Analysing the use of Operations Management in Mashreq Bank

Mashreq Bank is a premier banking and financial services institution operating within the Middle East. It is a specialized institution in that it offers financial services related to consumer, corporate, and commercial banking, as well as advanced financial services like investment banking. To the people of the Middle East, Mashreq Bank is one of the premier banks that they acquire financial services from. Operations management to this company, just like any other, is extremely important. This paper will examine why Mashreq Bank’s operational services are not at par with international standards, and how this situation can be improved. First, the current situation will be explained, and then contributions of the operation management will be described in order to analyse the problems. Following, the appropriate solution will be identified through creating new software which supports business process re-engineering to solve these problems. Finally, continuous improvement will be described in order achieve stability and to secure improvement for a long period of time.

Introduction

Mashreq Bank is a premier banking and financial services institution operating within the Middle East. It is a specialized institution in that it offers financial services related to consumer, corporate, and commercial banking, as well as advanced financial services like investment banking. To the people of the Middle East, Mashreq Bank is one of the premier banks that they acquire financial services from.

During the last three years, the client base of Mashreq Bank has grown exponentially and the bank has expanded the scope of its operations to newer locations within the Middle East. Within any organisation, there are three core functions which are marketing, development, and operations, all of which contribute to driving companies to success (Slack et al.,2007). In Mashreq Bank, we find an absence of intense investment in marketing activities, which is problematic since the bank is operating within the financial hub of the world. However, operation functions play a significant role in terms of improving its services to meet customers’ expectations. This paper will examine why Mashreq Bank’s operational services are not at par with international standards, and how this situation can be improved. First, the current situation will be explained, and then contributions of the operation management will be described in order to analyse the problems. Following, the appropriate solution will be identified through creating new software which supports business process re-engineering to solve these problems. Finally, continuous improvement will be described in order achieve stability and to secure improvement for a long period of time.

Current Situation

One of MASHREQ BANK’s major responsibilities is catering to the financial needs of its clients. These responsibilities include providing premier financial services to new and existing customers in the field of personal and corporate banking, SME banking, and investment banking whilst taking into account the financial obligations of the customers. In this paper, financial services provision will be analysed because it is the core operation function for Mashreq Bank.

Mashreq Bank is organised as a financial institution looking after the general financial needs of current and potential customers based within the Middle East. This makes the foremost activity in terms of operational performance, its client servicing departments. Mashreq Bank has Customer Services Officers and Relationship Managers who are responsible for providing end-to-end help and advice through the entire process for any customer. Furthermore, these officers and managers have huge responsibilities, particularly when dealing with new customers, from opening new accounts and following and monitoring his/her progress with through the completion of any financial transaction, while ensuring that customer satisfaction is adequate at all times. In addition, they should also track the progress of these transactions with the back end functions of the bank in order to ensure that there are no delays caused in any client’s transactions since that can lead to client dissatisfaction and the bank can lose important key clients and accounts in this manner. Ultimately, there are many factors which subsequently put more pressure on the Customer Services Officer or Relationship Manager, such as when customer’s numbers are increased to the point where the officers or managers are responsible for more and more clients and key accounts.

Operation Management

Operation Management Concept

Slack et al. (2007,p.4) define ‘operation management’ as ‘the activities, decisions and responsibilities of managing the production and delivery of the products and services’. Therefore, many organisations are similar in the way of transferring the input – such as facilities, staff and information – to output – such as services and products – through a process which ultimate helps the organisation to gain customer satisfaction. However, there are four elements which also help to shape overall operation, which are volume, variety, variation and visibility. These four V’s are used to assess the operation function with regards to whether or not it is considered to be manufacturing or service sector (Robert and Graham,2008). The current operation aim in Mashreq Bank is to provide a wide range of services to a high volume of customers with a high variety, which makes the process complex. In addition, the variation in terms of demand is obvious, simply because each customer or potential customer has different needs; however, customers have less visibility and contribution when making decisions. This tool indicates that Mashreq Bank’s operation costs are high if there is a low quality and unstable environment.

Operation Performance Objectives

The aim of the operation performance objectives is to measure the current performance, which subsequently leads operation function to improve; as Kaydos (1998,p.3) mentions, ‘measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you couldn’t understand it. If you couldn’t understand it, you couldn’t control it, if you couldn’t control it, you couldn’t improve it’. These objectives consist of quality, which emphasises ‘doing things right’; speed, which is ‘doing things fast’; dependability, which is ‘doing things on time’; flexibility, which emphasises the capability of the process to change; and, finally, the cost, which is ‘doing things cheaper’ (Slack et al.,2007). In addition, these objectives can draw the basis of operation strategy. As Anderson (1989, p.136) writes, ‘operations should be managed from a strategic point of view and used as a competitive force in the business’. Polar diagrams are considered to be useful tools which can represent the five performance objectives together and can also compare between current and required performance (Slack et al.,2007). The following diagram shows that Mashreq Bank needs more development in its operation and procedures in order to improve the current situation so as to achieve the required performance.  

Before identifying which of these objectives needs to be improved, it is useful to modify the entire Mashreq Bank operation process by implementing the concept of supply chain in the manufacturing industry, and the process design of service and products.

Process Design

The aim of this section is to achieve a satisfactory level of all performance objectives in order to meet customers’ satisfaction. Clients need to ensure a quick response with the clarity of procedures and rapid implementation with high quality, mainly because they might become attracted to or involved with other banks that provide better financial services.

Using a method which has been successful in manufacturing and services sectors is not new. In the UK, for example, the lean system approach – as applied by TOYOTA – is transferred from the manufacturing industry to service-based companies in order to improve housing rent systems, as well as process re-engineering, which is common in the use of redesign processes (Jackson et al.,2008). When managers need to redesign the process, they should focus on end-to-end processes, as Gregory (2007,p.1508) emphasises by stating that, ‘improving the ability of the system as a whole to enhance the customer experiences’. According to the Product-Process matrix, mass service is more likely to be appropriate for Mashreq Bank operation, which has a high volume with low variety, but does not need to be flexible because it has a standardised services based on MOHE policies and procedures (Slack et al.,2007). For example, a well-managed supply chain leads companies to achieving stability and value advantages, such as saving costs (Slack et al.,2007). Furthermore, applying the same concept of the supply chain network – which is help organisations to focus on one supplier rather than dealing with large number of suppliers – in the Mashreq Bank operation, is subsequently more likely to achieve stability and reduce wasting time by building long-term relationships with both sides of the network, which in this case would be the front and the back offices of the bank.

Improvement Priorities

The importance and performance are two factors which help any operation to priorities their actions in order to improve. The importance-performance matrix is a useful technique which uses both factors to determine the importance to customers and performance against competitors (Slack et al.,2007). As Mashreq Bank has many competitors, it should implement this strategy with some minor amendments made on a performance level. Furthermore, it is good to start to list the main services that customers need:

Communications, such as answering the phone or replying to emails or faxes.

Delivery speed, such as sending the required documents to and fro the back office of the bank and the customers (or potential customers).

Dependable Delivery because customers require their financial services to be credible and the advice provided to them to be dependable so that they no longer have to worry about their financial needs or financial status.

The right of clients in all aspects as per the policies of the bank or of financial institutions in general.

As a result of a survey for a small sample (8 Mashreq Bank clients), the following figure shows the distribution of the above list on the importance-performance matrix.

It is clear that poor communication, a lack of delivering services and promising to finish clients’ requirements are considered to be the urgent priorities for making improvements. Clients’ rights is becoming a second priority for Mashreq Bank customers. All these services are based upon information flow from both network sides and customers. If Mashreq Bank manages and controls the flow of information in an efficient manner, the customers would then be more satisfied. Castellanos et al. (2005, N.A.) emphasises that ‘as business operations become increasingly automated, there is a growing need from business managers to have better control on business operations and on how these are aligned with business goals’.

Solution

As mentioned above, there were some attempts to organise the work flow, such as by creating one point to deal with the back end functions and another point to deal with the clients. In this section, there are some solutions which could be implemented in order to exceed the expectations of clients.

Implementing Plan and Control Software

One factor which leads inventory to being successfully managed is the Enterprise Planning System (ERP), which is capable of working across all departments, as well as partner organisations located abroad (Slack et al.,2007). Another successful concept is the implementation of Customer Relationship Management (CRM) in service sectors (Payne and Frow, 2005). Therefore, using IT software is considered essential and necessary for improving integration between upstream and downstream information which is considered to play a crucial role in reengineering (Andersen,1999).  

IT systems can integrate all functions in order to easily process any request. It consists of three feeding areas. First, the customer site allows all Customer Service Officers or Relationship Managers to access their database and to accordingly add all information, such as ID, addresses, financial transaction records and so on, in order to easily retrieve them when they need to process requests. Furthermore, it allows these officers and managers to keep a track of the customers’ financial activity with the bank. The back end and front end offices of the bank can create their own databases and link them together through the system. Furthermore, the linked computer system would allow all departments of the bank to keep track of all financial activity of customers and this way, there would be minimal risk involved for the bank in the customers, irrespective of their scale of operations. Moreover, another benefit is for Mashreq Bank to improve their overall performance in order to achieve stability in the process flow. Therefore, the adoption of such a system would ensure that the response time will be faster and will ensure that every request is processed.

 Through Improvement Approaches

There are two types of improvement, which are breakthrough and continuous improvement. Slack et al. (2007,p.594) define the breakthrough approach as ‘an approach to improving operations performance that implies major and dramatic changes in the way operations work’; Business Process Re-engineering (BPR) is an example of this approach. Continuous improvement, on the other hand, is ‘an approach to improving performance which assumes more and smaller incremental improvement steps’, such as the DMAIC cycle and PDCA cycle models. Both approaches are useful in the case of Mashreq Bank because it needs a major change at the beginning by using BPR, and could then use continuous approach to ensure the stability of the whole process in the long-term.

3. Business Process Re-engineering (BPR)

Athanasiou (2000,p.32) defines BPR – which was introduced in 1990 by Hammer – as ‘the fundamental rethinking and radical redesign of Business processes to achieve dramatic improvement in critical, contemporary measures of performance, such as cost, service and speed’. He mentions the roles of both management and employees in order to achieve successful improvement. Therefore, there are several principles which should be taken into account, such as concentrating on results rather than tasks, avoiding centralisation by adapting resources, taking information once and forming the source in order to minimise the errors, and joining control and perform tasks together (Hammer,1990).

Unlike service sectors, public organisations are not flexible in terms of applying redesign because it has less incentive to reducing costs and increase efficiency. Thong et al. (2000) argue that an increase of bureaucracy, centralisation, monopoly and other factors – such as political and economical – are obstacles which BPR faces. As a result, BPR is difficult to implement within the public sector; however, many writers, such as Al-Mashari and Zairi (1999), Davidson (1993) and Athanasiou (2000), mention some factors which may potentially lead BPR to success; these include motivation, reward, good communications, qualifications and training.

In the case of Mashreq Bank, the first solution is implementing a plan and controlling software which will support BPR. Increasing levels of client satisfaction is the aim of BPR, which will start by determining the point of transaction. This point is the channel for providing services to customers, which should be done through the Internet, phone or fax.   

4. Continuous Improvement   

Implementing continuous improvement is done in order to achieve stability in the long-run and to accordingly increase productivity by meeting customers’ expectations. As such, it is important for everyone in the process to seek moving closer to one of the five performance objectives. A trade-off, for example, is a tool of how operation should prioritise performance objectives. There are two views of trade-off, which are ‘repositioning’ – where there is improvement in some objectives and reduction in others – and ‘effectiveness’ – where improvement is concerned with improving one or two objectives without any reduction in others (Slack et al.,2007). Customers have the same pattern, which means all financial requests will be repeated over a period of time. Therefore, it can be easy to identify the needs of specific clients based on their financial status. As a result, the response time will be reduced and the corresponding issue eliminated.  

Conclusion

To conclude, operation management is a crucial role within any organisation. By applying the operation management concept and five performance objectives, the current situation of Mashreq Bank is analysed. It is clear that the nature of bureaucracy leads to providing poor services. In addition, a lack of communications between employees and integration between the clients and the back end offices of the bank are making the process worse.

In this essay, it has become clear that the operation management techniques provide more powerful tools in order to improve Mashreq Bank processes by meeting customers’ expectations. The current situation was described and the objectives were set by using polar diagrams which compare current to required performance. Following, the overall process was designed and the priorities were determined through the importance-performance matrix.

There were four solutions that can help to solve Mashreq Bank’s operatioal problems, which are through developing new software and platforms that can deal with multi-function processes, and the redesign process by using BPR. In addition, continuous improvement was explained in brief, which would help the system to improve over a long-term period.

Appendices

Sample of the importance and performance of Mashreq Bank services

Services

Importance Rating

Performance Rating

Communications

1

8

Delivery speed

3

7

Delivery dependable

3

8

Customers’ Rights

6

5

Table 1: Sample of the importance and performance of MASHREQ BANK services