Zeeshan Ahmad Khan
University of Central Punjab, Pakistan
E-mail: Zeeshan.khan687@gmail.com
Muhammad Ahmad
University of Central Punjab, Pakistan
E-mail: ahmed_acma@hotmail.com
Sehrish Butt
University of Central Punjab, Lahore, Pakistan
E-mail: Sehrish.butt786@gmail.com
Submission: 27/08/2018
Revision: 10/09/2018
Accept: 01/10/2018
ABSTRACT
For Pakistani banks to remain
competitive in this 21st century, they have to adopt and excel in practices
that have brought significant competitive advantages to firms worldwide. Among
these practices, lean management has played a significant role. There is a need
to develop a systematic approach to access up to what extent firms are adopting
lean practices. The objective of this research is to measure the level of
adoptions of lean practices in banking sector in Pakistan. Face to face
structured interviews were conducted and our findings suggest that banks are
not implementing lean practices in true spirit. To implement lean practices
holistically, bank employees should understand the philosophy of lean.
Keywords: Lean Management, Practices, Pakistan,
Banking sector, Semi structured interviews
1. INTRODUCTION
In today’s world, organizations are
striving to deliver quality services to meet rising customer expectations. For
this purpose, they develop strategies to enhance understanding of needs of
customers. Increase in customer expectation has pressurized organizations to
reconsider their operational activities and to become more efficient to retain
their customer base (CRONJE, 2007). Goldman, Nagel and Preiss (1994) suggested that
agility, adaptability and leanness are three major pillars in order to remain
competitive in global volatile business environment.
Lean is a business strategy that has
focus on maximizing the customer value while eliminating waste and deficits in
the business process. It is viable and holistic methodology of management
processes of firms. Lean is all about continuous improvement and the only way
an organization can gain business excellence and sustainable change by making
strong bond between purpose, process and people (ALINA-MARIA,
2011).
The Lean practices are followed
globally by organizations that are facing some level of inefficiencies that is
negatively affecting their financial performance. For many years, lean was considered only for
manufacturing industries. However, recent researches have shown that lean
applied to every business. It is not a cost reduction approach or program, but
it is way of thinking for organizations (DEELY,
2014).
In order to retain and enlarge
customer base, banks should focus on customer-centric approach. Commercial
banks are offering same financial product that is why customer services become
core competency that can give competitive edge to banks (TYRER, 2010).
A study conducted by Lebides (2012) reveled that banks are more inclined
towards measuring employee performace in terms of sales and revenue and are not
focusing on behaviours that are associated with customer services. Customers
are more frustated due to errors made by their banks; this is due to the fact
that employess service product rather than clients. Banking institutions have significantly
transformed their business paradigm from product service to customer service
(NZAMA; MBHELE, 2015).
The banking sector is bit slow
in adopting lean practices because of its manufacturing origin; but this
attitude is changing gradually. The primary objective of applying lean
practices in banks is to gain revenues by reducing cost (DUTHOIT; BARTLETTA; BHATIA, 2010).
The only challenge faced by lean
practices lies in its application i.e. it needs to be implemented holistically.
Applying lean practices in few departments will result in its failure. In
addition, lean needs to be supported by cultural change from top to bottom in
organization. The top management must believe in and exhibit commitment to lean
practices while middle managers and frontline officers must feel motivated and
their empowerment to contribute (Bhutta,
Rosado-Feger, Huq, & Muzaffar, 2013).
1.1.
Significance
of study:
When a new term or theory regarding
cost reduction or increase in sale is proposed, there is interest in industry
to adopt it because a lot of prestige is given to academics in Asian countries.
Hence, there is a need to design a systematic approach to access the level of
adoption of such practices.
1.2.
Research
Objective:
In this research, our objective is
access up to what extent banking industry of Pakistan is implementing lean
practices. The banking sector of Pakistan has significant importance in
financial sector and country’s economic growth heavily relies on it (MINISTRY OF FINANCE, 2017). That is why; it is
important that banking industry adopts these latest techniques first and then
it migrates to other industries after identifying potential of these techniques
(BHUTTA et al., 2013).
2. LITERATURE REVIEW
Shah and
Ward (2007) provides a brief history of lean production locating its roots in
pre 1927. Hines, Holweg, and Rich (2004) also provide historical backgound of
lean production, from scientific
movement by Fedrick W.Taylor in early 1900s to the quality revolution in 1980s
and later new production model of 1990s.
Jaaron and
Backhouse (2011) stated that many researchers have turned their foucs to
analyze the impact on lean prodcution on specific industires. In developing
world, there is an active research on adoption of lean practices and their
impact on productivity (PORTIOLI-STAUDACHER; ANTARDINI, 2012). In the past
decade, lean has transformed from technical oriented to human oriented aspect
(NORDIN et al., 2012).
Chibaira and
Hattingh (2013) stated that primary goal of lean is to identify and eliminate
waste at different process levels. The lean methodology helps to streamline the
processes and entire flow of work to increase the firm’s productiviuty while
eliminating waste and satisfying customers.
Hines et al.
(2004) stated that lean can be classified in two level i.e. strategic and tactical.
Strategic level lean focuses on value creation thus have universal application.
Tactical level lean focuses on those techniques that are applied in specific
context. Many lean application focus on tactical level rather than strategic
level, with organizations applying specific tools and techniques. That is why,
many organizations did not get much benefits of lean implementation like Toyota
did.
According to
Anand and Kodali (2009), the major reason of poor implementaion of lean is
absence of brif list of principles, tools, techniques knowledge and practices
alongwith lack of unifying framework. Therfore, impact of lean varies due to
lack of general understanding on lean and how individual firms implement this
system.
Kanakana
(2013) stated that many service organizations are implementing lean principles.
Zarei, Fakhrzad and Paghalehc (2011) found that lean practices can reduce cost
and improve customer services by imporving process. Vlachos and Bogdanovic
(2013) found that in some cases, automation of some non streamlined functions
can cause some problems and work flow can be reduced. Therefore lean principles
cannot be applied to all inductries. However, service sector can adopt only
those principles that are useable and useful.
Goldenbaum-Gaber
and Rizenbach (2013) conducted a research to investigate how successfully
financial sector is adopting lean practices. Their results showed that banks
can gain substantial benefits by using lean practices including cost reduction
and improvement in efficiency.
This
validates the findings of (MALEYEFF, 2006) that banks can adopt lean to improve
the banking opeartions. A survey conducted by PriceWaterHouseCoopers (2013)
found that there is a lot of potential for financia; sector to adopt lean
practices to increase day to day effciency.
Lean practices can be directly
applied to banking system because it is purely process business. By applying
different lean techniques and practices banks can (i) reduce the time require
to perform specific tasks (ii) eliminate wasteful and idle activities to reduce
business cost, (iii) better customer services by providing quality services and
boosting morale of staff by engaging them in development and continuous
improvement. Moreover, lean practices can result in reduction of cost by 25
percent, response time can be increase by 50 percent and revenue gain can
increased by 5 percent annually (SAYER; WILLIAMS,
2012). GoLeansSixSigma (2015) shows a
list of financial institutions that have successfully implemented lean practices.
According to report, some banks have gained more than 90 percent result in net
income after few years of its lean implementation.
3. METHDOLOGY
There is a
significant evidence to use case based methodlogy in case of exploratory
research (BHUTTA et al., 2013). The case study methodology is used when
in-depth and holistic investigation in required (FEAGIN; ORUM; SJOBERG, 1991).
Barkley (2006) stated that case study method can be used for business
evaluation.
This
research uses the case study methodology to measue extent of lean practices in
banking sector of Pakistan. Face to face in-depth interviews from managerial
level bank employess were conducted to collecet data. These interviews were
conducted with a purpose to identify up to which extent lean practices are
followed in banking sector of Pakistan.
For this
stufy, we have conducted five interviews as we reach saturation point as
suggested by (DEPAULO, 2010). Tag clouds were created using tagcrowd.com The
banks involved in this study were from both public & private sector. Table
1 shows the profiles of respondants. The names of banks and respondants are
kept secret on their request.
Table 1: List
of Banks and Respondants
|
Banks |
Type |
Respondant
Designation |
Respondant
Banking Experience |
Education |
|
B1 |
Public Sector |
Opeations Manager |
10 Years |
MBA |
|
B2 |
Public Sector |
Credit & Trade Manager |
4 Years |
MBA |
|
B3 |
Private Sector |
Opeations Manager |
6 Years |
MBA |
|
B4 |
Private Sector |
Relationship Manager |
4 years |
MBA |
|
B5 |
Private Sector |
Relationship Manager |
6 Years |
MS Management |
4. FINDINGS AND DISCUSSION
Although all
respondants have enough banking experience and familiratiy with banking
operations, there was no concept of implementation of lean practices in banks.
Below are the findings of our study.
4.1.
Cost
reduction by using effective tools
Cost
reduction is now done by every bank. One of the respondants said, “Paperless banking is still not possible in
Pakistan but banks are trying to reduce cost at branch level e.g. in case of
inter bank communication, documents are sent via email, administrative expenses
of branches are reduced”.
Cheque
books, debit cards, credit cards are printed by head office that reduced
printing cost. Though banks have claimed that cost reduction is their priority
but in reality no effective toolsand techniques are being used by bank. Banks
are still using multiple copies for contracts and every contract is of 7 to 10
pages. Banks are spending too much time and resources for customer verification
and also banks have to maintain hard copy of every record and every record is
printed on single side page.
4.2.
Time
spent on walk-in-customer
Banks are
spending approximately 5 minutes on walk in customer. However, this time
depends on nature of transaction and speed of system. One of the respondants
said, “In case of big transaction, it can
take 10 to 15 minutes transactions”. Banks have operational token systems
that helps in reducing que and waiting time. Dual approval is required on every
transaction to reduce errors and mistakes. Time spent on walk in customer can
be reduced if system is not down and working properly
4.3.
Focus
on service excellence
Banks are
using differennt prodcuts for providing
service excellence i.e. ATM, Internet banking, phone banking, sms alerts on
every transaction, discount on debit and credit cards and many more. One of the
respondants said, “The use of technology
has given so much ease to customers and now they don’t have to wait in que”.
Due to use of technology, human interaction in banking transaction is reduced;
hence chances of errors are now minimu. In case of any error or mistake, banks
take normally 1 to 2 days depending on nature of error.
4.4.
Utlization
of Human Resource
In banks,
the minimum qualification required for OG-2 level job is gradaution but banks
are hiring post gradautes. The promotion of employees on their performance and
operational working their branches. One of the respondants said, “empployees have to spend minimum 3 years on
same post to become eligible for next promotion”. Banks conduct training
worshops for their staff on reqular basis. In case of launching of any new
product, trainings are delivered to staff members and banks ensure that staff
member must attend these trainings.
4.5.
Understanding
of Lean & Lean Banking
Managerial
level staff has no idea about lean and lean practices practices. “According to respondants, if banks can
reduce contracts to 4-5 pages then it can reduce cost”. Moreover, paperless
banking is not possible in pakistani culture because customer will not accept
paperless contract. The banks are not spending huge amount on publishing their
marketing material. Social media is one of the fastest and inexpensive medium
used by organizations to reach to their customers. One of the respondants said,
“Instead of using social media, banks are
using expensive mediums for reaching to their customer i.e. print and
electronic media”.
5. CONCLUSION AND RECOMMENDATION
For the past
few decades, lean practices has gained popularity in operations strategy of
organizations in developed countries. Recently, organizations in developing
economies have also started to implement lean practices to improve their
production and to increase competitiveness in continous changing global
enviormenet (BHUTTA et al., 2013).
Many
researchers argue that Lean practices is not about choosing appropraite
technique, but it is about adopting the philosophy and applying holistics and
complete lean program in organization. Also, implementation of lean program can
be take time as employees and managers need time to adjust with new philosphy (NORDIN
et al., 2012).
Very few
researchers are conducted in Pakistan to analyze the lean practices practices
in Pakistan. This study is an attempt to
identify up to what extent banking sector of Pakistan is implemeting lean
practices. Based on our findings, we can conculde that banking sector of
Pakistan is in early stages of implementing lean practices and also there is
great opportunity for banks to improve their operations by implementing lean
practices.
Though banks
are striving for reducing their cost but they are not implementing lean
practices in true spirit. In order to implement lean practices holistically,
banks should inculcate philosphy of lean practices in its staff. Even
managerial level employees of banks have no concept of lean practices.
Therfore, it is need of an hour to conduct training sessions specific to lean
practices for bank managers.
Also banks
need to educate their customers about their products. This will not only
decrese the transaction time but also reduce the cuctomer visits in branches. Also we have
found that there is a lot of paper wastage in banks i.e. single sided printing
is being used in braches, lenghty and multiple contract copies etc. This paper
wastage can be reduced to minimize cost. Pakistani banks should introuce
paperless banking and also feel their clients convinent in using paperless
banking.
To
recapitulate, Pakistani banks are operating in highly competitive enviorment
and it is important to invest in such programs which enhance their performance
alongwith productivity. For future research, we recommend to expand this
analysis to overall financial sector by making different clusters of financial
institutions. These cluster will then act as becnhmark for management to
determine where their financial instituion is standing in industry and it will
help in identifying best lean practices for financial institutions in context
of Pakistan.
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