Unit 2

Management of Conversion System

Chapter 8: Workforce Measurement
Lesson 24 - Tutorial 7
I

First National Bank

Lock-box operations in large commercial banks process accounts receivable from
customers. First National Bank has a major commitment to lock-box operations and is I
currently the regional processor for several major oil companies and national retailers. a
large credit card company, and dozens of small regional companies. Customers of these ,
companies mail their payments directly to First National, using a special zip code.
Theoretically, First National is able to intercept the payment (shorten the mail time.
process the paperwork, and credit the firm's account-all within a day from the time it
receives the payment. .
Lock-box operations are becoming a problem for First National. Every day it :
receives thousands of bills and payments for hundreds of accounts. Over the last few I
months, there have been as many as three days' backlog. First National is in jeopardy of I
losing two national accounts to competing banks, which are outperforming First
National. First National has assigned a "breakthrough" team to set performance I
standards and study jobs within the Lock-box department.
The key job appears to be the account processor job. An account processor opens
incoming mail, verifies payment with the bill, records payment by account number. I
separates payments and bills, and delivers each for further processing. An account
processor must also encode the payments (usually checks) and send them to check
processing so that they can clear the bank and First National can receive credit for the
money .it has credited to the national account customer.
The team performed both a direct time study and work sample for the account
processor job, with the results shown below. The bank uses a .15 allowance fraction for
all clerical jobs.
Management is concerned that setting a standard now will further damage
performance. In fact, the day after the direct time study, 14 of the 35 second-shift workers
were absent, a number much higher than the normal 1 0 percent. Jan Holms, an informal
group leader who was one of the workers studied, told the analyst the company would
"pay for this pressure." She was one of those absent the next day.
Frank Waring, the operations vice president, would like to change the entire work
flow, dissolving the lock-box department as it is now organized and grouping lock-box
and other-operations functions by customer rather than product. Frank's counterpart at
Citibank wrote an article for the Harvard J3ussiness Review explaining his bank's
success with this "customer account focus," and FranK was most impressed. Although it
seems an appropriate time to consider such a move, Frank is not gathering the support he-
had anticipated from his team of management subordinates.
Direct time study data: account processor job

Processor 1 Processor 2
Cycle time 0.5 0.7 1.0 1.3 1.5 0.5 0.7 1.0 1.5 2.0
(in minutes)
Number of 1 3 5 2 1 2 4 3 1 1
times
observed
Performance 85% 80%
rating

Work sampling data: account processor job

Processor 1 Processor 2
Number of payments 322 296
processed 8 8
Length of time observed (in 85% 80%
hours) 25% 30%
Performance rating
Idle time