Measuring

Performance in Operations: BankUSA: Credit Card Division Case Study

BankUSA operates in 20 states and provides a full range of financial services for
individuals and business. The credit card division is a profit center that has
experienced a 20 percent annual growth rate over the last five years. The credit card
division processes two types of credit (bank) cards. One type is for traditional card
issuers such as savings and loan banks, credit unions, small banks without credit card
processing capability, selected private-label firms such as a retail chain, and
BankUSA's own credit cards. This “individual customer” market segment involves
about 15,000,000 cardholders. These credit card services include producing and
mailing the plastic credit cards to customers, preparing and distributing monthly
statements to customers via the Internet or by mail, handling all customer requests
such as stop payments and customer complaints, and preparation and distribution of
summary reports to all internal and external customers.

The second major category of credit card customers includes major brokers and
corporations such as IBM, Dean Witter, State Farm Insurance, and Merrill Lynch.
These corporate customers use all the services of traditional card issuers but also
usually have direct electronic access to their account files and desire a cash
management type service. Although there are less than 3,000,000 cards issued, the
dollar volume of transactions processed is about equal to that of the traditional
individual card issuers.

“Our internal operational measures seem to be good,” Ms. Juanita Sutherland, the
president of BankUSA's credit card division stated, “but the customer perceives our
performance as poor based on marketing's recent customer survey. So, what's going
on here? Can anyone at this meeting explain to me this mismatch between these two
different sources of information? Is it an important problem or not?”

Mr. H. C. Morris, the vice president of operations, quickly responded, “Juanita, one
reason there's a mismatch is that operations doesn't have a say in the customer
survey's design or performance criteria. We don't ask the same questions or use the
same criteria!”

“Wait a minute, H. C.! We often ask you operations folks for input into our customer
survey design but the job usually gets shuttled to your newest MBA who doesn't have
enough company knowledge to truly help us out,” stated Mr. Bill Barlow, the corporate
vice president of marketing, as he leaned forward on the conference room table.
“O.K.,” Ms. Sutherland interjected, “I want you two to work on this issue and tell me in
one week what to do. I've got another appointment so I must leave now, but you two
have got to work together and figure this thing out. I'm worried that we are losing
customers!”

At a subsequent meeting between Mr. Morris and Mr. Barlow and their respective
operations and marketing staffs, the following comments were made:

“Reports are routed to over 1,200 institutions (i.e., card issuers), some electronically
and others by mail. We don't have total control over providing accurate and timely
report distribution because we must depend on other banks for certain detailed
information such as debt notices and various transportation modes such as airborne
courier service.”
“The trends in the marketing customer survey are helpful to everyone, but the
performance criteria simply do not match up well between marketing and
operations.”
“Who cares about averages? If a client bank or corporate customer gets a quarterly
performance report from us and it says we are meeting 99.2 percent of our service
requirements but they are getting bad service, then they wonder how important a
customer they are to us.”
“Plastic card turnaround performance is very good based on the marketing survey
data, but the wording of the customer survey questions on plastic card turnaround
time is vague.”
“Operations people think they know what constitutes excellent service, but how can
they be sure?”
“You'll never get marketing to let us help them design ‘their’ customer survey,” said an
angry operations supervisor. “Their marketing questions and what really happens are
two different things.”
“We need a consistent numerical basis for knowing how well process performance
matches up with external performance. My sample of data (see Exhibit 3.8) is a place
to start.”
“Multiple sites and too many services complicate the analysis of what our basic
problem is.”
“If your backroom operational performance measures really do the job, who cares
about matching marketing and operations performance information? The backroom is
a cost center, not a profit center!”
The meeting ended with a lot of arguing but not much progress. Both functional areas
were protecting their “turf.” How would you address Ms. Sutherland's questions?

Case Questions for Discussion
1. What are the major problems facing the credit card division?
2. What steps are required to develop a good internal and external performance
and information system?
3. How should internal and external performance data be related? Are these data
related? What do graphs and/or statistical data analysis tell you, if anything?
(Use the data in Exhibit 3.8 to help answer these questions.)
4. Is the real service level what is measured internally or externally? Explain your
reasoning.
5. What are your final recommendations?