failure to align objectives to broader business goals
NEW YORK (PRWEB) March 25, 2008
More than a third of the cost-reduction efforts launched by financial institutions in the past three years have failed to reach their goals, according to the study. As a result, an increasing number of companies are turning to the next generation of shared services called "Process Utilities." Unlike efforts that have delivered savings by scaling internal services -- finance, accounting, human resources -- process utilities pull together core activities for the delivery of products and services such as opening accounts and billing statements.
Building process utilities requires executives to look across business lines, functional silos and geographic divides to identify the processes that can be shared across typical corporate boundaries. "Account opening," cited by 47 percent of those respondents who have adopted process utilities, is the most popular business process that has been structured as process utility. "Billing/statements" and "Clearing" are also common choices, selected by 37 percent and 35 percent of respondents, respectively. Of processes yet to be converted, approximately one third of those surveyed say that turning "IT infrastructure" and "IT application development" into process utilities is at the top of their planning lists.
More than half of the financial institutions that have implemented process utilities reported "improved economies of scale," and nearly four in 10 said "increased customer satisfaction" followed deployment.
Despite the reports of higher efficiencies and reduced costs, the survey found that financial institutions seeking to use this new operating model face a range of cultural, technological and organizational challenges. More than 38% of respondents cited "variation in customer needs" as a significant hurdle, and approximately one third cited "complex product offerings" as a barrier. Over a quarter stated that "multichannel management was an obstacle to success.
"Finding new efficiencies and delivering on promises of synergy is top of mind for financial executives from New York to London," said J. Scott Cade, Principal at Booz Allen. "Process utilities are a proven path to boost efficiencies, cut costs and even deliver better customer service. This next generation of shared services is slated to become a key way for financial institutions to achieve their business goals."
Other key findings from the study include:
-- Cost-cutting track record - Of the 334 banks that tried to achieve savings of five percent or more over the past three years, 35 percent failed to reach their goals. The average shortfall in savings was approximately nine percent. A "failure to align objectives to broader business goals" was cited by 36 percent of respondents as a reason for coming up short, while 32 percent attributed it to a "failure to provide incentives."
-- Most valuable techniques - Among the most successful strategies these executives have used to cut costs in the past, the top three were "business process engineering" (61 percent), "outsourcing" (45 percent), and "shared services" (35 percent).
-- Familiarity with process utilities - Seven in ten of the executives surveyed say they are familiar with the concept of process utilities, and nearly a third state that process utilities have been important to their cost-cutting efforts over the past three years. When asked about the likelihood of their implementing the concept across their business lines in the future, 37 percent say they're likely to do so. Indeed, 64 percent believe process utilities will be important to their future cost-cutting efforts.
-- Size and type of financial institution - Of banks with more than US$1 trillion in assets, 26 percent say they are very likely to implement process utilities. For banks with less than US$50 million in assets, that number dropped to 14 percent. Three quarters of credit card companies and 46 percent of diversified banking institutions stated that they are likely to implement process utilities.
In July of 2007, the Economist Intelligence Unit conducted a global survey, sponsored by Booz Allen Hamilton, of 499 financial-services professionals on the subject of process utilities. Approximately one-third of respondents were C-level officers in their organizations, with 12 percent serving as CEOs. The balance represents heads of business lines, VPs, department heads or other professionals. Within the financial services industry, executives reported working in the areas of retail universal banking, wealth management, investment banking and corporate banking. The average respondent's bank held assets of approximately US$240 billion. Approximately 30 percent of the executives came from small banks with assets less than US$10 billion, and a fifth reported assets greater than US$500 billion. The survey's full findings and methodology can be found at http://www.boozallen.com/process_utilities.
About Booz Allen Hamilton
Booz Allen Hamilton has been at the forefront of management consulting for businesses and governments for more than 90 years. Providing consulting services in strategy, operations, organization and change, and information technology, Booz Allen is the one firm that helps clients solve their toughest problems, working by their side to help them achieve their missions. Booz Allen is committed to delivering results that endure.
With 19,000 employees on six continents, the firm generates annual sales of $4 billion. Booz Allen has been recognized as a consultant and an employer of choice. In 2008, for the fourth consecutive year, Fortune magazine named Booz Allen one of "The 100 Best Companies to Work For," and for the past nine years, Working Mother has ranked the firm among its "100 Best Companies for Working Mothers."
To learn more about the firm, visit the Booz Allen Web site at http://www.boozallen.com. To learn more about the best ideas in business, visit http://www.strategy-business.com, the Web site for strategy+business, a quarterly journal sponsored by Booz Allen.
About the Economist Intelligence Unit
The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit provides geopolitical, economic and business analysis on more than 200 countries, as well as strategic intelligence on key industries and management practices. With over 300 full-time professionals in 40 offices around the world, supported by a global network of more than 700 contributing analysts, the Economist Intelligence Unit is widely known for its unparalleled coverage of major and emerging markets. More information about the Economist Intelligence Unit can be found at http://www.eiu.com.