Aplying Lean in Financial Services Sector will generate major efficiencies going forward.

1. Towards a Leaner Financial Services Sector
Lean – a process developed by the Toyota Motor Company to streamline its business,
reduce costs and eliminate process waste – also has major applications for the Canadian
financial services industry, writes Joe Aherne.
Developed in the 1990’s by Toyota, Lean Thinking has been instrumental in driving the
Japanese motor giant to the top of the global automotive industry. Thanks to the
pioneering success of Toyota, the Lean concept – an approach focused on improving
process flows and eliminating waste – has not just been implemented in countless
manufacturing companies around the world, but also increasingly in service companies
ranging from healthcare to finance.
In terms of operations and improvements, the financial services sector is still a long way
behind manufacturing. However, many accounting, corporate insurance and banking
institutions are now applying the principles of Lean with unqualified success in speedier
operations, lower costs, better products, and improved customer experience. Given the
acute crisis currently affecting global financial markets, the competitive edge that Lean
can bring to a financial services organization can be crucial.
The accounting, insurance and banking sectors faces major challenges arising from the
ongoing banking crisis, stock market turbulence and increased regulatory compliance.
This will undoubtedly continue to impact the sectors growth prospects, profitability and
liquidity, undermining its overall financial strength for years to come.
Evolutionary structural changes are now taking place in the contact centre, insurance and
banking markets, as corporations (some now state controlled) continue apace with
consolidations, outsourcing, rationalization, and with attempts to extract maximum
benefit and operational efficiencies from streamlining of business processes. So what
exactly is Lean and how can it assist Canadian financial services companies?
One of the biggest challenges for adopting Lean in financial services is the ability to
recognize waste. Research suggests that at least 40% of operational expenses result from
wasteful activities that add no value to the customer and therefore should be eliminated.
There are seven types of process wastes that can be identified in virtually every
organization as identified here under the acronym TIM WOOD.

2. Type of Waste Description
Transportation Moving an item/information/unit of work from
one place to another. For example, walking a
customer request form to another department.
Inventory Items or units of work waiting to be processed.
For example, allowing orders to accumulate
waiting to be processed or storing tens or
hundreds of redundant files.
Motion Excess movement. For example, requiring extra
movement because of poor workplace layout of
necessary documentation and files.
Waiting Delays caused by shortages, approvals, or
downtime. For example, idle time in any process
waiting for action or orders in the in-box waiting
for credit approval by a supervisor.
Over-production Making or processing more than is needed. For
example, printing extra copies of an order just in
case it's needed; developing too many application
systems to capture a customer’s basic information
details.
Over-processing Adding more work than the customer is willing to
pay for. For example, inspecting work to make
sure it is done right or doing more than is
necessary when the customer does not want the
service.
Defects Having to correct mistakes. For example,
correcting an omission or an inaccuracy in an
order or application.
Figure 1: Types of Process Wastes
The majority of these wastes are caused by operations personnel managing increasingly
complex service processes that contain multiple handoffs and decision points. Some of
these processes are not easily seen because they are hidden in workflow systems, phone
calls and emails. There is no production line to follow. Work is therefore more difficult to
track and less tangible in a service environment, making hidden waste more prevalent.
Lean works well in financial services industries because they are process-oriented
environments. Lean can help improve customer relationships, increase customer
retention, streamline processes, and increase employee satisfaction within a financial
services organization. Adopting Lean concepts, tools, and practices can make an
enterprise more competitive and more likely to survive in what is a volatile marketplace.
Lean encourages employees to become more actively involved in how work is carried
out. This empowerment helps motivate employees to work more productively because of
a renewed sense of responsibility for the work processes in which they are involved.
The main benefit associated with Lean is the ability to identify opportunities to reduce
cost and the time taken to process a transaction/activity. Lean then provides a system for
reducing the costs and delays associated with these steps. It also provides a means of

3. reviewing standards and practices in terms of how relevant they are to customers. Those
that are not relevant can be eliminated or modified, thereby reducing costs, redirecting
associated resources to more relevant tasks, and maintaining a high quality of service.
The recent episodes of financial turmoil, including the sub-prime crisis, have shown that
even financial systems in developed and advanced economies continue to be vulnerable
to financial stress. A more difficult operating environment now exists that demands new
skills, increased innovation, and the ability to manage these new challenges. It is essential
that financial services management has the talent to foresee the new emerging
opportunities, deal with high levels of unpredictability, and work through volatile
conditions as effectively as possible.
As already stated, applying Lean thinking to the financial services sector can provide
significant cost and process efficiencies. Changes to processes cannot be sustained
however unless employee mindsets and behavior change, too. In order to realize and
sustain these benefits fully, there is therefore an urgent requirement to educate and
empower financial services staff in the principles and methodologies involved. Education
and training in Lean thinking should be a significant part of an organizations’ training
and education budget going forward.
The overall aim of the industry in Canada should be to ensure that the people in this
international and diverse sector have the skills and knowledge that are essential in
furthering overall productivity and competitiveness.
Joe Aherne CPA is the chief executive officer of the Leading Edge Group. The
company opened an office in Toronto in April 2009 and has recently launched a Lean
Financial Services Green Belt educational program. For further information on the
organization and its accreditation programs, click on http://www.leadingedgescm.com