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									LOMBARD DIRECT

Case exercise

One of the most significant trends in the financial services industry has been
the growth in telephone access. Many financial services, such as banks, have
developed a more focused approach to personal customers through 24-hour
telephone access. The concept of telephone based financial services is not
new. It was first launched successfully in 1985 by Första Sparbanken in
Sweden with a service called Första Direckt. This has become a blueprint for
several similar services.

Typical of these 'total access' services is that described below:

You can call us 24 hours a day, 365 days a year. If you want to give us
instructions to pay your gas bill on Christmas Day, that's fine. If you want to
tell us to transfer money at 2.00 am, that's fine too. If you're on the other side
of the world in a different time zone you can still call us ... [we are] ... more than
just a convenient telephone banking service. Your own Personal Account
Manager will offer you a highly individual approach to both your day-to-day
finances and your long-term financial planning.

Financial services have developed networks of call centre operations to
support such products. Call-centre staff are linked to sophisticated telephone
and computer systems where up-to-date information and customer requests
are instantly available so that customers can be dealt with promptly and
efficiently. Part of this sector are the companies who offer loans and related
services. Typical is Lombard Direct who must have one of the best known
telephone numbers in the UK: 0800 2 15000. This is based on their slogan
'loans from 800 to 15,000 pounds'. Lombard Direct is a subsidiary of Lombard
Bank, part of the National Westminster Bank group. Unsecured loans over the
telephone constitute about 90 per cent of the company's business, and other
products include insurance on loans, house, contents and motor insurance,
savings and a credit card.

The main call centre, in Rotherham, West Yorkshire, is a 24-hour operation
which operates every day of the year. The centre handles about two million
calls a year. Monday is a typically busy day, when around 6,000 calls are
received. The call centre has around 200 'seats’ or desks for their 'customer
advisors' (CAs) and employs around 250 full-time equivalent staff, most of
whom work part time. When potential customers call to request a loan, they
are asked a number of questions to rate their creditworthiness and then
allocated into a band which reflects their 'credit rating'. This risk assessment
affects the size of the borrowing allowed and the rate of interest to be
charged.




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Control to enabling culture

Sean Guilliam is the head of the call centre and has been working with the
managers and team leaders to try to move from a 'control' culture to a more
'enabling' culture. Sean explains: 'We have a great atmosphere here, people
really enjoy their work and we have lots of great events to build our team spirit
and also develop the business. The problem is that despite these efforts the
emphasis is still too much on control.' One problem facing Sean was how he
should use 'scripts'. Scripts are the set of questions and responses which CAs
follow when they talk with customers and potential customers. They are often
very carefully worded so as to avoid misunderstandings.

'We need to move away from the need to follow a set script in a strict way
which allows no discretion and try to work with the customer to understand his
or her needs and respond to them. We would also like to put ourselves in the
position of being able to offer more of our products, where appropriate. This is
difficult to do when you are using a script which is devoted to loans. The script
is a useful base of course. Indeed, there are several questions we are obliged
to ask and information we have to provide to comply with the financial
services laws. But there is a tendency to rely too heavily on the script. The
problem is not people's willingness to improve but our systems which
encourage them not to. For example, the CA's performance is partly assessed
on tapes of their interactions with a customer. We call this "call analysis". If
they are judged not to have followed the correct procedure, it is judged a
"nonstandard tape" and it will affect their pay, and possibly even their
contract.‟

'We have five grades of performance, or "spot" levels, and CAs are reviewed
every three months. Each level has a set of criteria based on six key
measures. If someone attains a higher level for two consecutive assessments,
they go up one spot level; if they perform less well over three periods they will
go down. Going up a level can mean a significant increase in pay. Also CAs
need to get to level 2 before we will offer them a permanent contract, although
I believe that we need to remove this barrier and put everyone on permanent
contracts from the start.‟

„We are making progress, however. Take for example, our call analysis
measure. In the past it was just used as a means of assessing people. Now it
is a developmental tool. We have identified nine different skills we expect to
see, including greeting caIlers (what we call the verbal handshake), the
general approach to the conversation, gathering information and so on. We
now have descriptors for each of these skills, defining what constitutes
excellent, very good and good performance or "an area for development”.
People can see exactly what we are trying to achieve. The call analysis
framework tries to assess CAs but also encourages them to do the right things,
such as use the caller's name, show interest in, and respect for, the customer,
not ask for the same information twice, ensure that customers know all the
costs involved and give customers time to make their decisions.‟


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„Also, we now refer to the script as a call guide and use about 30 cards in a
simple “flip-open” type of photograph album to help the CAs. But yet when we
get a new recruit, we still give them the cards and tell them to go home and
learn them! The other issue is “cross-selling” other products. I compare loan
conversions and insurance sales, for example. And, although, we want a good
ratio of insurance sales to loans, too high a ratio might mean that staff are
doing too hard a sell. We don‟t want customers being put off using us again.
The problem is in balancing flexibility with control, especially when a 1 per
cent increase in insurance sales can contribute half a million to the bottom
line.‟


Source: Slack,N. et al, (2004,) Operations Management, 4th edition,
Pearson: Harlow




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