Building a management system in a retail bank (part 1)

This article is devoted to the formation of a bank management system. The article consists of two parts: the first part discusses the theoretical aspects of building an organization's management system based on a process approach, the second part describes the steps taken in the course of creating a management system in a retail bank (CB, Samara). We also made an attempt to answer a number of questions that arise both from the heads of enterprises implementing or planning to implement process management, and from specialists directly involved in improving management systems (consultants, directors for strategic and organizational development):

what are the principles for highlighting top-level business processes in an organization
how the process organizational structure is formed
how the structure of performance indicators of departments is formed
what should be the structure of regulatory documentation
what is the effect for the company of applying the principles of the process approach to building a management system

The prerequisite for carrying out work to change (it would be more correct to say build) the management system of the bank was the decision of its owner (Group of Companies) to enter the consumer lending market and create a federal-level retail bank. In 2002, the CB adopted a new development strategy, according to which lending to individuals became a priority for its activities on the basis of an express assessment (scoring) of potential borrowers. The basis of the technology was to be the speed of decision making, customer service convenience and constantly monitored or maintained quality of the loan portfolio in terms of the amount of debt on loans issued (ensuring the specified quality of the loan portfolio). It is these principles of technology formation, together with a significant growth in the consumer lending market, that should have ensured the achievement of strategic goals.

At the time of the decision to start building a new business, CB was a small regional bank, the main specialization of which was servicing the needs of a narrow group of legal entities included in the GC holding. The number of the bank's staff at that time was about 40 people, the organizational structure of the bank is shown in Figure 1.

Picture 1.

The bank's development strategy provided for an active geographical expansion of activities (creation of a wide network of representative offices in the Russian Federation), a significant increase in the number of personnel, the creation of new technologies for banking products, the introduction of a banking information system, and all these tasks had to be solved in a fairly short time. It was obvious that without an adequate bank management system, it is not possible to achieve strategic goals, so the bank's management decided to initiate a project to create a management system based on a process approach. The new management system was supposed to ensure the achievement of strategic goals, the maximum acceptable customer satisfaction, subject to the harmonization of the interests of owners, staff, government agencies. It is obvious that the solution of this problem could be based only on advanced experience. For this reason, a comprehensive methodological framework for transformations included:

when developing a new model - the approach of the company (Moscow) based on the localization of the normative eight-process model, practical methods for improving business processes developed in the Corporate Governance Department of the Group of Companies, requirements for the Quality Management System in accordance with ISO 9001-2000;
when carrying out transformations - a project form of organizing activities;
when introducing and developing a new model - the procedures of the Quality Management System.

One of the key factors that ultimately had a positive impact on the success of organizational changes was the decision on the division of powers between the owners and top management of the bank during the implementation of the project - the process of transformation and subsequent operational management (implementation of the business model) was carried out by the bank's management, the owners approved the strategy and controlled the key points of the project.

We want to thank the colleagues who gave their time and effort to make this challenging project a success. We are especially grateful to Kadyev T.R., Borisov A.A. and Korganov I.E. for methodological support, assistance in carrying out work, support from the bank's management, as well as to specialists of the Bank's Organizational Development Department D.G. Eryshov. and Simagin I.A. for the quality of work performed within the framework of the project.

Before talking about the practical implementation of organizational changes in the design bureau, I would like to give a more detailed idea of the methodology for carrying out the work.

Theoretical background

Principles of change

The foundation of the new organization was to be the classic eight principles of quality management in the following interpretation:

Customer Orientation - Understanding an organization's dependence on the satisfaction of its customers. Applying this principle means that the organization understands and strives to meet the needs and expectations of customers.
The principle of leadership leadership means that leaders take on the role of leaders in the ongoing transformations, provide the work with the necessary resources.
Personnel involvement - active involvement of personnel in the design, implementation and improvement of activities.
The process approach is a process approach to management, detailed in the section below.
Systematic approach to management - detailed below in the section.
Continuous improvement of performance - this principle involves the continuous improvement of business performance and organizational processes.
Fact-based decisions - this means that decisions are made primarily on the basis of an analysis of actual data.
Mutually beneficial relationships with suppliers - in our case, this principle means building trusting and mutually beneficial relationships with our partners and suppliers in order to achieve maximum satisfaction of our customers.

Two approaches to building control systems

The existing practice of building control systems includes several approaches to the organization of control systems. The most famous of them are systems built on the management of functions and management of the organization's processes.

Management systems built on the principles of function management represent a hierarchical pyramidal structure of departments grouped according to their functions. A functional unit can be understood as a group of experts in a given functional area. In organizations built on this principle, management is carried out on administrative-command principles.

Another approach to building management systems is to manage the workflows or processes that make up the activities of the enterprise. The process unit includes a coordinator and performers of operations from various functional areas, grouped according to the principle of unity of the result of the business process. Such systems are often referred to as "horizontal", meaning by "vertical" management a hierarchy of functional units and managers in a standard management system built on a functional principle.

At the moment, the application of the process approach is a prerequisite for building a Quality Management System according to ISO 9001-2000. Practice has shown that a management system built on the principles of process management is more efficient and effective than a functional system of equal scale. However, the development and implementation of such a system is an extremely complex process. In addition, the practice of applying the process approach involves the management of functionally heterogeneous units, which makes it difficult to manage this process.

What do we mean by process approach?

We understand the process approach to manage the activities of an organization as a system of interrelated processes. Within the framework of the process approach, any enterprise is considered as a business system consisting of processes, the ultimate goal of which is the product purchased by the consumer or the services provided (satisfied consumer), as well as the fulfilled requirements of the business owners.

Undoubtedly, there are processes in any organization, regardless of its size and specialization. Usually, a process is understood as some logical sequence of related actions that transform an input into an output (or result of a process). In other words, all management and production (in a broad sense) activity can be considered as a set of interacting processes. At the same time, the enterprise can retain the functional form of organizing its activities (for example, organizational structure). Then it's just a matter of process control. If, in the course of engineering or reengineering, the principles of organizing activities by processes are chosen, then we are talking about process management in the full sense.

Figure 2. Content and process

In such a system (with process management), the owner of the process (the head of the cross-functional unit) ensures that all operations are performed in accordance with the established rules (procedures), and is responsible for compliance with the established requirements. In addition, he is responsible for the continuous improvement of the process, increasing its efficiency and effectiveness. With this construction, the organizational structure is easily associated with the budget and planning system, to the results of activities: one process - one owner - one division - one budget.

Let us formulate the basic principles of the process approach:

the company's activities are presented as a set of processes carried out to achieve the specified goals;
the execution of processes is regulated;
every process has a consumer, internal or external;
each process has an owner, a person responsible for the result of the process;
for processes, key indicators are established by which one can judge how the process is performed and how it affects the final result of the entire enterprise.

As our practice has shown, the transition to process management allows you to effectively manage complex and geographically distributed organizations. The process approach is especially effective with the rapid quantitative and qualitative growth of the organization, it is this approach that allows large organizations to maintain flexibility without loss of control and ensure a stable quality of customer service.

Systems approach

When designing a management system, any company operating in the market is considered as an integral business system that interacts with the subjects of the external environment. This approach excludes the optimization of individual elements without considering the relationship with other elements of the system and taking into account the impact of changing any element on the behavior of the system as a whole. During the implementation of our project, proposals were received from bank employees to optimize individual elements, for example, reorganization, only the sales process, optimization of only IT. Such options were immediately ruled out - local reorganization was not allowed, an unambiguous decision was made - the system would be built entirely.

Considering a company as a system allows you to create a complete and consistent management system that fully realizes the expectations of owners from owning a business, satisfies the solvent requirements of consumers and the requirements of state regulatory bodies.

With this approach, the construction of the management system is based on the expectations of the owners from owning the relevant business, the restrictions of the owners and state regulators on the conduct of this business. Owner expectations can be classified as:

system expectations;
financial expectations;
moral or psychological expectations.

Obtaining the required results from the activities of the business system and meeting the expectations of the owners is possible when implementing certain types of activities implemented by the company (Figure 3), which form a system of top-level business processes.

Figure 3

Regulatory Model

Based on the top-level business processes, a normative model of the enterprise's activity is formed, which is detailed to the level of operations by the method of algorithmic decomposition. The use of normative models in the design of control systems can reduce the time for designing control systems and reduce the cost of organizational development projects.

Figure 4. Eight-process BCG model

The choice of this model was not accidental. From our point of view, it most accurately describes the processes that connect any organization with business entities from the external near (customers, partners, competitors, labor market, public opinion, etc.) and the distant environment (state regulatory bodies) of various kinds of relations. On the other hand, the model describes the internal processes necessary for the existence of an organization as a subject of economic and legal relations, universally and regardless of a specific type of activity or technology used. It most fully describes the processes that exist in any organization. Like any normative model, the eight-process BCG model is redundant, therefore, in particular cases, some processes can almost degenerate, or somewhat transform for different organizations.

The main and most difficult work of building a management system is the localization (or adaptation) of the regulatory model in accordance with the strategy, current conditions and market opportunities.

Using algorithmic decomposition, top-level business processes are broken down into sub-processes, and the construction comes from the outputs of the top process in order to get the transformation process into. The definition of the transformation process itself takes place on a lower-level decomposition, while the requirements introduced into the system are described as restrictions for business processes (requirements of owners, regulators, ISO 9001-2000, Basel II, PMI, etc.). By sequential decomposition of top-level processes, activities are described to obtain the expected results from the business system. The algorithmic decomposition of processes should ensure the simultaneous achievement of the following results:

preservation of the idea of the object of work as an integral system;
the possibility of independent consideration of individual areas and subsystems.

Algorithmic decomposition is subjected to both the organization's activity itself and its result, goal, and limitations.

By decomposing processes (to the level of elementary operations), we can also decompose goals, and based on the costs of carrying out activities, we obtain the budget of the process and the classifier of cost items, as well as accounting items. The application of this method allows you to control the status and parameters of the results of activities at accounting points, all this forms an accounting system that includes a set of management reporting and the procedure for its document flow.

Stages of the project of building a control system

Summarizing the above, we can highlight the key concepts that underlie the process synthesis and determine the content of the project to build a control system:

Enterprise strategy, business and its model;
Processes and process approach;
Regulatory model;
Algorithmic decomposition of processes;

As our practice has shown, in general terms, the project for building a company management system should consist of the following stages (subprojects):

1. Building a model of processes, taking into account the requirements and restrictions of the owners, the requirements of consumers and government bodies (model). This stage involves building a model of a new system that does not carry the "genetic" negative features of the existing management system. At this stage, the following work is carried out:

detailing the company's strategy
selection of control objects
determination of the initial and required states of control objects
determination of the structure of work on transferring the states of objects from the initial to the required
definition of criteria for achieving the results of processes

2. Algorithmic decomposition of top-level business processes. At this stage, cost management is taken into account - at each step of decomposition to each sub-process, the corresponding costs and revenues, which allows you to get the structure of costs and revenues of the top-level business process.

3. Introduction of additional requirements, for example: CRM customer relationship management techniques, ISO 9000 quality management standard.

4. Determination of the organizational structure - the choice of principles for the formation of units (functional or process organizational structure).

5. Determining the correspondence between the works (blocks of work) in the processes and their performers - the appointment of those responsible for the implementation of business processes. The result of the stage is a system of procedures and regulations that describe the interaction of departments, indicators of performance and efficiency, document flow and reporting, requirements for personnel, job descriptions.

6. Formation of the planning and budgeting system - development of procedures for strategic planning and budgeting;

7. Development of a system of employee motivation based on indicators of efficiency and effectiveness of business processes.

8. Determination of the process of transition of the business system from the current state to the planned one and the implementation of the transition. Implementation of a new management system.

9. Launching a mechanism for adjusting and improving the processes laid down in the Quality Management System;

10. Organization of the procedure at the level of individual departments and the organization as a whole (self-assessment in departments and the entire bank, development of measures to improve processes and management systems). Launching the rest of the QMS procedures.