Achieving the transformation financial services customers are looking for

Financial services continually hit the news.

Last year, Clancy Yeates wrote an article* in the Sydney Morning Herald titled “Banks’ customer-first claims ring hollow”. Clancy wrote

Qoute There are few things banks like banging on about more than being “customer-centric.” I’ve been writing about these financial giants for a few years, and some version of “we put customers at the centre of what we do” is probably the most-used phrase I’ve heard from the people who run banks.

Westpac’s Brian Hartzer has promised a “service revolution”; Commonwealth Bank’s Ian Narev has responded to a series of scandals by pledging to put customers first. National Australia Bank’s Andrew Thorburn and ANZ Bank’s newish boss Shayne Elliott both say it’s a top priority, too.

The question is, are these transformations working? What do customers think?

The above article had an online poll which ran for 8 months until December last year. The poll had a simple, single question: ‘Do you believe your bank puts your interests first?’ – 7% of respondents said Yes, 93% said No.

What do the regulators have to say? Are they seeing change? Clancy again

Qoute In speech after speech, ASIC chair Greg Medcraft has slammed the banks for incidents where customers are treated poorly, despite their slogans.

“We’ve got a lot of people saying ‘we put customers at the centre of what we do’, and then you see all their actions, and you go, ‘there’s something missing there’,” Medcraft said

It’s not just banks that have been put under the microscope. This month, Michael Roddan wrote an article* in The Australian Business Review titled “ACCC’s Medcraft raps insurers for ‘appalling’ products“. Michael wrote

Qoute Corporate watchdog chairman Greg Medcraft has attacked the insurance industry for selling “appalling” and “shocking” products that many in the sector would not buy themselves or recommend to family and friends.

“Frankly these findings, to put it bluntly, are shocking,” Mr Medcraft said. “What we saw was appalling. Insurers here have designed expensive and extremely complex products that put consumers at risk.”

We have a conundrum. Financial services organisations are stating they want to put customers first and be customer-centric, yet customers, and the regulators, are still critical, as they aren’t seeing the evidence.

None of what follows is theory. It is all evidence based.

In Europe there are some pioneers in financial services that have achieved improvement way beyond their expectations. From superannuation to credit cards, bank loans to household claims, business banking to global banking, account opening to payments, all are achieving amazing results. All have achieved improvements in customer satisfaction. It has also been better for the people that serve customers, and the shareholders have seen the benefits of improved profits.

What’s their secret? How have they been able to design services that deliver what matters to their customers? How have they been able to pull away from the competition?

The Vanguard Method is the secret behind these profound improvements in performance. Created by leading management thinker and occupational psychologist, Professor John Seddon, the Vanguard Method is now being recognised as the principal method for improvement in financial services organisations, producing fast, effective, tangible and sustainable results.

Not many people outside of Europe have heard of it. However, European leaders who have applied the Vanguard Method cross a Rubicon. Let’s hear from some of them.

In this short video Katharina Haase, Chief Operating Officer, Barclaycard Germany, describes how the Vanguard Method helped her organisation become truly customer focused, instead of just paying lip service.

Other European leaders agree

Qoute Once you realise you’ve been wrong about everything it’s really hard to go back.

Richard Hiscocks, Director Casualty Claims, Aviva UK

Qoute Leaders learn how to become real advocates of fundamental change.
People can predict performance, they can take preventative action and they can take the right decisions on where to focus for improvement.
We’ve halved the cost and got twice the value.

Pauline Holroyd, Vice President, HR, Europe, Middle East, Africa and Asia Pacific, Crawford and Company

The Vanguard Method in financial services

If you are a financial services leader, much of what follows will probably challenge your current view of how things work in the financial sector and may, at first sight, seem counterintuitive. However, once understood you will see that the issues are not complicated, the solutions are straightforward and the resulting improvements to the bottom line and customer satisfaction will amaze you.

Moreover, the improvements achieved through the application of the Vanguard Method in sales revenue, reductions in failure demand and elimination of wasteful activity, can all be realised without the risks associated with traditional change programs. The ‘big bets’ so often requested of senior managers can be designed out and in their place small investments based on knowledge and data designed in. Small controlled changes resulting in big effects with minimal risk for all – what’s not to like?

Gaining the knowledge required to take these small actions is a process of learning that you take at your own pace and, when you are ready to act, you will be able to predict the outcomes of the redesigned processes. In general insurance claims, the result of applying this kind of redesign is to reduce the indemnity spend by millions and send NPS ratings through the roof. The control will come from governance designed in through better measures used by people making the changes.

When the same ‘get knowledge – redesign – make normal’ route is followed in any financial services sales system, customers will ‘pull’ more from the product and buy more products. Customers end up buying more than a room full of your best sales agents could ever ‘sell’. Sales improvements of 30-50% are typical.

As I mentioned above, this is all evidence based, not theory. Let’s look at a UK Financial Services company who have achieved the transformation their customers were looking for.

This is Aviva, who are the UK’s largest general insurer, and a leading life, and pensions provider. In the short video below you can see them talk about their substantial, rapid & innovative change, that delivers what matters to their customers.

The good news does not stop with improvements to the delivery of core services. Support areas such as IT, HR and Finance can all benefit from the application of the Vanguard Method. As an example, IT managers learn their way to adding value to the core of the operation. It is a great example of what happens when the industry wide reliance on IT-led change is broken.

The shift from IT as the main agent of change, to one providing post-change support, always has an immediate and dramatic reduction on IT spend. Once people from IT ‘get it’, their contribution can be huge. One UK client with an approved budget of £15m for changes to a pensions system struggled to spend £500,000 once managers understood and acted on the major system conditions governing performance. ‘Understand the system – improve the work – ‘pull’ IT/digital’ is a formula that works every time and will without fail achieve a massive return.

Lets see an example of this approach to IT in operation, through a short video from Justin Watts, Head of Service Excellence, Lloyds Banking Group

Charles Eames, designer of those iconic aluminium and leather chairs found in so many boardrooms, liked to say, ‘Never delegate understanding’. It’s advice those who occupy his chairs would do well to heed. Through new principles, European financial services leaders have gained levels of understanding that go way beyond that which can be learned from ‘Red-Amber-Green’ reports. When leaders study the work in their system, the knowledge they gain frees them from a reliance on assumptions and data that is unhelpful at best, misleading at worst.

Knowing where to start can sometimes be the most daunting issue for managers. The good news for leaders in financial services is that the ideal place to begin the learning journey exists in every organisation in every sector we have worked in. Any substantial Contact Centre for customers has everything you need to gain the insights required to start leading action on your system.

When senior executives did this in a life company they learned that the functional design of service did not match the demands placed on the system by customers. When they led a service redesign to deliver the predictable service elements that mattered to customers, an 80% efficiency gain was registered that resulted in an NPS rating above 95%.

So when it comes to taking action on what’s been learned, you and your fellow leaders can choose where to focus your efforts based on an understanding of the true causes of failure demand and wasteful activity in the system. As we saw earlier, the control delivered by small controlled steps, judged against good measures, mean there is no need to bet the farm on any one action or programme. The process of identifying these causes will also provide the source for new design solutions, and engage the people who need to decide how the solutions will work and the best way to implement them. Momentum for change is designed in, resistance and dysfunctional behaviour designed out.

We need our financial services organisations to succeed in their efforts to reinvent themselves. The kind of change needed to rebuild trust and faith in the sector can only be achieved through the adoption of new principles that break with those that have led to the mistakes of the past.

The new principles must provide guidance on how customers experience service, how roles are designed to create value for customers, or add value to that work, and they must ensure that better measures are in place to judge how well the organisation is working against its purpose defined by its customers.

It is tempting to believe that doing things better will be enough to achieve the transformation customers are looking for. Deep down I think we all know that real, successful transformation will only be achieved when the whole financial services sector learns how to do better things.