Implementation of Lean Banking and continuous improvement in an African global Bank: the

United Bank for Africa

By:

Professor Alain Ndedi

COMERCI
Email: ndedi.alain@gmail.com

And

Mrs Jeanne Anie Ekeme

United Bank for Africa Cameroon
EMAIL: anie.ekeme@gmail.com

Abstract:
In today’s marketplace, it’s much too risky to rely on the company gut for decision-making.
Lean banking data analysis is an evidence-based solution that provides any innovative
organization with a new view of organizational challenges with the objective to improve
efficiency and data quality, effectively eliminating corporate waste. The process is an
undergoing and rapid transformation in the banking industry. For an effective implementation
of the process, the information technology must play an increasingly greater role in helping
banks carry out marketing, sales, and channel integration initiatives, and in ensuring that
banks comply with various regulatory requirements. To this end, IT in banking needs to adopt
a strategic approach to managing change.
This paper looks at what Information Technology Infrastructure Library (ITIL) offers to
manage these corporate challenges and whether ITIL practices are sufficient to improve the
Bank performance. The paper present ITIL best practices that are needed to manage risk but
not sufficient to drive the Bank performance.
According to Ndedi, Moutila and Tsoungui (2016), the real essence of lean is in harnessing
the passion and knowledge of front-line staff and equipping them to focus on ensuring as
many activities as possible within an end-to-end process support the delivery of value to the
customer. The authors argued that the objectives of continuous improvement methods are to
boost organizational performance; because simply meeting customer expectations is not
anymore enough; customers who aren’t completely satisfied are likely to switch to another
service provider. Building a culture of continuous improvement through the adoption of lean
principles ensures the identification of the end-to-end process from the customer’s perspective
and the design and management of those processes to ensure the smooth flow of information
and material as efficiently as possible.
The first part of this paper explains what the United Bank of Africa is. The second part discusses the principle
of lean banking. The third part of the paper gives an overview of best practices with UBA.

Key words: Lean Banking, continuous improvement, United Bank of Africa, competitively, ITIL 3.

PROBLEM STATEMENT
Why to be interested in the banking system? The Banking industry is a specific service business
characterized by the fact that the product is purely data and information. Banking transactions are
often performed as an outsourced back-office internal service function – the supplier and the customer
are the same entry. Banks are typically office environments with a highly educated workforce, using
computers and data process capabilities to perform the tasks. In a bank, respect for people is of utmost
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importance. As banking is a pure process business, Lean Management is directly applicable to it.
Lean practices and techniques can improve a bank by: reducing the time spent performing specific
activities, reducing the total cost of doing business by eliminating wasted time and effort, increasing
customer satisfaction by delivering faster and better quality service, reducing routine, improving the
staff morale and increasing enthusiasm by engaging them in the development and implementation of
improvements. The objectives of implementing Lean Management practices in a bank are reducing
costs and improving revenue gains. It is realistic to expect a reduction of 25 percent in costs and 50
percent or more in response times and in process errors and, in addition, increasing revenue gains of at
least 5 percent annually. (Sayer and Williams, 2007)
As in all service businesses, the aim in banking is to increase both speed and quality at all levels. To
deliver bank services more quickly is an essential element for the bank to become more flexible and to
better respond to changing customer demands and market conditions. Faster services are delivered by
fewer hands and by eliminating unnecessary steps. For example when processing payment orders
faster, the bank reduces opportunity costs and customers are more satisfied.
To focus simultaneously on quality and Turn Around Time (TAT) means to establish specifications
and collect metrics, applying tools to reduce variance, prevent failures and attack root cause. Both
strategies (focus on speed and focus on quality) have as consequences lowering costs, cement
customer loyalty by offering higher quality service and increasing revenues.
In banking (especially in Retail Banking), variety increases complexity and should be vigilantly
examined and reduced whenever possible. Any increase in complexity directly increases the risk of
both slower and defective services, and increases support and maintenance costs in the form of
overtaxed back-office processing procedures, too many customer-service systems and too much staff
training.

METHODOLOGY
In order to understand the concept of Lean Management and Continuous Improvement, the paper in
simple terms traced the evolution in time in a comprehensive comparative way. Even though the
assembly of principles and practices known as Lean date from late 1980s, known theories on Lean are
much older. King Henry III of France in 1574 watching the Venice Arsenal built up complete gallery
ships in less than an hour using continuous flow process. In the 18th century, Benjamin Franklin
established principle regarding waste and excess inventory and Eli Whitney developed interchangeable
parts. In the late 19th century, Frank and Lilian Gilbreth were the first who explained motion efficiency
as it related to work. In the 20th century, Fredric Winslow Taylor, the father of scientific management,
pioneered the concept of standardized work and best practices (SSayer and Williams, 2007).
However, the first person to truly integrate an entire production process was the American Henry
Ford. He lined up fabrication steps in process sequence wherever possible using special-purpose
machines and go/no-go gauges to fabricate and assemble the components going into the vehicle within
a few minutes, and deliver perfectly fitting components directly to line-side
(http://www.lean.org/WhatsLean/History.cfm). In fact, Ford clearly understood the requirements of
true efficiency (constant increase of quality, great increase of pay of workers, repeated reduction in
cost to the customer) but also the many forms of waste and the concepts of value-added time and
effort. The effect was one hundred folds in less than ten years and an enormous profit for the
manufacturer.
The Japanese Kiichiro Toyoda, Taiichi Ohno, and others at Toyota looked at this situation in the
1930s, and more intensely just after World War II. They understood that a series of simple innovations
might make it more possible to provide both continuity in process flow and a wide variety in product
offerings. They therefore revisited Ford’s original thinking, and invented the Toyota Production
System. (TPS)
This system in essence shifted the focus of the manufacturing engineer from individual machines and
their utilization, to the flow of the product through the total process. Toyota concluded that by right-
sizing machines for the actual volume needed, introducing self-monitoring machines to ensure total
quality, lining the machines up in process sequence, pioneering quick setups so each machine could
make small volumes of many part numbers, and having each process step notify the previous step of
its current needs for materials, it would be possible to obtain low cost, high variety, high quality, and
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very rapid throughput times to respond to changing customer desires. Also, information management
could be made much simpler and more accurate (http://www.lean.org/WhatsLean/History.cfm).
Developed in the 1970s as a combination of different quality movements and approaches in the United
States, Europe and Japan, interest in TQM increased in 1990s. (Sayer and Williams, 2007) TQM
focuses on culture and organization. The cultural element requires a quality perspective in all aspects
of a company’s operations. As a broad culture oriented approach, TQM is challenged by a lack of
focused implementation methodology and direct measurable results. Like TQM, Lean is an integrative
strategy for an organization and it uses and incorporates TQM principles and practices.
The concept of Six Sigma appeared at Motorola in the 1980s. An engineer named Mikel Harry began
analyzing variation in outcomes in the company’s internal procedures, and realized that by measuring
variations it would be possible to improve working systems. Harry’s original idea was developed into
Six Sigma approach aimed to change procedures, so that overall performance could be improved
permanently. (Thomsett, 2005)

PART I: THE UNITED BANK OF AFRICA

The United Bank of Africa has more than 65 years of providing uninterrupted banking
operations dating back to 1948 when the British and French Bank Limited (BFB) commenced
business in Nigeria. BFB was a subsidiary of Banque Nationale de Crédit (BNCI), in Paris,
which transformed its London branch into a separate subsidiary called the British and French
Bank, with shares held by Banque Nationale de Crédit and two British investment firms, S.G.
Warburg and Company and Robert Benson and Company. A year later, BFB opened its
offices in Nigeria to break the monopoly of the two existing British owned banks in Nigeria
then. (UBA Website, 2017)
Following Nigeria’s independence from Britain, UBA was incorporated on 23, February 1961
to take over the business of BFB. UBA eventually listed its shares on the Nigerian Stock
Exchange (NSE) in 1970 and became the first Nigerian bank to subsequently undertake an
Initial Public Offering (IPO). UBA became the first sub-Saharan bank to take its banking
business to North America when it opened its New York Office (USA) in 1984 to offer
banking services to Africans in the Diaspora.
According to UBA Group (2017), the Bank emerged from the merger of then dynamic and
fast growing Standard Trust Bank, incorporated in 1990 and UBA, one of the biggest and
oldest banks in Nigeria. The merger was consummated on August 1, 2005, one of the biggest
mergers done on the Nigerian Stock Exchange (NSE). Following the merger, UBA
subsequently went ahead to acquire Continental Trust Bank in the same year, further
expanding the UBA brand. UBA subsequently acquired Trade Bank in 2006 which was under
liquidation by the Central Bank of Nigeria (CBN). UBA had another successful combined
public offering and rights issue in 2007 and made further banking acquisitions of three
liquidated banks namely: City Express Bank, Metropolitan bank, and African Express Bank.
The bank also acquired Afrinvest UK, rebranding it UBA Capital, UK.
The quest to build a strong domestic and African brand intensified in 2008 when UBA made
further acquisitions of two liquidated banks, Gulf Bank and Liberty Bank while at the same
time intensifying its African footprint with the establishment of UBA Cameroon, UBA Cote
d’ Ivoire, UBA Uganda, UBA Sierra Leone, and UBA Liberia as well as the acquisition of a
51% interest in Banque Internationale du Burkina Faso, which was the largest bank in the
country with 40% Burkinabè market share. Currently, UBA has 19 African subsidiaries
contributing more than 20% of the Group’s balance sheet with a target of contributing 50%.
On 13 December 2012, the shareholders of UBA Plc unanimously voted for the bank to
restructure into a Monoline Commercial Banking Model in order for it to fully comply with
the new CBN guidelines for commercial banks in Nigeria, which repealed the erstwhile
universal banking regime. (UBA Group website, 2017)

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With the restructuring, the Group’s non-commercial banking subsidiaries with the exception
of Africa Prudential Registrars Plc and Afriland Properties Plc were consolidated under UBA
Capital Plc and spun-off to shareholders of the Bank. The Bank’s excess real estate assets
were used to capitalise Afriland Properties Plc, which was then spun-off, along with Africa
Prudential Registrars Plc, to be held directly by the Bank’s shareholders. Along with UBA
Plc, the result of the restructuring is three stand-alone entities held directly by the Bank’s
shareholders – UBA Capital Plc and Africa Prudential Registrars Plc, which are already listed
on the Nigerian Stock Exchange, as well as Afriland Properties Plc, now controlled by
independent shareholders. Under the Monoline business structure, UBA Plc remains the
parent company for all of the Group’s commercial banking activities in Nigeria, Africa and
the rest of the world. UBA Plc is also the parent company for UBA Pension Custodian
Limited, UBA Capital (UK) and UBA FX Mart Limited. Now fully positioned as a pan-
African bank, the UBA Group is firmly in the forefront of driving the renaissance of the
African economy and is well positioned as a one-stop financial services institution, with
growing reputation as the face of banking on the continent. UBA realised that the personnel
remain the most valuable assets of any organisation. UBA’ employees are the competitive
edge of the organisation in a highly dynamic and competitive world and African banking
environment. Therefore, the company has invested in the best performance management
systems to ensure its employees always have the cutting edge skills to excel in what they do.
With a staff which is multicultural, multi-lingual and highly diverse in their outlook reflecting
richness and multicultural diversity of the 22 countries UBA operates, the company has also
developed financial and non-financial incentive schemes, including a staff recognition scheme
that ensures that highly performing staff are recognized and rewarded for excelling in their
duties. UBA strategy is hinged on always seeking to employ the best people; creating a
conducive environment for them to excel in their work to delight customers while providing
competitive remuneration and reward systems to retain THE best hands. UBA employees are
referred to fondly, as the 'UBA Lions and Lionesses' reflecting the confidence with which
they deliver financial solutions to the bank’s customers.

UBA approach to business

According to UBA website (2017), UBA have an overall strategic goal in our approach to
business. This is underlined by the company strong desire to always deliver exceptional
customer service. Serving customers is not just about profit but also creating an enduring
brand that will outlive generations. The company realizes that customer needs are constantly
changing and that a good customer service yesterday will not necessarily count as good
customer service tomorrow. UBA is constantly monitoring and tracking how satisfied
customers are with our services. The customers remain the cornerstone of UBA strategy to
dominate the African banking space; compelling the Bank to constantly seek for new and
innovative ways to deliver exceptional service to all its customers daily. For UBA to deliver
exceptional customer service consistently, the company deliberately make efforts to
understand its customers intimately, treat them fairly and with empathy while keeping all
dealings with customers highly confidential, offering them the best advice to manage their
personal or business financial matters. In this regard, UBA value its reputation as a financial
institution, conducting its businesses within strict regulatory guidelines in a way that protects
the company reputation. Integrity is a core value in all the company financial transactions
ensuring that UBA word remains an irrevocable bond in all transactions.
UBA engages the community where the company does its business and carry financial
transactions in a sustainable way that protects the environment the interest of future
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generations to meet a viable planet. Furthermore, UBA do not take lightly the need for
customers to conduct their business in a secure environment using secured processes. The
company has invested in IT systems and processes to ensure maximum protection for all
customer transactions with high level controls that minimizes losses from fraud and errors. As
a financial institution, we fully realize we have to take risks, however we are conscious of the
need to manage the level of risks we have to take without compromising the massive trust of
our customers. In line with this, we have invested heavily in high level enterprise risk
management system that minimizes the bank’s exposure to loss in its lending activities. The
bank manages its finances closely, keeping a close eye on its capital to avoid any capital
eroding losses. We are constantly replenishing the bank’s capital to keep it at par with fast
expanding business across Africa.

PART II: EXPLAINING THE PRINCIPLE OF LEAN BANKING

Lean processes are being adopted globally by organizations suffering from some level of
inefficiency that’s negatively affecting their bottom line. In fact, post-recession, as the
financial industry continues to resolve its credit and capital problems, many banks are now
shifting their focus to improving operational efficiency. The objective of a lean banking
approach is to identify areas of waste and inefficiency within the organization and then apply
proven methodologies to generate solutions. Lean middle-market banks enjoy improved
customer experiences, get the most out of their staff, improve operational controls and reduce
monetary waste wherever possible. Furthermore, lean banking is a low-cost way to eliminate
non-value-added activities throughout all areas of the banking organization. As lean banking
operations take shape, the management set the stage to develop a company culture with the
mindset for continuous streamlining of processes and improvements to operational efficiency.

The implementation of Lean Banking and process improvement

Many middle-market banks assume efficiency improvement should focus solely on overhead
reduction. This is a starting point. However, for an organisation to drive substantial lean
banking process improvements, the company needs to improve revenue. Unfortunately, over
the last 15 years, drops in revenue rather than increases in overhead have driven declines in
middle-market bank efficiency ratios. Therefore, the lean banking process improvement
initiatives must include an analysis of sales and marketing, margin management, non-interest
income management, as well as an ongoing review and improvement of these elements of
lean banking operations.

The Benefits of Implementing Lean Banking Operations at UBA

In general, overlapping and/or inconsistent data, manual reporting, disparate systems and
aging technology is leading to inefficiency and poor information quality. Internally, the bank
requires fast, accurate and increasingly transparent information to support smart, informed
business decisions. While lean banking helps the company to gain internal operational
efficiency through fast and accurate banking data analysis, this process also satisfies the
external needs of the organization (i.e. stakeholders and regulators who demand transparent,
reliable information in less time). Streamlined processes and operational efficiency lead to
reduced costs and released capacity, meaning lean banking process improvement contributes
significantly to the company bottom line. In fact, financial institutions leveraging lean
banking operations report results of 20-30% cost reduction within 12 to 18 months and
maintain cost-efficiency ratios below the industry average. Finally, unlike other banking
process improvement methodologies, lean banking does not require significant capital
investment. Lean middle-market banking concepts and tools are relatively easy to learn and
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apply. Lean Banking relies on building a client-centered organisation. Therefore, on important
last element while implementing Lean Banking is the need to have a client centered
organisation. The banks have long-struggled to deliver excellent customer experience due to
processes that are not geared toward the customers’ needs – this has hurt customer satisfaction
overall.

PART III: BEST PRACTICE OF ITIL (Information Technology Infrastructure

Library) AT THE UBA
To achieve UBA’s overall objectives, the Information Technology Infrastructure Library must
provide excellent cutting-edge IT services to all stakeholders including senior executives,
internal departments and especially Bank customers.
ITILv3 includes five core disciplines and 24 management components.
The five core disciplines include:
1. Service Strategy
2. Service Design
3. Service Transition
4. Service Operation
5. Continual Service Improvement

Service Strategy. The Service strategy focuses on developing a business organization

development strategy that is consistent with IT users’ and outside customers’ needs. Its
overall objective is creating the best services through design, maintenance and service
improvement.
Service Strategy includes the following:
1. Strategy and value planning
2. Roles / responsibilities
3. Planning and implementing service strategies
4. Business planning and IT strategy linkage
5. Challenges, risks and critical success factors

It includes the following four management components

1.1 Financial Management (FM) includes Return on Investment (ROI), Total Cost of
Ownership (TCO) record and IT budget management
1.2 Strategy Generation management strategy - developed to reflect ICT Master Plan
1.3 Service Portfolio Management determining management strategy: developing IT Service
Portfolio structure and elements, IT services value and business performance assessments
1.4 Demand Management determining management strategy for IT resource requirements;
controlling and increasing efficiency

Service Design
IT services are designed for each process, including strategy and management approach
development.
Service Design includes the following;
1. The service lifecycle
2. Roles and responsibilities
3. Service design objectives and elements
4. Selecting the appropriate model
5. Cost model
6. Benefit and risk analysis
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 7. Implementation
8. Measurement / control
9. CSF’s and risks

It includes seven management components:

2.1 Service Catalogue Management - design information management according to IT
structure and elements
2.2 Information Security Management - develop work safety programs
2.3 Service Level Management (SLM) - design SLM of each process
2.4 Availability Management - design system to sustain IT service-availability to support the
business at a justifiable cost
2.5 Capacity Management - design management for IT capacity adjustments
2.6 IT Service Continuity Management - design management to continue service in disaster
cases
2.7 Supplier Management - design to manage supplier performance is in compliance with
agreements

Service Transition
Service transition management addresses development testing, and implementation issues and
their optimization. Service transition covers the following:
1. Managing change (organizational and cultural)
2. Knowledge management
3. Risk analysis
4. The principles of service transition
5. Lifecycle stages
6. Methods, practices and tools
7. Measurement and control
8. Other best practices

It includes 7 management sub-items

3.1 Transition Planning and Support - involves planning and pre-use processes, including
developing, testing, checking, delivering, information transition and reversion plans if
problem occurs.
3.2 Service Asset and Configuration Management - managing IT asset and system
configuration.
3.3 Change Management - developing systems including change processes, communication.
3.4 Release and Deployment Management - managing development work processes and prior-
use testing.
3.5 Service Validation and Testing - identify framework for system control, testing and prior-
use testing of each system.
3.6 Evaluation - evaluating and measuring outcomes.
Two cycles: Testing cycle and Usage cycle, according to criterion identified in Service
Design
3.7 Knowledge Management - knowledge management process to collect problem and other
information into database - analyzing data to support learning and developing skills to solve
problems efficiently.

Service Operation

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Focusing on operations and maintenance processes. Emphasis on resolving operational issues
(root causes) and includes the following;
1. Principles and lifecycle stages
2. Process fundamentals
3. Application management
4. Operations management
5. CSF’s and risks
6. Control processes and functions

It includes seven 7 management components

4.1 Event Management - manage events, system will analyze statistical data and information
on risk
4.2 Request Fulfillment - assigning related departments to deal with problems, separating
reporting types.
4.3 Access Management - managing IT usage control system. It has an audit process
4.4 Service Desk Management - manage all service requests from IT users, arrange priorities,
manage difficult problems so that they have minimal impact on Bank business
4.5 Incident Management (SLA) - create processes to manage unusual events. The objective is
to promptly communicate problem to involved persons and restoring normal service operation
quickly as possible within the Service Level Agreement (SLA) - minimizing adverse affects
on business operations.
4.6 Problem Management - manage IT problems with proactive thinking, focusing on
analyzing Root Causes of problem, minimizing occurrence of long term errors Continual
Service Improvement
IT services perform at Deming standards (William Edwards Deming, a famous thinker,
statistician, professor and specialist who invented 14 quality management principles such as
PDCA) - performance in accordance with the Plan-Do-Check-Act framework and produce
accompanying reports.
5. Continual Service Improvement
IT services perform at Deming standards (William Edwards Deming who invented 14 quality
management principles such as PDCA) - performance in accordance with the Plan-Do-Check-
Act framework and produce accompanying reports.

Expected benefits after ITIL implemented

After ITIL is fully implemented, the Bank expects to reduce IT management costs because its
required operational processes and regulations will improve IT services. At the same time,
users will receive much higher service satisfaction from an upgraded global standard system
that delivers more efficient and professional services. The system’s simple rules and patterns
will create more flexibility, reduce confusion and ultimately increase production.
ITIL training will increase our people’s work skills and allow them to work more efficiently
with our IT systems to deliver standardized services flexibly and efficiently.
The Bank will increase its competitiveness in the market with more efficient use of our IT
systems to deliver products and services. Repetitive and unnecessary tasks will be eliminated
and each job or project will be efficiently executed as planned.
The increase in IT service capability will help the Bank deliver promised high-quality services
to our customers at competitive costs.
Reference Performance Guidelines: ISO20000 Information technology service management
standards, Part 1 Specification and Part 2 Code of practice and ITIL v3.

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In summary, the implementation of Lean Management at UBA requires some important steps.
Therefore, UBA when applying Lean Management, should do the following: 1) explicitly
map the value stream to understand precisely what is required to complete the process task for
the customer. The map will be used to continually eliminating wasteful practices; 2) move
beyond the misconception that ‘transactions are not like products’ and design, source,
assemble and deliver transactions; 3) regularly use KAIZEN (incremental continuous
improvement that increases the effectiveness of an activity to produce more value and less
waste) (The Improvement Encyclopedia, www.syque.com/quality_tools) to examine and
optimize processes, keep the changes small, local, continuous and practical; 3) Perform paper
work processing like an assembling line. In banking, by implementing Lean Management, the
organization improves business performance using simple, practical tools and techniques to
enhance quality, cost, delivery and people contribution. Employees are not expected to simply
routinely do their job, but are expected to contribute to the improvement of processes and
operations, utilizing their own personal experience and creativity.

CONCLUSION
Lean banking initiatives are rising rapidly in the financial sector, yet most banks’ approaches
are still too focused on cutting expenses. Real, lasting change requires the bank to focus on
the cultural aspects of lean banking process improvement. The lean banking is as a
behavioural change. The reduction of costs is just one benefit as it has been demonstrated in
this paper. To achieve a high-performing organization, it is imperative to combine lean
banking operations with best practices that inspire the company staff to deliver continuously
excellent customer service. This paper has shown that Lean banking is all about improving
process efficiency, performance management, organizational capabilities and the mindset and
behaviours of the staff. In fact, identifying and removing non-value-added activities, the end-
goal should always be focused on who the customers are and what they value, as they are a
direct extension of the value stream. To be more effective with UBA, the lean Banking must be
associated to the lean six sigma which is a methodology that relies on a collaborative team
effort to improve performance by systematically removing waste, combining lean
manufacturing/lean enterprise and Six Sigma to eliminate the eight kinds of waste:
Transportation, Inventory, Motion, Waiting, over production, Over processing, Defects, and
Skills (abbreviated as 'TIMWOODS').

REFERENCES
Ndedi, A; Moutila, L and Tsoungui, S. M, (2016), Bridging the Gap: Lean and Continuous
Improvement in the Service Industry and Public Service in Cameroon (October 22, 2016). Available at
SSRN: https://ssrn.com/abstract=2857639. Accessed on the 5th February 2017.
Sayer, N.J.;Williams, B. (2007), Lean for Dummies,Wiley Publishing, Inc.,2007
Shook, J. (2017) What is Lean Management?, available at:
http://www.lean.org/shook/displayobject.cfm?o=1447. Accessed on the 21st January 2017.
UBA Foundation, (2017) UBA Foundation. Available at: https://www.ubagroup.com/sr/foundation.
Accessed on the 2nd February, 2017.
UBA economic Empowerment, (2017° UBA Focus Area - Economic Empowerment. Available
at: https://www.ubagroup.com/sr/economempvrm. Accessed on the 28th January 2017.
Thomsett, M.C. (2005), Getting started in Six Sigma, John Wiley & Sons, 2005