Business Management Articles
/ Banking Service Management


by Rene T. Domingo (email comments to

Clerical errors in banking operations deserve much more attention than what they are getting. Errors, which include omissions and mis-posting, can result in delays in customers service, lost accounts of angry clients, high cost of operations, and demoralized employees after receiving sanctions. Catastrophic clerical errors, like the proverbial adding of three extra zeros to the actual amount, can cause large and embarrassing losses to a client or to the bank itself, depending on who is on the receiving end of the erroneous sum. Many smaller errors go unnoticed, but they can accumulate into huge sums that may surprise management.

Perhaps what is currently deemed sufficiently drastic to address the persistent problem is penalizing the erring employee or teller --- as if the problem will go away and will not the recur by deducting the lost amount or error from the employee's take-home pay, or better yet by firing the suspected culprit. This vicious and costly cycle of trial and error, and error and trial can go on and on repeatedly to the detriment of clients, employees and the banks. The flaw with this common management solution is the assumption that all clerical errors are human errors, and sanctioning or eliminating the human behind the error will eliminate the root cause. This is analogous to the convenient claim of airline management and air safety regulators that the cause of almost all crashes are "pilot errors", thereby absolving all other possible non-pilot causes like the aircraft, the air-controller, ground maintenance, the fuel, the systems and procedures. In banking and in the service industries, blaming the clerks for their errors will not prevent recurrence and will not lead to improvement, for most causes can be traced to poor management and poor management systems. This shift in perspective in necessary, but in reality, it is difficult for the judges, the managers themselves, to judge themselves guilty of and responsible for the negligence and mistakes of their subordinates.

Let us examine several major causes of clerical errors which can be traced to poor management decisions and inadequate management support.

work overload

Extreme pressure, stress, and fatigue from work overload can lead to loss of concentration and consequently to inadvertent errors or omissions. Even the best trained employee cannot sustain flawless work if overtime and overwork have become routine. Poor manpower and capacity planning or imprudent staff reduction to cut cost are the root causes of this type of clerical error. The solution would be to re-deploy manpower to balance the load and to eliminate peak and valleys in demand by managing customer inflows and outflows.

complex tasks

If tasks and procedures are too complicated and unsystematic, employees may be not able to repeat them correctly and consistently hundreds of times during the day, every day of the week. Management should redesign and simplify tasks by eliminating unnecessary, wasteful, and redundant steps. Simple and short procedures are less error-prone.

unclear instructions

If the job to be done is unclear and poorly documented, execution may result in errors especially by new recruits. If the procedures and sequence of steps are stored in someone's memory, they may not be repeatable and transferable to others. Operating manuals must be updated regularly. Procedures should be written up in simple terms and be made conspicuous in the work area, should the clerk or teller need to refer to them.

lack of standards

If banking procedures lack standards and are subject to whimsical changes, personal style and interpretation, then we are inviting errors and confusion. There is nothing wrong with changing procedures, especially for the sake of improvement. The problem is when these changes are not documented and communicated right away to the rest of the organization. Another problem occurs when it is not clear who is authorized to make the changes in procedures. In this day and age of all-out employee empowerment, we should address this downside risk of changing things without proper and timely documentation and communication.

lack of training

If untrained or inadequately trained personnel are assigned even the simplest of tasks, then errors are prone to happen. If fact, these incompetent employee may not even know they are committing mistakes. But again, we cannot put the blame on them. It is management's responsibility to properly train employees especially those assigned to complicated, sensitive, or front-line operations. Putting the right people at the right places is one of the most important management decisions.

monotonous jobs

The minds of employees bored with monotonous jobs wander continuously. They try to fight the system and eventually lose concentration and make mistakes. There is nothing inherently wrong with monotonous job. In fact the most basic jobs in both service and manufacturing industries are simple, repetitive, efficient, and consequently monotonous jobs, that have to be done right each time all the time. But ironically, monotony can lead to errors. If a job cannot be enriched, then management must resort to continuous job rotation of employees, especially those assigned to stressful and highly monotonous tasks.

poor working conditions

An employee working under adverse working conditions, will make mistakes, whether he likes it or not. Distracted and irritated by noisy, hot, cramped, or poorly illuminated work area, he cannot put enough attention to the job on hand. Management should create ergonomically sound, comfortable work areas conducive to efficiency.

inadequate, unreliable equipment

If employees are made to work with machines that keep on breaking down or difficult to operate, then equipment induced human errors are inevitable. It is not fair to blame an operator or clerk who makes mistakes while trying to grapple with poorly maintained equipment or an unwieldy tool provided by management. It has been suspected that many pilot errors blamed on accidents were induced by complicated and confusing aircraft controls. It is management's job to make sure that employees are provided only with sufficient, well-designed, reliable, and properly maintained tools and equipment to prevent this particular type of clerical error.

wrong incentives

Finally, employees must be financially motivated to do things right the first time, rather than to produce the most volume or quantity. Incentives, like piece rates, which are tied to the volume of output, e.g. number of documents processed, can be very counterproductive by inducing employees to disregard quality and accuracy in their haste to reach or exceed quotas. Management should make sure that incentives and bonuses put a premium on correctness and quality.

In general, employees would like to do a good job. Nobody wants to intentionally make mistakes, except those very few who have criminal schemes. With poor management support, even the best and most motivated employees are bound to make big or small mistakes in their daily routine, sooner or later. The first step in minimizing clerical errors is therefore management's recognition that they are primarily responsible for their commission. Then improvement and prevention should take place.


home | about | feedback | buy a book |

Copyright 2003. All Rights Reserved.