ORG 727 Week 4 Performance Gaps and Root Causes Example

Where the Members Are Lost: Identifying Performance Gaps and Their Causes at a Southwestern Credit Union

[Student Name]

University of Phoenix

ORG/727: Organizational Diagnosis and Intervention

Week 4 Assignment

[Instructor Name]

[Date]

Saguaro Federal Credit Union, its people, data and figures are composites written for a model paper.

Week 3's data showed that Saguaro loses most of its potential new members at one point: after an auto loan applicant receives a conditional approval and before an account is opened. This paper defines the performance gaps that matter, traces their causes and ranks them for intervention.

Defining the Gaps

Primary gap: conversion of conditionally approved non-member loan applicants into members. Current: 41 percent of about 5,800 a year, about 2,400. Lost: about 3,400. Target: 70 percent within two years.

Supporting gap: time from conditional approval to funding. Current: average 3.4 days. Competitors: same day. Target: same day for 80 percent.

Supporting gap: branch account opening time. Current: 52 minutes. Target: 20 minutes.

Supporting gap: digital account opening with a loan. Current: not possible. Target: available.

Three Levels of Performance

Rummler and Brache (1995) argued that an organization performs well only when goals, design and day-to-day management are in place for the whole enterprise, for each cross-functional process and for each individual job. Problems often arise where processes cross the white space between departments on the organization chart. Saguaro's gap sits in that white space.

At the organization level, lending reports to the chief lending officer and is measured on loan volume and credit quality; branches report to the retail vice president and are measured on deposits and accounts opened in branches. No unit is measured on converting loan applicants into members.

At the process level, loan origination and account opening are separate processes in separate systems. A conditionally approved applicant is simply emailed instructions to come in or phone within five days. No one follows up by phone or letter, and no report shows how many applicants never respond. The lost applicants are invisible to every manager.

At the job level, lending officers cannot open accounts; branch staff cannot see loan applications. Each hands off to the other without tracking.

The member falls into the space between two org chart boxes, and neither box is measured on catching her.

Behavior Engineering Model

Gilbert (1978) proposed that performance depends on six factors: in the environment, information, resources and incentives; in the individual, knowledge, capacity and motives. He argued that environmental factors are usually the cheapest and most effective to fix. Applying the model:

Information: lending officers do not know which approved applicants have not opened accounts; branch staff do not know which walk-ins have pending loans. Strongly supported by interviews and observation.

Resources: systems do not connect, requiring 20 minutes of re-entry; the app cannot open accounts with loans. Strongly supported by observation.

Incentives: no one is rewarded for conversion; lending officers' bonuses depend on funded loans, which they get either way through dealer channels that do not require membership in some cases. Supported by records and interviews.

Knowledge: branch staff are uncertain about loan products. Moderately supported by interviews.

Capacity and motives: survey scores on commitment to members are high; no evidence that people lack ability or will.

Most causes lie in the environment, consistent with Gilbert's argument.

Why the Problem Persists

Repenning and Sterman (2002) studied process improvement programs and described capability traps, in which pressure for short-term results leads managers to push people to work harder rather than invest in improving processes, so capability erodes; and attribution errors, in which managers blame workers for problems caused by processes, reinforcing the trap. Saguaro shows both. When new-member numbers fell, the retail vice president pushed branches to open more accounts, which branches could not do because applicants never arrived. Lending blamed branches for poor service; branches blamed lending for slow decisions. Each unit's attribution confirmed itself, and the process between them went unexamined for three years.

A Fishbone View

To make sure no category of cause was missed, the steering group also built a simple cause-and-effect diagram for the primary gap. Its branches covered people, process, systems, policies, measures and environment. Most of the causes fell on the process, systems and measures branches, matching the other frameworks. Two new items appeared on the policies branch: a rule requiring identity documents to be shown in person, which compliance confirmed was no longer required by regulation, and a five-day expiry on conditional approvals that pushed applicants to act quickly but gave them no easy way to do so. Both were added to the cause list as quick fixes.

Asking Why Repeatedly

For the primary cause, the group asked why five times. Why do approved applicants not join? Because joining requires a branch visit or call. Why? Because account opening and loan funding are separate processes. Why? Because they were built by separate departments at different times. Why were they never connected? Because no one owns the whole path, and neither department's goals include conversion. Why has no one noticed? Because each department's reports show its own steps working, and losses between them appear in no report. The chain ends at ownership and measurement, which confirms the ranking below.

Validating Causes

Causes were tested with the steering group in a two-hour session. The group agreed with the information, resources and incentive causes. The chief lending officer challenged the claim about dealer channels, noting that most dealer loans do require membership; records review showed he was right for 88 percent, so the incentive cause was narrowed: lending officers still receive credit for loans whether or not membership follows quickly. The marketing vice president accepted that the app problem is about loans, not overall design.

Causes That Were Considered and Set Aside

Several possible causes were examined and set aside for lack of evidence. Pricing was one: Saguaro's auto loan rates were within a quarter point of competitors throughout the period, and applicants who left did not cite rates in follow-up calls. Branch hours were another: extending Saturday hours at three branches last year produced no change in conversion there. Staff attitudes were a third: survey scores on commitment to members were the highest of any item. Recording what was ruled out matters because each had its advocates, and the steering group needed to see why the analysis did not support them.

Ranking Causes

Highest evidence and impact: disconnected processes and systems between loan approval and account opening; no follow-up.

High: no measure or owner for conversion.

Moderate: lack of information across units.

Lower: branch staff product knowledge.

Hypothesis only: whether competitors' online experience has changed expectations so much that even a fixed process would lose members.

Conclusion

Saguaro's stalled growth reduces to a defined gap, converting approved loan applicants into members, with causes at every level: an organization structure with no owner for conversion, separate processes and systems, and jobs without the information or authority to close the gap. Gilbert's model shows the causes lie mainly in the environment, and capability trap research explains why they persisted. Ranked causes set up the choice of interventions in Week 5.

References

Gilbert, T. F. (1978). Human competence: Engineering worthy performance. McGraw-Hill.

Repenning, N. P., & Sterman, J. D. (2002). Capability traps and self-confirming attribution errors in the dynamics of process improvement. Administrative Science Quarterly, 47(2), 265-295. https://doi.org/10.2307/3094806

Rummler, G. A., & Brache, A. P. (1995). Improving performance: How to manage the white space on the organization chart (2nd ed.). Jossey-Bass.