Westpac: +$1 Billion Incorrect Transactions

Tens of thousands of people were either double paid or missed out on getting their pay due to a processing error by Westpac Bank.

Westpac is reported to have confirmed that a “processing error” caused $1 billion of incorrect transactions to be processed on their computerised pay-roll & Direct Debit system.

The Sydney Morning Herald reported that the Finance Sector Union Spokesman attributed the error to a review of backroom processing that had left processing staff under pressure, believing that their jobs may be sent offshore.

In his recent Harvard article Michael Hammer, the father of the BPR, identified 6 factors that were the difference between successful and unsuccessful process innovation.

Michael Hammer also gives Gail Kelly, the new CEO at Westpac, some good support for sticking with it when things go wrong.

The 6 success factors he identified are:
1- Process Focus – describe your enterprise within an enterprise process model (a small number of value-creating end-to-end processes).
2- Process owners – senior executive empowered to make decision across the enterprise, overcoming silo focused resistance.
3- Full-time design team – don’t try and get your staff to fit it in while doing their real job!
4- Managerial engagement – don’t let the team’s work sit in reports waiting endorsement; have a senior executive charged with sponsoring approvals fast.
5- Buy-in – the people at the front will be the ones doing things differently, don’t let this be a surprise to them; keep them informed.
6- Bias for action – “the perfect is the enemy of the good” Voltaire: To maintain momentum implement at a defined standard; fine tune when it is operational.

While the SMH article did not provide enough information to make even an uneducated guess at the contributing factors, when looking at the comments by the Union Spokesperson you get the feeling that Item 5 may be a bit harder to implement if you are considering offshoring the work that the frontline people are doing.

In defence of Michael Hammer on Item 5; The Union Spokesperson’s comments also indicated that any tension or apprehension the frontline staff may feel could be just gossip and rumour. If it is just speculation, decreased anxiety levels may have been delivered if the frontline people were provided with frequent up-to-date information on the progress of the internal review.

In the RCA’s we are conducting, the tight employment market is showing it’s self to be an increasingly relevant causal factor in operations process failure.

We are finding that enterprises are unable to consistently fill jobs with staff that have the same level of experience and skill as the staff they were employing to fill similar jobs three years ago, or even 12 months ago.

The employment of less experienced staff is often just overlooked on a day-to-day operating basis. No changes are being made to increase the resilience of the business process that supports the less experience staff member. The opportunity for new process failures to occur consequently increases.

Where a more experienced worker will monitor or correct obvious errors the less experience staff member just does not notice the error and therefore does not correct it.

A high-profile process failure, like the one at Westpac, would keep any CEO awake at night but the return on investment from process innovation is huge; in Michael Hammer’s case study a logistics firm generated hundreds of millions of dollars per annum, in just two years, from one process innovation initiative -improving response time on RFP’s.

Here is hoping that Gail Kelly keeps on remembering all of her earlier victories during the next couple of days. This event will end up being just a “blip” on what has otherwise been a golden start to her new role as CEO at Westpac.

© 2008 K. A Thompson http://www.systemic-resilient-precision.biz/ Please cite web-link with reference.
REFERENCES: Michael Hammer - http://www.hammerandco.com
Harvard Management Update Reprint # U0504B http://www.hbsp.harvard.edu/
SMH Article: http://www.smh.com.au/news/technology/computer-glitch-sparks-westpac-chaos/2008/07/03/1214950997519.html