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A Side-by-Side PerspectiveOn Process Excellence
WCBF 2008 LEAN SUMMIT
Jim Halloran – Pershing LLCVice President – Quality Management Office
Karim Houry - DTCCVice President – Business Reengineering & Quality
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Why Side-by-Side?
A live comparison of two approaches in firms at different maturity phases along their Business Transformation journeys
An opportunity to share lessons learned and compare notes, on the fly
An engaging approach
Also known as the…
“tennis presentation”
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FS-BT Roundtable
Launched in January 2008, the Financial Services Business Transformation Roundtable’s main objective is to provide a forum for Reengineering, Quality and Business Improvement professionals to:
share best practices on: - program deployment- change management- innovation- performance measurement tools to achieve substantial, positive and sustainable impact
explore solutions for industry-wide challenges
perform benchmarking studies in areas of common interest
network and partner on initiatives as and when judged appropriate
The FS-BT Roundtable meets, at a minimum, on a quarterly basis
Alliance Bernstein
Bank of America
Barclays Bank
CIT
Citigroup
Credit Suisse
DTCC
Deutsche Bank
Goldman Sachs
HSBC
Lehman
Merrill Lynch
Morgan Stanley
Pershing
UBS
Vanguard
Wells Fargo
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Our Respective Businesses
Largest post-trade financial services infrastructure organization in the world: Over 13 billion equity and bond transactions processed in ’07
“Cradle-to-Grave” management of securities: Over $40 trillion of securities on deposit
Primary business focus on clearance, settlement and asset servicing for equity and fixed income
securities: Over $1.85 quadrillion in securities settled in ‘07
Industry owned
A leading global provider of financial business solutions to more than 1,150 institutional and retail broker-dealers, registered investment advisors, and money managers
Over five million active investor accounts, over $950 billion assets in custody
Industry’s largest solutions provider with nearly 70 years in the business with primary business focus on clearing, custody, technology, and practice management.
A subsidiary of The Bank of New York Mellon Corporation, the largest securities servicing firm in the world
DTCC Pershing
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Pershing and DTCC
Pershing ranked within the top 10 DTCC Customers
Services provided by DTCC to Pershing:
- Custody and Safekeeping
- Asset Servicing
- Clearance and Settlement
- Insurance Processing
- Mutual Funds Settlement
- Trade Comparison and Recording
- Continuous Net Settlement
6
Business Transformation at PershingInfrastructure
> Chief Quality Officer established
> Service Excellence I (Customer Service) matures
> Achieved CMM Level 5
> Service Level Management infrastructure completed
> Six Sigma efforts focus within Pershing
Initiation & Awareness
> Created Quality Management Office
> Firmwide introduction of quality metrics
> Initiated Six Sigma program
> Service Excellence I (Customer Service) training begins
> Achieved CMM Level 3, ITIL
> Service Level Management infrastructure designed
Process Evolution
> Quality Scorecard released
> Six Sigma efforts focus on customer processes
> Service Excellence II (Operations) deployed
> Quality Metrics process designed
> Voice of the Customer process initiated
2003 2004 2005 2006 2007 2008
Pre-2003
• Quality Circles
• Total Quality Management
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Business Transformation at DTCC
• Catalyst for Change
• Support DTCC Growth and Strategy
2010
2001
’02 to ‘06
2007
2000
The 100-Day
Plan
Launch of
Six Sigma
Program
Expansion
Program
Acceleration
1980’s
Quality Circles
Employee Participation Program
1990’s
Continuous Improvement Program
Cost of Non Conformance
Work Process Improvement
Early 2000’s
Launched Six Sigma & Quality Council
Central Quality Office & Six Sigma Infrastructure Teams
Balanced Business Scorecard
Cross-functional projects
CMMI and ITIL
8
Burning Platform at Pershing
To be the recognized industry service leader, creating lasting competitive advantage for our Customers and Pershing through operational and service excellence
Create a customer-centric quality service culture Create a customer-centric quality service culture
Consistently anticipate and exceed our customers’ Consistently anticipate and exceed our customers’ expectations, building loyalty and trust expectations, building loyalty and trust
Instill a measurements-based culture to foster Instill a measurements-based culture to foster objectivity and continuous improvementobjectivity and continuous improvement
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Burning Platform at DTCC
A metrics-driven senior management team
An imperative to factually demonstrate commitment to Quality
A desire to maintain excellent customer satisfaction results (historically at 90% overall satisfaction)
A need for a rallying methodology to engrain Quality improvement tools across ALL DTCC functional areas
Requirement for an environment that allows DTCC to extend to its external partners
10
The People
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Sponsorship at Pershing
Chief Quality Officer established and member of Executive Committee
Service Excellence one of six Pershing Core Competencies
Established firm-wide communications standards to ensure consistent customer experience throughout Pershing
Service Excellence Awards given throughout the year
Firmwide Service Excellence Award named at annual leadership meeting
Incorporated into New Hire orientation program
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Sponsorship at DTCC
“ . . . and if we are to stay relevant in this changing financial services environment – then Six Sigma methodology and metrics must reach deeply into our organization.”
Jill M. Considine, previous Chairman & CEOHow The Depository Trust & Clearing Corporation Built A Culture of Quality, June 2006
“ . . . our Six Sigma program has made DTCC better, measurably better, in the way we deliver services to our customers, and in the way we perform on a day-to-day basis.”
Don F. Donahue, current Chairman & CEOSix Sigma in Financial Services address, May 2007
QC
A Business Reengineering & Quality Council with senior executives
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Engagement at Pershing
300 Customer Service Associates trained on Professionalism competencies
700 Operations Associates Trained in Customer Service Competencies
Manager Training
Random samples monitored each month and scored by external firm
Individual and departmental scorecard
Incorporated into annual performance appraisal
Service Excellence
Continuous Process
Improvement
Trained 54 Six Sigma Green Belts
Completed 21 projects
15 Active projects
Certified 17 Green Belts
Executive and Project Champion Training
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Engagement at DTCC
80 GB, 37 YB (Lean), 10 BB, 4 MBB
7 rounds of GB training
eLearning and instructor- led training
GB/YB Graduation Ceremonies
Over 250 projects completed
700+ employees engaged
More targeted training classes
Enhanced coaching skills
Rotation Program
Project pipeline
Kaizen Events
Quality Day
Chairman’s Award for Quality
Engaging the “base”
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Engagement at DTCC
Engaging the “middle”
Id Project Champions
Expand Process Excellence
Require short BPM Training
Establish a Quality Forum
Launch Quality Champion of the Year Award
Draw by example via Fast Track MD Training
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Lessons Learned: The People
Be creative and inventive to engage the “sticky middle”
Ensure senior management “walk the walk” and not just “talk the talk”
Celebrate successes regularly and with fanfare
Build skills that are relevant to the parties being trained or certified (and to their sponsoring business units)
Avoid training for the sake of training. Ensure employees have the skill AND will to enhance their knowledge and apply their learning to planned project
17
The Infrastructure
18
Governance at Pershing
CUSTOMER QUALITY SCORECARD
Customer Transparency
Process Excellence tracked since January 2007
Part of core NetExchange®
product offering
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Governance at Pershing
79%
43%
61%65% 68%
64%
54%50%
57%
79%75% 78%
21% 54% 36% 34% 31% 35% 45% 48% 42% 21% 25% 22%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
Exceeds Expectations Meets Expectations
Nearly 1,200 calls per month are monitored for professionalism
Telephone Professionalism Scores
Level to “Exceed Expectations” was raised in February 2007
Percentage of Associates Exceeding Expectations(Based on Independent Third-Party Monitoring)
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Governance at DTCC
ID Core Process
Map and/or SIPOC
ID Metrics
ID Process Specifications Start to
Track Metrics
Baseline& Control Charts ID Improvement
Targets
ID Pipeline of Improvement Projects
ID Process Team ID Project
TeamsLaunch Improvement Projects
Track Progressvs. Targets
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1. Setting the Stage
2. Understanding the Issues
3. Executing
Curriculum:• E-Learning for Metrics• Process Control & Mgt• Lean
Line-UpProcess TeamMembers forTraining
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Governance at DTCC
Asset Services (Operations) tracked since 2006
Process Excellence tracked since 2007
Web-based tracking and reporting
Balanced Business Scorecard
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Lessons Learned: The Infrastructure
Establish a disciplined yet not overwhelmingly bureaucratic and rigid governance structure
Accept that business units will be at various levels of maturity - and engagement - throughout your organization
Measure what you measure… and manage what you measure
Leverage the “good old” red, yellow, green flags
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The Impact
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The Results at Pershing
Six Sigma EfficiencyDPMO Improvement
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007
Project Cycle Time (Days)
0
50
100
150
200
250
300
350
2005 2006 2007
Six Sigma Project Cycle Time
25
The Results at Pershing
Customer Statements Sigma Levels
26
Quality Scorecard Performance 2007
Successful Service Levels Operations and Technology
4.6%
4.5%
4.8%
4.4%
4.30%
4.60%
4.10%
3.6%
3.8%
4.0%
4.2%
4.4%
4.6%
4.8%
5.0%
Jun Jul Aug Sep Oct Nov Dec
87% 91
% 96%
94% 96
%96
%96
% 100%
100%
98%
96%
89%
89%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Service Center Reopen Rate
The Results at Pershing
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The Results at DTCC
2007 Asset Services Blended Sigma Levels
Functional Areas Underwriting Announcements Redemptions Cash Receipts Reorganization
Sigma Levels By Month
3.43.53.63.73.83.9
44.14.24.3
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Sig
ma
Lev
el
Accuracy
Timeliness
Average
Target 3.75
COPQ Customer Sat Re-work Risk
Average ’07 Sigma Overall = 3.99 Timeliness = 3.88 Accuracy = 4.10
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The Results at DTCC
0.72% 0.71% 0.69%
0.44%
0.32%
0.22%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
Agent A Agent B Agent C Agent D Agent E Agent F
.24.11.01-.15-.16-.16Deviation from Industry σ
17.67%9.61%8.06%20.75%36.54%7.38%As a % of all Agents
103564712121343Number of Amended Rates
% A
men
ded
Rat
es (
or D
efec
t R
ate
) 3.95σIndustry σ: 4.11 or .
45% defect rate Internal DTC σ : 5.09
3.95σ 3.96σ
4.12σ
4.22σ
4.35σ
Amended Rates CMO/ABS (Dec. 2007)
Major Volume Drivers
“Going Public” with Sigma Levels: Structured Securities
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• AON Performance Monitoring• Phone Call Transfers• Call Abandon Rate
Customer Satisfaction
Service Excellence
Flexible Technology
Relationship Survey Data
Transaction Survey Data
Focus Group Data
Key Drivers
Customer Service
Average Speed to Answer
Service Center Responsiveness
System Availability
System Response Time
Usability
Looking Ahead at Pershing
Customer Quality Index
30
Looking Ahead at DTCC
All functional areas enrolled in Process Excellence by 2010
Retrofit into enterprise-wide processes and identifybusiness process interoperability
All VP’s and Directors business process improvement proficient
More joint initiatives with external partners
Go public with all Asset Servicessigma levels
Year 1
ID Process
& MetricYear 2
Improve
Process
& Metric
Year 3
ID New
Process
&/or Metric
ContinuousImprovement
Loop
Year 3
Continued
Improvement
Build
Improve
Re-Build
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Summary: The Road to Process Excellence
DTCC
FunctionalMeasures
ExternalMeasures
EngagementExecutiveSponsorship
Pershing
ExecutiveSponsorship
EnterpriseMeasures
EngagementExternalMeasures
Enterprise Measures
FunctionalMeasures
32
Closing Remarks
Different game strategy… yet same desired outcome
Similar challenges… yet varying approach
Stayed focused but remained flexible
It is truly about the corporate culture, the people and the long term business objectives…
… and it all must lead to enhanced customer trust and loyalty