Business Process Redesign: Case Study

Client Situation

A leading national retail bank’s consumer lending division has identified emerging market (EM) customers [ethnic minorities and low-to-moderate income (LMI) individuals] as a major growth opportunity and critical element of its strategy to increase market share. Unfortunately, this consumer segment has some unique needs which the bank’s current loan origination and fulfillment process do not adequately address. The bank desires to redesign its loan origination and fulfillment business processes to better meet the unique EM customer needs. The bank has asked Alliance Consulting Group to drive this process.

Alliance Approach

Alliance employed its Discover, Develop, Deploy methodology to assess the current situation, re-design existing business processes and implement the recommended approach. The following sections highlight the key findings from each phase.

DISCOVER

  • EM Segment Will Drive Mortgage Business in Next Decade – Detailed analysis of home mortgage and census data revealed that from 1994-2000 minorities accounted for 40% of homeowner growth while from 2000-2020 minorities are expected to account for the majority of population and household growth
  • Client EM Performance Lagging Industry Average – Analysis of internal data revealed that the client lagged the industry average in percentage of total originations to both minority and LMI customers.
  • Existing Business Processes Not Optimized for EM – Evaluation of the client’s business processes from customer acquisition to loan closing revealed that the current system was not well structured to capture the EM opportunity. For example, the processes were not designed to handle unique EM customer needs (e.g., loan applications were only available in English). In addition, the structure of the system was designed to handle high volume “standard” loans that met most, if not all, strict underwriting guidelines. Unfortunately, the system structure had difficulty fulfilling EM loans which, though still of high quality, often did not fit the “standard”.

After understanding the current situation and identifying gaps in the current business processes, the team set out to develop and detail a new system structure and business processes to capture the EM opportunity.

DEVELOP

  • Structure Refined – Design of the modified system structure was composed of several elements which could be tailored to local market conditions including:
    • Identified markets with high EM potential and recommended opening new sales branch locations
    • Modified ratio of sales personnel to loan processing personnel to address high touch needs of EM customers
    • Established a new “liaison” function which served as an interface between sales staff and loan processing center in areas of high volume EM loans
  • Processes Optimized – Optimization of business processes comprised several elements including:
    • Developed new process flows which routed certain EM loan applications to the appropriate loan processing centers of expertise
    • Clarified roles and responsibilities of key organization units and staff within system
    • Modified incentive programs to reflect complexity of loans processed, not simply the number of loans processed
    • Improved communication flows to ensure timely, consistent handling of all loan applications
  • Financial Impact Quantified – Modeled modified system structure and business processes to quantify impact on key performance variables including system capacity (e.g., loans closed per staff employee), cost per loan and cycle time

After fully developing the recommended new business processes, the team developed a plan to roll out the new system first in seven pilot markets, then nationwide.

DEPLOY

  • Blueprint Created – Defined the broad program elements of the pilot, which could be tailored by location by site management to reflect local market needs. Recommended the location, scope and model type of the selected pilots
  • Project Management Plan Crafted – Recommended the organization, communication and management of the pilot implementation process including responsibilities, accountabilities and key milestones. Outlined the key activities and timetable for the overall pilot process, from launch to interim checkpoints to final review. Identified key resource requirements including capital, technology and HR
  • Measurement System Developed – Provided financial and business metrics and criteria for evaluating the performance and degree of success of the overall pilot process

Results and Impact

As a result of the team’s recommendations, senior management fully supported the initiative and provided additional capital and resources to proceed. The redesigned business processes are currently in the process of being rolled out in seven pilot markets to be followed by a national rollout.