Bank Of America-1

Six Sigma at

Agenda • • • • •

Introduction What is Six Sigma? Why Six Sigma at Bank of America? Success at Bank of America Connection to Strategy.

Introduction to Bank of America • Formed in 1998 through a merger. • Parties of Merger Agreement: NationsBank of Charlotte North Carolina BankAmerica of California • 5th most profitable company in the world • 2nd most profitable banking institution in the world

Contd… • • • •

Provides full service banking in 29 states Also in Washington, D.C. in the US Operates in 30 countries worldwide. Performs under 3 subsidiaries: Bank of America National Association Bank of America, N.A (USA) Fleet National Bank (Fleet)

Contd… • 4 major business segments: Global Consumer and Small Business Banking Global Business and Financial Services Global Capital markets and Investment Banking Global Wealth and Investment Management

Values of Bank of America • • • • •

Doing the right thing Trusting and teamwork Inclusive meritocracy Winning Leadership

Facts • • • • • • • •

US’s largest bank owned ATM US’s Largest consumer bank US’s largest small business bank US’s leading financial institution First bank having national franchise in US Processes 8000 transaction per second 400 customer interactions per second More than 12 million active customers

Contd… • Considered as ‘bank of choice’: 98 % of US fortune 500 79% of Global Fortune 500 • 30 million electronic bill payments per month • 6 million active bill payment customer. • More than 12 million active customers • One of the world’s largest wealth management business • No.1 in online banking

Industries & Largest Companies Company

Market Cap (Billions)

Berkshire Hathaway Inc.

181.66

JPMorgan Chase & Co.

137.13

Bank of America Corporation

122.41

Citigroup Inc.

101.58

Goldman Sachs Group, Inc.

72.00

What is Six Sigma • Sigma

is a measure of “goodness: the capability of a process to produce perfect work.

• A “defect” is any mistake that results in customer dissatisfaction. • Sigma indicates how often defects are likely to occur. • The higher the sigma level, the lower the defect rate. • The lower the defect rate, the higher the quality.

What Is Six Sigma?  Know

What’s Important to the Customer (CTQ)

 Reduce  Center

Defects (DPMO)

Around Target

(Mean)  Reduce

Variation (Standard Deviation)

Process Philosophy

?

More About Six Sigma • Six Sigma was Developed at Motorola in the 1980’s As a method to Improve Process Quality. • It was First used to Improve Manufacturing Process Capability and then Migrated to Business Processes Capability • Companies that Have deployed Six Sigma: Bank of America, Motorola, GE, IBM, Kodak and Many More • The Basic Premise is, that all Processes have Variation. Variation Is the Enemy.

Six steps to Six Sigma Step1: Identify the product we create or the service we provide. Step2: Identify the Customer(s) for our product or service and determine what they consider important. Step3: Identify our needs (to provide product/service so that it satisfies the Customer). Step4: Define the process for doing the work. Step5: Mistake-proof the process and eliminate wasted effort. Step6: Ensure continuous improvement by measuring, analyzing, and controlling the improved process.

Two Approaches Change Integration Ownership & Commitment

GB/BB Improvement (Current) Define

DFSS

$

Measure

Development (New)

Analyze

$

Improve

Project Management • Two approaches to reaching the Six Sigma goal: - Improving existing products and processes - Developing new products and processes • Different tools and steps, but focus and flow is the same

A Common Tollgate Approach

Control

What is the Six Sigma Philosophy?

Science

☛ We don’t know what we don’t know.

Six Sigma

☛ If we can’t measure it, we really don’t know much about it.

Art

☛ If we don’t know much about it, we can’t control it.

Magic

☛ If we can’t control it, we are at the mercy of chance.

Focus on the Customer!

Six Sigma as a Goal

σ

Defects per Million opportunities

2

308,537

3

66,807

4 5 6

6,210 233 3.4

Process Capability

.

Six Sigma -- Practical Meaning 99% Good (3.8 Sigma)

99.99966% Good (6 Sigma)

• 20,000 lost articles of mail per hour

• Seven articles lost per hour

• Unsafe drinking water for almost 15 minutes each day

• One unsafe minute every seven months

• 5,000 incorrect surgical operations per week

• 1.7 incorrect operations per week

• Two short or long landings at most major airports each day

• One short or long landing every five years

• 200,000 wrong drug prescriptions each year

• 68 wrong prescriptions per year

• No electricity for almost seven hours each month

• One hour without electricity every 34 years

Service Encounters Range from High-Contact to Low-Contact

Which Business Function Needs It? SERVICE

ADMIN.

DESIGN

PURCH. 6 Sigma Methods

QA

Marketing

MFG.

MAINT.

As long as there is a process that produces an output, whether it is a manufactured product, data, an invoice, etc…, we can apply the Six Sigma Breakthrough Strategy. For these processes to perform to a customer standard they require correct inputs!!!

Ken Lewis’ “Vision” Why Six Sigma? “Six Sigma will enable Bank of America to make the breakthrough improvements in customer satisfaction and shareholder value that we must achieve to reach our goal of becoming one of the world’s most admired companies. That’s why I’m committed to using it as a performance management discipline throughout our company.” Ken Lewis, Chairman and Chief Executive Officer Bank of America

Education

Champions

Master Black Belt

Mentor, trainer, and coach of Black Belts and others in the organization.

Black Belts

Green Belts

Leader of teams implementing the six sigma methodology on projects.

Delivers successful focused projects usin the six sigma methodology and tools.

Team Members Quality Fundamentals/ Kaizen Now

Deployment Champions

Participates on and supports the project teams, typically in the context of his or her existing responsibilities.

Responsible for supporting the Deployment Strategy within Line of Business/Customer Segment

Executive Commitment The Bank of America executive officer team are all certified Green Belts Bank of America Executive Officer team • Ken Lewis – certified Green Belt • Jim Hance – certified Green Belt • Amy Brinkley – certified Green Belt • Ed Brown – certified Green Belt • Rich DeMartini – certified Green Belt • Barbara Desoer – certified Green Belt • Gene Taylor – certified Green Belt

What Makes Six Sigma Different? • •

• •

Leadership Commitment, Competence, & Involvement Methodology & Tools • Data Driven • Statistically Validated Best People 100% Dedicated to Defect Reduction Project Focused • Aligned to Strategic Goals • High ROI Expectations

Six Sigma & Leadership Six Sigma only works when Leadership is passionate about excellence and willing to change.

• Fundamentals of Leadership – – – – –

Challenge the process Inspire a shared vision Enable others to act Model the way Encourage the heart

• Six Sigma is a catalyst for leaders

Key Success Factors

• • • • • • •

Consolidation: Achieving Strategic Balance Retail Renaissance: Bonding with Customers The Offshoring Decision Transforming the Finance Function Monitoring Credit Quality Achieving Comprehensive Governance of Risk Management Corporate Governance

SUCCESS AT BANK OF AMERICA Organic growth strategy - Quality of service - Enhancing customer satisfaction - Customer Retention

PROBLEMS FACED IN SIX SIGMA IMPLEMENTATION :

• Measuring metrics • Categorizing error as qualitative or quantitative • Employee oriented performance in banking

STRATEGIC IMPLEMENTATION OF SIX SIGMA

Bank of America applied six sigma in three ways: •

Core Process Performance Metrics

•

Business Approach

•

Leadership Philosophy

CORE PROCESS PERFORMANCE METRICS

• Setting of standards and targets for each branch and each banker • Developing metrics for sale of product • Gathering Voice of Customer and CTQ • Benchmarking of 90% in providing customer delight • High quality service: - Individual customer - Small Business Entity - Large Business Entity

BUSINESS APPROACH • • • • •

Increasing Investment Retirement Accounts Improving Certificate of Deposits Reducing Response Cycle Time Relationship banking Enhancing customer experience via computerized and electronic channels • Applying six sigma to all operations in BOA and to entire value chain

LEADERSHIP PHILOSOPHY

• • • • •

Recruiting six sigma professionals BB and MBB from GE, Honeywell and Motorola Adapting culture of quality Developing process engineering teams and Project leaders Prioritizing business – deposits & payments

Effect of CRM repurchase

Loyal customization

Satisfaction Good word of mouth

Increase revenue

Creating new customer

Service/ Product Brand switch

Losing customer

Decrease Revenue

dissatisfaction Bad word Of mouth

losing potential customer

CS Guarantees Company’s Revenue?

Service Quality Model How Service Expectations are formed…

Word of Mouth

Personal Desires

Past Experience

Marketing Messages

Factors of Quality

Empathy Reliability Tangibles Assurance Responsiveness

Expected Service Compared to… Perceived Service How Satisfaction is Determined…

Perceived Service Quality

Satisfaction Level

Factors that Influence Customer Expectations of Services (Fig. 2.4)

Personal Needs Desired Service Beliefs about What Is Possible

Explicit & Implicit Service Promises Word-of-Mouth Past Experience

ZONE OF TOLERANCE

Perceived Service Alterations Adequate Service

Predicted Service

Situational Factors

Source: Adapted from Zeithaml, Parasuraman & Berry

Strengths • Fortune 500 company -More than 175,000 associates providing financial products, services, ideas, and solutions to customers in all 50 states

• Have 31 international offices serving clients in 150 countries -Have relationships with 97% of the fortune 500 companies in U.S. -Relationships with 82% of the fortune 500 companies worldwide

• Merger with Fleetwood resulted in the 4th most profitable company in the world -strengthened their diversity and ability to cross sell

• Bank of America is the nation's No. 1 small business lender • Online banking system is used more than any other banking website • First Bank to span the nation with Automated Teller Machines -largest proprietary ATM network in the nation

Weakness

• Global economies are slowing down and the equity market is falling

-Company has reported losses in the equity investment department -Must increase productivity in other areas • Difficult to differentiate goods

•

Recent job cuts from the purchase of MBNA may lower moral

Opportunities • Purchase of MBNA

-Will have 40 million active credit card accounts -Becoming the Wal-Mart of banking with one stop shopping • Acquisition of Boston Fleet Bank helped gain considerable market share

-6 million new clients • Company fully analyzes the fastest growing areas in the country

-In the 26 out of the 30 fastest growing metro areas in the country, Bank of America has the largest market share

Threats • Difficult to Manage • A lot of competition domestically and worldwide • Threats and risk increases as a company does business worldwide

-Volatility of exchange rates, market rates, and foreign economies

Results

Six Sigma has enabled us to generate more than $300MM in first-year productivity gains for the company. It has also had a significant impact upon the leadership team with our personal education and certification as Six Sigma Green Belts. As we look to the future, our leadership charge is to keep Six Sigma a top priority and use it to produce organic customer revenue growth.” Ken Lewis (10/9/07)