she thinks it worth it.Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 7
  • 8. Having another point of view Client Interest: Service Quality • Emerging organization. • Long lasting profitable relationship. • Short term loss, investments into future • Good short term profits with good profit. outlook. • Losses with no future. • Exploit and erode current client base. • Good short term profits with long term losses. Business Interest: ProfitErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 8
  • 9. Know your customer: switch perspectiveWhen working on your project:− focus primarily on simple, non-financial, process related measuresWhen selling the project to business leaders:− focus primarily on financial and cost-oriented measuresErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 9
  • 10. Evaluating an InvestmentLike it or not:Spending on quality is a financial decision for business leaders.And so:− a quality project is considered as an investment− being an investment it must be financially accountable− being accountable means it will be evaluated and compared to other investment options− being evaluated will show that quality initiatives are not equally valid and that there might be better non-quality investment optionsErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 10
  • 11. Return On Investment is ...Return On Investment (ROI)− is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. Source: www.investopedia.comErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 11
  • 12. Have an impact! Show your impact! Gain share of wallet − increase repurchase − increase X-selling X Improve efficiency Improve market share − reduce operating − lower attrition costs − (improve acquisition) − reduce operating risksErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 12
  • 13. Effect on share of wallet − product holdings per Clientaverage # of products held per Client correlates with service quality − on the individual Client level it depends on many other factors − slightly different slope for different target groups (e.g. age, income etc...) − on total bank level R2 turns up source: Erste Banks End of Year 2010 service quality around 0,3 - 0,4Reasoning goes:− 5% increase is expected in perceived quality due to the project− this will result in an average +0,15 product holdings in the target group− this will result in an average +8% profit per clientErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 13
  • 14. Effect on market share − attrition correlates with serviceattrition quality on bank level − no general correlation with acquisition (as service is mainly experience based) − above-expectation quality show no further improvement (possible to overspend) − on total bank level R2 turns up source: Erste Banks End of Year 2010 service quality around 0,2 - 0,3 on the slope Reasoning goes: − 10% increase is expected in perceived quality due to the project − this will result in an average -2% attrition in the target group − this 2% not lost will deliver profits next year Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 14
  • 15. Effect on market share- reasons to leave Reason to change bank − quality is a more compelling100% Fees 6 Service Quality 4 4 Economic situation of Bank Miscellaneous argument in reality than 9 3 13 10 90% 4 6 7 16 0 4 15 0 0 expected either by the bank or 80% 70% 32 28 28 30 the Client 39 43 52 60% 47 − reasons are highly target group 50% 40% dependent 65 30% 61 59 20% 55 44 36 43 38 − base actions on real causes not 10% on theory 0% 2008 2009 2010 2011 2008 2009 2010 2011 − there is always more than one Hypothetical Actual reason to changesource: IMAS Corporate Study to Erste BankReasoning goes:− „fees” and „service” are about equal reasons to leave the bank− spending only on „fees” can only have a limited effect− spending should be balanced based on actual reasons to leaveErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 15
  • 16. Effect on market share - misleading expectations − remember the Kano model, notloyalty correlation often expected correlation as it usually is all needs are equal, and good service is often taken for granted − base actions on real research data not on theory or expectations − it is possible to overspend on below expectations meets exp. exeeds exp. service quality service quality − a nonexistent correlation will not generate results Reasoning goes: − ! do not overstate the expected gains − understand the actual correlation of service quality and loyalty − show the realistically expected gain in loyalty Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 16
  • 17. Effect on efficiency Cost Structure Time Structure − quality work with minimal Mistake Regulatory resources (time, cost) Post Value Added − efficient is not equal to FTE Non Value Added effective, make sure taht you Print Wait / Post do the right thing − think holistic: optimize the total process, not single stages − lots of incremental savings will Before After Before After add up to one fundamentalsource: Erste SQ&CM − hard to realise FTE savingsReasoning goes: (more work or layoff)− 40% less FTE saves 40% cost (if...)− 70% less paper usage saves ~ 60-70% printing costs− 90% less physical file movement saves ~ 95% of NVA timeErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 17
  • 18. The case− average product response time is higher than competition− huge variation in response time, hard to manage customer expectations− high number of dissatisfied customers, due to delays− branch reports that it is hard to sell without favorable time promise− back office reports frequent overtime due to product processing− considerable operational risk due to complicated processErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 18
  • 19. The taskThe task:− is to improve sales up to targeted market share with minimal resources.Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 19
  • 20. Targets for the project Metric Current state Desired state Mystery Shopping 92% 90+% Cycle time (P95) 5 - 11 day less than 2 dayMeasured beforeMeasured for the project First Time Though 40% 90+% Process Steps 56+ minimize Value Added Steps 12 no target Unit Transfers 9+ minimizeErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 20
  • 21. 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 15 MINUTES 1 visit 30 MINUTES 45 MINUTES 2 visits 1 HOUR 2 HOURS 3 visits 4 HOURS 6 HOURS 4 visits acceptable 8 HOURS acceptable 10 HOURS 5 visits 12 HOURS TTY 1 DAY 6 visits # of visits 2 DAYS surprising surprising 3 DAYS 7 visits 4 DAYS 5 DAYS 8 visits source: IMAS Retail Study to Erste Bank 1 WEEK 9 visits unacceptable 2 WEEKS unacceptable 3 WEEKS 10 visits 4 WEEKS 5 WEEKS more 6 WEEKSErste Group Quality & Complaint Mgmt. | Gabor Megyesi 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 15 MINUTES 1 signature 30 MINUTES 2 45 MINUTES signatures 1 HOUR 3 2 HOURS What the Client is asking for? signatures 4 HOURS 4 6 HOURS signatures acceptable 8 HOURS acceptable 5 10 HOURS signatures19.10.2011 12 HOURS 6 1 DAY TTC signatures surprising 2 DAYS 7 surprising # of signatures 3 DAYS signatures 4 DAYS 8 5 DAYS signatures 1 WEEK 9 2 WEEKS signatures unacceptable unacceptable 3 WEEKS 10 4 WEEKS signatures 5 WEEKS more 6 WEEKSPage 21
  • 22. 0 10 20 30 40 50 60 70 80 90 100 UP TO 15 MINUTES 0 10 20 30 40 50 60 70 80 90 100 2 UP TO 30 MINUTES 2 4 1 UP TO 45 MINUTES 36 1 visit 6 6 8 UP TO 1 HOUR 14 UP TO 2 HOURS 2 visits UP TO 4 HOURS 40 76 or less 4 2 1 UP TO 6 HOURS UP TO 8 HOURS 3 visits 16 93 UP TO 10 HOURS or less 0 0 0 UP TO 12 HOURS 18 20 20 21 21 21 UP TO 1 DAY 4 visits 31 4 96 UP TO 2 DAYS or less 38 Time To Yes 10 7 9 UP TO 3 DAYS 5 visits 4 UP TO 4 DAYS 47 51 2 98 or less 6 UP TO 5 DAYS 57 source: IMAS Retail Study to Erste Bank UP TO 1 WEEK. 73 6 visits 1 UP TO 2 WEEKS 16 14 99 or less UP TO 3 WEEKS UP TO 4 WEEKS 1 UP TO 5 WEEKS more 100 87 92 97 97 # of Visits needed 5 5 1 3 MORE THAN 5 WEEKS 100Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 UP TO 15 MINUTES 5 5 1 signature UP TO 30 MINUTES What Banks are providing? 2 18 11 1 0 UP TO 45 MINUTES 2 signatures 13 or less UP TO 1 HOUR UP TO 2 HOURS 3 signatures 7 10 20 38 or less 2 5 3 2 UP TO 4 HOURS 4 signatures UP TO 6 HOURS 14 52 or less UP TO 8 HOURS 5 signatures 12 64 UP TO 10 HOURS or less19.10.2011 1 0 0 0 UP TO 12 HOURS 12 12 12 12 12 6 signatures 11 74 UP TO 1 DAY or less 21 # of Signatures UP TO 2 DAYS 7 signatures 29 4 Time To Cash 79 or less 9 8 9 UP TO 3 DAYS 2 UP TO 4 DAYS 8 signatures 38 40 6 84 or less 7 UP TO 5 DAYS 46 UP TO 1 WEEK. 9 signatures 1 21 67 85 or less UP TO 2 WEEKS 15 81 10 signatures 8 UP TO 3 WEEKS 93 or less 7 7 UP TO 4 WEEKS 8 UP TO 5 WEEKS more 100 88 95 97 2 3 MORE THAN 5 WEEKS 100Page 22
  • 23. Considerations when evaluatingsuch a project− which aspects of the service will be improved− # of Clients effected− # of effected Clients actually interested in the improvement− importance on the purchase decision− how much profit is made per product per Client− how is the current cost structure of providing the serviceErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 23
  • 24. Actions taken • full scope, prudent communication (advertisements and at branch) Product / Services • accuracy Values • right decision • speed, single contact sales Mystery Shopping • front office is up to service standards (92% vs. target 90+%) • 56+ process steps, only 12 value added Value Stream • 9+ transfers between 7 units Mapping • 60% needs rework • establish single piece flow • eliminate non value added steps, loops • mistake proof, develop auto-checklist, simplify To do • minimize transfers between units • minimize file movement, administrator movement • minimize scanning and printing • train front and back office staff • minimal: just enough to reach target, minimal change to historic process Options • limited changes: reorganize back-office, minimal changes elsewhere • optimal: fundamental changes, allowing beyond target benefits • minimal option chosen and implemented Implementation • cross-functional monitoring • P&L calculatedErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 24
  • 25. Proving financial successDirect Effects− benefits*: − 71% sales improvement − 40% less FTE consumption** − 85% printing cost saved RoI ~ 9− costs: or the project yields − time spent (~ 500 expert hours) 9 times it’s execution costs in 12 months − new manuals, checklists, documents − trainings* calculated 3 months after implementation for the volumes at that time, comparing the cost structure before and at that time** free FTE is fully utilized at other processes + less overtimeErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 25
  • 26. FinancesIndirect Effects− poka yoke (mistake proofing) results in less mistakes to correct and less risk cost due to non-corrected mistakes (reduced FTE need due to less rework has been calculated at direct effects)− less rework causes less unexpected overtime for both branch and back- office employees, employee satisfaction is improving− nearly zero complaints due to slow response time from the branchErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 26
  • 27. Why not the “optimal” option?What could have be the RoI for the other options:− minimal: just enough to reach target, minimal change to historic process − RoI estimate: 10− limited changes: reorganize back-office, minimal changes elsewhere − RoI estimate: 4 (slightly better benefits, considerably more costs)− optimal: fundamental changes, allowing beyond target benefits − RoI estimate: ~1 (slightly better benefits, very high costs)Potential benefits are limited, potential costs however are not.Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 27
  • 28. Q&AErste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 28
  • 29. DISCLAIMERThis document has been prepared by Erste Group for informational purposes only. Not to be reproduced without priorpermission.This document does not constitute an advice, offer or invitation to purchase or subscribe for any shares and neither it nor anypart of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.The information contained in this document has not been independently verified and no representation or warranty expressedor implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of thisinformation or opinions contained herein.Certain statements contained in this document may be statements of future expectations and other forward-lookingstatements that are based on management’s current views and assumptions and involve known and unknown risks anduncertainties that could cause actual results, performance or events to differ materially from those expressed or implied insuch statements.None of Erste Group or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence orotherwise) for any loss howsoever arising from any use of this presentation or its content or otherwise arising in connectionwith this document.Erste Group Quality & Complaint Mgmt. | Gabor Megyesi 19.10.2011 Page 29