We have spent time with many Banks who are looking to improve the performance of their credit processes. Often, they have explained that their overall performance is sluggish – analysis, objections and approvals simply take too long with no understandable root cause. Some think it’s their staffing level, some that it’s sub-standard performance in key positions or departments, and others that maybe there is a chokepoint in the process where one step takes too long because the work involved is primarily manual. But, the bottom line is that they are not certain because they don’t have metrics that they can completely trust.
Our recommendation to these Banks is that they look at their credit processes from the top down, compartmentalizing each step. The compartmentalization thought process, with the intent of being able to measure each step and maximize its efficiency, often leads to a different way of thinking about the overall process.
The key objective for breaking the process down is to be able to establish metrics for each step. For example, if you believe that your existing staffing levels should be able to support the originating, decisioning and boarding of a loan within 18 days, but it generally seems to take 30 to 35 days – having each step identified and measurable will allow you to validate that assumption very quickly.
You can then dial-in the efficiency of the steps that are causing the most significant delays in the overall process. If you choose to add to the resource pool, you can do it from a foundation of fact, rather than speculation and defend that decision. Or, there might be a less costly remedy such as changing the workflow, changing the criteria for the completion of a step, or introducing automation or deeper data integration into that step.
Robust workflow software will help compartmentalize the process for easy tracking. Even without workflow software, though, your bank can generate and track metrics by passing a virtual “token” between process steps that you define. Managers will feel the heat to move the token forward if they know it is being measured. This exercise may improve your metrics even before you set out to measure them.
Regardless of the path you take, a well-defined, measurable process gives you the tools you need to increase efficiency, profitability and support growth on demand.