Proposal for Operations Transformation at Westpac

March 26, 2009

To: Ms. Gail Kelly, CO an! Mana"in" #irector, Westpac $an%
Mr. Peter Clare, Gro&p 'ec&ti(e, Pro!&cts an! Operations
)rom: **********, Principal, +sia,Pacific - +&stralia, .erint /ystems
#ate: March 26, 2009
0e: Operations Transformation at Westpac
We are (ery please! 1ith the opport&nity to !eepen o&r partnership 1ith Westpac an!
2elie(e o&r proposal pro(i!es the most comprehensi(e approach for Westpac to
e'ec&te its strate"y s&ccessf&lly. This initiati(e is critical for Westpac to !ifferentiate
its ser(ice !eli(ery mo!el in the mi!st of an in!&stry shift to1ar!s "ro1in" c&stomer
share. Westpac la"s 2ehin! its %ey competitors an! the ris% of f&rther c&stomer
attrition 1ill res&lt in a systemic !eterioration of profita2ility.
Westpac an! .erint ha(e forme! a share! perspecti(e on the importance of
operational impro(ements to the 2an%3s o(erall transformation. O&r !ia"nostic 1or%
earlier this year s&""ests that a s&ccessf&l transformation pro"ram can free &p at least
2,000 personnel for frontline sales roles o(er the ne't 42,25 months. +ss&min"
c&rrent le(els of Westpac sales pro!&cti(ity, mi"ration of 2,000 personnel to the
frontline co&l! a!! 6476 million in ann&al re(en&es.
+s important, a s&ccessf&l re!esi"n of e'istin" operatin" processes 1ill allo1 the
2an% to s&2stantially impro(e t&rnaro&n! times for c&stomers an! free &p time
cons&min" tas%s carrie! o&t 2y frontline staff. We therefore (ie1 operations
transformation not simply as "ainin" efficiencies in 2ac% office processes, 2&t as a
strate"ic catalyst to lo1er cost, re!&ce frontline 1or%, impro(e c&stomer ser(ice, an!
increase the 2an%3s capa2ilities as if offers more comple' pro!&cts an! ser(ices to
mar%et. +s s&ch, operations transformation is an inte"ral part of Westpac3s c&stomer
centric strate"y that m&st 2e e'ec&te! in f&ll ali"nment 1ith the 2an%3s ne1 strate"ic
!irection.
This proposal o&tlines an operations centrali8ation pro"ram that see%s to 9&ic%ly a!!
to the 2an%3s 2ottom line performance an! is or"ani8e! as follo1s:
'ec&ti(e /&mmary
'pecte! $enefits to Westpac
Pro:ect )oc&s
Key /&ccess )actors
Propose! +pproach an! #eli(era2les
O&r ;&alifications
Professional )ees
We reco"ni8e the importance of this transformation pro:ect to Westpac an! the
inter!epen!encies in s&ccessf&lly !eli(erin" in a timely manner. Westpac is
!emonstratin" lea!ership 2y reco"ni8in" that it is time to enhance its 2ranch channel,
an! implement ne1 impro(ements to ena2le its line lea!ers to 2etter meet the nee!s of
c&stomers.
EXECUTIVE SUMMARY
The f&n!amental iss&e that has pla"&e! the performance of retail 2ranches at Westpac
is the si"nificant amo&nt of time spent 2y staff on lo1,(al&e a!ministrati(e acti(ities
that !eli(er little (al&e to the c&stomer. The c&rrent 2ranch en(ironment is
prohi2itin" Westpac from achie(in" its ne1 c&stomer,centric (ision of pro(i!in" fast,
con(enient an! relia2le ser(ice to c&stomers across all !eli(ery channels.
O&r proposal 1ill allo1 Westpac to transform its retail 2ranches into a hi"h,(al&e,
efficient c&stomer channel 1hile "ainin" economies of scale thro&"h centrali8ation of
lo1 (al&e acti(ities.
The follo1in" !escri2es the %ey aspects of o&r proposal:
Operations excellence is about accelerating performance. Operations
centrali8ation 1ill help !o&2le profits 2y 1ithin 2 years 2y releasin" staff for
sales, impro(in" c&stomer ser(ice, an! re!&cin" time,cons&min" errors.
ocus on four areas to impro!e operations. The pro:ect 1ill foc&s on 4<
centrali8in" non,c&stomer,facin" acti(ities to capt&re scale, 2< re!esi"nin" %ey
transaction an! cre!it processes to impro(e efficiency, =< mi"ratin" c&stomers
to self,ser(ice channels to impro(e profita2ility, an! 5< reali"nin" teller
staffin" le(els to impro(e ser(ice le(els 1hile !ri(in" !o1n staff costs.
To"ether, these chan"es 1ill free &p at least 2,000 2ranch,2ase! staff.
"uil#ing $%ar#& an# $soft& factors re'uire# for success. O&r e'perience
sho1s that s&ccessf&l centrali8ation m&st 2alance >har!3 an! >soft3 factors. We
1ill employ lean techni9&es &se! 2y lea!in" man&fact&rers to re!esi"n
processes 1ith a stron" foc&s on 9&ic% 1ins to a!! profits an! confi!ence for
chan"e. ?n parallel, 1e 1ill foc&s on the >soft3 factors s&ch as &p"ra!in" s%ills
an! chan"in" min!sets 2y settin" &p an @Operations +ca!emyA to train
in!i(i!&als on lean techni9&es an! a ne1 performance mana"ement system.
Centrali(ation )ill be substantiall* complete# in +, mont%s. While the
entire pro"ram 1ill ta%e &p to 4.7 years, they %ey components 1ill 2e e'ec&te!
thro&"h 6 centrali8ation mo!&les in the first 42 months.
Verint )ill pro!i#e ongoing pro-ect management support as part of t%e
transformation pro-ect. +s part of o&r operations 1or%, 1e 1ill 4< !e(elop a
ne1 2ranch format that can 2e e'ec&te! as space is free! &p in 2ranches from
centrali8ation, 2< !e(elop an o(erall cost re!&ction pro"ram for the 2an% to
a!!ress iss&es of e'cess space an! &n!er&tili8e! assets, an! =< contin&e to
o(ersee implementation of strate"ic initiati(es la&nches.
.erint is &ni9&ely 9&alifie! to s&pport Westpac3s centrali8ation. We 2rin" a trac%
recor! of s&ccess 1ith similar transformation pro"rams in +&stralia, a !eep
&n!erstan!in" of Westpac3s or"ani8ation an! strate"y, &ni9&e centrali8ation an!
transformation tools, an! the a2ility to com2ine e'pertise across strate"y, lean
operations, an! technolo"y.
EX.ECTE/ "E0EITS TO 1EST.AC
.erint has !etermine! that Westpac to!ay has more than =00 acti(ities to s&pport
transaction processin" an! more than 470 tas%s to s&pport cre!it processin". Many of
these acti(ities are !one man&ally in a !ecentrali8e! fashion, an! are !esi"ne! aro&n!
internal rather than c&stomer re9&irements. + systematic re!esi"n an! centrali8ation
of these processes, 1ith a clear (ie1 of ho1 to impro(e c&stomer ser(ice, 1ill yiel!
the follo1in" 2enefits:
Releasing capacit* to generate 2+34 million in ne) sales. ?ncrease! sales capacity
1ill come from to primary so&rces: 4< re!&cin" the a!ministrati(e 2&r!en on e'istin"
sales personnel, an! 2< freein" &p people in the operations an! cre!it !epartments to
2e re!eploye! to frontline sales.
Impro!ing customer ser!ice. Operations centrali8ation m&st 2e implemente! 1ith
the c&stomer nee!s in min! an! lin%e! to c&stomer se"ment strate"ies. The impact of
the centrali8ation is an enhance! c&stomer e'perience as follo1s:
Reducing branch wait time 2y mi"ratin" lo1 (al&e transactions to alternati(e
channels, simplifyin" forms an! steps Be."., acco&nt openin"<, an! creatin" a
part,time teller pro"ram to ali"n s&pply 1ith !eman!.
Reducing turnaround time. T&rnaro&n! time for %ey pro!&cts Be.". forei"n
remittances, loans, CDCs< 1ill !ecrease 1ith more efficient processes. )or
e'ample, /M c&stomers ha(e repeate!ly state! that faster t&rnaro&n!s at
+EF are one reason they 2an% at +EF (ers&s Westpac.
Ac%ie!ing %ig%er 'ualit* an# re#ucing errors. Centrali8ation an! stan!ar!i8ation
1ill !ri(e hi"her processin" 9&ality 2y increasin" e'pertise an! facilitatin"
monitorin". This 1ill res&lt in re!&ce! errors that 1ill help a(oi! reprocessin"
mista%es. )or e'ample, a recent !ia"nostic of the )G process for Westpac in!icate!
that the e'port CDC application processes s&ffers error rates as hi"h as 77H !&e to
incomplete information an! missin" !oc&ments.
Creating long5term cost5effecti!eness6 scaleabilit*6 an# flexibilit*. +s operations
are re!esi"ne! an! centrali8e!, Westpac 1ill capt&re economies of scale that 1ill
increase pro!&cti(ity an! !ri(e !o1n costs. Centrali8e! operations are more scalea2le
an! !eman! s&r"es are more easily a2sor2e! in lar"er pool of people.
"uil#ing a platform to integrate ac'uisitions. fficient centrali8e! operations 1ill
allo1 easier an! faster inte"ration of ne1 ac9&isitions 2y e'ten!in" the e'istin"
operations platform to ne1ly ac9&ire! 2ranches. We ha(e 1or%e! 1ith 2an%s in the
re"ion that ha(e initiate! operations transformation in a!(ance of ac9&isitions to
capt&re "reater syner"ies 2y inte"ratin" faster an! 1ith less !isr&ption. /&ch 2an%s
treat operations centrali8ation as a @!ress rehearsalA for ac9&isitions.
.RO7ECT OCUS
To achie(e the e'pecte! 2enefits, 1e ha(e !e(elope! an operations transformation
pro"ram that foc&ses on fo&r %ey areas:
4. Centrali(e non customer5facing acti!ities. We 1ill create consoli!ate! re"ional
an! Dor national processin" centers as >factories3 for non,c&stomer facin" 2ac%
office processes Be.". chec% processin"<, incl&!in" e'pan!in" the in2o&n! call
center. This allo1s 2ranches to foc&s on ser(icin" c&stomers an! !ri(in" sales.
+ltho&"h Westpac has centrali8e! some of its operations, there are still many non,
c&stomer facin" processes in the 2ranches. +t Westpac, only a2o&t 27 percent of
total 2ranch acti(ities are relate! to !irect c&stomer ser(icin". $est practices are
that 60 percent of 2ranch acti(ity sho&l! 2e !irectly c&stomer facin".
2. Re#esign processes for effecti!eness an# efficienc*. $oth 2ac% an! front office
processes 1ill 2e re!esi"ne! to eliminate! inefficiency an! re!&n!ancy. This
impro(es c&stomer ser(ice an! enhances pro!&cti(ity 2y re!&cin" the time tellers,
sales staff, an! operations staff re9&ire for each transaction 1hile also re!&cin"
t&rnaro&n! time for %ey pro!&cts Be.". time re9&ire! from loan application to
appro(al an! then !is2&rsement<.
=. Migrate customers to self5ser!ice c%annels. 0e!&ce !eman! on tellers thro&"h
mi"ration of lo1,(al&e c&stomer transactions to more efficient an! easier self,
ser(ice channels Be."., call center, +TMs, internet 2an%in"<. This re!&ces front,
line !eman! on tellers an! impro(es c&stomer ser(ice 2y re!&cin" 1ait times
5. Realign teller staffing. $etter ali"nment of teller capacity 1ith c&stomer !eman!
to match pea%s in 2ranch (ol&me B2oth across the month an! 1ithin one !ay<.
O&r !ia"nostic in!icate! that fe1 2ranch mana"ers are optimi8in" the comple'
9&e&in" mo!els re9&ire! to !o this effecti(ely.
8EY SUCCESS ACTORS
O&r e'perience 1ith lar"e,scale 2an%in" operations transformations s&""ests that a
n&m2er of factors are re9&ire! to !eli(er chan"e in performance. The >har!3 elements,
s&ch as technical re!esi"n approach, are not eno&"h an! m&st 2e com2ine! 1ith >soft3
elements, s&ch as staff min!set chan"e. ?f these elements are not present or
inte"rate!, the impact 1ill ta%e lon"er to achie(e an! 1ill fall si"nificantly short of
ma'im&m potential. Ta%e to"ether, these >har!3 an! >soft3 elements 1ill 2e m&t&ally
reinforcin" an! comprise a &ni9&e >Westpac Way3 to achie(e operational e'cellence.
These s&ccess factors can 2e "ro&pe! into three cate"ories: centrali8ation,
metho!olo"y, or"ani8ational chan"e, an! tactical e'ec&tion.
1) Centralization and transformation methodology
Emplo* a $9ean Manufacturing& toolbox for process centrali(ation an#
re#esign. O&r o(erall metho!olo"y is to apply to 2an%in" processes the >Cean
Man&fact&rin"3 principles that ha(e primarily 2een !e(elope! for the
man&fact&rin" in!&stry. These principles 1ere pioneere! an! perfecte! 2y Toyota
an! helpe! them 2ecome the 1orl!3s most profita2le a&toma%er 1ith a hi"her
mar%et capitali8ation than GM, )or!, an! Chrysler com2ine!. We ha(e a!opte!
an! implemente! these principles for spee!in" &p processes, re!&cin" 1aste, an!
impro(in" 9&ality in 2an%in" an! ha(e seen pro!&cti(ity increases of at least 20
percent an! t&rnaro&n! time re!&ction of 70 percent or more, all 1ith hi"her
9&ality le(els. >Cean Man&fact&rin"3 techni9&es ha(e pro(en to 2e far more
impactf&l than tra!itional core process re!esi"n pro"rams p&rs&e! 2y many 2an%s.
Re#esign an# centrali(e base# on a customer en#5to5en# perspecti!e. $est
practice centrali8ation an! re!esi"ns &nloc% si"nificant (al&e 2y foc&sin" on ho1
the c&stomer percei(es the process an! eliminatin" all steps that !o not a!! (al&e.
?n a!!ition, si"nificant (al&e is often &nloc%e! at the intersection 2et1een
2&siness &nits Be.". 2et1een cre!it &n!er1ritin" an! cre!it processin"<. +!optin"
a c&stomer en!,to,en! perspecti(e ens&res that these impro(ements are tar"ete! at
%ey c&stomer e'perience !ri(ers.
9e!erage existing IT infrastructure to rapi#l* centrali(e. $ase! on o&r initial
!ia"nosis of the ?T capa2ilities at Westpac, the c&rrent ?T platform is a2le to
s&pport the centrali8ation efforts. +!(anta"es of the c&rrent Westpac ?T platform
incl&!e a sin"le mainframe system 1ith an inte"rate! c&stomer information file,
scala2le har!1are, an! open architect&re for front,en! applications. +s a lar"e,
scale ?T transformation can typically ta%e 2,= years an! si"nificant costs to
e'ec&te s&ccessf&lly, it is important that Westpac can capt&re the 2enefits from
operations centrali8ation an! process re!esi"n 1itho&t 2ein" contin"ent on ?T
platform &p"ra!e.
2) Organizational change
"uil# capabilities t%roug% a rigorous :1estpac Aca#em*;< To create real
e'pertise in the re!esi"n techni9&es, 1e 1o&l! esta2lish a @Westpac +ca!emyA
that 1o&l! inte"rate re"&lar classroom learnin", on,the,:o2 learnin" mo!&les an!,
one,on,one coachin" from .erint e'perts. We 1o&l! le(era"e o(er 20 e'istin"
@learnin" mo!&lesA an! many sim&lations to ens&re that these ne1 operations
techni9&es are !eeply em2e!!e! across f&nctions.
Align min#sets an# be%a!iors to t%e ne) operating mo#el. ?nherent in
operations centrali8ation is a f&n!amental chan"e in thin%in" re9&ire! to achie(e
operational e'cellence. This incl&!es a min!set shift to1ar!s a c&stomer,centric
perspecti(e, acco&nta2ility for in!i(i!&al res&lts, a hi"h,performance attit&!e, an!
a tr&ly en!,to,en! perspecti(e that c&ts across operational silos. To ali"n the
c&rrent min!sets to those re9&ire! in the ne1 operatin" mo!el, 1e 1o&l! create
role mo!els of the ne1 min!set, foster con(iction in the chan"e thro&"h top
mana"ement comm&nications, an! create reinforcin" performance mana"ement
systems.
3) Tactical Execution
.rioriti(e processes to ensure a pragmatic6 focuse# approac%. While there are
o(er 570 in!i(i!&al processes at Westpac, o&r e'perience is that there are I to 40
en!,to,en! processes that really !ri(e 2oth the c&stomer e'perience an! &tili8e
si"nificant staffin". Therefore, o&r re!esi"n 1o&l! foc&s an! prioriti8e on these
processes to ens&re si"nificant impact 1hile minimi8in" the total time re9&ire! for
the centrali8ation an! transformation. This allo1s &s to "enerate a "reater n&m2er
of early 9&ic% 1ins.
Capture 'uic= )ins to generate earl* impact an# organi(ational bu*5in.
Transformation pro"rams often !eli(er 2enefits only at the en! of an &nnecessarily
lon" painf&l process. O&r e'perience in 2an%in" operations transformations
s&""est that capt&rin" 9&ic% 1ins early in the transformation is e'tremely
important to ener"i8e an! moti(ate the or"ani8ation, 1hile also !eli(erin" early
(al&e that is (isi2le to c&stomers, staff, an! sharehol!ers. We ha(e i!entifie!
9&ic%,1ins at Westpac !&rin" the !ia"nostic phase, 1hich rapi!ly create capacity
opport&nities of =70,700 )Ts 1ith si"nificant impro(ement in c&stomer ser(ice.
.RO.OSE/ A..ROAC> A0/ /E9IVERA"9ES
O&r e'perience 1ith similar 2an%in" operations transformation s&""ests that this can
2e e'ec&te! 1ithin an 4I,month perio!. This proposal co(ers the first 42 months of
the :o&rney, ass&min" that Westpac 1ill 2e a2le to carry most of the pro"ram after the
first year. The three %ey principles that "o(ern the 2l&eprint for the pro"ram are to
ens&re early impact in the pro"ram, ma%e a s&2stantial people in(estment that 1ill
help !ri(e or"ani8ation min!set chan"e, an! ens&re 1e are 2&il!in" the s&staina2ility
of the pro"ram. $y applyin" these principles, 1e ha(e prioriti8e! the pro"ram into
three %ey mo!&les of impro(ement initiati(es to Westpac 2ase! on relati(e financial
impact of each mo!&le an! the ease an! potential ris% of implementation.
ro!osed a!!roach"
Mo#ule ?@ .rogram launc% ABC )ee=sD
- #e(elop !etaile! master pro:ect plan
- sta2lish reso&rce plan an! select pro:ect team mem2ers
- $&il! comm&nications plan
- #esi"n approach for 2ranch in(entory e'ercise
- /elect pilot 2ranches
Mo#ule +@ "ranc% front5office excellence AB4 mont%sD
- Ca&nch 2ranch in(entory team to collect 2ranch !ata
- $&il! >as,is3 2aseline 2ranch capacity plannin" mo!el
- 0e!esi"n 2ranch processes an! !etermine processes for centrali8ation
- nhance f&nctionality for self,ser(ice channels
- #e(elop optimal 2ranch sche!&lin" 2ase! on c&stomer !eman! patterns
- Pilot an! refine impro(ements in select 2ranches
- #e(elop rollo&t plan for net1or%,1i!e implementation
Mo#ule ,@ "ac=5office an# cre#it process excellence AB4 mont%sD
- Ca&nch 2ac%,office in(entory team to collect operations !ata
- $&il! >as,is3 2aseline operations capacity plannin" mo!el
- 0e!esi"n cre!it an! operations processes 1ith >lean3 metho!olo"y
- #esi"n an! esta2lish national an! re"ional operations h&2s to s&pport
2ranches
Mo#ule E@ Transformation program support Aon5goingD
- PMO o(ersi"ht s&pport for transformation initiati(e
- $&!"et re(ie1 an! s&pport
- Comm&nications for all %ey sta%ehol!ers
- Monitor pro"ress
- +!(ise on chan"e mana"ement approach
ro#ect deli$erables
The !eli(era2les from the operations transformation lin%e! to each of the a2o(e
mo!&les 1o&l! incl&!e:
Operations transformation 2l&eprint
Operations centrali8ation re!esi"n man&al
$ranch in(entory
)&nctionin" call centre !esi"n
0i"oro&s 2ranch staffin" system
?mplemente! mi"ration steps
Ee1 process re!esi"ns for centrali8e! cre!it processes
Ee1 process implemente! for centrali8e! payments an! chec% processin"
Ee1 process maps for acco&nt openin" an! 2ranch acco&ntin"
Ee1 2ranch formats an! national rollo&t plan
On"oin" transformation pro"ram s&pport
OUR FUA9IICATIO0S
O&r &ni9&e approach meets a critical nee! for Westpac on this important initiati(e
2ase! on o&r e'tensi(e "lo2al e'perience in operations transformation an! o&r !eep
&n!erstan!in" an! %no1le!"e of Westpac.
O&r e'perience 1ith other financial instit&tions in +&stralia s&""ests that this :o&rney
re9&ires a &ni9&e 2len! of competencies from 2oth Westpac an! .erint. We 2elie(e
that .erint is 2est positione! to help Westpac 9&ic%ly an! effecti(ely implement for
the follo1in" reasons:
/eep un#erstan#ing of 1estpac. )or the past se(en years, 1e ha(e ha! a s&ccessf&l
2&siness relationship 1ith Westpac. We &n!erstan! yo&r or"ani8ation, yo&r c&lt&re
an! ho1 to s&ccessf&lly 1or% 1ith yo&
/eep un#erstan#ing of ban=ing operations transformation. We ha(e a !eep
&n!erstan!in" of the 2an%in" in!&stry 1ith competence 1ith all aspects of operations
transformation. We ha(e s&ccessf&lly complete! o(er 200 2an%in" en"a"ements
1orl!1i!e since 4994. We ha(e o(er J7 cons&ltants 1ith !eep e'pertise ser(in"
financial instit&tions.
Uni'ue operations centrali(ation an# transformation tools. We ha(e con!&cte!
27 operations transformation pro:ects for 2an%s aro&n! the 1orl! since 4996. We
ha(e !e(elope! a &ni9&e approach an! tool%it that incl&!es Cean an! /i' /i"ma
metho!olo"ies to 2an%in" an! &ni9&e approaches to implementin" or"ani8ational
min!set chan"es.
A trac= recor# for mar=ing operations c%ange successful in ban=ing, ser(ice
firms, an! other man&fact&rin" firms.
.ROESSIO0A9 EES
K?ncl&!e pricin" an! other feesL
OUR TEAM
K?ncl&!e 2ios of team mem2ersL