Begin with the end
BY JACK P. FERRARO, PMP
Before embarking on business process automation, this financial services provider examined its business needs, focused on process steps and mapped a clear course.
If you can't detail where you want to improve, don't be surprised when you get lost along the way. For business technology projects to provide real return on investment (ROI) to stakeholders, you must have clear objectives before you start.
Faced with the challenge of growing from a regional mortgage company to a national powerhouse, National City Mortgage (NCM), a Dayton, Ohio, USA-based division of National City Corp., saw benefits in automating its business process technology, particularly the hand-off from mortgage origination channels to the operations groups that perform post-closing, secondary marketing and servicing functions. Major problems included misplaced loan files, regulatory penalties and fines, uninsured loans, redundant audits, late coupon books, delinquent tax payments and service-level concerns for some customers. Further, as the loan volume exploded, so did the frequency of these problems.
All currency is in U.S. dollars, unless otherwise stated.
SOURCE: NATIONAL CITY MORTGAGE
Members of the document imaging system project team, called Image Express, discuss business process maps. The war room shown was used to post process maps and make visible the detailed steps to ensure that all stakeholders understood the proposed changes and the impacts.
The business volume also led to a string of related problems. “A delay in setting up loans led to a delay in providing the customers with payment coupons,” says Jack Case, executive vice president of loan administration. “Calls from customers in search of payment coupons overloaded customer service. Without loan information in the system, the company was unable to keep track of tax payments and insurance premiums that came due early as the mortgages were being processed. These problems then rippled into default processing and so on. We were able to handle the growth on the origination and servicing functions, but the hand-off to the back office needed a major overhaul.”
To solve these problems, NCM initiated a project to analyze the root causes and evaluate alternative solutions. The firm conducted a “future state definition” that identified the direction and vision—and the major impediments along the way.
With the help of a consultant, NCM began to identify the key stakeholders, validate the vision and process deficiencies, and look at alternative solutions. Many of the options dealt with how to better manage a closed mortgage loan file through various post-closing, secondary marketing and servicing processes. To add to the challenge, the loan file traveled between several buildings and required multiple parties to physically access the loan simultaneously. “Initially, there was a huge concern over who had the loan file last,” says Jim Wadkins, vice president of loan administration, who led the project internally. “We looked at several solutions and educated the stakeholders regarding each solution.”
The first solution was to use an imaging system for the loan file, but this alternative would not improve the business process sufficiently to support increased loan volumes. The second option was to use workflow technology to track and manage the work through the various processes. While relatively inexpensive, tracking was less important than process speed and post-closing and servicing accuracy. The final alternative considered both workflow and imaging. This solution offered the most benefits, but also was the most expensive and the riskiest.
To account for requirements, the team focused on defining and articulating the company's “real” strategic needs. For example, the servicing department required auditing speed, particularly during peak volume, so it could begin to perform loan service functions. Meanwhile, timely and accurate delivery of data had to satisfy secondary marketing functions.
To achieve the necessary ROI to gain project approval, dramatic process changes were going to be necessary. This significantly increased the risk associated with the project.
EXECUTIVE VICE PRESIDENT OF LOAN ADMINISTRATION, NATIONAL CITY MORTGAGE,
DAYTON, OHIO, USA
To address these differences and establish a common vision, the project team educated key people in each department about the available technology and the comparative strengths and limitations of the different products and vendors.
Defining the Solution
In selecting alternatives, NCM looked closely at the return on investment (ROI) and the associated risk. “To achieve the necessary ROI to gain project approval, dramatic process changes were going to be necessary,” Case says. “This significantly increased the risk associated with the project.”
To deploy a complex enterprisewide system while making massive process changes is difficult. NCM challenged its departmental managers to think out-of-the-box and identify new processes. The resulting solution was a $10 million technology acquisition to implement a high-volume image and workflow system and upgrade the network infrastructure. “Everything was on the table,” Case says. “If we were going to do this, we were going to do it right.”
Expectations had to be closely managed: NCM's departmental managers needed to own all process changes. NCM executives and project stakeholders agreed on the desired goals and the high-level vision, which consisted of graphics and summary slides. This plan gave the design team a blueprint without overburdening senior-level management with too many details.
Led by Wadkins, a new team of process owners sketched the process details. NCM created a “war room” where all process owners could analyze critical links between departments with detailed flow diagrams. NCM also invested many hours with the software vendor to identify its business processes and ensure that project members understood the magnitude of the process change.
FIRST THINGS FIRST
Steps to process improvement technology projects are:
Define real need
Create a high-level vision of the current business process vs. the future business process
Perform detailed mapping for the future business process created with the key people involved
Develop functional business requirements from the process
Test the requirements
Develop change management strategies to support the change.
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A systematic approach to technology implementation will achieve:
Minimized scope creep in the design, prototyping and testing phases. Requirements will be focused on the value they provide to the business process
Early and sustained end-user buy-in
A thorough understanding of the application by all key business owners or users prior to the initial rollout
More effective change management initiatives associated with the new technology and redesigned business processes
Lower project risk, well into the software deployment phase.
The selected workflow tool allowed the process to be easily configured and prototyped. The software team helped the NCM process team determine what was feasible with the tools available and what would require customization.
Here and Now
By focusing on the specific steps in the process, the project team developed system functionality and performance metrics to make the new process work effectively and produce the projected benefits. This improvement began with benchmarking areas within the current business process. The information helped ascertain which areas needed to be improved within the future business process.
For example, if non-value-added steps were eliminated, the auditors could process 30 loans in one day, instead of the previous 11. Scanning the document earlier in the business process significantly improved the cycle. With that done, the team could control which auditor got which file, thus eliminating the costly distribution of numerous hard-copy files to multiple buildings.
With a new loan file-delivery system, the team looked at how the process should behave. By specifically looking at the individual steps a loan auditor would conduct when receiving the loan file, the team developed requirements. Sorting the file was one step; not all auditors, however, sorted files the same way due to the screen flow of legacy mainframe systems. Thus, functional requirements had to deliver a loan file to a user's desktop with a predetermined sort order and an administrator had to be able to configure this sort order by task or function in the workflow.
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These requirements were based on the specific business process. If the software tool could not accommodate the functionality out-of-the-box, the team easily could justify the customization based on the value it brought to the process. Low-and medium-value customizations were dropped. “This allowed us to successfully manage scope and prevent unmanageable scope creep,” says Jennifer Robinson, IS project manager at National City.
After a prototype was developed for the process, the project team tested the functional and performance requirements to prove the change would work. Key process stakeholders reviewed the documents defining the process and the testing scenarios. The project team benchmarked the functionality and speed of the process vs. the desired objectives.
Creating this type of project documentation greatly enhanced change management initiatives. The process changes impacted more than 800 employees, who wholeheartedly supported the change. Many users went from years of using a terminal (green screen) and paper loan files to a personal computer and an electronic loan file. An aggressive computer training program was launched to support the project.
While optimum performance and full functionality was the long-term goal, the team ensured the system was ready from the start. A “Day One” team consisted of key users in each department who had an in-depth knowledge of the process and the system. As the technology rolled out, subject matter experts were close by.
Clearly defined requirements based on the business process ensured success. NCM's mortgage loan volume has increased three-fold over the past two years, but the firm's productivity gains have allowed it to keep pace with this dramatic rise. PM
Jack P. Ferraro, PMP, president of Ferraro IT Management Services Inc., Manassas, Va., USA, has 15 years of senior management experience, including business consulting, systems integration and systems development projects.
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PM NETWORK | FEBRUARY 2003 | www.pmi.org