quality in financial service

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The TQM MagazineEmerald Article: What is happening in "quality" in the financialservices?

Adrian Wilkinson, Darren McCabe, David Knights

Article information:

To cite this document: Adrian Wilkinson, Darren McCabe, David Knights, (1995),"What is happening in "quality" in the

inancialservices?", The TQM Magazine, Vol. 7 Iss: 4 pp. 9 - 12

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Lewlyn L.R. Rodrigues, Gopalakrishna Barkur, K.V.M. Varambally, Farahnaz Golrooy Motlagh, (2011),"Comparison of SERVQUAL

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Sur vey work across all sectors of the U K

industry has pointed towards the extensive

take-up of quality management techniques in

recent years[1,2]. However, quality manage-

ment in the financial services is a compara-

tively new phenomenon. A survey conducted

by KPMG Management Consulting in 80

major UK financial institutions found that 80

per cent of participants had adopted a quali-

ty initiative[3]. H owever, the report s of both

the Insurance and Banking Ombu dsmenindicate a rising level of complaints from

members of the general public. In 1987, t otal

complaints to the Banking Om budsman were

1,748; by 1993 there were 16,858 complaints,

almost a ninefold increase. Complaints to the

Building Society Ombud sman m ore than

doubled in the period 1990-1992. T he num-

ber of cases passed to th e Insurance Om buds-

man increased from 1,366 in 1987 to 5,576 in

1992. Allowing for the fact that par t of the

growth in complaints may be the result of

increased pub lic awareness of the ombuds-

mens existence, th is is a damning indictmen t.

It leads us to question whether quality is

having much impact in the financial services

sector. On e of the aims of a postal question-

naire survey was to increase our knowledge of

qua lity initiatives within this sector. I t seeks to

determine the extent of usage, and to explore

the natu re of a variety of quality initiatives.

T he ar ticle is structured as follows: first, we

explore the context within which quality is

finding a place in financial services. Havingprovided a b ackground und erstanding, we

present the findings. Finally we draw out

some of the main insights provided by the

survey.

The fina ncial services

Qu ality in the per sonal financial services

sector is particularly important because com-

petition between comp anies is increasingly

based on the delivery of quality service to

customers. In comparison with other indus-tries, pr ice and product innovation are not

sources of major competitive advantage

between compan ies. Fur thermore, for most

customers, the complex pricing of banking,

insurance and lending services effectively

inhibits them from shopp ing around for

cheaper products except in certain areas, for

example motor insurance. Moreover, product

innovation, although extensive in the indus-

try, provides only temporar y competitive

9

The authors

Adrian Wilkinson is a Lecturer in Hu ma n Resource

Management, Darren M cCabe is a Research A ssociate in

th e Financia l Services Research Centre and David Knights

is Professor of Organizational Analysis, al l at the M anches-

ter School o f M anagement , UM IST, M anchester, UK.

Abstract

Questions whether qual i ty is having as much impact in

the fi nancial services sector as th e evidence of use of

quali ty m anagement t echniques in the UK suggests.

Explores the context wi th in w hich qual i ty is finding a

place in fi nancial services, and presents the fi ndings of a

postal questionnaire survey concerned wit h the extent of

usage and the nature of the quali ty initiat ives in the

fi nancial services sector.

The TQM M agazine

Volume 7 Number 4 1995 pp. 912

M CB Un iv ersi t y Press ISSN 0 95 4- 47 8X

Research a nd concept s

What is happe ning inquality in thefi nancial services?

Adrian W ilkinson,

Darren M cCabe

and David Knights


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advantage. T his is because products are

comparatively easy to copy, cer tainly com-

pared with many manufactured products.

Consequ ently, finan cial services organizations

have always been at least par tly concerned

with quality.

However, in recent years fundamental

changes in the sector have served to heighten

competition and the search for competitive

advantage. T hese include increased customer

awareness and expectations regarding qu ality;technological innovation; and the fragmenta-

tion of boundaries between banks, building

societies and insurance companies as a result

of deregulation. In the mid-1980s, with stock

markets growing and house prices spiralling

upwards, the new age promised benefits for

all. H owever, a slowdown in econom ic activity

after the 1987 stock market crash, an d falling

or static property prices, mean t a new envi-

ronment. Since the late 1980s, the financial

services have been adjusting to the recession

after the boom years. Arguably, they are now

beginning to experience a period of consolida-

tion, althou gh hardly a comfortable one given

the regulatory crises, the restructuring and

rationalization and the consequent insecurity

for staff, including management . It is in this

context, then, that qua lity initiatives have

emerged as comp anies seek to gain a distinct

image in an increasingly und ifferentiated

market place.

The survey sam ple

A postal self-completion questionnaire was

sent to managers in 122 of the largest compa-

nies in the UK financial services sector

comprising bu ilding societies, ban ks and

insurance companies in 1994. T he intention

was to gain a general management response,

as opposed to those offered by specialist

quality personnel. The respondents came

from a variety of functions including general

management, m arketing, quality and person-

nel. It is thou ght that th e survey findings arerepresentat ive of the developm ents in 96

companies, which constitutes a response rate

of 79 per cent of the com panies surveyed.

The research find ings

What is the extent, an d the nature,

of these initiatives?

Qu ality initiatives appear widespread : 91 per

cent of managers reported that their

organizations have a quality initiative. M ost

organizations have a num ber of initiatives of

varying impor tance. Overall, one can identify

a cyclical pattern in their introduction. In the

mid-1980s the cycle began with customer

care and service quality, which were super-

seded (although not entirely replaced) by

T QM . Business process re-engineering

(BPR) is now the most popu lar quality initia-

tive: 75 per cent of managers reported adop t-

ing it (see Table I). T he phenom enon is arecent one, with 74 per cent of organizations

reporting its introdu ction since 1992. Quality

management app ears to be a complex phe-

nomenon: companies are adopting parts of

some and aspects of others, but they are often

unevenly spread at various stages of devel-

opm ent and enjoying different rates of success

throughout the organization. M any organi-

zations are merging and b lending the d ifferent

approaches to give an in-house flavour.

M any organizations do not identify any single

or most important initiative, but emphasize an

overall approach; some are u sing particular

initiatives to serve different ends ( i.e. BPR for

cost cutting and custom er care to improve

service delivery).

What is driving the interest in quality

initiatives?

A variety of complex factors have led to the

developm ent of quality initiatives the m ost

popular explanation being that competitive

pressure to improve service quality was thekey (see Table II). A furt her significant factor,

however, was the enthusiasm of a chief exec-

utive. Consultan ts played a significant role in

implementing change.

How are quality initiatives im plem ented?

Responsibility for qu ality lay in a num ber of

areas. Qu ality was generally considered to be

the responsibility of more than one person or

body. Less than half, 49 per cent, of respon-

dents considered that quality initiatives are

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Table I Which (i f any) of the fol low ing have you adopted?

Qualit y init ia t ives Response (per cent )

TQM 51

BS 575 0/ ISO 9000 31

Custom er care 69

Corporate culture change program me 46

Service qualit y 59

Business process re-engineering 75

Other 17


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the responsibility of all employees. Forty-five

per cent of respondents considered it to be the

responsibility of a steering committee. Most

quality initiatives have a steer ing comm ittee,

94 per cent of which include top manage-

ment. A num ber of organizations ment ioned

that responsibility for quality rests lower down

the organization, for instance with depart-

mental m anagers, line managers, and project

teams. D ifferent initiatives are often th e

responsibility of d ifferent ind ividuals. H owev-

er, according to one respondent lots of other

people are doing their own thing unofficial-

ly. T his suggests either a per vasiveness of

quality thinking and responsibility or that

official policy does not reflect the reality of

what is happening with regard to quality.

How is quality me asured?

M ost companies are employing a variety of

measures of quality, the most popu lar being

the use of customer feedback. H owever, only

29 per cent of organizations said that they

measured the cost of quality. Only 2 per cent

of organizations stated that they could not

measure quality improvement and only 8 per

cent said that they do not measu re quality.H owever, nearly half of the organizations

experienced problems m easuring quality

du ring the implementation of a quality initia-

tive.

What have quality initiatives ac hieved to

date?

T he results were quite opt imistic, with 60 per

cent of respondents claiming that the initia-

tives have been reasonably successful an d

12 per cent considering them very successful

(see Table III). However, some managers

comm ented that t here were different levels of

success throughout their organizations and

that there were difficulties in isolating the

reasons for improvements. In addition, initia-

tives were at different stages of developm ent.

T he find ings revealed that perceived individ-

ual benefits were lower than t hose for all

sectors reported in the Institute of M anage-

ment Report in 1993[1]. Possibly this reflects

the failure, or inability, to m easure quality

from t he outset and therefore to gauge

improvement , or it may reflect the intangible

natu re of services. Eighty-two per cent of

organizations considered that qu ality initia-

tives have improved awareness (see Table

IV). Yet, as Wilkinson et al.[1] found , more

11

Table II What led to t he development of t he qual i ty

initiative?

D et erm ining f act ors Re sp onse (pe r ce nt )

Custome r demand for qual i ty 51

Compet itive pre ssure to re duce cost 51

Competit ive p ressure to improve

product design 16

Competit ive p ressure to improve

service qua lity 74

Pressure from pa rent compa ny 6New senior managem ent 22

Enthusiasm of senior m anage rs/

chief executive 70

Employee relatio ns issues 1

Consultant advice 11

Other (p lease specify) 13

Table II I To date, how w ould you rat e the success of your

quali ty initiative?

Response (per cent)

Very successful 12

Reasona bly successful 60

Unsuccessful 2

Dont know 3

Too soon t o say 17

No answe r 13

Table IV In w hich areas have there been improvem ents as

a result of introd uction of the quali ty initiat ive?

Response (per cent)ESRC/FSRC IM study

1 9 9 4 1 9 9 3

(fi nancia l (a ll

Are as o f im pro ve me nt se rvice s) se ct ors)

Efficiency 55 69

Productivity 49 60

Custom er satisfaction 63 80

Sales 18 44

Profitabi l i ty 35 47

Employee turnover 13 9

Employee absenteeism 10 11Quali ty aw areness 82 95

Employee morale 39 61

Teamwork 59 75

Improved comm unicat ion 57

Flatter hierarchy 35

Employee empowerment 37

M onitoring of qual i ty 50

Change to organizat ional

culture 45

Other 4


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tangible improvements were less apparen t.

Few considered that either staff tur nover or

absenteeism has improved, and only 35 per

cent considered that profitability has

improved. H ence, while gains have been

achieved, such as increased awareness

through training and com mun ication, they

have not yet fed through to the balance-sheet.

What are the main diffi culties

encountered in the impleme ntation of

quality initiatives?

Organizational culture was seen as the main

obstacle to the implementation of qualityinitiatives (see Table V). T his stemmed from

departm ental barriers and m iddle manage-

ment resistance rather than staff opposition.

Given the context of delayering and d ownsiz-

ing, th is will clearly create middle manage-

ment concerns.

Conclusions

T he survey found a clear uptake of quality

initiatives in financial services, most of which

were seen as a response to the competitive

pressure to improve quality. H owever, the

initiatives were wide in their coverage and

unevenly spread across the organ izations.

BPR seemed to be the m ost popular of the

quality initiatives. Success was prob lematic:

while most organizations claimed increasedquality awareness, the more tangible issues,

such as profitability, did n ot appear to have

been significantly affected. Organ izational

culture seemed resistant to chan ge, although

it was man agers rather than staff who

appeared to block specific developm ents.

M uch of this resistance could be a function of

pressure at work since, from case stud y

research, it appears that management has

disproportionately taken on the burd en of

work intensification. C learly, these issues

need to b e further explored through casestudy research, which is the second phase of

this research project[4].

Note and refe rences

1 Wi lk inson, A., Redman, T. and Snape, E., Quality and

the Manager, IM Books, Burston Distribution Services,

Bristol, 199 3.

2 Wi lk inson, A., Redman, T. and Snape, E., What is

happening in quali ty m anagement ? Findings from an

IM survey , The TQM M agazine, Vol. 6 No. 1, 1994,

pp. 55-8.

3 IRS Employment Trends, HRM in the reta i l financial

services sector , Industrial Relations Review and

Report, No. 515, July 1992, p. 4.

4 Th e f u ll re po rt , Quality Initiat ives in the Financial

Services, is available from the Financial Services

Research Centre at UM IST, M anchester M 60 1QD,

price 8 5.00 plus VAT.

12

Table V What diffi culties have been experienced in the

process?

Response (per cent )

Organizationa l culture resistant

to change 65

Economic pressures 29

Lack of co-operat ion by unions 0

M easuring qual i ty 48

Clashes w ith other initiat ives 37Emphasis on short-term goals 42

Barriers betw een departme nts 49

Lack of top management commitm ent 26

Employee resistance to change 12

M iddle manageme nt resistance to

change 44

Other 8

Commentary

At the end of this issue, Richard Rowe quotes EFQ M General Secretary Gert de Reed in contrasting

TQM with BM W. H ardly anyone knows what BM W stands for, but most of us know what one is. We

all know what TQM stands for, but we dont always know what it is. H ow much of the problem of a

perceived lack of success in bringing quality to financial services can be attributed to the fact that the

instigators dont know what it is, really? Are two-thirds of organizational cultures, or half of middle

managers, really resistant to quality improvements? Or are they maybe resistant to fads, fashions and

fancies masquerading as quality? Hard to say, if they dont know the difference!

quality in financial service

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