It had been a long day for Andy Curtis when he emerged from the meeting. It was terrible in there. The marketing people gave me a really tough time when I told them our current average turnaround times. They were quite happy to remind me that I had told them our discount rate product was killing us operationally and that we had to pull it if we were to survive the reorganization. Ive been made to look stupid. Four weeks after reorganization and after the product has been pulled, our turnaround times are even worse. I think they are right, we really are a shambles. Mary Godfrey, his deputy, was protective of her staff. Its no use blaming us, we are all working flat out but we cant seem to make any inroads to the piles of work. Andy Curtis was the Mortgage Operations Manager for North West Constructive Bank (NWCB), a large retail banking group. His main responsibility was running the new applications process in the banks new mortgage centre. For twelve months Andy had led a project team that had been planning the consolidation of the banks original three mortgage- processing centres into one new site. Prior to the consolidation, the banks mortgage business had been divided into three regions: Northern, Southern, and Western applications. The driver for the consolidation was to achieve economies of scale. There is no reason why a processing centre need be located close to its market and we could make significant savings by giving up our city centre leases on the three old sites, consolidating all our operations. We also felt that there would be room to develop more flexibility between the three regions when demand varied. Andy and his team had always known that the merger of the three centres could be difficult, which is why they had planned it for early February, before the spring peak in applications. It was also why they 218 PART TWO DESIGN Source: Shutterstock.com/jl661227 M07_SLAC6208_07_SE_C07.indd 218 13/04/13 1:07 PM had decided to (at least initially) keep the three regional sets of processing cells located close to each other. Figure 7.21 shows the current layout of the new mortgage floor. Seven months ago, it became clear that the banks portfolio of mortgage products would be changing. We had a confusing and incoherent legacy of products that even our branches didnt fully understand (Parminder Singh, Mortgage Product Manager). The introduction of the new product portfolio was scheduled to start in June. And Andys team was delighted by the idea of a simplified product portfolio. We can see two operational advantages. First, by consolidating all three centres into one we can get greater economies of scale. Second, the new product portfolio could considerably reduce the variety, and hopefully complexity, of our processing. Demand Demand fluctuated according to the time of year and specific offers. The discounted rate product had been seen as very attractive by the market. Although intended as a shortterm offer, Marketing had wanted the product to continue for another few months, but Andy persuaded them to discontinue it to reduce the demand on the new applications process during the reorganization. Unfortunately, when the news of the imminent demise of the discounted rate product broke there was a final surge in demand. The new applications process The processing of a mortgage application involves four sets of activities: Input where applications are keyed into the computer and initial checks carried out. Underwriting where the decision to lend is made. Offer where the team liaises with surveyors to obtain surveys. Completion where sanction letters are sent to solicitors. When the processes were moved to the new centre, the only significant change from the old way of working was the grouping together of all the keying in activities associated with the input stage. Input is a fairly simple activity and there is relatively little difference between different types of product and it has worked very well. Also bringing the teams together has allowed us to examine marginal differences between the ways we used to do it and adopt the best method. The input section have reduced from 19 to 13. It has also allowed staff to specialize to some extent, which can be useful at times. Problems with the new process In spite of his irritation at the recent meeting, Andy was broadly optimistic. We have three problems, which have hit us at the same time. First, the move itself was bound to cause some disruption and has created an uncertain and unstable environment in which to cope with our other problems. Second, the last-minute rush on our discounted rate product meant an extra load above what we expected and hit us just at the wrong time. Third, although we have only been operating with the new layout for four weeks, its clearly not working as it should. Andys team debated this last point and identified a list of key problems: Staff were having to move about more than at the old centres. There, the information was within easy reach of all staff. Now, the files had been consolidated to avoid duplication, so the filing room was further away for most staff. Figure 7.21 Floor plan for new mortgage processing centre File storage Northern region Input activities Southern region Scanning machines Western region Elevators CHAPTER 7 LAYOUT AND FlOW 219 M07_SLAC6208_07_SE_C07.indd 219 13/04/13 1:07 PM 220 PART TWO DESIGN Therefore because of the effort in retrieving a file, staff were keeping it on their desk, out of the filing system, for longer than necessary, in case it was required again, making it unavailable to any other member of staff. All the scanning machines were located together in one location to maintain a high utilization of the machines, but again, this meant that staff had further to walk. Even the southern area team, for whom the scanning machines were convenient, resented the other teams constantly walking through their area. There was no clarity of flow. The high level of in-process inventory of partially processed applications (both physical files and virtual files on the IT system) had resulted in a black hole syndrome, with applications disappearing into peoples in-trays. We must get the flow through our process right. Processing a mortgage is a relatively standard task. The only activity where a specialized knowledge matters is at the offer stage, where knowledge of the region is required. We have already put all the input activities together and that has worked well. I dont see why we cant have work flowing from the input section, to underwriting, then to offer, and then to completion, just like a smooth running assembly line. (Andy Curtis) Redesigning the process Three separate options for the design of the process were being actively considered by the management team. Option 1. Keep the process as it is currently at the new centre, with a common data entry stage serving all regions, and with the three regions each having their own underwriting, offer and completion stages working in series. This arrangement had the advantage of not disrupting the existing way of working and of maintaining the organizational coherence of the three teams, which were each already developing their own cultures. Option 2. Reorganize the whole process by abandoning the current regional structure and organizing four sequential teams around each of the four stages of data entry, underwriting, offer and completion. The advantage of this arrangement was seen as being more appropriate for the higher volume that the new combined centre was processing. It would also allow some skills, such as underwriting skills and legal skills, to be developed because of the larger number of staff with these skills working together. However, there were some disadvantages. First, it would affect the morale of the existing regionally based teams, especially the southern team who had worked together for many years. Second, for some activities in the offer stage it was still an advantage to have some local knowledge of the regional property markets. Even if this option were adopted, the offer team would probably still have to retain some local cells within the process. Option 3. In some ways this was the most radical design option being considered. It involved reorganizing into four teams around the four stages within the process, but operating the underwriting stage and offer stage in parallel. This was seen as risky, especially with such high levels of recycled applications, but offered the advantage of short throughput times.

1 What appears to be the volumevariety position of the new centre? Is it different from the old centres?

2 Should the process be redesigned, and if so, which option should be adopted?

3 How would you recommend that Andy sets about making any changes?