Pom Lecture (24)

Unit 2 Management of Conversion System Chapter 8: Workforce Measurement Lesson 24 - Tutorial 7 I

First National Bank

Lock-box operations in large commercial banks process accounts receivable from customers. First National Bank has a major commitment to lock-box operations and is I currently the regional processor for several major oil companies and national retailers. a large credit card company, and dozens of small regional companies. Customers of these , companies mail their payments directly to First National, using a special zip code. Theoretically, First National is able to intercept the payment (shorten the mail time. process the paperwork, and credit the firm's account-all within a day from the time it receives the payment. .

Lock-box operations are becoming a problem for First National. Every day it : receives thousands of bills and payments for hundreds of accounts. Over the last few I months, there have been as many as three days' backlog. First National is in jeopardy of I losing two national accounts to competing banks, which are outperforming First

National. First National has assigned a "breakthrough" team to set performance I

standards and study jobs within the Lock-box department. The key job appears to be the account processor job. An account processor opens incoming mail, verifies payment with the bill, records payment by account number. I separates payments and bills, and delivers each for further processing. An account processor must also encode the payments (usually checks) and send them to check processing so that they can clear the bank and First National can receive credit for the money .it has credited to the national account customer. The team performed both a direct time study and work sample for the account processor job, with the results shown below. The bank uses a .15 allowance fraction for all clerical jobs. Management is concerned that setting a standard now will further damage performance. In fact, the day after the direct time study, 14 of the 35 second-shift workers were absent, a number much higher than the normal 1 0 percent. Jan Holms, an informal group leader who was one of the workers studied, told the analyst the company would "pay for this pressure." She was one of those absent the next day. Frank Waring, the operations vice president, would like to change the entire work flow, dissolving the lock-box department as it is now organized and grouping lock-box and other-operations functions by customer rather than product. Frank's counterpart at Citibank wrote an article for the Harvard J3ussiness Review explaining his bank's success with this "customer account focus," and FranK was most impressed. Although it seems an appropriate time to consider such a move, Frank is not gathering the support hehad anticipated from his team of management subordinates.

Direct time study data: account processor job Cycle time (in minutes) Number of times observed Performance rating

Processor 1 0.5 0.7 1.0

1.3

1.5

Processor 2 0.5 0.7

1.0

1.5

2.0

1

2

1

2

3

1

1

3

5 85%

Work sampling data: account processor job Processor 1 Number of payments 322 processed 8 Length of time observed (in 85% hours) 25% Performance rating Idle time

4

80%

Processor 2 296 8 80% 30%