Table of Contents
- Analysis of the current refinancing process
- The process flow chart depicting the current process
- Problems of the present process
- Value chain analysis
- Concept of Service value chain
- Business service value chain
This is a case study report on different problems in the Gold Coast Savings Bank. The bank was facing many problems. The report analyses the problems faced by the bank and it gives some recommendations for solving these problems and thereby improving the overall performance of the bank. The report is developed in such a way that there will be a brief introduction of the report. Then there will be an explanation of current system of operations and its limitation. After that there will be some recommendations for improving the performance of operations of the bank. The recommendations include redesigning the staff structure, giving effective training to employees, implementing a system for faster loan rocessing etc. At the end there is a conclusion of the report.
The Gold Coast Savings Bank faced problems with the operational structure of their loan refinancing department. They cannot ensure their customer satisfaction due to the longer time requirements in the loan refinancing process. In order to improve the process they had changed their loan refinancing process by adding some improvement measures. But it was also not supportive for reducing the time requirements.
For assuring the customer satisfaction through reduced time requirements for the loan processing, these unessential steps have to be eliminated by them. In this situation, a new loan refinancing process is proposed before the Operations Manager of the bank and it ignored all of the unnecessary steps in the process. It will be helpful for achieving customer satisfaction to the bank and thus its profitability and market share should be improved.
Customer satisfaction should be the main objective of any organization. Though profit is essential for the survival of any organization, the organizations should give preference for customer satisfaction. The reason is that profit can be achieved or maximized only by way of customer satisfaction. “Bankers’ traditional strategy has been to attract large numbers of customers, one product at a time.” (Shesbunoff 2002). The satisfied customers are the real and most effective advertisement for any organization. In this case study report the problems faced by the Gold Coast Savings Bank are explained.
So many customers have complained about the present system of operations of the bank. The complaints include waiting long time in the queue, complicated procedures for loan processing, and irresponsible attitude of the employees etc. If a customer is not satisfied with the service of the bank it obviously affects the smooth functioning of the bank and ultimately it affects the profitability of the bank. The mouth-to-mouth communication of the individuals is one of the fastest ways of communication. There is a chance for changing the decision of a person who is planning to open an account in Gold Coast Savings Bank, if he hears about poor service of the bank from the existing customers.
The current system of operations has lots of limitations such as irresponsible attitude of the employees, no proper arrangements for easy clearance of customer requirements resulting in waiting for long time in the queue, lack of Total Quality Management System etc.
Analysis of current refinancing process
Gold Coast Savings Bank adopted redesigned home loan refinancing process. The major reason for the redesigning of the refinancing process is to meet the increased volume of refinance requests from the part of the customers. The bank divided its refinancing process into 5 different stages. For each of these stages, separate departments are also arranged by the bank. The employees are not ready to take responsibilities. They are not working continually and thus customers are required to wait too long for fulfillment of their transactions.
“Bank employees apparently know when their customers are satisfied or dissatisfied with the level of customer service provided by their bank.” (Reynierse & Harker 2002). Another important problem is relating to lack of better co-operation among the organizational staff and it leads to information failures. TQM is not employed by the bank and thus involvement of the entire organizational staff for the supply of quality services is not ensured. Quality of services is very poor compared to other organizations in the industry. As a result of these factors the bank is required to process improvement policies in order to attract and sustain the customers. The simplification of the transaction process and its constant improvement is an essential factor for satisfying the customers, as time is valuable and waiting for too long leads to loss of customer satisfaction. In order to reduce and overcome these challenges in the banking operations, Gold Coast Bank has adopted process improvement policies.
The process flow chart depicting the current process
- Step 1: Customer completes the loan application and presents it to the loan officer.
- Step 2: The loan officer discusses various options for the refinancing request of the customer with him.
- Step 3: Make calculations on the data provided by the customer for assessing his eligibility for the loan approval.
- Step 4: If the customer is qualified on the basis of the calculations made by the loan officer, customer signs a few papers for allowing the bank to check his credit capabilities. After that, he waits for his loan approval through notification.
- Step 5: The loan application file of the customer is then passed to a loan processor. The loan processor is responsible for checking the credit capability of the customer. For this purpose, methods such as “verification of loans or mortgages from other financial institutions, an appraisal of the property, and employment verification” are adopted by the loan processor. In case of problems of confusing nature, he can adopt the advice of the loan officer.
- Step 6: Loan processor presents the credit verification report to the loan officer. In case of discrepancy between the figures in the loan application and the credit report prepared by the loan processor, customer is required to give explanation for such discrepancies in written form. Only acceptable explanations are considered by the bank for taking further steps of the loan approval. After that the loan file of the customer and credit report are sent to the loan officer for final approval.
- Step 7: A letter of loan approval is sent to the customer. The customer is asked to contact the loan closing officer for scheduling his closing date and fixing the inertest rate.
- Step 8: The name of the lawyer of the customer is included in the loan file of the customer by the closing officer. The lawyer is the person responsible for dealing the inspection or survey issues. The insurance and the closing of the papers are also the duties of the lawyer. The fee verification, fixing of payment schedules and pay out amounts are fixed by the lawyer and the closing officer jointly.
- Step 9: The loan servicing specialist reviews the previous loans of the customer to ensure whether they are paid off. After the closing of the loan application file, the loan payment specialist of the bank is responsible for the issue of payment books. The withdrawal of mortgage fees and calculation of accurate monthly payments payable by the customer are done by the loan payment specialist. The late payments on mortgages are also monitored by the specialist.
The problem that might have been caused by the present process
The time lag between the submission of application form and the approval of the loan is much longer. Customers have the complaint that it requires minimum two months for completing the procedures of the loan application. Too many employees are involved in the value added process. Appraisals are to be carried out annually. The waiting queues for the transactions seem to be too long and too many delays are occurred for the completion of a transaction process. The credit check, appraisal and loan processor requires too much time and often result in delay due to the irresponsibility of the staff.
The document moving between different sections in the organisation requires longer time. The process design is of poor quality. It needs check lists and standards. Adoption of online checking and stoppage of annual appraisal will help to remove the unnecessary movements in the transactions. Usage of mail for posting staff also is effective for reducing the time lag between the transactions. The defects in the transaction process required to be modified by eliminating unnecessary steps and adding value chain concept.
Value chain analysis
The value chain analysis is a concept developed by Michael Porter. In his book Competitive Advantage: Creating and Sustaining Superior Performance published in 1985, he defined the value chain concept as a chain of activities which gives the products added value. “The chain of activities gives the products more added value than the sum of added values of activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities.” (All about economy on the web 2009).
The added value concept is explained with the diamond cutting process. The cutting activities applied on the diamond provide it much value even though the cutting process costs less. The service value chain is the generic value adding activities adopted by the organisation over its services capable of generating higher value to the business.
“Becoming part of a value chain could offer firms a fast track to the acquisition of production capabilities.” (Gwynne 2008).
The effective value chain implementation requires the integration of various parties involved in the value chain in a cost effective manner. Application of better administrative management techniques along with infrastructure and human resource management is essential for the implementation of value chain in the most effective manner. Value chain concept can be applied to the entire supply chain and distribution networks. The interconnection of the different value chains creates an extended value chain and Porter termed it as the value system.
“A value system includes the value chains of a firm’s supplier (and their suppliers all the way back), the firm itself, the firm distribution channels, and the firm’s buyers (and presumably extended to the buyers of their products, and so on). Capturing the value generated along the chain is the new approach taken by many management strategists.” (All about economy on the web 2009). “The concept of value chain describes the full range of activities that are required to bring a product from its conception, through the different phases of production, to its end use and beyond”. (Pietrobelli & Saliola 2007, p.5).
The concept of value chain can be applied to service sector also.
Concept of Service value chain
Service value chain analysis is important for reducing or eliminating the cost adding steps in the service process. In the field of service businesses, the service value chain is an important concept. It is an essential tool for the identification of opportunities in the business. By applying the practical tips on the service value chain, the sales and gross margin in the business can be improved.
The service value chain is “a process that starts with the need for service and ends with the successful delivery of service. This is the heart of the Service Value Chain. The Service Value Chain is the progression of a service opportunity from beginning to end. Small improvements at each step can translate to significant improvement in sales and revenue.” (The service value chain 2005).
By making changes in the service process, improved revenue can be ensured even without changes in the service demand. “Customer service quality is a widespread concern in the banking industry these days. Trouble is, understanding of what customers consider better service isn’t widespread”. (Brewton 1989).
Therefore the banks have to understand the requirements of the customers.
The service value chain acts as a link with the customers. The service should be capable of ensuring the further relationship after the rendering of a service to a customer. That is, an ongoing relationship should be built up with the customer as it is essential for getting repeated business and referrals. This can be achieved through maximum customer satisfaction and apart from that a personal relationship with the customer that leads to the loyalty of the customer towards the business. The customer satisfaction is an ongoing concept and thus further improvement in services should be ensured to the customers as the customer satisfaction is not a constant concept. A dissatisfied customer will not like to have a long-term relationship with the organization.
Sales channels and repeat business are the two sources of customer opportunities. Repeat business is the reflection of the better management of the service value chain along with good customer service offered by the company to its customers. The service demand exploitation has to be carried out in the most appropriate professional manner. Customers always require faster service than what is offered by the business.
The basic concept on value chain analysis is that we cannot improve what we cannot measure. Business service value chain is focused on the roles and responsibilities of the service providers for attaining the customer satisfaction. “It is a group of equal business partners coming to the table with specific, market-leading competencies, identifying a group of similar buyers, and delivering that vertical solution repeatedly, reliably and cost-effectively.” (Beck 2002).
Higher level client satisfaction would result in profitability growth and opportunity for more innovative solution development.
Business service value chain
The marketing of services require identification of the customer needs and thus in order to fulfil these needs, the business firms have to position their offerings better. The value chain approach would help to gain capability for offering more reliable and cost effective solutions to the clients. Better planning is essential for identifying the key opportunities in the market. Through the application of technology, the speed and integrity of the service can be ensured.
“Gartner Dataquest explains that the day is coming when half of the buyers can be touched directly by sales and the other half depends on marketing influence with other companies higher on the value chain. This value chain approach will also help create more reliable, cost-effective industry solutions that can be benchmarked for specific business process objectives” (Beck 2002).
Sustaining market relevance is another focus of the business firms. CRM and enterprise resource planning techniques can be adopted by the service firms to speed up of their services. In the banking field refinancing is an important business offering. The customers always prefer quality and realisable services at the least cost and time.
The service value chain framework is prepared by considering the following:
- Understanding the co-production of value.
- Identifying the internal and external customers.
- Identifying the customer experience.
- Follow up and value capture. (Alter, p.7).
The existing loan procedure of the Gold Cost bank has to be re-modified by applying the concept of service value chain. “Banks should be actively monitoring customer satisfaction for insight to unresolved or developing service problems and responding aggressively to the data.” (Press, Ganey & Hall 2002).
Unnecessary transactions and adding cost with no value transactions should be eliminated in order to reduce the time and cost involved in the transaction process. The re-modified process flow chart is explained below:
- Step1: Loan officer receives the completed loan application.
- Step 2: Appointment of adequate number of valuation officers for the verification of refinancing request of the customer and to offer their comments.
- Step 3: A credit verification report is prepared by the valuation officers regarding the creditworthiness of the customer. In case of problems of confusing nature, the valuation officers can adopt the advice of the loan officer.
- Step 4: Valuation officer presents the credit verification report to the loan officer. In case of discrepancy between the figures in the loan application and the credit report prepared by the valuation officers, customer is required to give explanation for such discrepancies in written form. Only acceptable explanations are to be considered by the bank for taking further steps of the loan approval. After that the loan file of the customer plus credit report is sent to the loan officer for final approval.
- Step 5: Approving the loan application of the customer and giving notification about it to the customer with details of the terms and conditions of the loan.
- Step 6: The name of the lawyer of the customer is included in the loan file of the customer by the closing officer. The lawyer is the person responsible for dealing the inspection or survey issues. The insurance and the closing of the papers are also the duties of the lawyer. The fee verification, fixing of payment schedules and pay out amounts are fixed by the lawyer and the closing officer combine.
- Step 7: The credit history of the customer with the bank is analyzed by the loan specialist officer. The loan payment officer is responsible to issue payment books after the closing of the loan application file. The withdrawal of mortgage fees and calculation of accurate monthly payments payable by the customer are done by the loan payment specialist. The late payments on mortgages are also monitored by the specialist.
From the analysis of the present system of operation, it is clear that there are so many areas which require change or improvement. Today the world is filled with tight completion. Especially banks and other financial organizations are facing a cut-throat competition from their rivals. And also the present financial crisis has badly affected most of the banks in the world. Therefore to survive in this difficult situation, the bank has to make significant and effective changes in the current system of operations. The recommendations given at the end for changing the structure and mode of operation can obviously help the bank to come out of this crucial situation to a great extent. The bank has to redesign the process so that value adding steps are reinforced; cost adding steps are reduced or eliminated.
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