Process improvement has come a long way since US guru Michael
Hammer published his thoughts about business process models in his
1993 book Reengineering the Corporation. In the banking community,
such process models are accepted and used as tools for design
improvements and as a basis for measuring process efficiency and
effectiveness.
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Many studies into best practice in the European banking and
leasing markets have found, that while lessors from similar captive
markets appear to do more or less the same type of business with
similar customers and products, there are still significant
differences in terms of process efficiencies.
If we take as an example some recent comparisons of business
processes from a selection of captive lessors in the retail motor
finance segment, active in the UK, German and Italian markets,we
can see the differences in best practice metrics between the three
countries’ standards.
The penetration rate, calculated by taking the number of new
cars financed by the captive and dividing by the number of new
retail cars sold through the manufacturer’s dealers, can be
considered as a measurement of the loyalty of the dealers to the
brand set off against the strength of the competition by
independent financiers (see chart 1).
More interesting from the process perspective are the key
performance indicators (KPI) for the efficiency and the
effectiveness of the operative business.
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By GlobalDataThe first KPI evaluated is calculated by dividing all new
applications received by the total number of Full Time Equivalents
(FTE) required to process these applications (see chart
2).
This shows that on average one FTE in Germany handles almost
twice as much as one FTE in Italy, and is therefore nearly twice as
efficient, on average.
However, looking at another process, the contract review,
booking and funding, the order of effectiveness changes (see chart
3).
The differences between these three countries continue to be
seen when looking at customer services (see chart 4).
Chart 5 examines how the countries compare in the processing of
volumes of customer service calls per FTE. In this instance, the UK
is leading – and one of the reasons is obvious:The average length
of a phone call also differs (see chart 6).With the shorter call
length in the UK, the agents can handle more calls per
day.
For the termination processing, the legal environment and the
product specifics of leasing contracts have a strong influence on
the countries’ relative efficiency, with Italy over twice as
efficient as the UK per FTE in this area (see chart 7).
To show the impact of these process efficiencies on staffing, we
will analyse a lessor under the following business parameters
applied across the three countries reviewed, assuming the
following:
• 300 new applications per day on average, of which 250 will become
contracts (the rest are rejected for credit reasons or the car sale
is not closed) on average
• portfolio with additions of around 200,000 contracts
• the number of terminated contracts at 250 per day on average,
assuming flat growth
See chart 8 to compare how lessors from the UK, Italy and Germany
compare, on average.
In this way, the differences of performance measured by underlying
processes is enormous.Typically, the efficiency of the best
performer in a process can be five to seven times higher than the
efficiency of the lowest performer. On a positive note,we have seen
companies that have improved their process efficiency by 300- 400
per cent within five years, going from the bottom of the ranking in
the respective country right to the top.
The author is Director of BenchMarking in Europe,BenchMark
Consulting International
