Lean Six Sigma
Lean Six Sigma tools can be successfully applied to the financial services industry, particularly in the areas of risk management and compliance; after all, these are simply business processes. The monitoring, reviewing and reporting functions can all be streamlined through the skilful use of lean principles. Given the current regulatory environment, Lean Six Sigma presents a real opportunity to financial institutions to combat financial and reputational damage without incurring sustained additional cost. Through Lean Six Sigma, tangible, successful outcomes can include a reduction in processing costs, enhanced productivity and, ultimately, full compliance with regulatory guidelines
Originally developed in manufacturing industries, Lean Six Sigma is now increasingly applied in the service sector and particularly within the Finance Industry. It is a process to identify and eliminate sources of waste and activities that do not add value to create maximum productivity. Lean is a set of principles, practices and tools aimed at creating precise customer value originally developed within the Automotive Industry. It can be applied to all aspects of an organisation, from product development and provision through administration and finance to customer services and support.
By applying Lean Six Sigma, benefits are seen in cost reduction, shorter cycle times, improved customer service, greater employee productivity and increased profit margins. In fact, often it is not untypical for waste to account for up to 75% of a non-leaned process!
Lean Six Sigma is a proven systematic approach to improve measurable results for any organization. Sigma is a statistical term used to measure how far a given process deviates from perfection: Six Sigma is a highly disciplined, structured programme that delivers near perfect products and services.
The principles of Six Sigma are:
- Understand the critical to quality requirements (CTQs) of customers and stakeholders
- Understand processes ensuring they reflect these CTQs
- Manage by fact
- Involve and equip the people in the process
- Undertake improvement activity in a systematic way
The benefits include:
- Cost reduction
- Shorter cycle times
- Improved customer service
- Greater employee productivity
- Increased profit margins
For financial institutions such as banks and trust companies, it is exactly this high-risk, highly complex environment that makes Lean’s comprehensive approach to minimizing waste and variability so valuable. By focusing on end-to-end processes rather than on individual activities or functions, Lean Six Sigma allows these organisations to see that they have many more “factory-like” workstreams than they may have realized. They then can adapt Lean’s traditional approach to each specific operation—especially improving the alignment of operating teams, the balancing of capacity and workloads, and the transparency of information flows.
These changes allow institutions to use the investments they have already made—in IT and outsourcing, far more effectively. The impact can be dramatic. Our consultants have experience of realising the following benefits for financial services companies both in Jersey and the UK.
- £800k cost savings for a major Jersey based international bank.
- £5m cost savings at First Direct
- 400% improvement in productivity at Accord Mortgages