Towards Improving Banking Services Quality
13.
Non-value-added
Activities
Introduction
Non-value-added (NVA)
activities are a critical focus in Lean management as they consume resources
without adding value to the product or service from the customer’s perspective.
In the banking sector, such activities lead to inefficiencies, delays, and frustrations
for both customers and employees. Identifying and minimizing non-value-added
activities is crucial to streamline processes, reduce waste, and enhance
operational performance. This chapter explores the criteria for non-value-added
activities, examples from banking, and essential NVA activities that cannot be
eliminated but require optimization.
Criteria for
Non-Value-Added Activities
Non-value-added (NVA) activity consumes
resources but does not add value to the product or service. Since such activity
does not add any value to the product or service, the same can be termed as
waste.
Typical non-value-added activities include
scheduling, moving work-in-process from point to point, setting up equipment,
recording time spent on a particular job, inspecting a part, and billing a
customer.
Non-value-added activities are
characterized by the following:
1.
Resource Consumption Without Value Addition:
These activities use time, effort, or money but do not enhance the product or
service.
2.
Customer Indifference: Customers do not
recognize these activities as beneficial and are not willing to pay for them.
3.
Waste Creation: They contribute to
inefficiencies or delays in service delivery.
Examples of Non-Value-Added
Activities in Banks
A few examples of non-value-added activities in
banks are:
1.
Unnecessary Movement:
o Employees
walking between multiple counters to complete tasks.
o Customers
moving between various counters for different services like deposits, passbook
updates, or cheque-book requisitions.
2.
Too Many Work-Specific Counters:
o A
customer visiting a branch for multiple services (e.g., cash deposits, passbook
printing, and cheque requisitions) being asked to visit separate counters for
each task, leading to wasted time and frustration.
3.
Lengthy Payment Processes:
o A
cheque-based payment requiring multiple steps: presenting the cheque at one
counter, receiving a token, and waiting in a queue at the cashier counter.
4.
Lengthy Deposit Processes:
o Requiring
manual filling of forms, multiple verification steps, and long queues to
deposit cash or cheques.
5.
Unnecessary Verification Points:
o Overlapping
approvals or verifications for simple transactions that do not add value to the
outcome.
6.
Repetition of Processes Due to Errors:
o Errors
in data entry or documentation leading to rework, such as reprocessing loan
applications or revalidating cheque details.
7.
Waiting Time:
o Customers
waiting in queues due to poorly designed queue management systems or limited
staff deployment at peak times.
8.
Excessive Documentation Requirements:
o Asking
customers to provide redundant documents for processes where automation or
database integration could simplify requirements.
9.
Poorly Designed IT Systems:
o Outdated
software requiring manual workarounds, such as re-entering customer data across
multiple systems.
10.
Re-entry (Duplication) of data:
·
Transferring information manually from one
system to another or re-entry (duplication) of data due to a lack of system
integration.
Non-Value-Added But
Essential Activities
Certain activities in banking,
though non-value-adding, are essential due to regulatory or operational
requirements. Such activity /
activities does / do not add value, but cannot be eliminated. These
include:
1.
Compliance with Statutory and Regulatory
Requirements:
o Activities
like customer identity verification (KYC – Know Your Customer) or reporting to
regulatory authorities. For example, automating KYC processes with OCR (Optical
Character Recognition) can drastically reduce errors and time consumption.
2.
Documentation for Audit and Record-Keeping:
o Maintaining
records for compliance, internal audits, or legal purposes.
3.
Mandatory Audits:
o Periodic
audits to ensure financial accuracy and regulatory compliance. Banks in India
are required to undergo statutory audits to ensure the accuracy of their
financial records.
4.
Risk Assessments:
o Internal
checks required to manage and mitigate operational or financial risks.
Conclusion
Addressing non-value-added
activities is a pivotal step toward Lean banking. By identifying and
eliminating unnecessary tasks, banks can improve efficiency, reduce costs, and
enhance the overall customer experience. Essential non-value-added activities
that cannot be avoided should be optimized for speed and accuracy. In the
competitive and fast-evolving banking sector, minimizing waste and focusing on
value-creating processes are vital for long-term success and customer
satisfaction. Asking a vital question to bank employees - Reflect on your
banking experiences—can you identify processes that might be non-value-adding?
What could banks do to enhance their value delivery to customers?
I welcome your comments, questions and suggestions.
Warm regards,
Keshav Ram Singhal
Next - Value-added Activities vs Non-value-added Activities
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