TQM PARADIGM IN BANKING INDUSTRY
Banking industry our major concern should always be to create satisfied customers
By IMRAN AHMAD RANA
June 14 - 20, 2004
Due to the emerging need of quality management system implementation in banking industry now is the time for us to move about "paradigm shift". Following lines not only aware Pakistan banking industry about this but also help to hold a timely place in new quality management focused paradigm. Our commercial banks must pay attention to this shift and start thinking strategically for providing high quality products and services to customers. Up to date, a few models linking quality management and the banking industry have been developed (so far not implemented in Pakistan). A primary issue of concern found is the need for our commercial banks to work perfectly on the demand of, or response to, its customers' needs and wants. They should determine where improvement is needed, how service can be improved and where operating system breakdowns occur, why they occur and how they can be banned. Bank managers through the suggested quality models will be able to pinpoint areas where improvement could be made. Moreover now they can manipulate to make bank-wide improvement in quality performance. This quality improvement is taking place at a revolutionary pace in services sector, now becoming simply good management. We now see companies routinely averaging more than one improvement per person per year, some even approaching one improvement per person per week. This mounting pressure on the services sector is due to the established fact that a defective product can be replaced but a defective service may create a permanent damage. Due to this, implementation of total quality management in services sector is gathering vital status.
TQM ESSENCE: Before going for TQM paradigm, we must look at the meaning of each word of TQM, Total: Everyone linked with the operations is involved in continuous improvement (including its customers and suppliers (if feasible); Quality: Customers' expressed and implied requirements are met fully; and Management: Executives are fully committed. In the service industry customers are more sensitive to service quality and service delivery than in manufacturing because they are always in contact with front-line service personnel as against factory workers. These points-of-purchase contact or "moments of truth" decide whether the customer will come back or shift to the next door competitor. The banking industry, often the biggest service industry in any country stands to benefit from TQM. For one basic reason, banks depend on customer satisfaction and loyalty for their survival, but ironically, very few really pay much attention to the plight of their clients — before, during, and after sales.
QUALITY MANAGEMENT SYSTEM TRAINING: For continual customer satisfaction our commercial banks whether operated in public sector or run privately should consider starting a total quality management (TQM) program to upgrade and improve professional skills of the employees of the country's banking industry. A first approach towards implementation of the TQM is skillfully designed training programs. First the bank employees should be imparted training on ISO 9000 systems and cost of quality. These proposed programs will emphasize the need of excellence in all spheres of management. The training should be imparted in two stages i.e., first the employees might be provided with on-the-job training about total quality management. In the next phase industry-level seminars on TQM will be conducted at regular intervals and the employees of different public/private sector banks will be encouraged to attend such seminars. Educationists from different educational and management development institutions or management professionals from the industry should be invited at these seminars to present their views on total quality management.
GOOD CUSTOMER SERVICE: Good service in banking logically begins with understanding customer needs and using these needs to drive the good service or new product development process. Instead of solely relying on the marketing research organization to define these needs, team members (defined below) should meet with customers to gain a first-hand understanding of their needs. They will find multiple customer voices for improvement to a single service/product. This task can be easily managed by using TabSan & TQM model. These voices of the customers need to be satisfied that the service/product works reliably as intended. Understanding banking customer's voice involved a review of contract requirements, discussions with operations and marketing personnel responsible for the accounts that had contractual commitments as well as the discussions with the customer's specific service design personnel. Voice of product design division provides an insight and support for designing a good service quality measuring parameter.
PRODUCT ENDORSEMENT: If this model (TabSan & TQM) is implemented deftly, will definitely help to create and retain those customers who would not only buy but also endorse your products and services. Customers are the best salespeople because they are users of your products. Their desire to endorse them to their friends comes from the sincere delight and surprise. The company's salesmen are the least credible endorsers because customers know they want to meet quotas and earn commissions. The best quality strategy is to develop life-long customers by continuously delighting and surprising them ahead of the competition. To gauge your success in TQM, ask yourself this question: When your customer buys your product or service, is he just buying it, or will he also "sell" or endorse it to others? If you feel that he is just buying, then rest assured that tomorrow he may be buying the same product or service from your competitor.
TQM IN NEW TECHNOLOGY: Bank management commitment to TQM is a commitment to process innovation. Better known as reengineering, it is the revitalization of why we do things the way we do them and how we need to change. The result of process innovation is clear. Excess capacity is one that results in ability to handle additional customers or additional volumes from existing customers without degrading service levels. Another result of process innovation is better customer service. Because technology empowers individuals, they can make the types of decisions that result in satisfied customers who talk about the quality service they received. Finally, process innovation, whereby the bottom levels on the companies organizational charts tell top management how things really should be done, allows processes to be molded to more closely shape the needs of customers.
CONFIGURATION MANAGEMENT: A bank applying quality management practices can track as goals and benchmarks those that matter to the customer: e.g. 1. processing times of key products and services, like loans, new accounts, ATM cards, credit cards, check encashment; 2. waiting times like downtime and queuing time; 3. customer complaints, written or verbal; 4. friendliness and efficiency of staff; 5. accuracy and timeliness of statements of accounts and records; 6. effective interest rates, inclusive of all service and hidden charges; 7. promptness in responding to customer inquiries such as in answering the phone, the number of rings before phone is picked up, and number of transfers before the caller talks to the right person. 8. lost customers and accounts.
CONFIGURATION AUDIT: These service indices are as subject to audit regularly and conscientiously as the bank internal auditors audit cash flows, transactions, and balances. This can be accomplished easily by working on configuration management principles and standards for audit and control (functional configuration management, physical configuration management). Bank auditors equipped with standards and stopwatches, regularly check branch performance in terms of quality, service, cleanliness, and value. They make sure all branches have the same consistency in product and service quality. In other words, the customers will not have any "surprises". Contrast this to banks, whose service quality differs by branch, location, and branch managers. To aggravate the problem, head office rates and promotes branch managers based on the sheer business the branch generates: loans released, interest earned, and deposits generated; they are seldom evaluated on customers satisfaction, service, and complaints, most banks therefore do not have a system to handle errors or customer complaints.
QUALITY MODEL: The quality model that can effectively be used in banking for value added services is "value analysis". This comprises of method study, work measurement and job evaluation. Value analysis (VA) is a flexible quality and productivity improvement model implemented in two parts primary and secondary value analysis of banking products and services. VA identifies errors caused by employees during their operations followed by identification of appropriate corrective/preventive action to eliminate service deficiencies.
CYCLE TIME REDUCTION: Likewise Bank can improve total customer satisfaction by investigating well-known manufacturing methodologies as cycle time reduction (CTR), coupled with the detection of defects using specified ISO guidelines with the help of empowered teams, would result in significant improvements in process timelines, cash management and customer loyalty and satisfaction.
IDENTIFYING DEFECTS USING ISO GUIDELINES: Customers who initiate electronic/manual funds transfers call their banker and then fax, phone or mail in requests to have the transaction processed. Because of complication of the process, customers complained. Most of the complaints lodged with the department dealt with the time it took to complete the process. Once bank employees had identified the primary obstacles preventing them from achieving total customer satisfaction, they would be able to correct the problems with the said guidelines. These are achieved using simple tools such as the Pareto chart.
BANKING PROCESS FLOW: As far as the banking services like granting letters of credit, buying and selling foreign exchange, underwriting and dealing in stocks etc. are concerned, work-flow (process) mapping is one of the fastest ways to lower errors, increase productivity, and affect customer service.
It generally follows steps: A. Choose a Service process. B. Assemble a team. C. Map out the way work is currently done. Diagram each step, showing decision branches, time spent, any distances traveled or people contacted, and other important aspects of the work. D. Identify problem areas. E. Brainstorm solutions. Identify all possible action steps for each problem area, without evaluating them. F. Evaluate action steps. Set up a set of "final" action steps by group consensus. G. Assign responsibilities. H. Create a master plan. Summarize who has responsibility for what actions and the deadlines. I. Follow through. The meetings are useless without appropriate follow-through.
To put it briefly in banking industry our major concern should always be to create satisfied customers. Hence, all required systems, objectives, and measurements are designed revolve around this TQM paradigm.