Management

Management

operational analysis effectiveness
Case study: Blueprinting the Service-Profit chain
With the continued growth of the mining sector in Western Australia, the Community Bank of Perth had
experienced a strong growth in all areas of its business. One area that seemed to be booming was the
refinancing of home loans. Prospective and current customers were searching for more economical
loans, and the applications for refinancing were being received in ever-increasing numbers. In order to
handle the increased volume, the bank developed a new loans approval process. The process was
divided into five distinct stages and departments were created for each stage.
Stage 1: Loan application
The process begins with a customer completing a loan application for a loan agent. The loan agent
discusses the refinancing option with the customer and performs quick calculations based on customerreported
data to see if the customer qualifies for loan approval. If the numbers work, the customer signs
a few papers to allow a credit check and goes home to wait for notification of the loan’s approval.
Stage 2: Loan processing
The customer’s file is then passed on to a loan processor, who requests a credit check, verification of
loans or mortgages from other financial institutions, an appraisal of the property, and employment
verification. If any problems are encountered, the loan processor goes to the loan agent for advice. If
items appear on the credit report that are not on the application, or if other agencies have requested the
credit report, the customer is required to explain the discrepancies in writing. If the explanation is
acceptable, the letter is placed in the customer’s file and the file is sent to the loan agent (and sometimes
the bank’s board) for final approval.
Stage 3: Loan closing
The customer receives a letter of loan approval and is asked to call the closing agent to schedule a
closing date and to lock in a loan rate if the customer has not already done so.
The closing agent requests the name of the customer’s lawyer to forward the loan packet. The lawyer is
responsible for arranging a termite inspection, a survey, a title search, and insurance, as well as
preparing the closing papers. The lawyer and the closing agent correspond back and forth to verify fees,
payment schedules, and payoff amounts.
Stage 4: New account establishment
The loan-servicing specialist makes sure that the previous loan is paid off and the new loan is set up
properly.
Stage 5: Loan payment setup
After the closing takes place, the bank’s loan-payment specialist takes care of issuing payment books or
setting up the automatic withdrawal of mortgage fees and calculating the exact monthly payments. The
loan-payment specialist also monitors late payment of mortgages.
It is difficult to evaluate the success or failure of the process, since the volume of refinancing requests is
so much greater than it has ever been before. However, customer comments solicited by the loanservicing
specialist have been disturbing to management.
Customer Comments
? I refinanced with the same bank that held my original loan, thinking erroneously that I could save
time and money. You took two months longer processing my loan than the other bank would have,
and the money I saved on closing costs was more than eaten up by the extra month’s higher
mortgage payments.
? I just got a call from someone at your bank claiming my mortgage payment was overdue. How can it
be overdue when you withdraw it automatically from my cheque account?
? How come you do everything in writing and through the mail? If you would just call and ask me
these questions instead of sending forms for me to fill out, things would go much more quickly.
? If I haven’t made any additions to my house or property in the last year, you appraised it last year,
and you have access to my tax assessment, why bother with another appraisal? You guys just like to
pass around the business.
? I never know who to call for what. You have so many people working on my file. I know I’ve
repeated the same thing to a dozen different people.
? It took so long to get my loan approved that my credit report, appraisal report, and termite inspection
report expired. You should pay for the new reports, not me.
? I drove down to your office in person today to deliver the lawyer’s papers, and I hoped to return
them with your signature and whatever else you add to the closing packet. The loan specialist said
that the closing agent wouldn’t get to my file until the morning of the scheduled closing and that if
she hit a snag, the closing could be postponed! I’m taking off half a day from work to attend the
closing and “rescheduling” is not convenient. I know you have lots of business, but I don’t like being
treated this way.
? I received a letter from one of your loan-payment specialists today, along with a stack of forms to
complete specifying how I want to set up my mortgage payments. I signed all these at closing—
don’t you read your own work? I’m worried that if I fill them out again you’ll withdraw the payment
twice from my account!
Task
As the newly appointed Manager – Retail Banking at the Community Bank of Perth, you have been
asked to review the current process, and taking customer comments into account, redesign the process
so that it is customer friendly, efficient and protective of bank assets. Your report should:
? use the service blueprint concept to analyse the current refinancing process giving an explanation as
to why the bank might have originally designed it this way.
? describe, from an operations management perspective, the problems that have been caused by this
process.
? use both the service-profit chain concept and service blueprinting to redesign the process so that
value-adding steps are reinforced and cost-adding steps are reduced or eliminated. Construct a new
service blueprint showing how the overall process can be improved.

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