DW: How did that go over with the staff?
RP: In the beginning they were skeptical. I got all of the people who report directly to me into the board room, we sat down, I passed out copies of The Goal, and I said: "Guys, we're going to come together ev- ery week on Friday. We'll have fun, we'll have food, the whole bit, but we're going to discuss how to translate The Goal into banking terms." I'm looking over there at my CFO, he has this constipated look on his face. I said, "Jim, is there something wrong?" He says, "Yeah." I said "What?" He says, "There's no index in the back of the book. How do we find anything?" I said, "You read it, it's a novel." He eventually became our biggest advocate. But he was totally skeptical.
374
DW: So how did you approach the problem?
RP: Traditionally the tough issue within banking is how you manage all the regulatory constraints that you're faced with. Banks are just immersed in regulations. And if you actually tried to manage accord- ing to the regulatory measurements, your bank would fail. You bring that up to the regulators and they laugh. There's just this whole slew of things, some of which contradict themselves. Some of them were created when lawmakers added them onto banking legislation because they looked good, or else to fit a particular situation at the time.
DW: You're talking about regulations that keep banks out of certain businesses?
RP: Right, as well as those that mandate certain loan mixes, how you approach a market, that type of thing.
DW: Preservation of asset ratios and so forth?
RP: You got it. We took a slightly different approach. We decided we had to figure out what our real market constraint was. Using TOC, we found it had to do with service levels and how we were solving problems for our customers, not with the specific products we were offering. So we ended up gearing the whole bank toward solving prob- lems for our customers. Part of the solution-the injection that broke the conflict-was the creation of personal banking for everybody, not just for wealthy people. Banks normally assume it's not worth spend- ing time with you if you have only $100,000 when they can spend that time with a guy who's got $10 million. We discovered that a guy who only has $ 100,000 isn't really going to spend a lot of time with you anyway; he's just not there very often. So we stopped worrying about that and began focusing on how to better manage our customer relationships across the board. People ended up coming to our bank- ers anytime they had a financial problem. If we couldn't solve it for them, then at least we could refer them to someone else, and we could give them good advice because we didn't have an ax to grind. All we asked is that they let us manage their cash flow. Most people gave us everything in that regard, plus all their loans.
DW: You had a large mortgage business, too?
375
RP: Right. We had more than 300 correspondent banks, all over the country. National City and Bank of America would sell us mortgages. What we discovered-also using TOC, and this is how we expanded this business-is that most people with a loan viewed the bank that serviced the loan as their bank. So, whether Freddie Mac or Fannie Mae or PNC or any other investor actually owned the loan, we wanted to own the servicing asset. It was more valuable in terms of building customer relationships than the loan itself.
Also, these days it's a lot easier, but it used to take forever to get a mortgage approved. That's because there are all these things you have to have in place-again, to satisfy the regulators. We looked at that and said, "Okay, what's the conflict here?" We built our conflict clouds, and we built a current reality tree, and we discovered there are only three things that end up deciding whether a loan is a go or a no-go. If we just focus on doing those three items, and worry about plugging everything else into the file later, we can speed things up. In fact we were able to cut the approval time almost in half. That made us really popular with realtors and mortgage brokers, which brought us more business.
DW: What effect did TOC have on customers' ordinary day-to- day interactions with tellers?
RP: Most of the tellers said they wanted to do this TOC thing, too. Well, what do they really need to do? They really don't need to know how to do future reality trees because their everyday life is not involved in future reality trees. But a teller is often dealing with conflict resolu- tion. Tellers represent the frontline defense, especially at savings and loans. People come up to them and say: "This doesn't work, this is out of balance, they screwed this up," and it's the tellers who have to solve the problem. So we taught them how to do conflict clouds. We created conflict-cloud worksheets for them, pads of 50 sheets, eight and a half by eleven. On the back side were the instructions, just in case they forgot how to do it. And the teller could actually fill in the cloud as he or she was talking to the customer, work out the prob- lem, then rip off the sheet and do the next one. We had that going throughout the bank.
DW: It sounds like one of the main conclusions you reached
376
was that the perceived constraint-the regulatory climate-was not the actual constraint
RP: Correct. I would walk into the office of my compliance officer and I'd say, 'Jeff, I got this idea." And he would just automatically point to this poster on his wall that basically said: If you can dream it, there's a regulation for it.
DW: And yet even in that environment, you found ways to grow.
RP: We did things in the banking industry that were totally unheard of. We actually had regulators visit us more often than other banks because those other banks kept calling them and saying: "They've got to be doing something illegal, you need to check them out."
Interview with David Harrison, Administrative Ser- vices, Founder, Positive Solutions, Newcastle, U.K.
DW: Tell me about Positive Solutions.
DH: We provide management and administrative services to inde- pendent financial advisors. At present we have 755 of those people who rely upon us to help them with such things as compliance with financial services regulations, collection of commissions, and so forth. That's the company we built, 60% of which we sold recently to the Aegon group, one of the world's largest insurers.
DW: How have you made use of The Goal?
DH: In a couple of ways. First and foremost we use the five focus- ing steps almost instinctively now, in that we seek to identify the constraint in any problem before we do anything else. That's sort of been my mantra, if you like-before we go any farther, let's identify the constraint.
Beyond that, a big part of what we do is acquire new independent financial advisors-we want people to join our organization, and the people we use to recruit them we call our business consultants. Oded
RP: In a couple of ways. First and foremost we use the five focussing steps almost instinctively now, in that we seek to identify the con- straint in any problem before we do anything else. That's sort of been my mantra, if you like-before we go any farther, let's identify the constraint.
Beyond that, a big part of what we do is acquire new independent financial advisors-we want people to join our organization, and the people we use to recruit them we call our business consultants. Oded Cohen, of Goldratt UK, helped us build a process for that. He broke it down into very discrete steps and helped us program software which helps us track how each of our business consultants is succeeding, or not. At any point in time they may have 150-200 people they're hav- ing conversations with about joining Positive Solutions. We've got them to think of each of those people as a project. That streamlined the process and also got our business consultants to think in a more logical fashion.