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Process Variation as a Determinant of Bank Performance: Evidence from the Retail Banking Study

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Author Info

  • Frances X. Frei

    (Harvard University, Cambridge, Massachusetts 02163)

  • Ravi Kalakota

    (Georgia State University, Atlanta, Georgia 30303)

  • Andrew J. Leone

    (University of Rochester, Rochester, New York 14627)

  • Leslie M. Marx

    (University of Rochester, Rochester, New York 14627)

Abstract

This paper explores the relation between retail banks' branch-based processes and financial performance. There are 11 processes included in this study, which represent the bulk of the activities performed in a typical retail branch (e.g., opening checking accounts). The first finding of this study is that the financial performance of banks that perform better across these processes tend to be better than that of other banks. In addition to the variation in process performance across banks, there is also substantial variation across processes within banks. That is, banks that performed well in one process often performed quite badly in another. We present an analytical model that shows that improvement in process variation can be more important than improvement in aggregate process performance when dealing with certain customer segments. Empirical evidence from the Wharton Financial Institution Center Retail Banking Study of bank holding companies in the United States provides support.

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File URL: http://dx.doi.org/10.1287/mnsc.45.9.1210
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 45 (1999)
Issue (Month): 9 (September)
Pages: 1210-1220

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Handle: RePEc:inm:ormnsc:v:45:y:1999:i:9:p:1210-1220

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Related research

Keywords: process management; retail banking; service management;

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Cited by:
  1. Zeynep Ton, 2008. "The Effect of Labor on Profitability: The Role of Quality," Harvard Business School Working Papers 09-040, Harvard Business School, revised Jul 2009.
  2. Yee, Rachel W.Y. & Yeung, Andy C.L. & Edwin Cheng, T.C., 2010. "An empirical study of employee loyalty, service quality and firm performance in the service industry," International Journal of Production Economics, Elsevier, vol. 124(1), pages 109-120, March.
  3. Mair, Johanna & Rata, Cristina, 2004. "Corporate entrepreneurship: Linking strategic roles to multiple dimensions of performance," IESE Research Papers D/551, IESE Business School.

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