Creating the Perfect Digital Lending Process Flow

Ashley Garrison: Hello, and welcome to Baker Hill’s Lending Made Easy. Today we’re going to be talking about creating the perfect process and how to seek progress and not perfection. There are so many books about process, from agile methodologies to Kaizen and continuous improvement, and value stream mapping.

So, Brian and David, you are our two resident experts here. How do you begin a process improvement project? Let’s start with you, David.

David Catalano: Yeah, I’d like to start with what I’m trying to seek, what’s the end look like? How do I start with the end in mind? And, the overall theme should be simple. I want to keep this simple because people aren’t going to use something that’s really, really complicated. So from a process improvement standpoint, why am I doing this?

Let’s not just create a new process to create a new process. Let’s actually look for a business problem we want to solve. What’s that look like, what’s it look like today and how do I get there and leave everything that I know about what I do behind, because that may not be the right way to do it in all likelihood, if you’re going to improve a process, you’re probably going to imply or deploy technology. 

If you’re going to use digital lending technology and you don’t have that today, chances are the process you have today is not the one you want to place on that technology. It’s probably going to be a different, potentially a different process.

And you may need some help from some experts that understand that before you embark upon building this process out. But, Brian, what are your thoughts on that?

Bryan Peckinpaugh: You know, I always find it helpful to bring it back to our personal lives in what we do. It’s easy for things in the business world to get abstract and tough, to understand bringing it back to us as individuals, I think helps a lot.

And for those that may not know David, he’s a bit of a fitness buff and, I am known to get in the gym on occasion, but think about trying to start a workout routine, right? 

If I want to start to build a process being physically fit for the rest of my life. I don’t go into the gym tomorrow and start training like a Mr. Olympia. 

If I did, I would never go back and I would probably hurt myself. Probably what I need to do is I need to build a good solid plan over time. 

As David, you said to get me to that end in mind, I want to have an end goal of where I want to get, but I need to build good, consistent. Stages throughout to make sure one that I stick with it and two that I set myself up for success.

I think you really need to step back and focus on the have to have, so the what has to be there and that’s on two sides of it. I want to know as part of my process, what do I need to make sure absolutely happens every single time while at the same time saying, what can I not afford to have.

What can never happen. And if I can separate those two and solve for those, I can afford some gray area in the middle and give some of my high valued, my trusted employees, some flexibility. 
Think about Zappos, the shoe company. When they started they really wanted to focus on customer service, the brand for customer service and they realized they couldn’t, over-engineer the process associated with. 

If I tried to plan scripts for every single interaction with a customer, I’d never be successful, the manual would be so big. Nobody would instead what they did is they focused on the fundamentals.
We want to be this customer service excellence company. And to that end, we are going to empower you employees to do what you feel is right within a hundred dollar cost. 

If you can give "wow-ness" to that customer for less than a hundred dollars, go for it. I’m not going to build a process around that, I’m just going to define the building blocks. I think that’s what’s really critical as you look at this you kicked it off. 

Perfect. Ashley, we can’t go for perfect because we’re going to over-engineer it. 
We’re going to get way too deep in the weeds on the things that don’t matter as long as we stick to our fundamentals and that’s where you have to focus, you have to focus on what you can get right, what you can get buy into and build your reporting, your KPIs or metrics around that. 

Ashley Garrison: So just to ask you guys, we’re lending experts here, right? So at the end of the day, if I have a lending process today and I want to make it more efficient, if I want to, take out redundancy in that process, where do I start?

Bryan Peckinpaugh: I would say it’s gonna be different for every institution. Some people might want to rethink the process as a whole, right?

Some people may have built their lending process 30, 40 years ago based on the tools they had at that time. The last thing you want to do is just try to get incrementally better at X when you can go back to first principles and start from scratch.

You may, for example, leverage technology, or new technology that gives you the flexibility to centralize your underwriting if you were a decentralized shop before, and that could just give you exponential gains. If you’ve already done that, you’re gonna want to look somewhere else.

It’s gonna be unique to each institution, but it should come from, as David was saying that desire to delight your customers and your employees. How do I make their lives better so that they’re, delivering results for me at the end of the day?

David Catalano: Yeah, I would agree. I would evaluate process but I would first evaluate policy.

So policy process and technology is the format or the formula to follow. On the policy side, does your policy allow you to create wow experiences for your commercial customers? What is a wow experience for your commercial loan origination customer? You can decide. You’ve been a customer many, many times. What does that experience feel like?

You never asked for something twice. You anticipate what someone needs. You know everything about their interaction with you when you interact with them. There’s lots of things to think about on that wow experience, but then does your policy allow you to do that? Are you asking for two years of tax returns and financials for $50,000 equipment loan?

That’s not a wow of experienced guys. You don’t need all that information to lend $50,000 to the roofing company down the street.

Understanding what your policy is and if there’s impediments there and then moving on to process, just flow it all out that you don’t need to get that detailed. If you’re re-entering information 18 times to create a loan, you probably have a problem on your hands.

That sounds facetious, but we actually had a solutions consultant do a solutions workshop and the bank entered the same information 18 times to complete a loan. That’s obviously a problem. And you don’t want to do that when you get to technology. If it was my bank and I was running it, I want to enter information once and use it forever.

So I want a closed loop. Enter it once, somewhere in the process and be able to use it anywhere in that process again. That would be a really good lift. 

Think of the capacity you would create if you eliminated the requirement to re-enter the same data, especially if you were doing it 18 times. So you just got to think about simple things like that.

You are, this is the golden age of commercial loan origination. Most people don’t have a complete digital solution where you enter information once and use it forever. Most people have point solutions from the nineties and the two thousands. So getting a lift in your commercial lending environment is not that difficult to do.

It’s really not. So let’s not try to perfect this process. Look at the 80 20 rule, 20% of the stuff happens 80% of the time let’s work on that. Then, customers that we’ve worked with for decades, are far beyond that. They’re automating so much. You don’t need to get there today, crawl and then walk and then run, but start with the low-hanging fruit.

Bryan Peckinpaugh: Absolutely. Now, one other piece of caution though, is don’t go so far to the other side, right? So one of, one of my pet peeves is the phrase minimum viable product. Don’t go there.

I’m going to steal this from a client of ours where, which is where the first time I heard it and I thought it was fantastic. Is shift to a thinking of minimum consumable project, which, which has some connotation to it because I can’t just be minimum viable.

I need to understand what is required for this to be consumed by the constituents that will use it. In the context of commercial lending, I need to spend time with my commercial lenders, my underwriters, my decisioners. If I have loan assistance, my, whatever the roles are in the process to understand what will make this consumable for you.

I have to get that buy-in I have to put things in place that will guarantee their usage, so that I can start to build, as David said. That’s my crawl that, that minimum consumable is my crawl. 

What you need to build in the measurement to your process, you have to understand what is good look like for you and target certain reportable metrics. What gets measured gets changed.

If I identify where I want to be on certain key metrics and criteria is that may be win rate that may be deal size. That could be lots of different factors depending on what you want good to look like for your organization.

Identify those figure out how I’m going to use the systems that I have to report on that, so make sure you’ve got good reporting and every digital loan origination system you evaluate and purchase, and use that to continually improve and don’t try to strike for perfect right now.

Ashley Garrison: And I think you said something spot on too Brian, measuring where you are today is a great baseline to figure out, okay. If I make a change to this process, what is the result of that?

Sometimes when people take on too much change at once, they don’t really know what was it that ultimately caused the either the positive, the result or the negative results. Taking it slow, being methodical about it, having an end game in mind, all really great feedback.

Any final thoughts from either of you guys just on process improvement? Is there a perfect process?

Bryan Peckinpaugh: There’s there’s never a perfect process, right? I mean, if we’re, we should always be striving for better. But, to put a fine point, Ashley, on what you just said there. Never forget why you decided to make changes in the first place.

If you had a perfect process, you’d never change it. And so if you’re embarking on change, if you are evaluating your processes, there are reasons why you’re doing that.

Don’t forget them, make sure you’ve got those written down. That you’ve subscribed metrics to them so that I know why I’m doing it and I know what I’m looking at for measurable improvement and use that as your anchor, as you go through any of these exercises.

Ashley Garrison: David final thoughts from you.

David Catalano: I would say change is constant so you should build a culture that seeks to continually improve process, and then you won’t be so surprised when you change their process, because it’s going to continue to change as we evolve.

We’re evolving faster now than ever before. Get that culture built so they’re used to the next change and maybe they’re bringing the change to you which would even be even better.

Ashley Garrison: Well, and if you read the book Toyota Way about Kaizen, really at the end of the day, it is about continuous improvement. It’s not perfection. It’s how do we continuously evolve? And I think having that sort of mindset really sets people up to be successful.

So thank you, David. Thanks Brian. Thanks everyone out there for listening to Baker Hill’s Lending Made Easy.

If you need help with your digital lending process flow, give us a call. We’d love to help you take the first step.