Case Write Up Assignment
Case Write Up Assignment
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Case Write Up
Executive Summary
Capital One is well-known for its monetary management, information technology, customer service and innovation, and is one of the world’ biggest issuers of Visa and Master Card credit cards. The firm’s client base globally is approximately forty-nine million with managed loans amounting to in excess of $82 billion. The department of loan processing has insufficient associates in each process, and there are particularly few underwriters. Having extremely few workers limits the capacity of the firm to effectively serve the existing clientele. There is an opportunity to redesign the loan process operations such that Capital One’s clients get their approval decisions within 1-2 days so that they all get converted. It is recommended that the management of Capital One hire extra associates as the existing ones are few and the department is understaffed. This would remove the need to work overtime.
Company Overview
Capital One is a company that issues Visa and Master Card credit cards globally. The firm was founded by Nigel Morris and Richard Fairbank. It is renowned for its financial management, information technology, customer service and innovation, and is at the moment one of the world’ biggest issuers of Visa and Master Card credit cards. Capital One’s global client base is roughly forty-nine million with managed loans amounting to in excess of $82 billion. It is notable that since its Initial Public Offer in the year 1994 to the year 2005, the stock price of Capital One has gone up by over 1,400% (Immaneni & Terwiesh, 2007). A major aspect of its business strategy in recent years has been domestic diversification. Following its Initial Public Offer which enabled Capital One to become a public firm, the firm has progressed on both product line and geographic expansion by way of organic growth in credit cards as well as various acquisitions in non-credit card businesses. Some of Capital One’s diversified businesses together with a number of organically grown businesses reside in Capital One’s Global Financial Services organization. It is worth mentioning that the Loan Processing Centre is one of those businesses which supported various loan products including Jumbo loans, Line of credits and small business loans (Immaneni & Terwiesh, 2007).
Analysis
There are not enough associates working in each process. It is notable that at the moment, 14 funded loans are processed each month by every associate and there are 25 associates in total. The department of loan processing at Capital One lacks the capability of handling the volume of application leading to the target of seven-hundred funded loans on a monthly basis which was set after the company’s increased marketing effort. There are particularly very few underwriters at the department: in the process of loan approval, the most difficult job function is underwriting and underwriters are the associates who earn the highest on the team. The department has 8 associates who work as underwriters. An underwriter in the department at any given time can have an inventory that comprises between twenty to fifty applications which the underwriter would be working on (Immaneni & Terwiesh, 2007). Each of the 5 processes are evidently understaffed: the interview process has just 7 associates who call between 200-500 potential clients each day; the workflow management process has only a single Workflow Coordinator; the underwriting process comprises 8 associates; the quality assurance process has just 2 associates; and lastly the closing process has just 6 associates.
Capital One is clearly understaffed and this could affect various aspects of this company. Having extremely few staff members limits the ability of the company to effectively serve the existing clients and expand the business. Even though the top management of Capital One may view understaffing as a way of minimizing overhead costs, it actually has negative impact on the company in the long run. All in all, the quality of service at the firm suffers when there are fewer workers to serve clients. Fewer workers have to work quicker and overtime in order to handle a greater volume of work, and there are increased faults and mistakes made by workers who are stressed as a result of increased workload and being overworked. With time, poor quality of service would diminish the reputation of a company and drive clients away (Kryscynski & Ulrich, 2015). Few workers generally have an increased workload which adds stress to perform work tasks and satisfy the performance expectations. In essence, increased stress will lower not just morale of workers at Capital One, but also their job satisfaction. It will also take a toll on the physical and mental health of workers and could even increase the amount of time required off work. The rates of employee turnover may also go up when overwhelmed staff members quit instead of keeping up with increased workloads at the same rate of pay. Equally important, a company which is understaffed will miss opportunities for growth given that it is not able to satisfy the needs of its customers. Lost business essentially results in lost revenue as well as lost growth into new markets (Kryscynski & Ulrich, 2015). What can be done is basically to increase the number of staff members significantly in each process. Furthermore, the organization should invest considerably in information technology so as to increase the productivity of the company’s current personnel.
There is an opportunity for redesigning the operations of loan processing. The two key areas that need to be redesigned are certainly the underwriting step and the closing step. These two steps should be redesigned since they are the areas in which work in process inventory (WIP) accumulate the most thanks to high incoming volume. When there is a build-up of inventory, managers at the department would request overtime from associates especially from the phone associates and underwriters in order to keep the Apps flowing through the process. In addition, when Apps inventory build up, there would be an increase in customer wait time that consequently impacts conversion negatively. Wait times have a considerable impact on application withdrawals. The Operations Manager, Rick Weis, sampled some Apps and found that while 95 percent of the clients who get their approval decision in 2 days time would be booked as clients, just 83 percent of the clients who wait 11-12 days are actually converted; the remaining 17 percent basically withdraw their application (Immaneni & Terwiesh, 2007). As such, there is an opportunity to redesign the loan process operations such that customers get their approval decisions within a period of not more than 2 days so that all of them get converted and to reduce the proportion of those who withdraw their application.
The current performance metrics used at the department in Capital One are appropriate but not adequate since they only measure two key things, productivity and quality, but disregard other important things such as attendance, efficiency, helpfulness and initiative. At Capital One’s loan processing department, the performance of every associate is measured by tracking the number of hours which the associate worked as well as the number of apps/loan applicants the associate processed. In essence, the ratio of logged hours to the total number of hours paid is more or less 65 percent. This metric is tracked both at the departmental level and associate level with the goal being to meet or surpass 65 percent (Immaneni & Terwiesh, 2007). Besides productivity, the accurateness as measured by Quality Assurance also impacts the payout of incentives. To underscore accurateness and quality, a particular minimum quality score is mandatory for an associate to receive any incentive payout. Furthermore, the managers at the department are held responsible for the total productivity of the department. These performance metrics only focus on productivity and quality of work of employees in the department but overlook other crucial metrics.
Other vital metrics that could have been considered include the following: (i) attendance – it is of great importance to determine whether or not a member of staff is showing up to work. Attendance is something that is certainly worth tracking and it can be a helpful performance metric. If a worker shows up late time after time, takes more sick days than usual and leaves early, then he or she is probably not showing his or her full potential. The causes of poor attendance could include things like employee burnout, health issues or even a lack of motivation (Kondrasuk, 2011). (ii) Efficiency – staff members should be able to carry out their tasks and finish them on time. Employees need to work within the limitations provided by the available resources and time, and they should seek to complete their work as efficiently as possible. When measuring this metric, the company should look for missed deadlines for hints as regards how efficiently a particular worker is working. (iii) Initiative – it is good when staff members ask what is needed. However, it is better when employees see a need and then take the necessary steps to meet the need on their own. It is notable that initiative is a sign of staff engagement and satisfaction (Kondrasuk, 2011). Looking at staff members who take initiative is vital for expanding companies and for workplaces that are changing rapidly and which require workers who are able to adapt and be proactive.
Recommendations
The first recommendation is that the management of Capital One should hire additional associates since the existing associates are few and the department is understaffed. The company needs to weigh the cost of an associate in the department against the revenue amount which is created by the contribution of that associate to the company or department. Even though adding more associates might appear like a more of overhead for the department and the company overall, the value of increased business capability could actually outweigh the cost. Increasing the number of associates would also result in reduced workload particularly for Capital One’s underwriters, which would lead to decreased stress to carry out work tasks and meet performance expectations. It will also eliminate the need to work overtime. Secondly, it is recommended that the department at Capital One include other metrics in performance measurement of its employees/associates rather than focusing primarily on traditional metrics like productivity and quality which could at times be misleading. Other key metrics that should be taken into account include efficiency, initiative and attendance. The third recommendation is that the department should maximize the opportunity of redesigning the loan process operations so that customers get their approval decisions within a period of not more than 2 days. This will ensure that at least 95 percent of them get converted and will reduce the percentage of the customers who withdraw their application.
References
Immaneni, A., & Terwiesh, C. (2007). Loan Processing at Capital One. Wharton: University of Pennsylvania.
Kondrasuk, J. N. (2011). The ideal performance appraisal is a format, not a form. Allied Academies International Conference: Proceedings Of The Academy Of Strategic Management (ASM), 10(1), 61-75.
Kryscynski, D., & Ulrich, D. (2015). Making strategic human capital relevant: A time-sensitive opportunity. Academy Of Management Perspectives, 29(3), 357-369. doi:10.5465/amp.2014.0127
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