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   Boston, Massachusetts 02108
   (617) 426-3701

  Cheryl Gross, PMP, President


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The Nib
Timely Tips from Cheryl Gross and Associates

The New or Renewed Industry Buzz — Profitability and Growth

The halting economic recovery featuring tight margins, modest gains in the housing market, slow employment growth and volatile political rancor in Washington have caused all of us to rethink our strategy for profitability and growth. For most of us, the strategies remain the same, it’s the tactics that can and must change. When our clients ask for our thoughts on improving their margins, our answer is no different than it was five years ago. The keys are:

    1. Organic growth—fulfill Customer needs by:
      • Exceeding Customer expectations.
      • Providing exceptional products and services at a fair price.
      • Profitably expanding existing Customer relationships.
      • Identifying and gainfully serving underserved markets.
    2. Opportunistic growth—capitalize on strategic weaknesses within your marketplace by:
      • Capturing runoff resulting from mega-mergers.
      • Achieving economies of scale through mergers of like-minded institutions.
      • Consistently articulating your institutional value proposition.
    3. Improve profitability by doing more with less—streamline processes to deliver products and services more quickly and at lower cost by:
      • Aggressively advancing projects that will pay for themselves through increased volume without adds to staff.
      • Leveraging your staff’s productivity with workflow tools that eliminate redundant work and drive the process from a customer-centric approach.
      • Eliminating processes that exist because “we’ve always done it that way!"

Let’s talk about tactics; no surprise here, we’re process people, so we’ll focus on process—let’s consider three ideas:

  1. Utilizing process flow diagrams as a tool for identifying productivity improvements and a roadmap for future innovation.
  2. Getting started—it’s a big job, but someone’s got to do it!
  3. Constructing the process flow diagram.
What’s in it for my Organization?

We’re all looking for ways to improve our margins. Sometimes the answer is as simple as improving processes. We’re sure that this has never happened in your organization, but we’ve seen occasions where process improvements that result in significant profitability and productivity gains are overlooked because the focus is on growth and asset and liability management to improve margin. Generally, process improvement opportunities are identified reactively as a result of

  1. Customer complaints involving service delivery.
  2. Reduction in business prompted by a competitor’s service delivery.
  3. A new employee advancing processes used by their last employer.

In our view, process improvement opportunities can be proactively identified utilizing process flow diagrams—process inefficiencies literally jump off the page when viewed as a picture. So, what’s in it for your organization?

  • A mechanism for identifying, quantifying and measuring the results of process improvement. The embedded metrics include FTE requirements, volumes and volume threshold and the time required to complete each task, and provide a venue for analyzing:
    • Cost / Benefit of change.
    • Anticipated expense reduction.
    • Growth rate sensitivity.
  • A roadmap for innovation starting with your current process and concluding with a fully documented launch. Provides the methodology to:
    • Configure new applications such as mortgage loan origination systems, mobile banking and critical applications.
    • Adjust existing processes to improve profitability and productivity.

  • A conduit for fostering a culture of continuous process improvement, where “We’ve always done it that way” becomes a challenge to:
    • Streamline and retool inefficient or flawed processes.
    • Eliminate redundancy.
    • Improve service delivery standards through a customer-centric approach.

A Picture is Worth a Thousand Words —
The “How To”

Let’s look at process flow diagrams from a purely academic perspective. A process flow diagram is a drawing / picture of the discrete steps required to complete a task. The key characteristics are:

  1. Cross-Functionality—the drawing displays all participants in the process, from the individual or department that initiates the processes to the individual or department that concludes the process.
  2. Unique Action Steps—each unique entry point, decision variable, task, barrier, backlog, storage point, reject variable, rework requirement and exit point should be identified. In addition to identifying the unique action steps, you should identify how the task is performed: manually, semi-automated (automated between decision points) fully-automated (automated from start to finish, including automated decision points—you may have heard this described as an automated workflow).
  3. Metrics—each unique task should include volume that flows to each action step, absolute threshold volume, dropout percentages, backlog volume, time required to complete each step, time in queue waiting for the next action step to commence and the number of FTEs required to complete the step.
  4. Risks/Vulnerabilities—all should be determined at each entry point, decision point, connector point, queue and action step.
  5. Critical Path—the process flow that the majority of the volume follows.
  6. Secondary Paths—the process flows that all other volume follows.
What is the practical application?

Again, you might be thinking, “this sounds interesting, but I can’t see us spending the time drawing out processes; after all, we have procedure manuals which contain the step-by-step instructions for completing tasks!” Let’s use an example to display the relevance of this tool.

Click here to see a 1st Mortgage Pre-approval process flow diagram. Many of you have told us that you are considering eliminating pre-approvals as a product offering because the conversion rate is low. Let’s analyze what the process flow tells us about the typical pre-approval process:

  • The critical path, displayed in green, is a pre-approval that does not result in a loan. The time required to complete this process based on this example is 2.92 hours.
  • There are three secondary paths in order of volume, as follows:
a. A Pre-approval which is converted to a loan (22.5%).
b. A Real Estate Broker application referred to the loan originator (20%).

A Pre-approval which is denied for income or credit (10%). The time required to complete this process based on this example is 2.1 hours.


In all cases, the credit bureau and LP or DU decisioning cost is known and incurred.

We’re not going to spend any more time analyzing this example—although we could—but we would like to use some “what if” scenarios.

  • Let’s say you want to explore retaining the product. You’d want to ensure that the product pays for itself and the customer is sufficiently invested so that they will not walk away and go to another lender. You know your human resource costs and you know your fixed costs associated with credit bureaus and decisioning. You’ve just established the floor pricing for this product.
  • Conversely, upon review of the conversion rate and acquisition cost should you choose to eliminate the product offering, you know exactly how much time per unit is freed up by this decision. That translates directly into increase productivity.

Wow, that is a very powerful decision-making tool that enables you to prioritize process improvements and product innovation based on quantifiable measures.

Every Journey Begins with the First Step:

You might be thinking, “this sounds interesting, but I can’t see us spending the time drawing out processes—we just don’t have the time, manpower and/or expertise to complete this task.” Yes, we understand that you probably have 300–400 processes. Here comes that recurring theme—look at doing more with less, which we think can be done by leveraging other initiatives to accomplish the goal.

In our view, the easiest way to get started is by leveraging a current initiative. If your organization typically outsources projects, include the requirement in the project specifications. If you normally complete tasks internally, add them to the documentation requirements. OK, what’s the most logical fit?

  1. Best practice reviews—it’s the perfect opportunity; you’re looking at each process. Consider employing the following rules of thumb.
    • If you can’t fit the drawing on one page, the task is too complicated.
    a. It may not be a discrete process and needs further breakdown. As an example, consider the mortgage process: origination, loan processing, commitment, closing and post closing—there are multiple discrete tasks within each major process.
    b. The process should be streamlined. As an example, you may have too many layers—generally you shouldn’t have more than 3 or 4 layers (including external vendors and / or customers).

    The process is flawed or broken. As an example, you have backlogs, barriers and / or substantial rework components.

    • If you can’t determine why a task is complete as described or you hear, “That’s the way we’ve always done it!”, investigate eliminating the process.
    • If you have different processes for similar tasks—investigate eliminating the redundancy.

  2. Business Continuity Planning—you will likely open with limited staff and critical functions and then add staff and processes as the situation stabilizes. Consider . . .
    • Process flow critical functions—often employees working in an unfamiliar role will be able to perform the function quicker and easier if they have a picture to follow rather then a 500-page procedures manual.
    • Keep the momentum going—tackle secondary functions next and finally non-critical functions.

  3. Innovation—it’s new, start with a blank sheet of paper, and design a process that works for your organization and the tool you’ve acquired.
    • Draw your existing process—this will enable you to describe where you are to a prospective vendor and will also act as a roadmap to migrate from where you are today to where you want to be tomorrow.
    • Then draw the new processes as a means of establishing how you want to configure the application.
    • Ensure that you eliminate each process that you complete because it’s the way we’ve always done it. Save a tree—throw out the GL tickets!!

Start small, especially if you are going to complete the task internally. We recommend a three step methodology:

  1. Draw the process—keep asking what happens next, until completion.
  2. Add the metrics:
    • Ensure the drawing is correct before you start adding metrics.
    • Add the metrics incrementally as you enhance the utility of the tool.
  3. Maintain the process flow drawings whenever you make changes. In short, make it part of the documentation process.

Message from our President

Hi All—

The focus of this issue is utilizing Process Flow Diagrams as a tool for identifying, measuring and improving margin through productivity improvements.

As Senior Managers, our strategic focus is profitably growing the organization while making use of a Customer-centric approach. Generally, our focal point for improving margin is growth and asset and liability management. Often we can optimize our results by taking advantage of asset and liability management techniques in concert with process improvement tactics and methods.

In my view, process improvement opportunities can be proactively identified using process flow diagrams. When viewed as a picture, process inefficiencies literally jump off the page. Consider using the opportunities afforded by Dodd–Frank and Basel III to rethink all of your processes and improve your margin while you ensure compliance.

I hope you’ve found this newsletter interesting and informative. Your comments are always welcome.


Cheryl Gross & Associates offers a wide range of Business Analytics Services:

  • Best Practice Reviews
    • Residential and Consumer Lending
    • Commercial and Small Business Lending
    • Retail Delivery Channels
    • Operations
    • Project Office
  • Process Design and Improvement
  • Process Flow Diagram Development

Contact us for additional information at:

(617) 426 – 3701

About Us

Cheryl Gross & Associates was founded in 1994; our goal is to partner with our clients to create economic value and sustainable productivity gains by providing outstanding project management expertise, leveraging internal resources and offering objective perspective. We create value by providing senior focus and organization to strategic, financially significant opportunities. We deliver challenging assignments that pay for themselves by being accelerated.

Our President, Cheryl Gross, is a financial services professional with over 25 years experience in retail banking, private banking, residential and consumer lending.

Ms. Gross has served in positions with Boston Five Cents Savings Bank, Boston Safe Deposit and Trust Company and Household International.

Ms. Gross holds a Master of Business Administration with a concentration in Finance from Babson College, Wellesley, Massachusetts and a Bachelor of Science from St. Lawrence University in Canton, New York.

Ms. Gross is a PMI certified Project Management Professional.

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