Operational efficiency is most important factor 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.