Lean Management for Unpredictable Investment Banking Operations

Case Studies Financial Services
A Top 3 Global Investment Bank Broker-Dealer Group

Case Study: Lean Management Transformation for Unpredictable Investment Banking Operations

North America


“It’s a good problem to have.” Not necessarily. The global brokerage served the unpredictable hedge fund sector. It now must accommodate immediate, unbridled growth. But the Managing Director (MD) had seen it all before. A couple of years from now, it might shrink. Or, it could double in size. Today’s challenge was to implement lean management methods. The goal was to increase productivity of operations, without adding costly new technology or infrastructure.

Growth without cost control or productivity measurement had previously been the rule. And these surges were always followed by counter-productive cost cutting. These cycles could never be eliminated. But the MD knew that process improvement combined with lean, standard work routines could reduce the whiplash from rapid growth and cost reduction.

Project Sponsor:

Managing Director

Non-technology, self-funding operational
improvement implementation:

– No new technology
– End-to-end improvement
– 8-month implementation

Client Description, Project Scope, Objectives

The MD was stunned that The Lab possessed hundreds of process improvements for her specialized operations. Her lean consulting team struggled just to document work activities. In 6 months, The Lab used these non-technology improvement templates to standardize a global hive of one-off activities into a disciplined knowledge work factory. A capacity gain of 30 percent was delivered.

The brokerage is part of a Top 3 global investment bank. It serves hedge funds and specialty traders ranging from global giants to tiny boutiques. It includes only 5 percent of firm-wide employees but contributes a quarter of company earnings.

Implementation began with a 7-week Phase I analysis. It delivered a guaranteed, self-funding Phase II implementation work plan, completed in 8 months, world-wide.

Project Objectives:

– Productivity gains
– Customer service improvement
– Lean management routines

Project Scope:

– Trade support/middle office
– Cash securities (cashiering)
– Asset servicing
– Margin/collateral management
– Listed derivatives options
– Account/client services
– Operations risk/control
– Treasury/payment services

Improvement Implementation Examples

The Lab implemented over 200 non-technology, operational improvements. Examples:

Standardized New Account Set-up — Rapid, error-free account setup favorably influences hedge funds’ selection of a broker. The Lab implemented best practices from lean banking projects. These included a non-technology data standardization process that reduced errors and time-consuming rework.

Reduced Customer Over-Service — Customer service characteristics were unique to each account. This was only because customers had never been offered standardized suites of services. Operational efficiency was needlessly impaired by inconsistency. Lean process improvement, coupled with The Lab’s Daily Dashboard of productivity metrics delivered simultaneous cost cutting and service improvement.

Created Shared Operations Teams — Although products were unique, these comprised common components. The Lab documented these common elements and designed lean standard work methods for each. This enabled process standardization for two-thirds of these common components. Further operational efficiency was gained by consolidating components into specialized, shared operations teams.

Implementation Results:

  • Operating cost 20%
  • Capacity improvement 30%
  • Service levels 25%
  • Break even point 6 mos.
  • ROI (12 month) 4x