Towards Improving Banking Services Quality - 14 - Value-added Activities vs Non-value-added Activities

Towards Improving Banking Services Quality 

14.

Value-added Activities vs Non-value-added Activities

 

Introduction

 

Value-added (VA) and non-value-added (NVA) activities are fundamental concepts in Lean management. In day-to-day banking, these activities influence the quality of services, customer satisfaction, and operational efficiency. Identifying and classifying activities into these categories enables organizations to prioritize resources, streamline workflows, and reduce waste. This chapter delves into the distinction between VA and NVA activities, outlines strategies for their review, and emphasizes actionable steps to enhance operational performance.

 

From the previous chapters, we know that there are three types of activities:

 

-          Value-added (VA) activities

 

-          Non-value-added activity/activities (but essential) – Essential NVA

 

-          Non-value-added activity/activities (non-essential) – Non-essential NVA

 

Value-Added Activities (VA)

 

Value-added activities are tasks or processes that directly contribute to meeting customer needs or enhancing their experience. These activities must meet the following criteria:

 

1.       Customer Recognition: Customers perceive the activity as beneficial and are willing to pay for it.

 

2.       Change in Form, Fit, or Function: The activity results in a measurable improvement or transformation of the service or product.

 

3.       Right First Time: The activity is performed efficiently without requiring rework or correction.

 

A few examples of VA Activities in Banking:

 

·       Processing loan applications promptly.

 

·       Delivering financial advisory services tailored to customer goals.

 

·       Seamless fund transfers through digital platforms.

 

·       Automating repetitive tasks like passbook updates using self-service kiosks.

 

Non-Value-Added Activities (NVA)

 

Non-value-added activities do not contribute to the customer’s perceived value. These can be divided into two subcategories:

 

1.       Essential NVAs: Necessary due to legal, regulatory, or operational requirements but do not enhance customer satisfaction.

 

o   Example: Statutory audits, KYC verification processes.

 

2.       Non-Essential NVAs (Waste): Activities that do not add value and can be eliminated without any adverse impact.

 

o   Example: Duplicate data entry, unnecessary movement between counters.

 

Figure 5 - Value-added Activities vs Non-value-added Activities

Review

 

Organizations must periodically review their processes to classify and manage activities effectively. This may involve:

 

1.       Mapping Processes: Identify all steps involved in delivering a service.

 

2.       Customer Lens: Evaluate each step of a process to determine if it adds value from the customer's perspective.

 

3.       Waste Identification: Highlight areas of waste, inefficiencies, or redundancy in the process.

 

4.       Improvement Strategies: Develop plans to eliminate waste and optimize essential NVAs.

 

In short, we can say, banking organization must review activities in terms of value-added and non-value-added and thereafter take steps to keep value-added activities, minimize non-value-added activities (but essentials) and eliminate all wastes non-value-added activities (non-essentials).

 

The flowchart in Figure 5 illustrates the strategic approach to handling various activities:

 

1.       Keep VA Activities: Continuously improve value-added processes by incorporating customer feedback and innovation.

 

2.       Minimize Essential NVAs: Use technology, such as AI-powered systems, to automate tasks like compliance documentation.

 

3.       Eliminate Waste: Conduct Lean workshops to identify and remove redundant processes.

 

Conclusion

 

Distinguishing between value-added and non-value-added activities is critical for banks striving to achieve Lean excellence. While value-added activities directly enhance customer satisfaction, essential NVAs should be optimized, and wasteful activities must be eliminated. By adopting a structured approach to activity review, banks can unlock efficiencies, reduce costs, and ensure a superior customer experience. In a competitive financial landscape, focusing on Lean principles fosters sustained growth and customer loyalty. 

I welcome your comments, questions and suggestions.

Warm regards,

Keshav Ram Singhal 

Next - Waste Sensitization - Waste Identification