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Legacy and Leadership: Will your bank be around in 10, 25, 50 years?

Considering the recent spate of bank failures, it’s time to assess the correlation between legacy and leadership.

In his book The Intentional Legacy, David McAlvany relates his own story of familial legacy to illustrate messages that I find are also applicable in the business world:

1. Successful families have a big vision for legacy.
2. Successful families are intentional.
3. Successful families are redemptive.

This third message is his most important point and resonates with observations from our process improvement consulting engagements where we often find an us versus them atmosphere in the relationships between front and back office. Many reasons exist for this tension including differing levels of education, incumbents in a job versus a career, and conflicting priorities when making decisions to enforce the rules while serving the customer.

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CLO/CCO, toughest jobs in the bank

Not unlike Jaws characters Sheriff Brody, Hooper and Captain Ben each claiming rights to the greatest scar, every banker likes to think of their job as the toughest one in the bank. Certainly, arguments can be made for CEO, CFO, CIO, and CRO; each with their own nuance of challenges. But in my estimation, the hands-down winner goes to the those charting the primary revenue driver of the bank ship Orca.

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SDD, the ultimate process improvement hack.

Every banker knows the big four names in FinTech: FIS, Fiserv, Jack Henry, and Microsoft. Wait a minute! Microsoft?!? Well, of course. If crazy Russian hackers really wanted to take down the U.S. banking system, they'd find a way to make Excel, Outlook, and shared drives inaccessible for a week. Many, many, many core banking processes would grind to a screeching halt. Without Excel, Outlook, and shared drives community banks and credit unions across the country wouldn't be able to generate or fund loans. Checks would not be cleared and posted. ATM and debit networks would not be balanced and settled. General ledgers would take months to unwind.

A veritable apocalypse just waiting to happen.

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Reduce the Cost of Compliance 30-50% with RS4B

In a prior post I discussed the need for process owners to design compliance into processes. When compliance is treated as a secondary process result, it drives up the cost of the work. There is an expense associated whenever completed work has to be touched again. Whether that second or third touch is for verification or data re-entry, the activity itself is a waste because it should have been handled the first time.

A question to ask during the process design is “What do we need to comply with?”.

It’s easy to throw anything and everything under the compliance bus, but until you do these 3 things you’ll just keep on adding staff.

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Next generation banking leaders

One unfair side effect of the greed and unethical behavior coming out of the mega- and Wall Street banks, is the tarnishing of the image of the “banker” by the mainstream media. Certainly it was not the community banker who contributed to the global financial crisis or manipulated LIBOR rates. While Dimon, Stumpf, Blankfien, Lewis and their ilk were riding high and wreaking havoc on the economy, down at the bottom of the hill, where the dung of these four horseman of the apocalypse’s behavior rolled down, stood the community banker doing their best to keep his bank alive and her town in business.

Surviving that nightmare only to be placed under a constant barrage of new regulatory and compliance mandates, the community banker now spends more and more resources proving they are behaving nicely. The proof of compliance is and always has been there. The problem, and why today’s cost of compliance is so high, is the disconnect between the proving information and the regulatory reporting. Unless compliance and compliance-related reporting are designed and baked into the process from the beginning, there will always be manual rekeying, redundant verifications, and checkers-checking-the-checkers.

The solution to lowering compliance costs lies in leaders with a process and data oriented vision.

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Lenders, is scanning loan files the bane of your existence?

Unless you are one of the rare few that has eSignature for every type of loan, there’s no getting around the need to turn paper loan documents into digital assets early in the process if you want high-performing processes.  Unfortunately, the processes that I’ve seen in place leave much to be desired when it comes to efficiency.  Quite often lenders are morphed into operational clerks sorting documents, printing or handwriting barcode coversheets, scanning and committing batches, and logging critical items sent to central loan ops in case they “get lost” in the courier bag.
 

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Stop buying when software when you really need an I.P.A.

“Be careful what you ask for” is sage advice. When the noise of process dissatisfaction rises to the C-level, it is usually accompanied by the clamor for a new technology solution. One only needs to look at the Frankenstein of internal processes to know that:
1) we are not lacking in software;
2) the number of process work-arounds far exceeds the number of system integrations;
3) Excel and Outlook are much too often disconnected, mission-critical applications within a process.

None of this is good news when it is translated into operational expense and efficiency ratios.

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3 Keys to a Successful Process Improvement Initiative

Many banking New Year’s resolutions will include a renewed focus on efficiency.

  As annual shareholder meeting agendas and presentations are assembled, the obligatory nod to expense reduction will no doubt be worthy of a line graph or a bar chart to emphasize the need to rein in growing personnel and technology expenses.  How to execute and make this stick longer than that personal pledge to work out more and eat less (or at least healthier) requires a different approach than banks and credit unions have taken in the past.  Otherwise, we’ll be looking back at 2017 and that spare tire will still be hanging around our waist in the form of sluggish, expensive, and error-prone internal processes.

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Vision of a Paperless Banking Operation

What would a paperless bank or credit union look like?

AIIM's World Paper Free Day #WPFD was Friday, November 4th, 2016.
Based on my experience and observations of 200+ banks and credit unions around the country, we are far from being paperless.
For even an hour, much less a full day.

Below is Agile Banking's vision of a paperless banking operation.
Scanning the checklist you'll quickly discover just turning off printers is not the solution nor the end goal.
Nor is simply having permanent archives in the Enterprise Content Management (ECM) system.

Becoming paperless is to challenge all of your processes, all of your technology, and all of your people.
Challenge each to change the way that work is done.

Feel free to check off those that your shop has completed.
Email me your score if you're proud of it or decide that you want help.
Don't be intimidated by the length of the list, there's a lot of work to do.

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Nothing Like It In The World

Process Improvement: Nothing Like It In The World

In his book recounting the building of the transcontinental railroad, author Stephen Ambrose gives a compelling example of the cost of waiting until the end of the line to improve processes. 
For the financial industry, it was an opportune time to improve loan delivery processes when the number of loan transactions dropped following the financial crisis. 
Now that volumes have returned, many banks and credit unions continue the long-suffering frustrations that accompany cumbersome loan origination, approval, and closing processes. 
Compounding the issue are the rest of the Dirty Dozen processes that are in desperate need of improvement.

Two reasons can explain why we suffer.

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What does a digitally reengineered banking process look like?

After my last post trumpeting the need to do to internal lending processes the same thing we did to check processing, it occurred to me that not everyone in a bank grew up in operations.
Maybe not everyone knows what a proof machine is was.
If not, then many may not realize the benefits that resulted from the process reengineering that took place when banks started dealing with checks as images instead of stacks of paper.
If Agile Banking had been engaged to assess and reengineer item processing to be a high-performing digital process, the results would have looked something like this.

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To centralize or not to centralize? That is the wrong question.

Under the mantra of operational efficiency, banks and credit unions wrestle with which functions to centralize versus decentralize.
Many even equate standardization and centralization, wrongly believing that centralization results in standardization or that standardization requires centralization.
In reality there is one simple test for how a process should be designed.
What does the customer value? Or in financial speak, what will the customer pay for?

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Twice pregnant. 18-month bank exam cycles.

Now that the Federal Banking agencies allows financial institutions in the $500 million to $1 billion asset range to be eligible for 18-month examination cycles, what will these 617 additional banks do with the opportunity? 

I've seen what banks and credit unions go through to get ready for the exam. 

To paraphrase Jimi Hendrix, the call to action goes something like this.
  "Hey Joe! Where you going with that loan in your hands? We need that back in the vault by Tuesday."

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Bank stuck in the paper & stone ages? It's all HR's fault.

I often wonder about the bank back office that will be displaced when workflow and imaging are used to make processes more effective.
Wonderment fills me on both sides of the two-edged sword.
On the old, dull edge: Where will the clerical staff go that have limited customer-facing and problem solving skills?
On the new, sharp, and if I dare say more important edge: What will the remaining operational staff look like?
For they will no longer be clerical.

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The Dirty Dozen: 12 processes every bank must get right!

In a prior post I introduced the idea of an efficiency ratio that starts with a 4.
To see these kind of results, banks and credit unions only need to address a dozen, common, everyday processes.

80%-90% of the processes that banks perform are repetitive.
The same thing over and over and over.

With Teller Capture, Check 21, and debit, the processes for customers to access their money are as efficient as ever.
These processes have one thing in common.

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An efficiency ratio under 50?! You say B.S. I say easy peasy.

What does it take to get a better efficiency ratio?

Getting more efficient, of course. 
What does that mean? 
It means doing to everyday internal processes what Check21 did to couriers, proof machines, sorters, and rubber-banded cash letters. 
Eliminate the handoffs, rekeying, verifications, and printing. 

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