Why Ask Why? To Reduce Operational Costs and Improve Customer Service  
By Jeff Jenkins
Community Bank Advisor, 2008 Winter

In today’s increasingly complex and competitive environment, financial institutions battle to stay a step ahead of the competition and improve their bottom lines. In addition to competitors, the barrage of regulatory compliance requirements continues to increase. Pressure to conform to these requirements has caused many institutions to add countless checks, new steps, and activities to their already busy routines.

Often, these activities create internal complexity, increasing time and cost to your operations. The answer? Take a step back, challenge why you do what you do, and evaluate how you can do things more efficiently and less expensively. More often than not, there are more efficient and cost effective ways to comply with regulatory requirements than adding a step here and there!

A Simple Example

Recently, we were reviewing a client’s operational processes. One of the processes we looked at was how they issue certificate of deposit interest checks. We learned that the bank issued about 6,000 checks annually. These checks were touched by more than a dozen people, and there were up to 90 distinct steps that occurred to issue each check. It cost the bank more than $10 to issue each check-and some of the checks were less than $10! The total dollar amount leaving the bank in these checks was about $1,000,000 a year!

That’s Insanity!

They say the definition of “insanity” is doing things the same way and expecting different results. The sane thing to do, then, is take a step back and ask, “why?” Often individuals who are part of the organization are reluctant or even afraid to ask, “why?” There is concern that asking “why” is asking the “dumb question.”

It sounds simple, but in today’s fast-paced world, many financial institutions do not ask this question. Rather, it seems easier to fix perceived issues or problems by adding controls, people, and/or activities. Every step that’s added, or each additional check made increases costs, and the potential for mistakes. So what do you do?

In the example above, we simply worked with the client and began to ask the dumb question, “why.” Why do we issue deposit interest checks? Why would we allow $1,000,000 to exit the bank annually? Why did each of the 90 steps exist? Why did more than a dozen people need to be part of this process?

As we find in many instances, a number of the answers included the “dreaded three” responses:

“That’s the way we have always done it.”

“I don’t know…that’s a good question.”

“Because somebody said that’s the way to do it.”

As we continued to ask “why,” it led to more questions. As we “peeled back the onion,” the bank challenged itself to ask why it should issue these checks at all! In addition, the bank was able to understand the core reasons why the process morphed the way it did and instituted changes for improvement.

The bank significantly reduced the issuance of these checks; in addition, they’re serving their customers better by offering alternative opportunities to invest those dollars elsewhere within the bank. Today, if checks are issued, it is far less frequent, and they are touched by far fewer people, at less cost.

Why Ask Why?

It is simple: Asking “why” affords financial institutions the opportunity to analyze their processes and operations and find better ways of doing things-ways that are less complicated and much less expensive. Do you want assistance improving operations or cutting costs in your bank? Contact your P&M advisor for further discussion.