Current Trends and Lesson Learned in the Application of Lean Six Sigma in Financial Services

Six Sigma in Financial Services Conference New York, New York

May 11-12, 2006

Current Trends and Lessons Learned in the

Application of Lean Six Sigma in

Financial Services

• Introduction

• Purpose & Methodology

• Study Findings

• Insights and Lessons Learned for Accelerating Results from Lean Six Sigma in Financial Services Organizations

Agenda

Introduction

• Conducted the study to gain a better understanding of the awareness, needs, and experiences of banks with respect to the Lean Six Sigma (LSS) methodology.

• Partnered with Leap Technologies, Inc. on the survey design.

Introduction

Purpose & Methodology

Purpose & Methodology

• Administered the online survey over a ten-day period in March. • Sampled approximately 385 “large” institutions.

• Surveyed executive-, senior-, and middle-level managers.

Methodology

Purpose

• To gauge perceptions of Lean Six Sigma among banking executives.

A Note Before We Start

What it Isn’t…

What this Study Is…

• A “snapshot” of attitudes toward Lean Six Sigma in Financial Services Organizations useful for mining ideas and insights.

• An exhaustive research study from which to draw “set-in-stone” conclusions.

Respondents

• Visited the survey site: 93 bankers

• Responded: 42 completed (usable) surveys 20 partially completed surveys

• Only the completed surveys were used in the analysis (42 of the 385 banks surveyed – 11%)

Respondents

Survey respondents represented “large” banks of all asset sizes.

1

8

19

8

5

Less than $5Billion

$5Billion to$10 Billion

$10 Billion to$25 Billion

$25 Billion to$50 Billion

Greater than$50 Billion

Respondents

1

20

8

12

ExecutiveManagement

SeniorManagement

MiddleManagement

Other

Respondents were divided equally between executive management and senior/middle management.

• Deployment Leader

Respondents

Respondents’ responsibilities spanned the functional areas of banking.

4

1

7

4

10

16

3

2

7Retail Banking

Private Banking

Trust/Wealth Management

Lending

Treasury

Compliance/Risk Management

IT

Operations

Other

Respondents

• Finance• HR• Marketing, Investor Relations, Product Development• Project Management• Finance and Risk Management• Office of Quality Assurance• Finance and Treasury• Marketing, Training• Customer Experience Strategist• Corporate Security Services• Overall Administration• Project Management, Process Improvement• Finance• Marketing • Quality Director• Marketing

Familiarity with LSS


Twice as many executives at the nine banks that had implemented LSS were familiar with the methodology as those who were unfamiliar .

2

4

3

0

0

1 (Unfamiliar)

2

3

4

5 (VeryFamiliar)

LSS Users


Of the executives at the 33 banks that had not implemented LSS, most were not familiar with the methodology.

3

1

15

8

6

1 (Unfamiliar)

2

3

4

5 (VeryFamiliar)

LSS Non-Users

Deployment

Deployment

9

31

2

Yes

No

Not Sure

Of the 42 banks completing the survey instrument, approximately 20% (9) responded affirmatively to whether LSS had been deployed in their institutions.

LSS Users

Deployment

LSS appears to be more common among the very largest banks.

Asset Size Total

Has your bank ever deployed Lean Six Sigma?

Yes No Not Sure

Less than $5 billion

19 1 17 1

$5 billion - $10 billion

7 1 5 1


5 1 4 0


1 1 0 0

Greater than $50 billion

8 5 3 0

Total 40 9 29 2

All Respondents

Deployment

5

3

1

Yes

No

Not Sure

Of the nine banks that have used LSS in their organizations, five have deployed it during the past year.

LSS Users

Deployment

Banks that have deployed LSS were divided on the scope of that deployment.

1

0

3

1

4

LimitedDeployment)

Division-level

Bank-wide

None to Date

Not Sure

LSS Users

Deployment

4

2

4

3

7

2

2

2

6Retail Banking

Private Banking


Lending

Treasury


IT

Operations

Other

LSS deployment spanned the major functional areas of banks, withOperations and Retail Banking heading the list.

• Securities Processing• No idea

LSS Users

Drivers and Priority


2

2

0

2

2

1

Success Stories

In-bank Advocates

CEO Decision

Board of Directors

ConsultantRecommendation

Other

Among LSS users, the initial decision to explore the potential of the methodology was triggered by one of several factors.

• Blend of Lean & Six Sigma tools works best• No idea

LSS Users

5

7

6

4

1

0

7

5

5Improve Product Quality

Improve Service Quality

Increase Customer Satisfaction

Improve Delivery Time

Improve Core Processes

Reduce Costs

Grow Revenue

Compete

Other

The range of business reasons underlying a bank’s decision to deploy LSS reflects the power of the methodology.

• No idea

Drivers and PriorityLSS Users


1

1

0

3

4

0Among the Top Five Priorities

A Priority, but Not Top Five

Used Selectively

Being Tested

Reducing Commitment to LSS

Other

While LSS initiatives are clearly important to banks, such efforts are not among the leading priorities of those institutions.

• Investigating opportunities for use

LSS Users

2

3

15

9

4

1 (VeryUnlikely)

2

3

4

5 (Very Likely)

At banks that have not deployed LSS, about one in six may be leaning toward launching an LSS initiative within the next 12 months.

LSS Non-Users


14

13

21

21

3

0

22

23

10Improve Product Quality

Improve Service Quality

Increase Customer Satisfaction

Improve Delivery Time

Improve Core Processes

Reduce Costs

Grow Revenue

Compete

Other

When asked to speculate on the possible reasons their banks might cite for launching an LSS project within the next 12 months, LSS non-users were inclined to focus on customer and financial objectives.

LSS Non-Users


Regarding the decision to launch an LSS initiative within the next 12 months, LSS non-users provided a glimpse at where many banks are with respect to their “LSS thinking.”

Selected Positive Comments

• We are in the process of establishing the foundation and education to be able to execute Lean Six Sigma within the next year.

• We are constantly looking for ways to improve efficiency and have re-processed twice in the past two years. We would have to consider the benefits of Lean Six Sigma before considering an additional process improvement initiative.

• We already use Six Sigma in pockets of the organization. The original question asked if the bank deployed Six Sigma. Six Sigma is done by lines of business and is not mandated.

• Interested in the concept…sounds like something we would be interested in looking into.

• We have identified several processes that are impeding our customer service and need to be addressed.

• We have begun discussions and are currently visiting with other organizations that have implemented Six Sigma

Selected Neutral or Negative Comments

• Not sure that it has anything to do with trust work, since I have never heard of it. If it can help with trust work, I would be more than eager to hear more about it.

• We are currently implementing several other priority programs around software and process enhancements. I doubt this would be a priority within that time period.

• Cost issues.

• Since I am unfamiliar with this, I do not anticipate our using it. Would like more information.

• We do not use Six Sigma now and, I assume, Lean Six Sigma is based on Six Sigma.

• I have no idea what the term means, so I have no way of knowing whether my organization is interested or not.

• Not on our radar screen.

• Since I don’t know what it is, I don’t know if we would launch it or not.

LSS Non-Users


15

1

5

15

19

1

4

2

17Retail Banking

Private Banking


Lending

Treasury


IT

Operations

Other

Among banks that have not deployed LSS, the functional areas in the bank most likely to implement an LSS initiative are Operations, Retail Banking, IT, and Lending.

• Human Resources• Loan Operations• Deposit Operations

LSS Non-Users


2

7

21

20

1

9

19

9Cost

Time to Explore its Potential

Lack of Trained Staff

Lack of Training Opportunities.

Other Improvement Processes in Place

Lack of Awareness of LSS Potential

Competing Priorities

Other

At banks that have not deployed LSS, issues surrounding the lack of understanding of the methodology (including the time required to learn more about it) represent the most significant barrier to implementation.

• Corporate culture

LSS Non-Users


Financial Considerations

2

3

1

1

2

0Less than 3

Months

3 to 6 Months

6 to 9 Months

9 to 12 Months

Greater than 12Months

Don't Know

The average cycle time of LSS projects appears to be distributed around the interval of six to nine months.

Financial ConsiderationsLSS Users

Average Project Cycle Time


1

1

1

2

4

0Less than $50,000

$50,001 - $100,000

$100,001 -$250,000

$250,001 -$500,000

More than$500,000

Don't Know

Almost half of the respondents from banks that deployed LSS were unable to estimate “out-of-pocket” costs.

LSS Users

Deployment Costs


3

1

1

4More than 5 Times ImplementationCosts

Between 2 and 5 TimesImplementation Costs

Break-even

A Negative Return

Too Early to Tell

Don't Know

To date, the returns on the investments made in LSS training and infrastructure have been positive among the surveyed LSS users.

0

0

LSS Users

ROI

Satisfaction and Impact


Most surveyed banks were satisfied with their LSS implementation and results.

1

5

1

1

1

2

1

1

0

0

4

0

1 (Very LowSatisfaction)

2

3

4

5 (Very HighSatisfaction)

Not Sure

Implementation

Results

LSS Users


While overall satisfaction among the LSS-user banks was positive, respondent comments indicated a range of opinions regarding the level of that satisfaction.

• All divisions of the bank have used Lean Six Sigma with positive results.

• We still have more to do to be successful in the deployment.

• Knowledge transfer is good; time to [results] is slower than anticipated.

LSS Users

Representative Comments

7

2

Yes

No

Most respondents from banks that deployed LSS felt that the implementation and results had a positive impact on corporate culture.

LSS Users

Corporate Culture


Most respondents viewed the LSS impact on corporate culture aspositive.

Representative Positive Comments

• More fact-based decision-making is taking place.• People are now asking for data before making decisions.• Opportunity identification process has yielded unintended process improvements.• LSS is seen as a positive solution to issues and leads to cost-effective results. Representative Neutral and Negative Comments

• Six Sigma is not included in all major undertakings.• Spotty training has left a number of executives outside the loop.

LSS Users


Corporate Culture Comments

3

3

2

0

1StronglyDisagree

Disagree

Neutral

Agree

StronglyAgree

Most executives at banks using LSS agree with the statement: “Lean Six Sigma has significant potential for widespread success in financial services.”

LSS Users

LSS General Potential


5

1

4

2

17

StronglyDisagree

Disagree

Neutral

Agree

StronglyAgree

As expected, most executives at banks not using LSS appear to be relatively neutral about the statement: “Lean Six Sigma has significant potential for widespread success in financial services.”


• I’ve been a process improvement practitioner and have seen it provide hard dollar results.

• There are always opportunities to improve and, since product differentiation is challenging in banking, service is critical.

• The level of diligence and complexity is difficult for many organizations to sustain.

• I don’t have a clue since this is the first time I have ever heard of Lean Six Sigma.

• Unsure, need more information.

• Just another fad that will come and go.

LSS Non-Users

LSS General Potential


LSS Needs

LSS Needs

5

6

1

3

2

5

2

6

4

3Engaging Senior Leadership

Recruiting/ Retaining Staff

Improving Project Selection

Involving Managers and Employees

Reducing Project Cycle Times

Integrating Other Tools

Using Green/Yellow Belts More Effectively

Tracking and Capturing Project Results

Training in One or More Areas

Other

A broad range of needs underlies current LSS initiatives among those using the methodology.

• Continually improving approach and reach• Drill into more depth in our business units

LSS Users

4

3

3

3

4

1Change Leadership for SeniorManagers

LSS Principles for Senior Managers

Advanced Tools for Black Belts

Project Management and TeamFacilitation

Awareness Tools for Managers andEmployees

Other

Training needs appear to be distributed evenly across a range of areas.

• Too early to know at this time• Just beginning our program and can enhance• N/A

LSS Users

LSS Needs

4

1

2

0

0

2

1 (Not Effective)

2

3

4

5 (Highly Effective)

Have Not Attended SuchPrograms

Executives at banks using LSS rate the LSS training programs they have attended as effective.


• We ran our own executive training with great success.

• Broader reach would be an advantage.

• Champion and project selection training offered by consultant were excellent.

LSS Users

LSS Needs

Personal Training Experience

Executives at banks using LSS are split on whether they would consider participating in further training.

4

2

3

Yes

No

Not Sure

Representative Comment

Depends on what would be offered

LSS Users

LSS Needs

Personal Training Needs

Executives at banks not using LSS appear to be inclined toward participating in LSS training.

18

5

10

Yes

No

Not Sure

LSS Non-Users

LSS Needs


• Training and location would be a key factor.

• Looking for information in a concise fashion so we can “fast track” the process.

• Would need to be first-class presenters with more emphasis on application than concepts.

• I would be interested in attending if the program content were specifically geared toward implementation within the banking industry.

LSS Non-Users

• To learn more about the application of Lean Six Sigma in the financial services industry. • I am interested in learning more about any process that would help us improve quality, reduce costs, enhance customer service, etc.

• From working at [Name of Bank], I know this is a good program.

When LSS non-users were asked to explain why they would or would not consider attending, their responses provided insights into the type of training that would be attractive.

LSS Needs


• I need more information to determine whether the product is beneficial to me and my organization.

• I am not familiar with concept; never heard of it.

• A waste of time.

Optimistic

Pragmatic

Pessimistic

Objective

Summary Comments from Respondents

Summary Comments

These general comments offered by respondents sum up the principal conclusions of the study.

• Really don’t know very much about Lean Six Sigma.

• The success of Lean Six Sigma is well documented in the manufacturing sector, but less known in the financial services sector.

• Combination of Lean tools with Sigma quality drives most practical approach in financial services.

• Creates great enthusiasm among its practitioners.

All Respondents


Key Insights and Lessons Learned

Getting Value from This Study

• How would your leaders/managers responses compare with those in the study?

• Is there a gap between leadership perceptions about your Lean Six Sigma deployment and the “reality”?

• Why does that gap exist?

• What is the potential impact of leadership perceptions on your deployment?

• How effective is your deployment strategy in managing and shaping leadership perceptions?

Some Questions to Consider:

Insights & Lessons Learned

KEY INSIGHT:

Awareness and appreciation for the impact Lean Six Sigma can have in banking organizations appears to be an “all or nothing” proposition.

• Large organizations are leading the way. “Filtering down” to mid-sized and smaller organizations is proceeding more slowly than in many other industries.

• Even within organizations deploying LSS, there appears to be many “left on the sidelines”.

Common Barriers to Faster “Spread” of LSS Capability within Organizations

1. Inadequate linkage between the Business Planning Process and the Lean Six Sigma Project Selection Process.

“I’m all for this initiative but it’s not really helping me with what’s on the plate today.”

Senior ExecutiveTrust Operations

2. Treating all projects the same regardless of scope and complexity.

“It took us two years before we recognized that DMAIC is not a universal hammer for all problem nails. We probably wasted a lot of time optimizing processes that really needed to be leaned out or blown up.”

Master Black Belt Money Center Bank


3. Extensive training requirements make it difficult to get “non-belts” engaged.

“Compelling as it is, we simply can’t afford to pull people off the line for multi-week training sessions.”

CEO Community Bank

Holding Company


LSS Accelerators

1. Provide leaders with a fast, simple process for developing an improvement game plan linked to strategic objectives.

2. Match the right tools and resources to projects based on problem complexity.

3. Deploy tools and training “just-in-time”.

Y = f (x1 , x2 , x3 ,…)What do you

want to improve? What actions will getyou there the fastest?

Y

YY

Y

YY

Y

YY

Y

YYY

Y Y

Y

Y

Y Y

Y

Y

Top Priority Outcome and Metrics

YX

X

X

X

X

X

X

XX

XX

X

X X

XX

X

X

X XX

X

X1

X2

X3

Top Priority Performance Drivers

Rapid Action Projects

Expert Study Projects

Leadership Decisions

Improvement Game Plan

BreakthroughProjects

Leadership Planning Process

Leadership Planning Process – Key Tool: 4 Box Project Planning Tool

EXPERT STUDY

PROJECTS

BREAK-THROUGH PROJECTS

LEADERSHIPDECISIONS

RAPID ACTION

PROJECTS

Apply Advanced Six Sigma Statistical Tools

Apply Advanced Lean, Innovation and Intermediate Six Sigma Tools

Apply Workout & Basic Lean & Six Sigma

Tools

Complexity

“Just Do It” – Apply Leadership Decision Making

Tools

Need for Engagement

LEADERSHIP ALIGNMENT


Breakthrough Projects


AFTER ACTION REVIEW AND REPLANNING

Executive Decision Projects (ongoing)

• Engage people closest to the problem

• Simplified toolset

• Green Belt/Yellow Belt Driven

• Use Black Belts as Coaches/Mentors

• Engage cross-functional stakeholders from the start

• Black Belt/MBB Driven

• Black Belt driven with engagement as needed to “get the data”

• Ensures linkage of all projects to the business strategy

• Secures leadership commitment for all projects

• Allows leadership team to control pace of deployment

• Review results

• Recognize participants

• Lock-in process control plans

• Identify best practices and opportunities for “spread

A Repeating 90-Day Cycle of Improvement

Accelerated Lean Six Sigma Deployment Model

Thank you.

Appendix:Additional Detail on the 4 Box Project

Planning Model

EXPERT STUDY

PROJECTS

BREAK-THROUGH PROJECTS

LEADERSHIPDECISIONS

RAPID ACTION

PROJECTS

Apply Advanced Six Sigma Statistical Tools

Apply Advanced Lean, Innovation and Intermediate Six Sigma Tools

Apply Workout & Basic Lean & Six Sigma

Tools

Complexity

“Just Do It” – Apply Leadership Decision Making

Tools

Leadership Planning Process – Key Tool: 4 Box Project Planning Tool

Need for Engagement

Leadership Decision Projects

Accelerate results by making, communicating and enforcing a clear management decision to take action.

Best used when:

Action required to improve performance is ABSOLUTELY CLEAR AND SPECIFIC.

Minimum risk/significant gain in making a DECISION TO ACT.

Making a clear decision will accelerate OTHER IMPROVEMENT ACTIONS.

EXPERTSTUDY

BREAK-THROUGH

LEADERSHIPDECISION

RAPID ACTION


Achieve fast results by tapping into resident know-how and experience close to the improvement needed.

Best used when:

EXPERTSTUDY

BREAK-THROUGH

LEADERSHIPDECISION

RAPID ACTION

Action required to improve performance is CLEAR but how to best do it is not.

Minimal risk in taking action at the local level. High risk in not involving those who must OWN THE IMPROVEMENT.

LOCAL KNOW-HOW EXISTS and can be tapped with effective team approach.

Breakthrough Projects

Achieve “quantum leaps” in performance on complex, cross-functional and silo-challenged processes and systems.

Best used when:

It’s clear that existing process/ system is NOT CAPABLE of achieving desired performance.

Risk in maintaining the status quo FAR OUTWEIGHS risk in experimenting with new approaches.

STAKEHOLDER SUPPORT for change exists and can be leveraged through effective application of best practices for process redesign.

EXPERTSTUDY

BREAK-THROUGH

LEADERSHIPDECISION

RAPID ACTION


Accelerate results by gathering data and applying graphical and statistical analysis to identify root causes of problems and potential breakthrough paths.

Best used when:

Action required is NOT CLEAR nor supportable with existing data.

HIGH RISK to current performance levels in taking action without more knowledge.

Application of STATISTICAL ANALYSIS will build the case for action needed to identify solutions and secure broad stakeholder support.

EXPERTSTUDY

RAPID ACTION

COREREDESIGN

LEADERSHIPDECISION

Documents

Current Trends and Lesson Learned in the Application of Lean Six Sigma in Financial Services