Sunday, 25 December 2011


TOTAL QUALITY MANAGEMENT
IN BANKING
Some Newer Approaches


















Babu Appat, Pullipparambu, Chelembra, 673634, Ph: 9349101071, babuappat@gmail.com 

Introduction
Quality of services is the most important aspect in banking too. Business success can be reinforced if you conscientiously search for newer and more effective ways of improving the quality of your ways of serving your customer. Your organisation becomes more useful to the society as a whole thus. As far as banking is concerned, effective TQM measures bring in a transition form the good old good to the novel better or best from the bank’s internal department to its front-line employees. Marketing a bank is not just the same as marketing an FMCG company.  TQM, if effectively formulated and practised, provides extreme ease and clear direction to a bank marketeer in understanding what makes his bank the first choice to its customers before other banks.

What is effective TQM as far as a bank is concerned. Is it the physical amenities provided at each of the branches, is it a pleasing smile and a warm hand-shake at the front door, is it convenient hassle-free paperwork, or well thought about, well planned, target oriented, tailor-made  product mix, ICT enhanced sophisticated operational eases, or a properly balanced mix of all these. Will a centralised TQM plan is enough or freedom at the levels of individual branches needed, or a regional/zonal segmentation is enough? What could be the optimal level of decentralisation of decisions to achieve the maximum quality of services and at the same time achieve maximum profitability?

These are the various issues discussed and probed into in this study. An attempt to conceptualise and suggest some innovative TQM designs also is made here.  It’s envisaged that the findings of this study will be of some real use to the banking industry as a whole, the population pf students who are interested in pursuing higher studies in banking, and thus to the society in toto.
Objectives of the Study

The researcher intends to examine the present state of the total quality management in banks, analyse the present situation, make comments on the observed facts and suggest some innovative strategies.


Research Modality

The mode of collecting relevant information has been direct interviews of some bank officials, telephonic interviews of some bankmen, resource persons in the subject of banking and finance, direct beneficiaries and prospective beneficiaries of these financial services etc.  Convenience sampling is the sampling modality chosen.

As a case study the Total Quality Management measures adopted by CenterBank, Ohio, USA is discussed in detail, and some innovative Quality Assurance measures are suggested.
Published secondary data from books, journals and Internet also has been utilised.  The findings or the suggestions put forth in this study hopefully will be of some real use to the industry or the students who intend to do a study in these lines.

Quality of Services
As mentioned before a strongly founded quality assurance efforts can, perhaps only can, reinforce the success in a bank from its back office to the front office and in all its dealings. Service quality empowerment begins by giving the necessary training to the managers to train their employees in a proper way. They must then be provided with the resources required, to develop and train the employees on a continual basis. The training must be powerful enough to change the basic concepts of the employees especially those who come into direct contact with the customers. The training must enable them to derive satisfaction out of their everyday official chore, what you call job satisfaction. They must be taught the psychological aspects of rendering a good service, thus making themselves happy and through that making the customers also happy. In the end of each day the employees too will be freed from a lot of job related frustrations.
A properly formulated training programme will ensure the employees their all round personality development, so that they will be able to win the esteem of the customers. From a mere mechanical dispensing of the boring duties entrusted on them, they will get transformed to happy and enthusiastic solution providers. This is the only way they can build up their social esteem also.

Perhaps finding out the real performers and rewarding them for their exclusive capabilities is not possible in the present government set-up. We reward them class or category-wise, as a group. This will never be useful. We have found it from the recent bounteous hikes in salary and other perks of bank employees. They are one of the most highly paid clerks in the world, perhaps. Corresponding infrastructural improvements were also were brought in, but because of the resistance of the employees to change and acquire new knowledge most technical advancement some of the public sector banks has brought in, is not available in its full sense to the customer population. This causes huge losses to the public coffin and allows even small private sector banks overtake them and achieve faster business growth.

So a well thought about national training strategy for different levels of managers and employees has to be formed with the definite structure of an academic course. All efforts must be utilised to see that the attendees really learn and master the theories and techniques taught to them. This with intensified on the job training makes them masters in the art. This will help them develop self confidence also. Knowledge and wit commands reverence and so the public will come to respect them. They from the mere “weight throwing” public servants abhorred by the public, will be transformed to “esteem worthy problem solvers” liked and respected by the people.

Not to Retire but to Acquire
Normally a job in a public sector bank or for that matter in any government organisation is sought by a citizen as a happy culmination of his(er) quest to find a sure, safe and permanent way of winning a sustenance first, then to bargain collectively and get the resources to suffice all his whims and fancies, as far a s possible. This condition should be changed to a creative condition where all of them get an opportunity to acquire the necessary skills and expertise which they can use throughout their life.

After passing out from the education institutions (the courses prescribed as the basic qualification for managing an entry to any of the posts in a bank) they get into a bank. Theres’s a training course he has to undergo and emerge out successfully. Then he is paid a higher salary and continues in the job or if qualified gets promoted.

One of the parameters set for assessing his qualification for promotions and salary must be the customer’s opinion recorded as and when he served them.  This must be done on a regular basis. Each approach by any of the customers to a bank officer/employee must be recorded and his satisfaction level in that transaction recorded.

Reduction of  the Retirement Age
Since we have made the service in a bank especially in the public sector banks as a qualification for getting into any other jobs in the private sector, in government sector we can effectively and creatively reduce the age of retirement. It must be brought down to 35 or if the person wants it can be extended to 38, which will have some minus points, if not compensated by some extra achievements in the continuation phase. Then he is provided the minimum superannuation benefits, which will be almost equal to everyone, irrespective of the positions held, and will be in accordance with the recorded achievements during his career, basic education qualifications at the time of retirement, contributions made to the organisation, accrued up customer opinions etc. Then he goes on to other jobs in some other organisations. We can lay out some conditions for a re-entry also into the bank.

There must be provisions to go for educational courses without compromising on the requirements of the job. Achievements of extra qualifications can be treated as a weight point while assessing the amount of the pension he can draw after retirement.

After retirement he gets qualified to accept suitable jobs in any other organisations. His ability to be a capable person is enhanced by his career in the bank. Since there is a little healthy competition induced into the content of his profession/job he will constantly try to achieve excellence. Achieving excellence brings him life-long benefits. So he will not leave any occasions for achieving or attaining excellence. Normal ways of manipulations must be leaned well and these loopholes as far as possible must be closed effectively.

Entry Age Limit
There must not be any limit to the age of entry to the services of a bank. The aim of the banks is to provide opportunities of employment and at the same time ensure of quality of services. So a man seeking a job for the first time in his life, that means he has not entered into a job in any of the public sector organisations, he has the necessary entry qualifications and has been employed or engaged in some other works in our country, abroad or self employment avenues, has meritorious achievements to his credit he can be given an entry into a suitable position, the same chances for other employees is provided to him. He also has to comply with the rules and regulations. He can continue for ten years in service and get qualified for outside employments in the meantime. He also is provided with all the benefits following the same laid out conditions.

This kind of an innovative Quality Assurance Measure will ensure Total Quality in every aspect of the banking business, especially in the public sector, which is being accused of having a poor service quality.
All the paper-works must be scrutinised and must be brought to the bare minimum. Value added, multiple use tools must be introduced. Advancement in ICT can also be used to reduce the usages of paper. It reduces the total paper use and saves the environment. Those who are not aware of the required principles and techniques of using these tools must be provided the know-how. Both employees and customers. Their effectiveness and speed of using these tools must be constantly improved.

Expertise Earned through Exposure,
Employee Partnerships
Being exposed to a particular system, device or condition of operation anyone can in a particular span of time achieve mastery over it. The time required to achieve this mastery may vary form individual to individual. A system must be introduced by which we effectively measure the time every bank employee takes to master properly a particular system, device or condition of operation (s)he is being exposed to as part of his duty in the bank and the degree of mastery too. This must also be noted with event wise details in a certificate given to each employee while he retires and goes out of the bank. This certificate should contain all details about the services he rendered, educational qualifications attained after getting the job, in house trainings undergone and details of achievements he had got in those trainings, and the pension he is entitled to get. A man’s ability to continuously better his nature of dispensing a job must be monitored on a regular basis. This of course is a tougher proposition, even then with the advent of modern technology this can be judged and recorded without much of a problem.

The Global Nature of TQM in Banking
Implementing a total quality management program is an ongoing process consisting of many different components. Banks that have begun such a journey say it is an intense learning process that spans a lifetime. "It is a process that works backwards to the absolute heart of the organisation," says Bill Placke, president and chief operating officer at Centerbank, Waterbury, Conn.

A case Study

CenterBank
CenterBank is a locally owned, independent community bank headquartered in Milford, Ohio. It is a new bank founded on an old concept – Community Banking. Providing things the big banks can’t offer like relationship banking, exceptional service, local ownership, local decision-making, and community involvement.

As a community bank they’re obsessed with customer service, with having the best employees and taking the best care of their customers. By big things like taking the time to know each customer by name and understanding his(er) individual needs. And by little things like answering the phone with a real person – not a machine.

Their main characteristics are exceptional service and great products with reasonable fees, so the choice is easy for their customers. As a a small bank which has grown by successfully implementing the principles of TQM in the banking sector understanding this case is useful for this study, it’s presumed.
Placke describes the effort as creating a high level partnership between those who provide internal service and those who deliver external service. "The support level of your back office is absolutely critical to the job you are doing at the front line," he says.
Using a Harvard University analogy on the service profit chain, Placke explains how total quality management works. "Internal service quality leads to employee satisfaction, which leads to employee retention," he says. "Employee retention leads to external quality service, which leads to customer satisfaction, which in turn leads to customer retention and greater profitability
"There are six discrete pieces, all of which have to be inter-related with each other for this to work," he adds
Understanding the importance of interdependency has helped Centerbank develop its total quality management program. Banks that only think of the customer when they begin a quality management program, are making a mistake, says Placke. "Only a limited number of people are at the front line of sales," he explains. "If they are not tended to extremely well by people who provide them service, they will tire quickly when providing customer service because they are hassled at the back end."
Centerbank has defined three ways to provide total quality service: provide a high level of employee training; understand what satisfies customers; and develop measurement systems that provide regular feedback. "Communication is a huge part of all of this," says Placke.
One strategy for developing highly trained employees begins at the hiring process by identifying people who believe delivering quality service is a key goal. Finding the right person leads to expanding the interviewing pool and taking more time in selecting new hires, asserts Placke.
Another key component for the training process is empowering employees to make on-the-spot decisions. Through nontraditional training, managers act as mentors for their employees. Branch managers coach the customer service representatives and tellers only after they have been coached by their supervisors. Everyone, including Placke, participates in the training. "It is a cascading approach and there are many benefits," he says.
For instance, training while on the job does not disrupt the flow of business. If any interpersonal problems arise within the staff, they are identified and handled immediately, says Placke. The interaction between boss and subordinate also improves, he says.
Another part of the coaching program includes videotaping participants while they role-play. In these sessions, employees learn how to ask customers leading questions to determine financial needs. Special attention is paid to voice tone, facial expressions, eye contact and attitude. "If someone approaches you with a dazzling smile, a great tone of voice and good eye contact, you can't resist," says Placke. "We're trying to develop a style in the service level and attitude we deliver."
A change in attitude can sometimes make all the difference in the world. The results at Centerbank are dramatic, according to Placke. He gets letters frequently from customers who notice the difference in employees. Customers write, "You wouldn't believe how attentive this person was. He made me feel like I was the only person in the bank."
Understanding what satisfies customers is an important component in delivering total quality service. Focus groups and questionnaires are all part of what Placke calls the basic research. Secondary research digs much deeper into customer behaviour with the use of segmentation and predictive modelling.
By determining the net present value of its customers, Centerbank has been putting more emphasis on retention strategies. The premise for the strategies is that some segments of the customer base will be more profitable over time than others, based on the type and number of accounts and balances.

Quality as a Banking Strategy
Surveys show results. Customers register complaints. Employees leave. America is in the midst of a service crisis and the customer is the casualty. Financial service companies, including banks, are no different. Banks are struggling to improve service and proclaim that they are customer-focused, yet outstanding, exceptional quality service is still the exception rather than the rule. Two routes to profit growth in financial organisations are cost-efficiency and differentiation.' Excellent service contributes to both.
In this chapter, the use of quality in banking focuses on strategy and moves the focus from quality to total quality management. While banks understand the value of service quality, getting started can be a struggle. This chapter discusses the implementation of the quality process, the need for commitment, and the impact of quality on the bank. The quality process is complex and frustrating at times, but focus is critical. The process begins with top management's commitment to quality.

Quality Must be a Management Priority
Management participation and leadership is crucial to building a service quality culture. This vision and leadership is also important in developing and implementing a total quality management strategy. Lack of management commitment could lead to service gaps or cause service gaps to widen. Quality must be a management priority. Igniting the explosion of quality leadership in a company means repositioning quality from a secondary to a primary management role. Although much of the research indicates the need for management commitment, renowned quality consultant Philip Crosby says he does not want "commitment" from top managers, he wants "participation."

One of the most important functions of the total quality leader is the ability to empower people. It includes transferring power downward and outward and fostering wide employee participation in the quality process.  Service quality is everybody's business, and effective leaders empower employees to make on-the-spot decisions that are in the customer's interest. According to William Davidow and Bro Uttal in Total Customer Service: The Ultimate Weapon, employees will commit to quality if they see management commitment and believe it is sincere.
What is remarkable about service leaders is the way they treat employees. Getting their hands dirty keeps top managers in touch with the problems of customers and the experience of the front line, and it shows everybody that serving customers is important

Quality service comes from inspired leadership. Employees and managers at all levels look to top executives to set an example and a tone for the rest of the organisation. Top management must foster a general awareness that quality improvement will take its place as equal in importance to traditional cost, profit, growth, and sales goals. "Leadership is the backbone of quality, as it is for all planned cultural change.''
Adopting quality as a bank strategy means cultural change. Change is difficult to accomplish without solid, committed leadership. The bank president and other senior executives set the pace. It is imperative that senior managers in service organisations provide the leadership to focus their company around a set of core values that include customer service and service quality.

A quality strategy requires people and resources. Without the commitment of top management and their willingness to back it up with considerable resources at their disposal, quality improvement will not be possible. Total quality leaders know and understand that personal success comes from group success and that credit for success must be distributed throughout the group

One of the most important functions of the total quality leader is the ability to empower people. It includes transferring power downward and outward and fostering wide employee participation in the quality process. Service quality is everybody's business, and effective leaders empower employees to make on-the-spot decisions that are in the customer's interest.

According to Edward Furash
Edward E. Furash, President & CEO of City First Bank of DC & Vice Chairman of the Board, has been a banker, educator, speaker, and industry strategist for nearly 45 years. Mr. Furash recently retired as Chairman of Treasury Bank, N.A. which he acquired in 2000 in partnership with Countrywide Financial Corporation. He has been the chairman of Bank of America Corporation.
According to Edward Furash, bank management must have three critical characteristics:
1.      A style of doing business that makes customers feel the bank is something special;
2.      A management process that is systematic and transferable from region to region, bank to   bank, and department to department;
3.      A management style that also balances individual and unit freedom, creativity, and incentive with central control of risk, quality, and efficiency.

According to Ray F Boedecker
Ray Boedecker the author of  “Eleven Conditions for Excellence: The IBM Total Quality Improvement process” outlines the importance of management backing up strong words with visible action. Boedecker suggests management take the following actions:
1.      Incorporate quality into the bank's strategic plan;
2.      Issue a policy stressing the importance of quality, the commitment of the organisation to quality improvement, and everyone's responsibility for improvement;
3.      Make organisational changes;
4.      Form a quality council composed of senior managers who report to the CEO;
5.      Initiate quality training activities;
6.      . Incorporate quality improvement goals in operating plans on par with other traditional bank goals;
7.      Listen to customers through various forms of market research;
8.      Visit operating units and community offices to talk with managers and employees about their feelings on quality. Find out what problems they face in meeting customer expectations;
9.      Make quality a periodic agenda item at meetings;
10.  Insure that quality is a factor in all performance, compensation, and incentive programs;
11.   Initiate a recognition and reward system to reward quality achievements for individuals and groups;
12.  Review quality goals and targets and challenge them frequently;
13.   Educate the senior management group on quality improvement;
14.  Visit other firms that have embarked on quality improvement programs;
15.  Go public with details on the company's quality improvement plan

Introducing the Quality Process
After identifying the need for change, committing to a customer-driven focus on service, and gaining top management commitment, a bank must assess the level of quality in the organisation. Customer and employee research is critical. After gathering the information, the bank can use the information and can begin to formulate a strategy for total quality improvement.


Quality is a process. Many different elements comprise the process. Most strategies develop from top-down, but bottom-up works as well. It is crucial to understand that there are many approaches, but all require patience and time. Banks have to implement quality strategies that make sense for them, and it may take years to figure out exactly what works and even more time to get it right.

Although a bottom-up approach can work, a top-down method works better for two reasons. First, managers will be able to support the effort due to adequate communication and some experience. Second, management may be capable of pursuing meaningful initiatives with non-management support. All the elements outlined below must be implemented over the course of time. There is no correct or incorrect order, although elements do interrelate. For bankers, the move to quality may be frustrating, but the rewards are great.

Feedback
Once senior management has a vision statement that reflects the opinion and brain power of the entire management team, they ask the employees for feedback. Feedback from customers are also really important. Effective ways of collecting feedback from customers are to be implemented successfully.
Outside business organisations also can be utilised to collect feed-back about the satisfaction levels of the Bank’s customers. A supermarket, a bookstall, or such other sales points where banks customers also frequent can be chosen as feedback collection centres.

Product Mix

A bank has to clearly examine the nature of each product they are offering to their customers. A need-identification programme conducted prior to the conceptualisation of the product will clear idea about the nature of the need the market has. Fine tuning the product of the bank in accordance with that must be a continuous process. Levels of freedom of decision available at the local level, at the levels of individual branches may vary from bank to bank and it’s a problem in this respect. But they convey up their findings and suggestions and these suggestions must be considered when a centralised policy on product designs are arrived at.
A convenient and problem solving product will get faster acceptance in the market.  A continuous feed back machinery will be useful in fine tuning it from time to time. This will help in improving the profitability of the bank and will enthuse up organisational growth.

Tools
Tools means the various forms and other documents used in the banks for receiving and processing the requests from customers for availing the various products offered by the bank. They must be made very simple, so that even customer with the minimum education even can understand it and provide the necessary information sought through that easily . They should be reduced to the minimum possible. Unnecessary paper-works are burden on the employees, a trouble to the customers and unfriendly to the environment.

Conclusion
The Indian banking system though lauded by the global experts, especially in the time of the recession has got a long way to develop, especially in the matter of customer relation. Total Quality Management (TQM) in the Indian banking scenario can do a lot in improving the present conditions, in rendering it more useful to the people and in improving the profitability. Training the employees, fine-tuning the product mix, improving the top management commitment to quality, fine-tuning of the processes of ensuring quality top-bottom and bottom-top, reduction of retirement age, introducing employee development programmes with the nature of an academic course, monitoring of the performances and proper rewarding based on achievements, empowering the employees professionally and personally, ensuring the customer satisfaction in everything etc are the ways suggested as a aspects of Total Quality Management in Banking



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