Importance of Operational Efficiency in an Organization

1. Executive summary
Operational efficiency and its quality of providing service is most important factor whatever organization either production or service. That is most important part in any company operations whether it is business oriented or nonprofit oriented organizations also are highly concern & their organizational growth and local and regional expansion of their operations. Mainly operational efficiency and performance is depending on the external environment drivers. Those external drivers are creating competition and intense of the among the industry player. Therefore future strategic planning, contingency plan, operation strategy is most important and playing vital role to face forthcoming changes. If the organization is not be able to manage those changes that happening in the originations and outside organization directly affect on operational efficiency of the organization. To face those environment changes most prudent strategies make adjustment in organization operating style and strategies. That does will help to achieve organizations corporate objectives as planned. Mainly manufacturing & service organizations are performing functions such as;
Sales & Marketing
Human resource
Operation
Accounting & Finance or treasury
IT/Information department
Logistic/branch management
Channel management
Internal auditing
Risk management
So called functions linking each other and having inter – dependencies, no one can override those operational activities. Everybody work in the must focus on very well on operational activities. Because, at the end of year shareholders (investors) are raising questions at AGM, how much of amount of return generate by businesses and whether business operations went smoothly, what will be the future plans to deliver high rate of return for our investment and what type of operational strategy going to carryout to face the completion. So on frequently raise the questions by shareholders. “Production and operation management” was begun with industrialization. But it play vital role in the service sectors. In the contemporary world named it as “Operation Management”. Contribution of this subject is making bigger differences for business functions. Multinational & local companies have established independent department to manage their operational activities very well. For an instance nowadays emerging business is banking & financial service company name called “Nation Trust Bank”. That bank routine operations are making huge impact on their business performance. That is because; bank performance is driven by its operational capacity & style. Mainly employees and customer’s satisfaction are most important element to show outstanding performance and to attract the new customers. In this industry is driven by managing effectively whole operations of the business. Lack of operation management delivers poor performance. To provide remarkable service wider range of service related need to have well defined operations strategy to uplift business. This assignment report mainly focused on current practice of operation management banking industry and assignment contain the followings.
Define operation management, its characteristic and playing role in banking & financial service industry.
Evaluate the goals and objectives are achieved in operation management objectives.
Define systems in operations in relation to service and routine activities.
Major resource, tools and systems that are supporting operations and to support quality of service of the bank.
Analyzing importance of quality audit and implementation of quality management system in bank.
Major weakness and explore opportunities to improve the bank service to satisfy the stake holders of the business. Making recommendation to capitalize the opportunities and avoid weakness of the bank.
Conclusion of assignment
2. Define term of operations management
According to literature production & operation management are considering as one subject but in the current situation totally expert says about it as
“Operation management is subject that Design, execution and control firms operations that converts it resources into desired goods and services, and implement its business strategy” and its define as another way
“The maintenance, control and improvement of organizational activities that are required to produce good or service”.
“Operations Management deals with design and management of products, process, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their client wants.
First definition can be related the following diagram is simple operation of any organization.
Feed Back
Input
inputs Service
Process
servicing process
Out put
Maximize customer satisfaction
Employees
Money (local & foreign)
Savings accounts
Information
Systems
Open up Bank A/C
Cashiering
Credit card promotion
Mortgaging
Generate bank statements
Buying & selling of foreign currencies
Happiest or loyal customer
The above diagram we can see operations different operations in the input level, process level and output level. Therefore we can conclude that
2.1. Operation management from aspect of Nation Trust Bank
To get analyze importance of operations of the bank the vision mission and values is helping out it
Vision – Making life simple by being the benchmark of convenience
Mission – Be innovative in continuously developing customer centric solutions. Unleash the talent of our team to be the best in the industry. Consistently grow market share and be the most profitable and respected Sri Lankan bank by 2015.
Values
Inspirational leadership
Integrity in all our dealings
Open communication
Learning focused
Meritocracy
Prudent risk management
Respect for all
Innovation and continuous improvement
Nurture relationships
Socially and environmentally responsible
Vision, mission and value are Nation Trust Bank (NTB) operational objectives in relation to corporate objective. Organization chart shows hierarchy of the departments
Chairman
Deputy Chairman
Board of Directors
CEO
Corporate management
Senior management
Branch management
Managers
Operation management
Corporate management overlooking the follwing functions
Director/CEO
DGM – Retail Banking
DGM – SME Banking
DGM – Cards, Consumer Assets and Strategic Marketing
DGM – Corporate and Institutional Banking
Chief Operating Officer
Head of Legal and Company Secretary
Chief Financial Officer
Head of Human Resources
Head of Credit and Market Risk Management
Head of Internal Audit
Consultant/Head of Treasury
Consultant/Head of Operational Risk and Compliance
Senior management overlooking functions are;
Trade Services
Branches and PBC
Alternate Channels
SME Banking and Factoring
Cards and Consumer Assets
Branch Operations and Credit
Wholesale Banking
Consumer Credit Risk and Collections
Consumer Sales
Treasury Services
Leasing
Corporate Banking
Leasing Operations
Management Information and Planning
Cards Marketing
Collections
Central Operations
Fixed Income Securities
Leasing – Zone 2
Leasing Recoveries
Marketing Services
Retail Banking Credit
Delivery Channels
Nations Insurance Brokers
Technology
Legal
Credit Operations
Credit Risk
Corporate Banking
Delivery Channels
Leasing – Zone 1
Internal Audit
Infrastructure and Administration
Business Banking
Compliance and Financial Reporting
Business Solutions
Delivery Channels
Credit Risk – Leasing and Factoring
By looking at the above orgnization chart and that functions, can get clear idea about the how its importace of the operaton mangement in the NTB operations. Here in the chief oprating officer and head operational risk is paly vital role of for the baking operations. They are responsible for the bank oprations as whole. Operational scope No of branches – 40, No of leasing centers – 9, No of ATM – 43 , 6 personal banking centers as well as Internet Banking
2.2. SWOT analysis of NTB
Strenght
It is subsidiary of Jhon Keels group, idirectly they can gained group strenght.
Reputed coporate brand name Coporate brand value is very high
Has selected well & profitable segment to provide the banking service
Wider product portfolio
Strong IT net work
staff in every layer having experice
More than 20yers experaince in that perticualr field.
Carryingout more promotion
Respect corporate governance
Good Internal auditing & risk management
Weakness
Faliures in th the IT system
define some operations wrong manner
Poor promotion – Newly introdce gurnateed invetment paln will be fail because of it is irrational plan.
More customer complins prices and products quality
Few brach and ATM
Suboptoimization is happening & Employee discrimination
Poor advertising in relation to market leader.
Employee selections very static do not willing to new comers and do recruitment based on the personal contact.
Poor strategic implication.
Try to do mass scale promotion, it has failed
Always try todepend group strenght
Poor opertations of mini brach in the supermrkets
Opportunities
expansion opportunity in further in sri lanka in norht & south ( war affected areas)
Can be offered more differntiated Service by giving well traning for the staff.
Customer driven promotion.
Customer feed back system over the phone or by SMS,by mail.
Rewarding system for employees
Threat
High competition in the banking industry.
Overriding tax ruels and regulation by bank.may have legal risk for business.
New management is do not more concern on the operations
Paying high premius to get new business without cinsidering future feasibility.
2.3. Importance of operations management NTB
To satisfy the share holders objectives
Investor’s are expecting return by investing money on the banking business. If the bank is not generated sufficient of amount of return on the shareholder’s will not invest in the bank. Therefore its corporate objectives must design and link with operations.
To defense the market share & face the competition
Another main importance area of the operation management is developing strategy to face the competition.
To managing the risk of the business
Mainly banks facing the following risk;
Credit risk
Market risk
Asset & Liability management risk.
Operational Risk
When look at all the risk are related with the operation with banking business, if bank the bank stopped their business operations there is no any risk to manage for them. Therefore, managing risk of the banking business should have smooth plan to manage the operations.
To fulfill rules and regulation of governed by Central bank of the country
To fulfill rules and regulation of governed company act and banking acts
Supporting decision making
Operational information’s are giving support to make the decision making. As example to advertising effectiveness evaluate branded saving accounts can be used no of accounts opened up by customers on daily.
To adapt new changes on technological information
Technological environment is rapidly changing to adopt those changes ATM came into apply to increase banking operational efficiencies.
2.4. Performance analysis of the operations in relation to organization goals and objective
External process changes (customer satisfaction)
Personal banking service providing branches
New investment plan offered by bank
24 hours banking facility
Open mini branch in supermarket location.
Online bank account opening systems
SMS banking system
Door step banking system
Billing payment system via their mobile phone
Internal process changes (to happy internal customers)
new auditing system to analyze the business risk
Make contract with the international HR consultancy firm for training & development of staff.
Policies have been changes when issuing loans
Transferring staff between branches to reduce
Giving good training for newly recruited employees regarding bank operations.
To reduce bottlenecks IT system training was provided.
To prevent hacking introduced new system PIN by IT
3. Routine banking operation and related resources, tool and systems in support to improve operation quality.
As banks it having so many business process, that can be divided into two
External business process – Customer focused process
Under this process defined that banking service which they provide to the customers. Those service are divided into 3 categories
Corporate banking
Personal banking
Treasury
Issue Letter of credit
Current , saving and fixed deposit
Foreign exchange dealings
Shipping & other guarantees
Credit card
Forward exchange booking
Import & export finance
Debit cards
Commercial paper
SWIFT facility
Branded Savings accounts
Foreign currency swaps
Syndicate loans
Certificate of deposit
Interest rate swaps
Project financing
Advice on foreign current market movement
Securitization
Salary remittance package
Structuring , managing and underwriting of initial public offering and private placement of equity
Housing loans
Company valuation & restructuring
E exchange – money transfer facility
Structuring of Corporate debt instruments
Holiday banking systems
Working capital financing
Red carpet banking system
Bullion trading
Off shore banking facility
Leasing
Internal business process – Internal operation centric process
Where mainly internal functions related process can be analyzed
Marketing Management – Ex. process of introduce of new product
This the huge process from the idea generating and to launch to customers is having certain approval to procedure such as;
Idea generating new service based products
Evaluating feasibility with the market condition
Getting approval from the Head of the marketing
Head of the marketing and Director of the Marketing, brand manger discussing pros and cons of the product, brand name selection, effect of existing products and competitor response
Finalized the approval
brand name Registering
to launch the product preparing budget and get approval for that
brochures designing and making agreement with the ad agency
Printing pass books
Communicating to customers regarding the product via ad
Get feed back from the customer
Compare budgeted deposit or account to measure whether branches have achieved budgeted sales.
Human resources management – Opening new Branch fill the staff requirement
Forecasting staff requirement
Advertise regarding the vacancy
application sorting and short listed candidates
Call for the interview
1st interview for them and short listed for second interview
Call for the second interview
Select the right candidate for the job
Giving the appointment letter
Familiarizing for the organization via inductions
Training for that candidate
Permanent those staff
Internal auditing system
Here try to ensure that bank staff follow the procedure as planned and prescribed the accounts and finance. Here they evaluate
Analyze & search Fraud and errors
Management auditing
System auditing (IT)
Accuracy of accounting entries
Analyze & search Ineffective accounting procedures
Assets auditing
Deposit management
Under this category try to manage the deposit level with liquidity and profit. By balancing rules and regulations which are governed by central bank.
Channel Development System
This is described regarding new branch operation and development of customer service.
Managing Assets & Liability
This also very important business process and functions in the banking operations managing their assets and liabilities. If these two are not balancing each other, the bank balance sheet will show impact on assets and liabilities. It should be managed by well qualified management account or fiancé disciplined person. Otherwise bigger impacts made on the corporate image as well as destroy the customer’s relationship and may have position go out of the business. Ultimately it will makes huge impact banking system in the economy.
Risk Management System
major different risk component those are making bigger impact on the business continuation. According to bank information major risk rating as follows;
Risk Areas
Component of the risk
Credit risk
Default risk
Security risk
Sectoral exposure risk
Legal risk
Counterparty risk
Cross border risk
Sovereign risk
Market risk
and
Asset & Liability management risk.
Interest rate risk
Liquidity risk
Exchange rate risk
Investment risk
Group financial risk
Share price decline risk
Country risk
Operational Risk
Employee behavioral risk such as omission, fraud, judgmental errors, negligence, etc.
Disaster related risk
Trained staff turnover risk
Insider dealing risk
Sensitive information leakage risk
Lack of creativity and innovativeness
Risk on MIS and IT related risks
Planning & Budget related risks
Shortcoming in the organizational structure
Credit rating falling risk
Money laundering
Risk of technological obsolesces
Risk failing business volume and market share
Risk is being overtaken and losing the leadership position
Overtrading risk and risk of financial disintermediation
When look at overall risk, high risk show by operational risk compare to other risk areas. Therefore, to analyze any type of these risks, need to have solid information to mitigate those risks in business operation.
Operation management
Operations managements are looking after following areas. Those are;
Bank or branch opening procedure
This is very important part in opening branches and head office. Opening must be done without authorized people. If not that is considered as misused of operational rule on the other hand it taken as illegal act. Therefore those rules & regulation must very well.
Cash handling process by cashiers
Main cashier hand over cash to the counter cashier
Get it signed on the log book
Cashier log on the computer
Carryout the day today operation (saving, withdrawals)
Handover cash to main cashier after counting
Fill the cash summary by using slip
Main cashier reconcile the cash with slip
Cash put into the safe box
Managing bank electronic data
Data management is major important part of business process. Bank decisions are making process based on this process. If there is an error in the data, outcome (information) is will be inaccurate, ultimately, made decision are delivering risk picture. Following the appropriate tool for quality assurance of the data applied by the banks;
Describing data that is in the warehouse
Specifying what In and out of data is warehouse
business events scheduling extract based
Documenting and monitoring data synchronization requirements
Measuring validity & quality of data
Data process management and security management system for data
building Capacity of the bank
To improve productivity of service that providing process by bank need improve existing capacity in terms of ATMs, Branch and staff.
Loan Management system
The following process is involved in under the loan management;
Analyzing suspension of the loan and advance
Then made reservation or taking legal action to receiver those loans
Managing the Finance of the bank
Financial management process overlooking low cost funding sources and mainly following procedure also looking after by fiancée manager
Working capital management
Corporate tax planning
Analyzing Investments
Debentures and Share issue
Corporate planning & Budgeting
Bank corporate planning and budgeting strategies are followed by operations, main step that is following certain steps in the corporate, business and operations levels.
Analyze the Vision, Mission, Goals and objectives of the bank
Carryout position audit (SWOT) and environment analysis (PESTEEL)
Generate strategic options
Analyze strategic options are generated
And Develop functional strategies such as finance, marketing, HR, operation, and IT to achieve corporate objectives. Such as
Profitability (Profit before tax)
return on capital employed of the bank
Growth and Market share of the bank
Customer satisfaction and value addition for service Quality of service
3.1. Analyzing and evaluating resources, tools and system to support in the quality operation
Bank or any other business resources, tools and system can be divided into 3 categories based on value platform. Those are;
Customer capital
Structured (organizational) capital
Human capital (Human Resources
Customer loyalty
Corporate brand name and it reputation
Business collaboration
Intellectual property
Patents & copy rights
Design right
Service mark
Trade mark
Infrastructure assets
Management philosophy ,Corporate culture, Management process ,Information systems, Net working systems ,Financial relationship
Know how (serving offering process)
Education level of employee, Vocational qualification, Work related knowledge, Proactive and reactive abilities, Changeability, Occupational assessment
3.2 Define and implement quality management for bank
Quality management defined by American Society for Quality “Quality is the totality of features and characteristic of product or service that bear on its ability satisfy stated or implied needs”. Banks can focus on their quality the following way. Quality of services or business can be measure by using the following methods;
Six dimensional performance matrix
Balance Score card systems
Generic measurement
3.2.1. Six aspect or dimensional performance matrix
Dimension of the performance
Type of measures
Competitiveness
Relative market share
Measure of customer base
Deposit growth
Financial performance
Profitability
Liquidity
Capital structure
Market ratios
Quality of service
Reliability
Responsiveness
Aesthetic/appearance
Comfort
Friendliness
Courtesy
Flexibility
Volume flexibility
Delivery speed flexibility
Specification flexibility
Resource utilization
Productivity
Efficiency
Innovation
Performance of the innovation process
Performance of the individual performance
3.2.2. Balance scorecard (BSC) system
BSC is identifying financial and non financial measures to evaluate quality of service. 4 pillars are representing by BSC. Those are;
Customer perspectives
Satisfaction of the customers
Financial perspectives – Satisfaction of Share holders
Internal business process
To satisfy both party what must be offered
Learning and growth – Improving, developing, changing process and procedures to satisfy all the parties in the organization to improve efficiency of the organizations continuously.
3.2.3. Generic measures system
To evaluate service efficiency the following generic measures can be implement
Generic Measures
Type of measurement
Service of Quality
Access – Easy to find out supermarket
Appearance – Staff appearance, well groomed
Availability – products availability
Cleanness – Gondolas and shelf must free from dust
Competence – Speed of cashiering
Courtesy – CSA must polite and respect to customers
Responsiveness – Response any queries
Security – personal security
3.3. Implementing quality management system – (six sigma model)
Improve any process performance either production process or service providing process. This model can be implemented and it has 5 steps.
Step – Define measures
Step – Measure
Step – Analyze
Step – Improve
Step – Control
4. Identifying Weakness and opportunities in the process
4.1.Weakness analysis and strategic implication
Wrongly define some operations
To collect the deposit banking assistant are sending to the outide banking premises, that is very risky because the rob or theft money.
Faliures in th the IT system
Banking industry one of the key driver is IT systms in those suystmens failutre affect couters, ATM or brnach operation. Therefore IT deparment need to take relavent action to prevent this kind of situations.
Poor promotion
Newly introdce gurnateed invetment paln will be fail because of it is irrational plan.We the customers are get calcualte benefit of the invesment plan, relizing bank try to make fool the new customerss. Therefore NTB need to evaluate that promotion of investment plan.
Few brach and ATM
To satisfy customers need exiating ATM’s and branch are not adequate. Therefore top management need to increase number of ATM’s and mini brach increse the customer service.
Suboptoimization is happening & Employee discrimination
This always happen in the top management and they don’t allow come with new ideas and try discriminte those people as headche for the bank. This is not acceptable level of pracite because of new ideas are helping to develp the bank service. That culture must changed by HR department.
Poor advertising in relation to market leader
Commercial bank is market leader in the banking industry but problem is that NTB is not spend sufficient amount of cost on advertising and they have selected brand ambassder as sport star that is not reflect imporatnce of the bank service.
cost of staff training is very high and cust down other cost
NTB has made an agreement with interanationl HRM consultancy firm to get trian the satff. But it is very cost. There are experianced firms are availble in locall to get bank staff training at resonable cost. That must be changed.
Employee selections very static do not willing to new comers and do recruitment based on the personal contact.
Junior and senior level staff recruitment is made via personal contact, that is not good practice, it will leads poor operational perfornances.That is need to be chaged by HR department.
Poor strategic implication
Competition of the banking inductry is very high and NTB strategies not capable enough to cope the competition.
Try to do mass scale promotion, it has failed
Promotion that made by using brand ambassader was not successful. Even the NTB advertising fail to highlight their major benefit of the each of bank accounts. That has already capitalized by other players of the industry.
Always try todepend group strenght
JKH is large conglomarate bunines group, therfore NTB try use the those group of companies money in their accounts as corporate accounts. But it will not be successful strategy, if any buisness will fail that will directly affect o on the bank operations.
Poor opertations of mini brach in the supermrkets
In the supermarket bank service expecting customers are very high, but mini branch is included 3 staff members they can’t manage rush time banking operations.
4.2. Opportunities analysis and strategic implication
Expansion opportunity in further in sri lanka in norht & east ( war affected areas)
There is an opportunity to open up new brach north & east. Because of those areas high ended customer is having desire to get good banking service. Therefor NTB could capitalize that chance.
Can be offered more differntiated Service by giving well traning for the staff
NTB staff always having an attitude as most prestige bank, but they need change that attitude and need do differentiated bank service for the customers.
Customer driven promotion.
By analyzing most valuable customer, NTB must offer rewarding system such as;
Interest excemeptions
Gift vouchers
Seasonal promotions on the minor accounts,
Customer feed back system over the phone or by SMS,by mail.
This will help to increase the customer satisfaction efficicny of the bank by merging with new technological development.That will help to increase the number of customers and reduce operational failures.
Rewarding system for employees
To motivate the employees need to have proper and stimulus arisen rewardign system to increase the sales and productivity
5. Conclusion
According to the report and based on practical application of operation management, can be make the following conclusions
Importance of the operations management will be increased in future
This subject will be more developed and that knowledge need put into practice.
Operation manager role of will highly important.
HR department must play as supportive department in managing people to implement operational strategy
Marketing department is play a bigger role when comes to the sales management or branch level operation.
To improve the business performance and quality benchmarking need be practiced by any company. Most effective bench marking practice is industry based bench marking.