1

A Side-by-Side PerspectiveOn Process Excellence

WCBF 2008 LEAN SUMMIT

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?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”

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”

3

FS-BT RoundtableFS-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 BusinessesOur 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 DTCCPershing 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

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

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Business Transformation at PershingBusiness 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 DTCCBusiness 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 PershingBurning 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

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 DTCCBurning 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

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

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The PeopleThe People

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Sponsorship at PershingSponsorship 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

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 DTCCSponsorship 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 PershingEngagement 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 DTCCEngagement 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

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

More targeted training classes

Enhanced coaching skills

Rotation Program

Project pipeline

Kaizen Events

Quality Day

Chairman’s Award for Quality

Engaging the “base”Engaging the “base”

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Engagement at DTCCEngagement at DTCC

Engaging the “middle”Engaging the “middle”

Id Project Champions

Expand Process Excellence

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

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 PeopleLessons 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

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

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The InfrastructureThe Infrastructure

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Governance at PershingGovernance at Pershing

CUSTOMER QUALITY SCORECARDCUSTOMER QUALITY SCORECARD

Customer Transparency

Process Excellence tracked since January 2007

Part of core NetExchange®

product offering

Customer Transparency

Process Excellence tracked since January 2007

Part of core NetExchange®

product offering

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Governance at PershingGovernance 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 DTCCGovernance 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 DTCCGovernance at DTCC

Asset Services (Operations) tracked since 2006

Process Excellence tracked since 2007

Web-based tracking and reporting

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 InfrastructureLessons 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

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 ImpactThe Impact

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The Results at PershingThe 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

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The Results at PershingThe Results at Pershing

Customer Statements Sigma Levels

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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 PershingThe Results at Pershing

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The Results at DTCCThe Results at DTCC

2007 Asset Services Blended Sigma Levels

Functional Areas Underwriting Announcements Redemptions Cash Receipts Reorganization

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

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

COPQ Customer Sat Re-work Risk

Average ’07 Sigma Overall = 3.99 Timeliness = 3.88 Accuracy = 4.10

Average ’07 Sigma Overall = 3.99 Timeliness = 3.88 Accuracy = 4.10

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The Results at DTCCThe 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

Number of Amended Rates

43 213 121 47 56 103

As a % of all Agents 7.38% 36.54% 20.75% 8.06% 9.61% 17.67%

Deviation from Industry σ

-.16 -.16 -.15 .01 .11 .24

% A

men

ded

Rat

es (

or D

efec

t R

ate) 3.95σ

Industry σ: 4.11 or .45% defect rate

Internal DTC σ : 5.09

Industry σ: 4.11 or .45% defect rate

Internal DTC σ : 5.093.95σ 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 PershingLooking Ahead at Pershing

Customer Quality Index

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Looking Ahead at DTCCLooking 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

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 ExcellenceSummary: The Road to Process Excellence

DTCC

FunctionalMeasures

ExternalMeasures

EngagementExecutiveSponsorship

Pershing

ExecutiveSponsorship

EnterpriseMeasures

EngagementExternalMeasures

Enterprise Measures

FunctionalMeasures

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Closing RemarksClosing 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

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