Many corporate banks and other financial institutions routinely apply the management principles of lean manufacturing to help standardize straightforward business procedures, such as the straight-through processing of securities transactions. The advantages include speedier operations, lower costs, better products, and an improved customer experience. But many of an institution’s most valuable activities involve dozens or even hundreds of steps that may require sophisticated customization and expert judgment from numerous sources—and thus resist standardization.

This was the problem facing a specialized commercial lender that had expanded its sales force to fuel rising levels of business from several industries but couldn’t keep pace with demand for new loans. Constrained by head office limits on the number of new hires, its only alternative was to investigate ways of making its processes less complex.

The silo mentality of the bank’s functional advisory and underwriting experts represented a particular challenge, inadvertently made worse by the high degree of independence required of them to ensure that lending decisions were sound. While specialists in such functions as risk and environmental compliance, for example, provided crucial inputs at discrete stages of the process, none had a direct stake in the outcome of individual loans, much less the motivation to...