standard exceptions

By Dennis Sullivan
Chief Executive Officer

“Oxymoron” is a term we’ve all had fun with in the past. The definition is two words with opposite meanings juxtaposed in a single term. If you are from my generation, you probably remember George Carlin’s famous comedic routine about words you can’t use on television. In his routine he has fun with expressions like “jumbo shrimp.” Are those little jumbos or really big shrimp?, he wonders.

Last week in a client meeting, the topic of which was a new system installation, a reference was made to the standard exceptions for a series of products. I stopped and questioned the logic of “standard exceptions,” but the response from the people in the room was business as normal: they expect exceptions, and when they are common, they become “standard.” “Standard exceptions” as opposed, I guess, to “non-standard exceptions.”

Why does this bother me? First off, people no longer flinch about the cost of exception processing. It has become part of the game. Second, the fact that the impact on system development and downstream processing expenses doesn’t even enter the conversation or get any attention when product managers talk about product changes, is troubling.

The financial services industry is constantly fending off offshoring challenges for administrative services. Although there have been success stories, there are also examples of customer service nightmares. What drives administrative services offshore? Cost, plain and simple! If you want to maintain control of your service delivery model and be able to offer tailored service to the right clients, you have to be on the top end of the efficiency scale. That will take hard work and some compromise when it comes to exception processing.

The two areas that are most affected by exception processing are operations and IT. Many CIOs pride themselves on being able to develop whatever unique business rules are required. The question is, at what cost? Downstream changes or modifications can be more costly, and maintenance can cost even more.

The solution is simple. Product development and benefit designs need to be a collaborative process at the beginning of the development cycle. Marketing, sales, operations, and information technology all need to be at the table. We need to balance “salability” of a product with the administrative and IT cost of servicing the product. Here is where real creativity comes into play. Only a seasoned pro possesses the skills needed to sell “our products” to a client looking for a modification of the standard offerings. It is a role that can often be supported by a knowledgeable IT professional who understands both sides of the equation—the technical aspects of administering a product on current systems and the client’s expectation of benefits delivered.

So, the challenge is one for the entire organization. How do we become flexible with product design while we are trying to become the most efficient operations organization? Collaboration is one key and understanding the long-range cost impact of exception processing is the second piece of the puzzle. In the past I’ve written about the cost of keeping outdated processes in place to handle old products and services. Well, today’s discussion topic is the ugly sister of the “pack rat” syndrome—those unchallenged “standard exceptions.”