"Rengineering" has replaced "outsourcing" as the term most likely to be heard at banking conferences, and like most buzz words, the more it is used, the murkier its meaning becomes.
While some bankers throw around the word to describe how they complete such mundane tasks as replacing a mail-sorting machine, the process of reengineering entails a complete re-thinking of strategic business goals.
The result is a radical change in the basic methodologies and organizational techniques that give a company its structure.
Implementing new and and creative technologies is clearly an integral part of this process. However, bankers who have undertaken reengineering projects are quick to point out that their work goes far beyond the mere automation of manual tasks.
"The true challenges of reengineering are organizational, not technical," said Roy Camblin, a senior vice president at Wells Fargo & Co. who oversees an ongoing reeingineering effort in the institution's wholesale area.
One Exec's Prescription
"Many companies set out to reengineer by changing technical paradigms," he said, "but if any significant strides are to be made, the whole structure must change."
To that end, Wells has broken up its major businesses into a dozen separate units, each with its own budget and management team. This structure allows each business to make the technical and staffing changes appropriate to its specific functions.
In the wholesale area, for example. Mr. Camblin has identified a need for getting new automated clearing house and wire transfer products to market more quickly.
To make this and other changes possible, the wholesale area is now gradually reducing its reliance on mainframe computer programs - which are typically expensive and time-consuming to alter.
Taking over work once done by the mainframe is a network of about 50 personal computers arranged in a Unix operating system-based "open system."
This network, which will eventually be expanded to about 200 workstations, has cut in half the time it takes to develop and implement new products while also improving the sharing of information with other business units.
A Quick Diagnosis
And Mr. Camblin said there are other, less tangible, benefits to Wells' reengineering effort.
For example, when the wholesale group's system was experiencing a slowdown in response time, the modular structure of the system enabled trouble-shooters to pinpoint the problem - a cheap software package that was creating conflicts in memory allocation on the network - in about four hours.
"I've seen similar problems that took 18 months to locate and even longer to fix," Mr. Camblin said.
Experts said the form that a reengineering effort takes will necessarily vary from institution to institution. However, bankers engaging in large scale reengineering can expect productivity improvements of 15% to 40%, according to consultants and bankers engaged in these projects.
Unlike the operational initiatives of the 1980s, which were driven largely by a desire to cut costs, reengineering efforts are motivated more by a desire to achieve specific business objectives - such as improved response time to customer inquiries or adapting to a changing market.
According to a survey by First Manhattan Consulting Group in New York, about 30% of the nation's top 250 financial institutions, including Citicorp, Nationsbank, and J.P. Morgan & Co., are engaged in some sort of reengineering effort. And another 65% are looking into reengineering.
A Major Change in Thinking
Yet, despite this interest, consultants and industry-watchers said that many bankers have yet to fully embrace the radical changes in thinking required by true reengineering efforts. Specifically, they say, bankers are having a hard time breaking away from a decade-long emphasis on cutting operational costs.
"You can't have an operations guy making the decision to reengineer and then let the business flow from the changes he implements," said Christopher A. Green, managing vice president at First Manhattan Consulting Group.
"That's letting the tail wag the dog, and unfortunately it's the course many bankers are taking."
According to Mr. Green and others, step one in any reengineering project is to identify business objectives. Step two is to throw out preconceived notions of how certain jobs should be done to make room for more productive methods.
Step three is to be prepared for a certain amount of upheaval and pain, for any good reengineering effort will rock existing structures to their foundations.
Tradition-bound bankers have been slow to adopt reengineering-which began in the manufacturing sector - author Tom Peters noted at a recent retail banking conference.
However, there are areas of the banking business that have had some success with reengineering.
The most notable of these is the check processing area, where several forward-thinking banks have invested millions in a new technology that will eventually improve just about every aspect of the way customer checks are handled by the bank.
The technology component is image processing software, which allows a check system to scan, process, and display digitized pictures of paper checks - radically changing the traditional back-office workflow.
In the short term, these changes result in tangible efficiency improvements. For example, the labor associated with inputting check amounts drops about 20%.
However, most of the institutions implementing check image have more significant long term goals, including the improvement of archiving and customer service functions associated with check processing.
More Applications Expected
Most of the institutions currently running check image systems - Huntington Bancshares Inc., Columbus, Ohio; Comerica Inc., Detroit; and Signet Banking Corp., Richmond, Va., to name a few - have cited the abilty to transmit check images throughout the bank as the major motivation behind installing the systems.
The idea is that since a check image can be stored on a compact disk and shared among personal computers, more applications for the technology will develop as time goes on.
But like many reengineering projects, check imaging will probably not reach its full potential for a number of years. For this reason, proponents of reengineering emphasize that patience, above all, is a must for a banker thinking about undertaking such a project.
"It's a long journey, and the route you take is going to be changing all the time," said Stanley E. Miltko of Littlewood, Shain & Co., Exton, Pa., image processing consultants. "But if flexibility is the key to success in the [1990s], a lot of banks are going to have to change what they're doing now in order to prosper."