The Emerald Research Register for this journal is available at
www.emeraldinsight.com/researchregister
IJBM
23,1
Re-engineering service
quality process mapping:
e-banking process
28
Received February 2004
Revised July 2004
Accepted August 2004
International Journal of Bank
Marketing
Vol. 23 No. 1, 2005
pp. 28-53
q Emerald Group Publishing Limited
0265-2323
DOI 10.1108/02652320510577357
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0265-2323.htm
Raphaël K. Akamavi
The Hull University Business School, Hull, UK
Abstract
Purpose – The paper examines a financial service innovation process, which is referred to as
financial product innovation: improvements to existing services. This study conducts a critical
analysis of the operational process of opening a Lloyds TSB Student Account at a local branch.
Design/methodology/approach – The process of opening a student bank account is documented
in a flowchart/flow network, which highlights operational steps and the visibility line between
front-end and backroom staff. This process mapping technique/flowchart allows for the diagnosis and
identification of both potential and actual bottlenecks in the existing process, which prevented a
quality service encounter for the customer. After outlining these problematic areas/non-value added
activities, the adopted qualitative triangulated methodological approach yields a redesigned flowchart
illustrating these changes. Furthermore, this paper proposes a re-engineered process (i.e. e-process or
virtual process), which removes these bottlenecks systematically.
Findings – The results show the increased efficiency, productivity and customer satisfaction levels
that are the key to innovation process performance. The study concludes with evidence of
non-financial performance results of this type of financial service innovation.
Research limitations/implications – The study does not quantify the performance of e-process
operations, and it does not examine customer concerns related to complexity, trust security and safety
issues. However, it provides useful managerial recommendations for improving the process of opening
a student account. Numerous key learning points and invaluable insights gathered during this project
are practical contributions both to managers involved in innovation process and researchers interested
in this domain.
Practical implications – This paper provides a re-engineered process which is simpler, more
economical and faster than the original process. It presents principles to diagnose appropriate service
operation processes for re-engineering using action mapping programmes and review their innovation
performances. Managers will learn new frameworks, diagnostic tools and analysis techniques to better
understand and improve their firm’s service operations. This study is designed to give service
innovation managers and e-marketers instantaneous and continuous improvement in the quality of
their e-service designs.
Originality/value – One of its contributions lies in increasing the ability of managers to improve
their knowledge and skills for responding to the e-service innovation process. It adds to the growing
literature on the innovation process for financial services. While the study answers a number of salient
questions, it also produces a stimulus for further investigation of service innovation through the
provision of future research directions in this area.
Keywords Financial services, Innovation, Flowcharts, Process planning, Customer services quality,
Virtual banking
Paper type Research paper
Introduction
Retail banks are under tremendous pressure of competition from other financial
institutions, new entrants/newcomers and non-financial financial firms (e.g. Tesco plc,
Sainsbury plc, Virgin, Marks & Spencer plc, etc.), and from the rapid growth of
information and communication technologies (ICTs) and unpredictable market
dynamism (Watkins and Wright, 1987; Mullineux, 1987; Nellis and Lockhart, 1995;
de Ruyter et al., 1998). Therefore, they are constantly seeking new markets and new
financial products, and new ways to increase their market shares and to improve their
operational processes. Thus, retail banks are targeting young people, mainly students
opening accounts with their grant cheques, and persuading them to continue banking
after graduation. This is well documented in Lewis (1982), Lewis and Bingham (1991),
Kara et al. (1994), Goode and Moutinho (1995), Colgate et al. (1996) and Mintel (1999,
2000, 2001). Despite this increased emphasis on student banking services and the
increasing rate student population, the financial services marketing literature provides
little insight into the process of opening a student account (OSA). Therefore, this study
examines the process of OSA activities. Thus, it aims to gain a better understanding of
the re-engineering service quality process map of a local Lloyds TSB branch.
The paper reviews previous works related to the concept of process. It presents a
pragmatic examination of the magnitude of service process and its influence on service
quality. A pressing question remains partially unanswered: how a process can be
analysed for its relative transparency and efficiency is one of the priorities in balancing
productivity and quality issues. To analyse the translucent effectiveness and efficiency
of the OSA process, this paper adopts a case study approach to investigate the key
dimensions of the OSA process in a local branch of Lloyds TSB Bank. This study
presents alternative frameworks that are practically superior to the one adopted by
Lloyds TSB. Finally, the paper concludes with managerial and academic implications,
followed by areas for future research.
Background of the current study
There is a rich body of literature indicating the concept of process when analysing the
transparency and efficiency of an operational process (Levitt, 1972; Chase, 1981;
Shostack, 1984, 1987). The banking process of OSA may be defined as a series of
steps/stages which converts inputs into an identifiable output intended for internal and
external customers. Childe et al. (1994) argued that a business process operates in a
way analogous to a system which comprises a series of continuous actions or
operations performed at different stages. Furthermore, Deming (1982) revealed that a
diagram of any process will divide the work into the stages which form a process.
These stages are interdependent entities. However, the final stage will send the service
offering to the ultimate customer. Every activity is a part of a process framework.
There are many existing frameworks for increasing firm performance, presented
under the umbrella of blueprints (Shostack, 1984, 1987; Shapiro, 2002); process analysis
(Graham, 1995; Boaden and Zolkiewski, 1998); total cycle time compression pipeline
(Towill, 2001), process control (Jones and Dent, 1994), process improvement
(Harrington, 1992; Pulat, 1994; Zairi and Hutton, 1995; Povey, 1998); process
redesign (Ferguson, 1990; Kaplan and Murdock, 1993) and business process
re-engineering (Hammer, 1990; Davenport and Short, 1990; Maull and Childe, 1994;
Zairi and Leonard, 1994; Borja et al., 2000). Previous studies provide different
methodologies related to inefficiency in the operational process which is due to
incorrect design or to poor performance (Deming, 1982; Harrington, 1992; Hammer and
Champy, 1993; Mukhopadhyay et al., 1997; Shin and Jemella, 2002). Ho and Case (1994)
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service quality
process
29
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reviewed the literature for 1981-1991 on process optimisation using economic design of
control charts. However, despite broad interest in the subject, there is still a lack of
tools to support an operational process of OSA in the financial services sector. In this
light, the current study is mainly concerned with the operational flowchart/blueprint
for opening a student account. Therefore, this paper will demonstrate an approach to a
flow mapping process which highlights steps and provides a basis of evaluating how
effectively it contributes to the achievement of service quality in the financial services
sector.
Shapiro (2002, p. ix) defines a blueprint as a “capability” which is combination of
people and technology that together deliver targeted service quality performance. The
re-engineered blueprint can be viewed as a process innovation of service delivery
which is related to financial product development in the context of financial product
augmentation, repositioning and cost reduction (Hammer and Champy, 1993; Johne
and Storey, 1998; Chronéer, 2003). Financial product development has often been the
result of a process innovation (Agnihothri et al., 2002; Roberts and Amit, 2003).
Innovation in the service domain includes changes in the features of service itself
(de Jong and Vermeulen, 2003). One example of service innovation is connected with
changes in delivery method, which leads to re-engineering of the operational process
(i.e. product development). Johne and Storey (1998, p. 190) refer to this type of product
development as “re-engineering efforts” which improve the performance (e.g. speed of
delivery, customer time reduction, responsiveness to customer, convenience) and
introduce new working practices (e.g. new technology). Therefore, the process
innovation of financial product development focuses on new offers rather than new
financial products (Johne and Pavlidis, 1996; Veryzer, 1998; Johne, 1999; Sundbo, 1998;
Zineldin, 2000). A number of authors have contributed to the thematic typology of the
new product development debate (see, for example, Booz, Allen and Hamilton, 1982;
Heany, 1983; Lovelock, 1984; Ansoff, 1987; de Brentani, 1989; Wheelwright and Clark,
1992; Drew, 1994; Johne and Storey, 1998; Cumming, 1998; Journal of Product
Innovation Management, 1998; Cooper and Edgett, 1999; Avlonitis et al., 2001; Garcia
and Calantone, 2002; van der Aa and Elfring, 2002; Gounaris et al., 2003; Akamavi,
2005).
Gounaris et al. (2003, p. 267) state that “potential users cannot compare the new
offerings with something similar in the market, and they are often are unable to
envision the potential entailed in a highly innovative new offering”. Kapoulas et al.
(2002) reveal that customers find the process innovation/e-process (e.g. e-banking
process) of their service providers difficult to assess. Mattila et al. (2003) argue that a
group of consumers (e.g. laggards) has negative technology attitudes and never adopts
internet banking. Black et al. (2002) also suggest a similar point, i.e. that there is a
segment of consumers who probably have access to the internet but do not use it for
online banking operations. They go on to echo that “lack of familiarity and experience
lead to higher perceptions of risk with the internet when compared with other
channels” (p. 169). E-banking consumers can be classified according to the degree of
risk perceived. Daniel (1999, p. 74) points out that “at present [. . .] our knowledge of the
extent to which e-banking services are developed and deployed is limited and there is a
very little systematic research”. Therefore, there is a need to investigate this
phenomenon of mapping the process innovation, which is under-explored. Thus, this
study focuses on flowcharting the blueprint.
The flow mapping/flowcharting method can be one of the simplest ways to analyse
problems visually as well as to detail other parts of a process or an entire process. It
provides valuable insights about how to optimise operational performance in terms of
quality, cost and time (Soliman, 1998; Fülscher and Powell, 1999; Biazzo, 2000; Cotoia
and Johnson, 2001). It also enhances the customer’s encounter with the process,
identifies bottlenecks, unnecessary deeds, delays and duplications, assists in
eliminating non-value-added protocols, and reduces the intricacy of the process.
Therefore, this study capitalises on operational service quality, concurrently reducing
cost and time, but achievement of targets is also greater. The flow mapping process is
helpful for this objective when it is brought into line with a more detailed narrative
explanation of main the elements. Consequently, mapping of the process is performed
in order to gain a clear understanding of how and why the process operates the way it
does. Thus, the next section outlines the research aims and objectives guiding the
study.
Research aims and objectives
The aim of this research was to conduct a critical analysis of the operational process of
opening a Lloyds TSB student account. The specific objectives of the study were:
.
to provide a brief introduction to Lloyds TSB Bank;
.
to identify the key characteristics of the service operation in terms of offering the
service to the market;
.
to develop a service quality process map (also known as a flowchart/flow
network or blueprint) to depict the operational process steps, representing both
consumer and business perspectives;
.
to identify and express clearly diagrammatically problem areas regarding
service delivery; and
.
to devise creative and fully justified solutions that address problems identified:
these are illustrated in a revised service quality process map to present
opportunities for a future research direction.
These broad objectives provide the overall framework for the research. Analysis of the
process will identify problems that exist within the present process that must be
eliminated in the alternative frameworks proposed. In order to achieve the above aims
and objectives, the next section discusses the methodology adopted. To complement
the literature review, a case study research project was adopted to provide in-depth
insight into the different stages of the OSA process.
Research methodology
The aim of this section is to explain the research methodology undertaken to provide
sufficient information to enable estimation of the reliability and validity of the author’s
findings. Four trained students, who were supervised by the authors, collected the
data.
A case study approach was employed to examine the development of the specific
OSA process. The qualitative investigation of a specific operational process through its
development presents the opportunity to take a more grounded approach (Glasser and
Strauss, 1967; Campbell, 1975; Eisenhardt, 1989; Corbin and Strauss, 1990; Cassell and
Re-engineering
service quality
process
31
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Symon, 1994). This approach fits the real world of mapping a banking business
process. The basic rationale for the case study approach is to assemble information as
comprehensively and systematically as possible about the selected case organisation.
One of the most important sources of case study information is the interview (Yin,
1994).
However, a major strength of case study data collection is the opportunity to use
many different sources of evidence (Gross et al., 1971). The strengths of this approach
are its ability to provide rich descriptive detail, conveying a feeling of what it is like to
experience an organisation, event or problem from the inside (Clegg et al., 1985).
Additionally, it allows for the discovery of grounded theory (Corbin and Strauss, 1990;
Robson, 1993), and the comparison of existing literature and theory with what actually
happens in reality (Partington, 2000). Therefore, any finding is likely to be more
accurate if it is based on several different sources of information (Yin, 1994).
There are several techniques available in case studies that allow for the validity and
reliability of the research to be verified. Below are detailed the three methodological
phases which were devised to acquire the necessary understanding for this study, and
which were required to address the “objectives” in a systematic manner:
.
phase 1 – secondary research: background information (e.g. company reports,
web site, Mintel reports);
.
phase 2 – primary research: exploratory interviews of bank staff (i.e. five
mangers of five different branches, three front-line and two back-room
employees); and
.
phase 3 – primary research: process observation and interviews with the study
site manager.
Phase 1 – secondary research
The primary purpose of this phase was to address the “terms of reference”, reiterated
below:
.
to provide a brief introduction to Lloyds TSB Bank, and to the Lloyds TSB
student account; and
.
to identify the key characteristics of the service in terms of offering the service to
the market.
This exercise assisted the author’s understanding of the service product, which
facilitated the identification of potential faults from the actual process, and
opportunities in the form of solutions using flowcharts. In addition, by highlighting
the service characteristics, valuable marketing insights were established that sparked
off a holistic approach to the analysis, culminating in a re-engineering of the service
process.
Phase 2 – primary research: interviews with bank managers
In order to explore the research question and objectives further, semi-structured
interviews were held with five local bank managers. Further, various junior members
of staff were also interviewed. This provided an ideal opportunity to add more depth
and additional insight for the development of the service quality process maps. Bank
managers were chosen as suitable respondents for the interviews because of their
multiple responsibilities (e.g. branch operations and administration, supervision and
human resources, and, to a greater or lesser extent, merchandising and marketing). In
addition, bank managers interact directly with customers, making them customer
contact workers as well as supervisors. Thus, the roles of these bank managers have
critical strategic implications for operations, marketing and human resources
management in addition to their impact on customer perceptions of service quality
(Weatherly and Tansik, 1993). However, the constraints imposed on the study by time
and cost considerations did not allow calls to interview students. However, the research
assistants employed were students.
A range of question types were used, including, open, probing, specific, and closed
questions. The protocol interview focused on the following themes: the background of
the firm, analytic applications of various stages of opening student account, queuing
system at the branch, roles of frontline and backroom staff, check cycle time, customer
time, checking IT functionality, IT legacy systems, approval cycle time, notification
cycle time, filtering section, process efficiency issues, and the web community. The
emphasis was on understanding the interviewee’s explanations and meanings as
effectively and efficiently as possible. Furthermore, the interviewee was provided with
a list of the most important themes one week before the interview. This was intended to
promote the research’s credibility, and also to promote validity and reliability through
giving the interviewee time to consider the information being requested (Saunders et al.,
1997). In order to identify comments that were important to the research topic, attentive
listening on the interviewer’s behalf was thus extremely important.
A major concern was that the findings from qualitative research using an interview
that is unrepresentative of the population frame (i.e. all retail banks offering student
accounts) cannot be used to make generalisations. However, the validity and
understanding that have been gained from the interviews have substantially more to
do with data collection and analysis than with the size of the sample.
Weatherly and Tansik (1993) pointed out that one of the dilemmas of studying
individuals in highly demanding occupations is the threat that they may be too busy to
participate. McGrath et al. (1982) stated that data collection is often a process of
compromise between suitability and accessibility. They went on to argue that
researchers may choose at times to forego some of the usually desired characteristics of
scientific research (e.g. randomness, sample size, response rate) in exchange for
mundane considerations such as how well the response pool typifies the behaviour
under study or how accessible the respondents are. Therefore, dimensional and
purposive sampling was used in constructing this case design because of certain
limitations, i.e. financial resources and time (Robson, 1993).
Phase 3 – primary research: process observation
According to Chen (1998), observing processes serve as an effective approach to
identify problems pertaining to quality. The specific observation technique that was
used is known as participant(s) as observer(s), or becoming a guinea pig (Saunders
et al., 1997). This methodological approach is an effective way of developing, at first
hand, an understanding of the service experience in exactly the same way as a
customer would do as they come to interact with the service provider. Research
assistants are students who are simultaneous participants and observers. Therefore,
they were exposed to different stages of the OSA process. Thus, they gained
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service quality
process
33
IJBM
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34
knowledge without hiding their scientific intentions about the operational activities as
they occur in real-world context, in real time, and without the prompting of potential
distortions or discomfort from post hoc verbal descriptions. In addition, they remain in
the background and watch and listen to what others do, what they say, and the
circumstances in which these actions and comments occur. Field experimentation
taking place in the branch is realistic for external validity.
One can gather quality data, and thus obtain an insightful understanding of
customer perception and how it is influenced by all the various activities which occur
throughout the whole process of the service delivery, as it proceeds in its natural
environment. A significant factor that enabled the use of this technique was obtaining
organisational access and co-operation. During the development of the research
strategy, it was thus important to consider the conflict between what is theoretically
desirable on the one hand and what is practically possible on the other (Buchanan et al.,
1988). Failure to obtain sufficient physical access and co-operation may have required a
review of the feasibility of the research, and thus modification of the research question
and objectives.
The primary purpose of phases 2 and 3 of the research strategy was to provide the
necessary data required, addressing the following terms of reference:
.
to develop a service quality process map to depict the operational process steps,
representing both consumer and service provider perspectives; and
.
to identify and express clearly diagrammatically problem areas regarding
service delivery.
It was from this position that one was able to prepare justified solutions to the
problems identified.
Data collection for this study relied on many sources of evidence, such as
documentation, archival records, interviews, observation, and physical artefacts (Yin,
1994). Yin (1994) suggests that the various sources are highly complementary, and a
good case study should use as many sources as possible. The use of multiple sources in
this study allowed the author to address a broad range of issues of the OSA process
(Patton, 1987). Therefore, the essence of this approach, so-called triangulation or hybrid
strategy, was that it tried to illuminate the set of objectives enumerated in the previous
section. However, for all its appeal on an experiential basis, criticism has been aimed at
the use of the case study method, and this is associated with the issues of verification
and generalisation (Guba and Lincoln, 1981; Campbell and Stanley, 1966).
Once the results of interviews had been recorded, they were transcribed and
analysed to enable the author to map the OSA process. The initial draft was checked
and validated with members of staff in practice before being refined. The basic
framework (original flowchart) was also checked with five students and two
practitioners (i.e. a manager from another practice and a consultant of financial
services) to ensure that any general misunderstanding was removed. Therefore, with
triangulation, the potential problems of validity were overcome because multiple
sources of evidence essentially provide multiple measures of the same phenomenon in
Lloyds TSB Bank plc. Table I provide a concise history of Lloyds TSB Bank plc.
In the last two decades the financial services sector has experienced fundamental
changes (Nellis and Lockhart, 1995; Bloemer et al., 1998). Financial institutions are
facing increased competition, deregulation, increasing consumer demand and
Date
Event
1765
The origins of Lloyds Bank stretch back to 1765, when John Taylor and Sampson Lloyd
set up a private banking business in Birmingham
Lloyd’s association with Taylor is dissolved
The partnership changed its status to a joint stock company, naming itself Lloyds Banking
Company Ltd. A period of rapid growth followed. This was largely through mergers with
two large domestic banks (Wilts & Dorset Bank, with around 100 branches in 1914; and
Capital & Counties Bank, with 473 branches in 1918), and also through acquisitions of
several small banks. The result was that Lloyds had become a powerful banking force in
the Midlands by the 1880s
The Lloyds Bank “black horse” symbol was registered when it took over two private
banks in Lombard Street in the City of London. The black horse is the recognised emblem
of Lloyds TSB throughout the world
Due to domestic pressures (i.e. the post- First World War economic depression), Lloyds
begins to pursue a strategy of international expansion. This is in addition to its presence in
France through the acquisition of Armstrong & Co in 1911. This was achieved through
mergers (e.g. London & Brazilian Bank in South America, 1923) and acquisitions (e.g.
London & River Plate Bank in South Africa, 1918)
Following the failure to acquire Martins Bank, Lloyds planned a progressive group
concept. This was intended to help Lloyds withstand the growing pressure from American
banks entering its domestic markets, and also to promote further expansion overseas. By
1971 Lloyds Bank had achieved a truly international presence, with offices in nearly 50
countries
Market dynamics caused by competition, deregulation and technological innovation forced
Lloyds Bank to make fundamental changes to its corporate strategy that focused on
shareholder value: Lloyds Bank divested itself of businesses such as its investment
banking arm, and focused on the far more profitable retail banking sector in the UK
Lloyds Bank merged five of its businesses with the Abbey Life insurance company to
create Lloyds Abbey Life plc. This expanded Lloyds’ growing insurance business
Lloyds acquired Cheltenham & Gloucester in a move to expand its home mortgage
business
Lloyds merged with the Trustee Saving Bank (TSB) to form Lloyds TSB plc. This
expanded Lloyds’ customer base and its product portfolio
In a bid to strengthen its life assurance business, Lloyds acquired Scottish Widows. This
made Lloyds the second largest provider of life assurance and pensions in the UK
1852
1865
1884
1911
1960s
1980s
1988
1995
1996
1999
Sources: Lloyds TSB Group (1999); Lloyds TSB Bank (2000a, b, c, d)
galloping development in technology. Therefore, marketing managers are forced to
rethink their marketing activities to sustain competitive advantage. To maintain its
stability and growth, Lloyds entered the student segment by providing a student
account for various reasons. However, the OSA process has not been fully investigated.
Therefore, this study focuses on the operational process of OSA.
The first step in any important shift programme must be to evaluate “where we are
now” and identify the key problems which need to be tackled. Therefore, the
prerequisite is for a tool which will assist in answering the question of where we are
now, dealing with issues such as provision of clarity to end users and an identification
of the original process of OSA (i.e. the core process) that takes place to serve students.
The following sections cover the service quality process map, which represents a clear
visual form of the OSA process and facilitates the definition of problem areas,
diagnosis and solution generation.
Re-engineering
service quality
process
35
Table I.
A summarised of the
historical background of
Lloyd TSB Bank plc
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Service quality process map
OSA: the current process
In order to grasp an understanding of the process of OSA, it was necessary to develop a
detailed flowchart representing the process steps from the viewpoints of the consumer
and the provider (i.e. Lloyds TSB Bank plc). Through interviews and participation
observation we were able to develop at first hand an understanding of the service
process as it proceeds in its natural environment in real time. However, documentation
of the process in the form of a flowchart diagram facilitated analysis and the
identification of problem areas. Documenting the process aided our knowledge and
understanding of how the service is delivered to the customer. A view of the current
process of opening a student account is shown in Figure 1.
The process of OSA is split into two sub-processes by a line of visibility. From the
original flowchart, the potential problem areas are determined. There are some
problematical areas which show that the OSA process is currently weak in design.
However, without discovering these potential problems there cannot be effective
management of service quality and improvement. Figure 2 therefore illustrates the
problem areas that need to be tackled.
Some of the problems are soft problems, and cannot be displayed on the flowchart.
These are discussed in the following section.
Potential and actual problems of the flowchart
Problem areas. Once all the steps in the flowchart have been documented, it is possible
to analyse the flowchart to reveal potential problems areas. Changes to a flowchart can
be one of four types (Lovelock, 1991). These are:
(1) reduced divergence – this leads to uniformity, which tends to reduce costs,
improve productivity, and provides a more effective distribution system: this
process is usually aimed at reaching economies of scale;
(2) increased divergence – greater customisation and flexibility: this leads to price
increases, and indicates a niche positioning strategy;
(3) reduced complexity – this indicates a specialisation strategy, steps and
functions are dropped from the system, so the resources can be focused on
narrower services and complete satisfaction to the customer; and
(4) increased complexity – this strategy is used to gain a greater penetration in the
market (e.g. banks have expanded their product ranges to maximise revenues).
Below we detail and discuss the problem areas that have been identified and
highlighted in Figure 2.
Entrance and exit. The first problem that was identified is the bank’s opening hours.
Although this cannot be changed diagrammatically and expressed on the flowchart,
the problem needs to be addressed and considered. Identification of problem areas is
undertaken with the intention of improving the service and customer’s perception of
the service. Most banks and building societies are open from 9.00 a.m. until 5.00 p.m.
during the week and from 9.00 a.m. to 3.00 or 5.00 p.m. on Saturdays. However, some
customers/students may find it hard to access their bank during these hours, especially
if they are working/studying from 9.00 a.m. to 5.00 p.m. Alternatively, the internet
could be used, which would allow 24-hour banking. Nevertheless, customers who do
not have access to the internet or do not feel that the internet is secure would not benefit
Re-engineering
service quality
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37
Figure 1.
Opening a student account
IJBM
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Figure 2.
Process for opening a
student account: analysis
of the potential problem
areas
from such a service. So, the high street banks should be looking towards extending
their opening hours.
Obtaining the form. We have identified this as being problem area number two:
when the customer goes to obtain a form, are there enough available, and are they
identifiable? To solve the immediate problem of supply, a fresh supply should be put
on the shelves daily. During the first week of university, when all first-year students
are opening accounts, bank staff should check on the supply during the day in order to
manage demand.
Completing and submitting the form. The customer needs somewhere to rest and sit
so they are able to complete the form. In most banks there are tables and chairs as well
as counters for the customer to rest on, but probably not enough to cope with the
demand in the first week of term. This could be rectified by adding a few more chairs,
and surfaces to write on.
This then brings us to the application form itself, and specifically the user
friendliness of the form. Lloyds TSB stated that they already have existing problems
with the language barrier of the form as it is only written in English. The bank still has
not rectified this problem. One method of solving this problem would be to have
application forms in each different language (e.g. for freshly arrived international
students in the UK): this would provide excellent customer service and increase the
perception of service quality to customers.
Illegibility of handwriting may also prove to be a problem. This is illustrated in the
revised flowchart. Each form has to have precise and correct information in order to be
processed into the database. This takes time as the form has to be screened and all the
information then has to be processed into the database. The revised flowchart
addresses all of the above problems to provide a customer-friendly service, all of which
makes the customer feel better about the process which they have just completed.
Service counter staff availability/is the customer prepared to queue?. Once the form
has been completed, the customer then needs to go back to the service counter, queuing
if necessary. This has a negative effect on the customer. Furthermore, there is nothing
to occupy their minds, such as a customer noticeboard, as they are queuing.
One problem for the bank is that the customer has already spent a great deal of time
filling in the application form. They will not want to waste any more time queuing. The
system works on a first-come, first-served basis. This is unlikely to be changed in the
short term, because it is an equitable way of inventorying customers. It is the processes
that occur between queuing stages, such as returning to the service counter to submit
one’s form, that need addressing. Thus, the customer is not wasting any more of their
valuable time by returning to the queue. This problem is rectified in the revised
flowchart (see Figure 3) by the clerk entering the customer’s details straight into the
database. This would provide a more effective customer service, which can be seen in
the revised flowchart.
Required identification. After all of the form filling has been completed, queuing has
taken place and the customer is at the counter, unless they have two forms of
identification with them then the process stops once more, maybe for a few hours, days,
or for good as the customer may not return to that bank. The fact two forms of
identification is required should be mentioned at the beginning of the form so time is
not wasted by the customer or the bank staff.
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39
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Figure 3.
The revised process for
opening a student account
The above processes and problems all take too much time. The revised flowchart does
not completely solve all the problems and it would be naı̈ve to think that it would do so,
but it does address the problem of time wasting: the bank becomes more efficient and
productive, and customer satisfaction levels are met. Bearing these factors in mind, the
current flowchart will be changed according to the reduced divergence factor, as the
new process provides uniformity and economies of scale.
Re-engineering
service quality
process
41
Recommendations for changes to the process design
Through the identification of problem areas within the current process flowchart
(Figure 2), the author has been able to develop recommended changes which will need
to be made to operations, as illustrated in the revised flowchart (see Figure 3). These
changes will need to be made so that the service experience is as effective as possible
for the customer, and as easy to provide as possible for the bank’s frontline and
backroom staff.
The major change that the author has made to the process is to remove the
paper-based application form. This is one of the main problem areas from the point of
view of both the customers and the bank. The customers’ perception of the quality of
the service will be formed at the service counter. If the paper form is removed from the
process, this will enable the process of opening an account to be quicker, as the clerk
will enter the details directly into the bank’s database while the customer responds to
each question. This will also allow for greater interaction between the bank and
customer, along with the customer receiving a sense of customisation in the service.
The increased interaction between the customer and the bank’s employees results in
the need for employees to be empowered and competent in their delivery. This is
because the employees are drivers of service quality dimensions. The critical qualities
that influence the service experience are the following:
.
Reliability of the service. Can the customer rely on the frontline and backroom
staff to carry out the necessary work?
.
Responsiveness of the staff. Do the frontline staff undertake their duties quickly
and efficiently?
.
Assurance from the staff. Do they give credibility to the service and can the
customers trust them?
.
Empathy from the staff. Are the staff able to customise and personalise the
service to suit the customers requirements?
.
Tangibles. These are things such as the physical surrounding environment, the
atmosphere in the bank, and the equipment provided.
.
Ability to recover from errors. If things do go wrong, can the staff recover in order
to keep the customer satisfied?
Unhappy or unmotivated staff will have a detrimental impact on service quality. The
bank has to ensure that staff are empowered to act in response to unexpected requests
from customers. In addition, staff must feel valued by the organisation so that they are
motivated to create the correct impression. Feedback from the staff regarding their
opinions, and training sessions, will help to ensure that the service experience is of a
consistently high standard.
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The whole process will be dependent on the capacity of the service, which includes
the number of counters and service personnel available. This will have to be scheduled
carefully to meet peak demand so that the service experience for the customer is as
smooth and satisfactory as possible.
From the bank’s point of view, the revised process will be simpler and will prevent
staff having to check the accuracy of the application form once the customer has
completed it. The customer’s details can be entered directly in to the bank’s database,
which will speed up the processing of the account and remove a lot of the paper-based
information which has to be mailed to other departments and stored for record
purposes. The resource requirements that are needed in order for customer satisfaction
to be gained from the new service experience include:
.
a sign at the old location of the application forms informing customers of the new
process;
.
the availability of trained staff to meet peak demand; and
.
the availability of service counters to meet peak demand.
The changes to the service encounter which are recommended will result in increased
efficiency in the delivery of the service to the customer. As a result, service delivery
will be more efficient for the customer, avoiding the lengthy process of completing the
application form. An acknowledgement of their acceptance will occur on the same day,
together with the welcome pack.
The new revised process depicted in Figure 3 could overcome the problems
identified in Figure 2. However, customer requirements are always evolving,
demanding changes to the way the process operates. There will be constant demand to
reduce cost and cycle time, and there will be new technology capabilities emerging, all
of which will drive the need to improve the process continuously.
One can see the recommended changes that have been implemented in an effort to
improve service quality (Figure 3). The main problem area found was the requirement
for the customer to complete a paper-based application form, which took excessive time
for the customer and excessive time for the bank staff to screen. Recommendations
have focused around the removal of this paper-based form and the implementation of a
computer-based solution (Hammer, 1990). Therefore, this is where creative redesign
work is beneficial. As part of the redesign process a thorough examination of new
capabilities provided by emerging new technologies is performed, so that the
re-engineering considers both the objectives of the process and novel ways of achieving
those objectives based on new the capabilities of technology and robust, simplified
process designs. Thus, this paper suggests a re-engineered process of OSA.
Re-engineering the OSA process: e-process (i.e. virtual process)
It is far easier to design a process from the outset than to try to modify an established
design to accommodate limitations and constraints of service quality, as was
performed using a flowchart to portray improvements to the design of the process.
Although it is indeed often the case that organisations simply modify existing process
designs in response to current market dynamics, it is undoubtedly of far more benefit
(if resources permit) to service quality to adopt a more proactive approach towards
process design.
There are various views of the role of service process design. The most limited and
short-sighted view is that process design is finished when a feasible design has been
developed which meets market needs. However, market conditions are very rarely
stable, and a technological push can give rise to new process opportunities. Such an
opportunity has been provided relatively recently in the shape of electronic commerce
(e-commerce), and specifically the internet.
According to Sharpe (1999), 7.3 million people will be accessing online banking
services in the UK by 2003. Although Lloyds TSB plc has (along with most other major
banks) established an online/virtual presence, there is currently no facility to enable a
customer to open a student account. This failure to take a proactive approach has given
rise to the opportunity to adopt a holistic view of the current service process, and to
re-engineer this creatively in the light of this technological push towards e-commerce.
Business process re-engineering (BPR) is the process of reconfiguring activities to
create a dramatic improvement in performance (Dignan, 1995; Johnson and Scholes,
1999). Information technology, and more recently the internet, are important driving
forces behind BPR. Therefore, this study proposes a re-engineered process (e-process or
virtual process) of OSA, which is illustrated in Figure 4. The consequential effect of the
e-process is a direct impact on productivity, time compression and cost reduction.
The above framework highlights some of the advantages that the e-process brings
to the service: the re-engineered process, as a process innovation of a financial product,
should provide more competitive advantage than focusing on the performance
development of attributes.
Greater consistency. One of the most frequently stressed differences between goods
and services is the lack of ability to control service quality. Unlike goods, the contact
personnel in any branch of Lloyds TSB are not inanimate objects, and being human,
they exhibit variances that cannot be controlled by the service process (Bateson and
Hoffman, 1999; Rust, 2002). By automating the interface with the customer via a fully
integrated web site, greater consistency could be achieved. Therefore, there is a need
for real-time analysis of information, which should be the driving force in the
development of data mining and data warehousing methods. Greater consistency is
seen as an improvement in service quality. This e-process mapping increases
flexibility, improves responsiveness and maintains standardised and homogeneous
operations. It also allows the entry of accurate and timely customer data. The benefits
attributed to the e-process map are summarised in Table II.
This study found that both productivity and quality increased with higher use of
IT. This is consistent with the findings of Mukhopadhyay et al. (1997). These
developments yield positive results. In the long run, the above gains should in turn lead
to an improvement in financial performance (e.g. sales, profits, market share, and
return on investment). However, financial services firms which invest in unfit
e-banking processes may end up with operations which seem to be less profitable (e.g.
it will be difficult to recover investment).
Greater access and availability. A Mintel (2003) study has revealed that by 2004, 60
per cent of UK households will have access to the internet, which may greatly increase
the customer base for online financial services. In addition, they forecast that over 20
million people in the UK will be using e-banking services by the end of 2005. Gandy
(1999) makes a similar point, reporting that the use of internet banking will increase
from 7 per cent to 28 per cent by 2004. This trend is also apparent in the USA,
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process
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Figure 4.
The re-engineered process
(e-process)
Benchmarking indicative measures
Improvement assessment
Lead time
Duplication of work and repetitive work
Costs of producing service
Responsiveness
Data entry errors by frontline staff
Paper usage
Customer responsibility
Co-production role
Empowerment of customer
Customer satisfaction level
Volumes of enquiries and sales
Potential data entry errors
Costs of promotion
Cost of transaction
Convenience and customer accessibility to
their finances
Time in updating and revising documents
Dissemination of up-to-date product information
to customers
Supply of information
Down
Down
Down
Up (prompt)
Down
Down
Up
Up
High
Up
Up (increased)
Down
Down (lower)
Down
24-hour banking availability throughout the year
Down
Faster
On-line
Singapore, Sweden, Germany and Norway, and the more advanced service-providing
economies in the world (Barto, 1999; Mulligan and Gordon, 2002; Gerrard and
Cunningham, 2003; Mattila et al., 2003). The number of customers demanding
e-banking operations is likely to increase in the future. With an increasing student
population, increasing computer literacy and availability of computers, and reductions
in the cost of computers, telephone bills and internet access, there will be a substantial
rise in this target market of consumers choosing e-banking operations. Therefore, this
will change banking operations for the majority of retail banks. Thus, it is therefore
imperative that Lloyds TSB allocates resources and gets a share of the action.
Today an automated web site is accessible 24 hours a day, seven days a week,
without the need for human operators to keep it functioning. Not only does this clearly
offer increased convenience to the growing number of people with internet access, it
also represents significant cost savings for the bank. The cost of maintaining manned
premises in prime high-street locations, 24 hours a day, seven days a week will be very
prohibitive. Much of this cost would be ongoing revenue expense, whereas the greatest
cost in setting up a fully integrative web site network is capital. Substantial investment
in effective information and communication technologies may minimise physical
presence and infrastructure by organising in virtual teams. Therefore, financial
services firms should exploit new market opportunities through communities that rely
on virtual processes.
Greater consumer involvement in the service factory. The e-process illustrates a
fundamental aspect of the service model, demonstrating that consumers are an integral
part of the service process. This is consistent with the studies of Bateson and Hoffman
(1999), Akamavi (2002), Rust (2002) and Grove and Fisk (2002). A fundamental
difference with the e-process (i.e. the re-engineered process) illustrated in Figure 4 is a
greater active participation on behalf of the consumer. For example, there is no need for
Re-engineering
service quality
process
45
Table II.
Performance results of
e-process map
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contact personnel (e.g. a bank clerk) to duplicate the entry of information onto the
bank’s data acquisition and database. This task is actually co-produced by the
consumers themselves, directly on the bank’s web site. Thus, changes made in the
service factory have necessitated changes in consumer behaviour, firstly to reflect a
shift towards self-service (Tseng et al. 1999), and secondly so that consumers do not
need to go physically to a bank to experience the service (i.e. virtualisation of banking
operations). Students are computer-literate and may represent an explicit segment for
virtual banking operations/e-banking business. However, managers should encourage
them to use the e-process or virtual process.
Limitations and constraints of the re-engineered process
The main difficulties with the re-engineered model are those that centre on the
customer’s perception of the service and the customer’s skill in operating the graphical
user interface (GUI) of the web site. If the customer perceives interpersonal contact to
be an important element in the service, then full automation is inappropriate.
Customer skill is related to customer selection, and also to the flexibility of the
service offered. Therefore, it is necessary for the service designer to know and
understand the customer, and to design a GUI that the customer will find easy to use.
The presentation of too many options frequently only causes confusion, and automated
service GUIs are most effective when only a few facilities are offered. Benefits
attributed to e-process mapping include increased flexibility, improved responsiveness
and customer co-production empowerment.
This study presents only non-financial gains, which indicate the performance of
e-process operations. The performance results are elementary at this stage, and this
study focuses on only one firm. Therefore, managers should be cautious when
interpreting these findings: more empirical studies are needed in order to generate
more sound managerial implications Thus, researchers should direct efforts towards
quantifying the performance of e-process operations across the financial services
sector.
Conclusions
From documenting the process, the functions and activities of opening a student
account with Lloyds TSB have been determined. The biggest problem identified from
the original flowchart was the time it takes from first entering the bank to leaving and
actually receiving the cards and chequebook. This led to the flowchart being
re-engineered so that the whole process is performed at the counter, with all the
customer’s details being entered directly into the database. This is more efficient for
both the bank and the customer, and also cuts down on paperwork. These
re-engineering efforts resulted in a new financial product development, producing
increases in revenues, operating savings and improved service quality. These results
should be quantified. Therefore, there is a need to examine this performance issue.
Real-time processing by customers at points of encounter replaces manual
intervention in the backroom zone. This is consistent with the findings of Shin and
Jemella (2002). The time spent on customer details related to manual data entry is
eliminated, while customer data is directly and automatically transferred to the data
warehouses. Customer interactions appear in the configured framework of improved
information flow. The introduction of the e-process should enact its uniqueness in the
marketplace and deliver competitive advantage. Therefore, further studies should
address questions which can help to improve financial product development/process
innovation. Thus, more research is needed to determine how technological innovations
can be acknowledged in the new financial product development literature.
This process innovation is based on customers’ value experience, and searches to
eliminate all that does not contribute to customers’ added value creation. The e-process
permits the customisation of a number of financial products and mass account opening
activities via the internet. This study has significant implications for managers as it
provides them with a redesigned blueprint for the e-banking process.
The shift towards a more innovative firm is not simple, as human capital (i.e.
employees and customers) will find it hard to change. A financial services firm can
re-engineer its banking process but not its human capital. Therefore, managers should
assess the internal and external readiness of staff and customers to implement this
e-banking process operation. They should also identify, outline and control critical
success factors to improve the levels of readiness. Thus, it is essential that managers
learn how to drive corporate culture towards innovation in the financial product
development process. This issue represents an area of research related to e-banking
process implementation.
The flowchart methodology used in this study illustrates the effectiveness of
flowcharts as a technique to document and highlight service operations, and the line of
visibility as the line of virtualisation/virtual line. However, flowchart methodologies
are limited when documenting detailed processes. For example, when service delivery
becomes more complicated, this will naturally increase the complexity of the flowchart,
even though large processes can be created on huge diagrams known as brown papers.
The difficulty still remains of clearly documenting the process so that the targeted
customers can clearly understand the flow of the whole process, and hence understand
how the service is delivered.
Zineldin (2000, p. 11) also found that “technological changes alter the role of the
customer and patterns of market communications, relations and interactions”. Managers
should observe that the broad picture of developing future customer relationships can be
difficult to prognosticate due to the explosion in and rapid development of e-banking
operations. Therefore, further research should investigate the potential impact of
e-banking and ICTs on future bank-customer relationships (e.g. customer relationship
management of e-banking operations, e-loyalty after graduation).
The financial services sector is growing, and is also facing a new delivery challenge
in the shape of the internet and e-commerce. In addition, the e-banking process of an
online banking operation is under-researched. Therefore, there is a need for further
studies in this area. Future studies should help practitioners to identify stakeholders’
contributions to product development (e.g. process innovation) performance. Future
studies need to address measurement issues related to the quality of e-process
operation and the experience of internal and external customers.
This study did not survey customers’ perceptions of using e-banking process
operations. Customers may perceive the e-banking operation to be complex, which
seems to create a negative attitude towards its adoption. Therefore, some customers
may tend to be late majority or laggards rather than innovators. Thus, managers
should try to comprehend laggards’ buying behaviour in order to stimulate the
adoption of e-banking operations.
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service quality
process
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The e-banking process enables customers to gain control of their banking
operations. Managers should take this opportunity to regard customers as part-time
workers and encourage them to be co-producers. Customers such as students, who are
familiar with the internet, should not find e-banking operations complicated. However,
e-banking operations may require a certain minimum degree of technical experience
and competence. Customers may also find difficulties with personal service and
computers and the internet (e.g. security and safety concerns, complexity, trust, lack of
standards, regulations, and conventional principles) to be potential barriers to
adoption. Therefore, considerable work needs to be undertaken to expand this
e-process. For example, this study did not examine impediments such as security
issues (e.g. risks, fraud, virus, and hackers) related to the e-process: these should be
addressed as an area of future research.
Various scholars in services marketing management have discussed process
innovation but, this domain of the e-process is under-exposed. This study could also be
reproduced by focusing on other customers (e.g. corporate customers), and other
services industries. In addition, this study deals with the e-banking process as it relates
to the student segment. Therefore, extending this study would assist managers with
significant consumer behavioural aspects when re-engineering their banking process
operations (e.g. financial product development via process innovation: e-mortgage,
e-insurance processes).
Financial product innovation plays a crucial role in developing competitive advantage
and contributes to a firm’s organisational performance (e.g. profitability and expansion).
Therefore, financial services firms should have a balanced financial product portfolio to
maintain and protect their current market position and future competitiveness.
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