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Credit Granting Services

The Process Works has worked with a number of large financial services institutions in the re-design of credit granting services with a view to:

• Improving credit control  
• Improvong the quality of business taken up 
• Imporving process efficiency
•  Improving customer satisfaction to a point of becoming first choice lender
• Creating a learning environment for “learner” credit controllers without increasing risk or reducing process efficiency

 A number of important lessons have been learned from the consulting opportunities in which we have participated. These are summarised below.

 Holistic Approach

Many of the credit granting services under consideration proved to be the product of ad hoc change rather than the result of holistic consideration. They had evolved rather than been purposefully designed. Problem resolution was piecemeal and process, people (roles), structures (working relationships) and technology had been adjusted independently of one another. The result was a patchwork rather than an engineered end product. Failure to holistically consider all related factors, in every case had led to sub-optimal performance.    

Impact of Automated Workflow

In some instances automated workflow had been introduced, at significant cost and loss of productivity, particularly during early implementation. In no situation did the productivity rise to pre-workflow levels. The reason for this was that in every case, the workflow had been introduced to support existing processes, structures and roles. Little consideration had been given to the possibilities that new technology could raise and the implications in terms of changes to processes, structures and roles. Further, the flexibility inherent in manual processes had been lost as technology will not readily permit people to change roles and undertake new activities when problems arise. In short, the new technology had literally “cast in concrete” sub-optimal processes, roles and structures and post implementation productivity reflected this.    

Separation of Customer Facing, Factory and Support Activities

Generally the financial services institutions concerned had failed to grasp the importance of separating consumer/partner processes, factory processes and support processes. Such separation demands inter-dependent but distinct structures populated with roles and staff appropriate to a particular focus (customer/factory/support). The result was staff having to be “all things to all people”. Productivity was generally low, staff were suffering high levels of stress, staff turnover was high and the quality of credit decisions variable.

Consumer/partner facing processes require relationship building and retention skills. People deployed here must have a customer orientation. Clients also require continuity in their relationship with credit granting services. Either team-based structures are required which generally provide backup in the absence of a person playing a client relationship role, or alternatively technology needs to be able to provide high quality, fast access to client information which allows greater pooling of resources.

In contrast factory processes are just that. They must avoid interruption from customers and staff need to have a production orientation, with some capacity for repetition. Production processes benefit from a high degree of automation.

Support processes are generally less urgent than either factory or customer facing processes. They often require periods without interruption, e.g. to resolve a problem, search for missing documentation or give an opinion. They are important rather than urgent. However, if they become entangled with the urgent – they rarely get attended to. Analysing the root causes of poor credit rating decisions would represent a typical support process, as would compiling important credit performance information. They clearly have an important impact on performance and improvement      

Avoiding Channel Hop

This is yet a further example of how structure can shape behaviour. Poor structures can result in undesirable behaviour such as channel hopping.

Some of the clients had created complete credit granting service structures for each client segment. In addition, in an attempt at greater client orientation, these services had been placed within Sales/Marketing structures within their businesses. These decisions had the effect of:

•  As they were generally more senior, placing credit controllers in charge of  the full service for a segment
• Diluting the focus of credit controllers, as they had to ensure the delivery of all aspects of credit services, much of which is administrative
• Reducing the quality of credit decision-making as credit controllers were no longer a cohesive unit and therefore unable to share learnings and mentor new entrants
• Creating undue levels of stress among credit controllers, resulting in commensurately high turnover
• Reducing staff morale, as credit controllers were recruited for their attention to detail and not the management of administrators and development of client relationships
• Reducing client satisfaction
• Encouraging clients to hop to another credit service team if they did not receive the credit decision they wanted

 Credit decision-making is a factory process and therefore needs to be isolated from client interference. Further, it benefits from a production focus, with attention on continuously improving decision-making and learning from past experiences. Team structures work well for this type of process and support learning and mentoring for entry level credit decision-makers. Credit decision-makers are comfortable with other like experts – their affiliative preferences are well accommodated in a team situation.  

Separation of Specialist and Generalist Activities

Making the most of expensive, specialist resources is critical to service efficiency and effectiveness. Spreading credit decision-makers thinly (1 per client segment), increases the risk of bottlenecks significantly. The absence of a credit decision-maker creates the potential for a bottleneck for an entire customer segment. Given the way in which businesses measure and reward performance, it is unlikely that a credit decision-maker from another customer segment will make the required contribution to fulfil a colleague’s responsibilities.

On this basis it makes sense rather to pool specialist resources and make the resources in the pool available to administrators and customer service staff on the basis of, but not limited to:

• First come first served – next free decision-maker or next free decision-maker with the required skills/knowledge to make the decision
• Last come first served (based on client importance) – next free decision-maker or next free decision-maker with the required skills/knowledge to make the decision   

Education of Senior Management

It was evident that many of the senior management in the businesses engaged, had had limited exposure to process and organisation design practices, except these were learnt on the job. This is not surprising in that this is considered the domain of management consultancies, who take considerable pains to protect this space.

Universities and Business Schools have also failed to offer practical skills development in these areas. The result is that even when a deficiency is recognised, addressing it is not a trivial task. The Process Works has therefore undertaken to develop training material in both process and organisation design. However, taking a horse to water is one matter and making it drink, another. Senior business executives appeared to still rely on management consultants than acquire and deploy these new skills themselves.

See the Bigger Picture

It is important to understand the bigger business context within which a service (credit granting) is delivered. Such a service is delivered to customers in collaboration with but not subservient to Sales and Marketing activities.

Referring to Michael Porter’s value models (value chain, value network and value shop), Banks and Insurance companies are invariably Value Chains evolving into Value Networks. Sales and Marketing activities fall under “Sales and Marketing” and Credit Granting activities fall under “Operations”. Structures supporting these two domains would generally need to be inter-dependent but distinct, as they are reflected in the value models.

In conclusion, not only are structures internal to a service important, but the greater structures within which they fit are equally important to successful service outcome and satisfactory service performance.

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