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Lean Machines

How lean thinking is helping credit unions maximize value

When Connie Wighton was first introduced to Lean thinking at Libro Credit Union (100,000 members, $3.6 billion in assets) in London, Ontario, she watched a YouTube Video entitled “The Lean Burrito.” In the video a guy orders a burrito for lunch and, along with it, receives containers filled with hot sauce and sour cream. The burrito is wrapped in both aluminum foil and paper, and comes in a cardboard box with aburrito fork, knife, and a couple of napkins. After he eats the burrito the guy is left with a pile of waste: cutlery he didn’t use, containers he didn’t need, and so much wasted packaging. All of which could be avoided, he surmised, if they had simply put the sour cream and hot sauce inside the burrito, and wrapped it up in foil.

The video made Wighton, manager of value creation at Libro, consider her daily morning coffee. “At Libro every day I have my coffee and I put six creams in it,” she says. “I use six little cream containers every day.” She showed her colleagues the Lean Burrito video. “Now we’re getting cartons of cream,” she says.

Lean thinking

Lean thinking is becoming an increasingly popular way of approaching business process improvements and waste reduction. It originally stemmed from car manufacturer Toyota’s renowned just-in-time manufacturing process, in which the amount of product created matched up exactly with demand in order to eliminate storage and wasted materials. With this focus on lean operations, Toyota turned a ailing car company into a global leader in the automotive sector. The company called its process the Toyota Production System, and described it as a “framework for conserving resources by eliminating waste.”

Lean thinking later made its way to tech startups by way of the book The lean startup. “It spawned a real movement,” says Tim McAlpine, president and creative director at Currency, a credit union-focused marketing firm in Chilliwack, B.C. “The whole idea behind the book is about getting things to market quickly, testing with actual users, and having a feedback loop instead of launching something without input from the market,” he says, adding that this is often counterintuitive to credit union operations, which are by nature highly regulated and risk averse.

But the idea of Lean goes well beyond auto manufacturing efficiencies and technical product launches. It also encompasses a way of thinking that is inherently familiar to credit unions: maximizing value for members. That value often goes hand in hand with minimizing waste.

According to a Filene Research Institute report entitled Operational efficiency: process improvement opportunities for credit unions, “Billions of dollars are spent every year purchasing and implementing new IT systems. These systems can help improve the efficiency of an organisation only if they can effectively integrate with existing systems and process – eliminating the need for manual intervention and additional monitoring.”

“Lean thinking has become part of our DNA. Everyone has a part to play, and staff embrace it and apply the tools. They can all see how this impacts members.” – Neil Brown

The report goes on to say that, ultimately, it’s process improvement that is the key to waste reduction. “Well-designed processes require fewer resources because all areas of waste, redundancy, rework, poor handoff, and failure have been identified and removed. Additionally, good process design takes into account the ‘voice of the member’ and ensures that those processes can meet member requirements and expectations.”

Libro looks inward

For Libro, which started its Lean department at the beginning of this year, Lean thinking has resulted in an examination of processes that can be improved to boost value to members. “It’s easy to blame technology for a lot of things,” says Wighton. “Sometimes the technology is adaptable. But it could also be policy or process related.”

Libro has taken a two-pronged approach to its Lean projects: it looks both for large-scale undertakings that align with its annual strategic direction, as well as quick hits that require very simple fixes, like the coffee cream cartons. “Everyone must think about Lean in everything they do,” Wighton says.

With its 2016 strategic focus on driving value for members, the credit union took a look at the process of member acquisition. “The first onboarding steps were critical,” says Wighton. “So we went to our Advice & Service Delivery department and asked for a commitment from the group. They agreed to commit to the process. It was a huge project with many departments involved to get everyone’s feedback.”

Next year, Wighton — currently a department of one overseeing Lean initiatives — will put together a Lean steering committee tasked with selecting four to six big projects, or kaizens, as they’re referred to in Lean terminology.

Wighton learned both the terminology and Lean principles through training with Lean Sensei International, a Vancouver-based academy that offers Lean training and certification complete with Japanese-inspired vernacular and a belted system of achievement ranging from whitebelt, to greenbelt, blackbelt and master blackbelt.

“We started with a two-day strategy planning session with our executive team,” says Wighton. “Then we set a goal to train 50 per cent of our staff in Lean 101, and to train 15 greenbelts. I was the first greenbelt, and I’ve done a lot of the groundwork on the roadmap for what Lean looks like for us.”

To get her greenbelt, Wighton spent three weeks in a classroom, and completed two kaizens on pro- cess time reduction. She’s now working toward her blackbelt and says Libro’s goal is to eventually to have all staff trained in the Lean 101 course. “We’re hoping all staff start looking for improvements.”

Change agents

Libro consulted with First West Credit Union (250,000 members, $11 billion in assets) as it embarked on its Lean journey. An early adopter of Lean thinking, First West started its training back in 2010, when an “environment of higher operating expenses and declining membership,” plus a number of mergers, created the need for a new approach to grow and transform the business.

“We needed to create a culture of problem solvers,” says Neil Brown, director of continuous improvement at First West. “We identified 25 individuals and put them through greenbelt training. These were our change agents. Then we identified the parts of the business we wanted to see improvements in through the lens of what would be of value to the member experience. Fast forward to today and we can see how Lean thinking has created capacity that has enabled us to grow the business and membership in a significant way.”

“Everyone must think about Lean in everything they do.” – Connie Wighton

Vicki Morgan, a business partner in continuous improvement at Penticton-based Valley First, a divi- sion of First West Credit Union, says she did everything she could to be included in the Lean training.

“I was a branch manager at the time, and I was so passionate about Lean I was already applying Lean tools without realizing it.”

Now a blackbelt, Morgan helped harmonize the Valley First and Envision teams after the mergers. “We wanted to bene t from shared knowledge and formally capture how to make things better.”

She says the Lean training “really challenged us to think differently. Many times you look at things from how they affect you. This asked us to consider how we could build a perfect process from a member perspective, and then layer back in the business value-add and regulatory necessities. It taught us to question anything leftover and ask ‘Is it worth doing?’”

Like Libro, First West chose to examine its membership opening process. “Our membership numbers were consistently growing at higher levels than fellow credit unions, but it still took over an hour to open an account,” Morgan says. “So we took a rst look and made some improvements. Then we improved upon those, and then took a third look. It’s continuous reinvention every 12 to 18 months. We’ve got it down to 15 minutes now.”

Morgan says once the account-opening process was refined, they turned to IT solutions to reduce the time even further. “An IT solution can get it down to five or 10 minutes from 15. And members can walk away with their member card, which makes it even easier for them to get started.”

Ken D’Sena took a slightly different approach to applying Lean strategies in his department. The assistant vice-president of commercial banking at Envision Financial, a division of First West, D’Sena adopted the Lean practice of hansei, or re ection, to engage his team in a regular process improvement exercise.

“After every meeting, I collect the team together for a five-minute exercise where we look at what worked well, what we could do differently, whether anyone needs help and whether we lived First West’s six ideals. “It’s transformed the way I engage my team,” he adds. “And for me, it’s been both personal and professional. I use hansei at the end of the day for personal reflection.”

First West has gotten so good at Lean thinking, it’s now offering advice to its members on how to implement the concept in their businesses. “We have a member whose CFO will be joining us because they’re curious about the Lean program,” D’Sena says.

“Lean thinking has become part of our DNA,” says Brown. “It’s not just a program or project. Everyone has a part to play, and staff embrace it and apply the tools. They can all see how this impacts members.” ◊

Green belt isolated on a white backgroundThe Collaborative Approach

The path to maximizing value for members isn’t Lean for all credit unions, especially smaller credit unions with limited resources. For Shelley McDade, CEO at Sunshine Coast Credit Union (SCCU) (165,000 members, $550 million in assets) in Gibsons, B.C., that path took the form of collaboration.

“Our collaborative approach was rooted in our size and the landscape of what’s coming in the financial services sector,” says McDade, adding that as a small credit union, SCCU could only afford to invest in either Lean thinking or collaboration. She chose collaboration.

“It’s unlikely we could be a world-class financial institution without collaboration because we simply don’t have the resources to keep up. Innovation and creativity cannot be achieved on their own.”1025255_thumbnail

But that hasn’t stopped SCCU from achieving Lean-like results. In fact, the beauty of McDade’s choice is that SCCU’s collaborative endeavours have been an alternative route to the same outcomes as a Lean thinking implementation: less waste, streamlined processes, and more value for members.

McDade got SCCU involved in several key collaborations that have enabled it to maximize efficiencies. The first collaboration, the Solutions Centre, launched in 2010, consists of a group of 42 B.C. credit unions that have joined together to solve problems and apply their joint mass to value creation efforts.

“We’ve been able to bring our mass together to purchase at a better cost and quality,” says McDade. “We’ve also gotten a better quality of contract design,” she says, adding that large contracts often require a level of legal advice that isn’t accessible to small credit unions.

“Together we can hire best-in-class legal design these contracts.”

The collaborative approach has also benefitted ongoing vendor management. “If SCCU has a problem with a vendor, the vendor is not as likely “to be as motivated to correct it than if all 42 credit unions call them up.”

Another area in which SCCU has applied a collaborative model is wealth management. “Small credit unions may not be able to afford the calibre of leadership required to manage that part of the business,” says McDade. “We created a credit union service organization (CUSO), which several credit unions came together to build so that we could maintain good rigour and control in how wealth management advice was provided.”

CUSO started with three credit unions in B.C. and has grown to include 10 in both B.C. and Alberta.

“We all aspire to the same model and to improve our bottom lines and quality of service delivered to members. We’ve achieved both through the CUSO.”

A third area that has benefitted from a collaborative approach is risk management, says McDade, adding that 10 credit unions have come together with a memorandum of understanding to create a leading-edge risk management framework. “Together, our costs are significantly lower than what we would have paid alone. If we’re not spending quadruple the cost we can invest that back into interest rates for our members or new technology channels.”

Aikido green belt on the white kimono

How to get Lean

Filene Research Institute conducted a survey of credit unions, ranging in size from $130 million to $7 billion in assets, on their continuous improvement initiatives. the resulting case studies, published in Operational efficiency: process improvement opportunities for credit unions, identify seven essential elements for Lean success:

1. LEADER-LED: CEOs and board members must agree that Lean is valuable and must lead the way.

2. STRATEGIC: Create a meaningful strategy to improve service quality and track it with key metrics.

3. COST-CUTTING: Hone in on key improvement opportunities to reduce operational expenses without adversely affecting the member experience.

4. COMPETITOR AWARENESS: Be aware of what other financial institutions are doing to better their performance, and don’t idly sit by and watch.

5. CORPORATE CULTURE: Create a culture of continuous improvement so that it’s not just a one-time project but a part of your credit union’s DNA.

6. TOP DOWN EDUCATION: Train senior leadership rst so that they can reinforce the culture.

7. DEDICATED STAFF: Create positions dedicated to overseeing and implementing process improvement.