It all started in July of 1990, when management guru Michael Hammer sent an urgent message to corporate America, “Don’t automate, obliterate!” This groundbreaking Harvard Business Review article sparked what became known as the reengineering revolution. Although things got terribly out of hand, the core concepts that Hammer introduced were right on:
“Most companies use computers to speed up, not break away from, business processes and rules that are out of date.”
More than a decade later, reengineering has petered out, and the buzz has moved to e-commerce, CRM and awful mutations like eCRM. However, out in the trenches, it appears that bankers are ready to take another hard look at their processes and learn from the past.
Things didn’t go too well when banks took their first stabs at “obliterating” old processes. Here’s a list of the sins we should avoid going forward:
Sin #1: Flowchart overload
The most overrated aspect of reengineering is the beloved flowchart. While it’s not a bad idea to draw current and future processes, bankers replaced tough decision-making with excess flowcharting. I witnessed project groups who made flowcharts longer than boardroom tables. Even worse, I often saw teams add steps to these monstrosities when developing their new “ideal” process. The result? Things were made worse with triplicate routing forms, tighter approval requirements, and some poor soul in the middle called a “cordinator.”
Sin #2: Check the score!
Many reengineering efforts were torpedoed by managers unwilling to sign up for specific measurable goals. Our firm spends a lot of time surveying and researching peer productivity metrics for the banking industry. Oftentimes, we meet functional managers who wish we and our dumb benchmarks would just go away. It’s a real litmus test for CEOs: which managers are willing to commit to measurable goals based on peer data and which managers prefer to use rhetoric to describe their “success” with no evidence to back it up. In the first reengineering wave, the industry drowned itself in rhetoric.
Sin #3: The technology that wasn’t
As the 1990s opened, we all were optimistic that process improvements would be enabled by new database, client/server, imaging and workflow technologies. Most of this stuff never got delivered like the brochure indicated. New Windows versions of products were very late to the game. Imaging initiatives struggled with competing technical standards, and most workflow efforts were costly disasters. The lesson: we dreamt too big and relied too much on new technology. We even used technology as a convenient way to stall simple improvements. (“There’s no way our lending group can handle the increased volume without document imaging.”)
Sin #4: Details, details!
The first round of reengineering resulted in a stalemate between the big picture and the operational details. Big picture folks had grand aspirations and cool PowerPoint presentations but no deep understanding of the complex processes within a bank. Bank operational managers had all the deep process knowledge, but lacked either the authority or the desire to shake things up. Any projects that succeeded were usually initiated by a creative middle manager who had the desire to run for daylight and somehow found an opening.
THE SECOND TIME AROUND
I’m optimistic that banks will succeed in the second round of reengineering. If things go right, process improvements will be characterized by the following key traits:
#1: Focused and pragmatic
Successful banks won’t try to reinvent major functions with 90-day revolutions. They’ll define their goal in plain English, leverage middle management knowledge, and figure out practical ways to use technology.
Wrong way: “We need seamless, real-time 24X7 lending through any channel.”
Right way: “Let’s figure out a way for the branches to accept mortgage applications and track loan status online.”
#2: Driven through the intranet
The intranet will be the glue that will hold future reengineering efforts together. Even today, our clients are cobbling together all kinds of creative stuff through their intranets. Not just the employee phone book! We’re starting to see database-driven forms, browser-based reports and extensive online resources for the front line. For the next few years, inelegant, homegrown intranet apps will be competing with the packaged software market.
#3: Life or death through scorecards
Our most productive clients are typically fanatics about measurement. A good consumer loan manager can tell you how many loans per underwriter were booked last month and what percentage were credit scored. A good commercial loan manager can spout off the average portfolio per loan officer and their current loan/deposit production. With real accountabilities, a two-page benchmarking scorecard with 20-30 key measurements can change the culture of a bank.
#4: Limited reliance on systems and vendors
Banks have become much more realistic about technology’s role in process improvement. Banks that succeed will:
#5: Middle managers become “process hackers”
Banks who successfully reengineer will not look to management books, technology vendors or consultants to make it happen. Instead, they will look for those rare stars in middle management who get stuff done. I like to refer to these folks as “process hackers.” Process hackers are great at identifying stupid things in an organization and figuring out ways to fix them. They avoid buzzwords, value utility over elegance and can make just about any technology, no matter how old or ugly, work for them.
Today, process hackers are the gurus of Excel spreadsheets, ASCII downloads and aging report writers. In the future, they will be the gurus of intranet forms, SQL databases and XML interfaces. Successful banks in the future will increase their ranks of process hackers from a few to several dozen.
Take a quick gander at your office bookshelf. There might be a copy of that recognizable red book, “Reengineering the Corporation”. I recently blew the dust off of it and realized most of it still applies today:
“For most companies, reengineering is the only hope for breaking away from ineffective, antiquated ways of conducting business that will otherwise inevitably destroy them.”
I still see lots of antiquity out there for our industry to deal with. Let’s get it right the second time. –sw