Finance organizations are experiencing challenges due to the growing competition in today’s advanced business environment (Madhani, 2020; Singh & Rathi, 2018). To gain a competitive advantage and stay in business, these organizations need to eliminate operational waste and enhance their efficiency and productivity to better manage their operational capabilities, increase customers’ satisfaction, and achieve their organizational objectives (Madhani, 2020; Singh & Rathi, 2018; Chiarani, 2013; De Koning et al., 2008). Hence, certain strategies like process improvement and innovation must be utilized to accomplish this feat (De Koning et al., 2008).
In organizations such as banking services, better quality initiatives must be implemented to meet customers’ high-quality expectations, provide more efficient processes, and gain an advantage within the competitive business environment. Several quality initiatives that most of these types of organizations employed include TQM (Total Quality Management), customer care, quality circles, process re-engineering, and team building (Knights and McCabe, 1997, as cited in Singh & Rathi, 2018). Yet, other modern quality improvement initiatives that are mostly implemented extensively within these organizations are the Lean, Six Sigma, and Lean Six Sigma methodologies (Singh & Rathi, 2018; Antony et al., 2017).
Lean Six Sigma Methodology And Tools In Finance
To remain competitive in the current competitive business environment, it is imperative for organizations to extensively implement process and quality improvement approaches. Not only will they improve their manufacturing and service quality, but they will also increase sales and market shares and improve customer relations (Ansari et al., 2011; Gera et al., 2017). Therefore, many organizations like Motorola Corporation, Alaska Airlines, 3M, and Caterpillar Inc. implement process improvement initiatives such as Lean, Six Sigma, and Lean Six Sigma (the fusion of Lean and Six Sigma) to enhance manufacturing and service quality for many business operations (Madhani, 2020).
In service organizations, Lean – or Lean Thinking – helps enhance process efficiency. This includes eliminating waste (in terms of time) by focusing on the big picture, analyzing the workflow cycle from client’s perspective, and maximizing value to customers using as few resources as possible. On the other hand, Six Sigma helps refine the process to meet customers’ needs and satisfaction. This is achieved by measuring the quality of the service and reducing defects through various processes involving the use of statistical tools and only producing 3.4 defects per million opportunities equalling a 99.9997% success rate (Delgado et al., 2010; Singh & Rathi, 2018; Antony et al., 2017).
Lean Six Sigma (LSS) is effective in simplifying operational processes and making it easier to detect defects and wasteful procedures (Madhani, 2021). In addition, LSS has been utilized widely across various industries to help reduce errors, excessive cycle times, inefficient processes, and additional costs that are related to their financial reporting system in order to enhance companies’ customer satisfaction, process speed, return on investment, quality, productivity, and ultimately the overall business performance (Madhani, 2021; Ansari et al., 2011; Singh & Rathi, 2018).
According to a study by Vashishth, Chakraborty, and Antony (2019) involving the analysis of several case studies, the employment of LSS Methodology in the financial sectors and organizations involves various tools. Here, the tools that emerged are as follows:
- Value Stream Mapping (VSM);
- critical-to-quality analysis;
- Process Flow Chart;
- Control Charts;
- C&E analysis;
- Supplier-Input-Process-Output-Customer (SIPOC);
- Pareto Analysis or 80/20 chart;
- Voice of the Customer (VOC).
The tools above are observed to be the most common ones and are easily integrated with DMAIC and fused with Lean philosophy (Chakravorty & Shah, 2012).
It has been proven in recent years that LSS is effective in many different business organizations including finance. As mentioned above, due to inefficient processes, the procedures within the current financial reporting of many organizations are facing multiple errors, duplicated data entry, excessive cycle times, and additional costs (Ansari et al., 2011; Singh & Rathi, 2018). Traditional finance operations are characterized by low speed and high variability. However, with the deployment of Lean Six Sigma initiative, finance operations are transformed to reflect high process speed and less variability with developed competitive capabilities that are up to standards of the current advanced business environment (Madhani, 2021).
A case study by Ansari (2011) illustrates the application of Six Sigma methodology within the finance department of a major U.S. defense contractor. It involves utilizing the DMAIC strategy in the effort to streamline and standardize the establishment and maintenance of costing and planning for all business activities within the current financial management process under the project “Continuing Account Reconciliation Enhancement”. Evidently, results from this study showed a significant reduction in the average cycle time, errors, and cost (per unit of activity) needed to produce the required financial reports.
Similarly, Sunder et al. (2019) study the application of LSS through the DMAIC strategy in consumer banking involving two banks (Case A and B) for process improvements in real-time settings. Multiple LSS tools were utilized in both cases within the five phases of DMAIC including Voice-of-Customer (VOC), brainstorming, Pareto analysis, Value-Stream Mapping, Fishbone diagram, and 5-Why analysis. Results found that the deployment of LSS in both cases has achieved significant improvements in terms of employee utilization (Case A) and payment processing accuracy (Case B). This demonstrates that LSS methodology is effective and applicable in the consumer banking sector.
There are many other finance organizations that apply LSS to achieve process improvements and the leading implementers of LSS for process improvement in finance around the world include Bank of America, American Express, Citibank, GE Capital, HSBC, Vanguard Group, and JPMorgan Chase & Co.
Here, it shows how LSS is the predominant process management methodology that can help improve process management in finance sectors and organizations. Not only does it bring out greater process efficiency and quality, but it also helps rectify organizational issues faced by finance sectors and organizations through the tools and discipline provided (Madhani, 2021).
Benefits Of Lean Six Sigma In Finance
Lean Six Sigma brings great benefits to organizations of many sectors to obtain higher quality and efficient processes. Here are some of the major benefits that come with the successful deployment of Lean Six Sigma in finance (Madhani, 2020; Vashishth et al., 2019; Antony et al., 2017):
- Reduction of cost, delay, complaint, and operational time
- Reduction of erroneous rates in the billing process with faster turnaround time
- Reduction of manual workflow and staff and administrative inefficiencies and errors
- Elimination of waste and non-value-adding tasks
- Effective cash flow management
- Streamlined and standardized financial reporting process
- Improved cycle time, process, and operational efficiency
- Improved cross-functional teamwork and bottom-line results
- Improved service quality and customer satisfaction
- Increased process control and regulatory compliance
- Enhanced financial statement preparation accuracy
- Outperform competitors and gain competitive advantages
- Enhanced employee morale and job satisfaction
- Positive organizational culture change
Key To Successful Execution Of Lss Strategy In Finance Sectors/Organizations
The key to a successful deployment of LSS Methodology depends heavily on the commitment to continuing the program. To maintain the improvement of a company’s operational and service performance, it is vital that the standards and processes be simple, easily understood, and accepted by all parties involved (Ansari et al., 2011). Otherwise, the approach will likely not be trusted let alone utilized; hence, implementing the program would only bring fruitless results (Ansari et al., 2011).
Here are some of the essential elements to achieve successful deployment of LSS Methodology in the finance sector or organization suggested by Antony et al. (2017);
- A clear direction on the application of LSS within the organization
- Commitment of time and staff for the deployment
- Clear communication to everyone on the need for the initiative
- Determination toward achieving tangible bottom-line impact
Selection of top talent
- Assigning competent and reliable people in the initiative of LSS deployment
- Utilizing the Belt system (i.e., Yellow Belt, Green Belt, Black Belt)
- Active involvement from the LSS methodology experts, project sponsors, and an effective management system to maintain the initiative
Project selection, task prioritization, reporting, reviewing, and tracking system
- To maintain the momentum of the initiative within the first couple of years, it is wise to have the projects workable within three to six months after implementation. It has been observed that senior management teams in many organizations lose interest in projects prolonging more than six months.
- Regular project reviews with the LSS expert after each stage of the DMAIC strategy.
- Under the circumstance where culture change is needed but not addressed properly at the outset of the initiative, the collapse of the initiative will be expected.
Essentially, to achieve faster turnaround time and lower costs, finance sectors or organizations need to retain better controls and compliance whilst fulfilling business demands. Additionally, to meet customers’ satisfaction, it is imperative to obtain efficient and high-quality financial processes within the organization to ensure a sufficient, on-target, and value-added work effort. As such, a well-executed LSS programme will bring about significant improvements which ultimately enhance the performance of a finance organization and retain its competitiveness.
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