What I am trying to discuss here is part of the frustration with the bail out.  I am not saying that I am pro or against it, just that you cannot throw money at a problem without fundamentally understanding and fixing the root causes.  Otherwise we are doing nothing but applying a gigantic band-aid to our problems.  One of our interns pointed out a job posting to me yesterday for a Loan Officer at a regional bank.  The job description scared me for its complete detachment from the realities of the sector today:
 
“The Loan Officer performs all phases of investment real estate lending, including the review and coordination of new and existing business development, loan origination, underwriting, processing, closing and servicing…”

It is as if we have learned nothing; the guy who is being incentivized to bring a loan through the door, is also responsible for underwriting it, funding it and ultimately monitoring it.  This is but one huge conflict of interest. Where is the control in this process?  Why are institutions being given money so that they can continue with processes that got us (partially) here?

S.Shaffie, ProcessArc, Inc. 

Next thing you know we have adjusters and structural engineers walking around the house, taking photos.  And I am trying to guide them to the damage area, but I was basically talking to the “wall”.  They were camera happy.  The roof gets replaced, we decided not to put in the claim, months go by and then we get the phone call.   Thank god for the patient claims manager because I was about to lose it.   The underwriters, based on the findings of the adjuster, had decided that a flat roof with over 3” of snow is considered hazardous.  Well there we have it people, never walk into another commercial building when it snows.  So you can forget about all the big box stores, grocery stores, malls, etc.  The underwriting department’s suggestion was for us to change the pitch of the flat roof.   As the claims manager is trying to explain this to me, I am trying to figure out how did we end up here?  How did we go from “can you please replace a few water damaged areas” to “your entire roof structure, which by the way a commercial roofing company just replaced, is hazardous”?  Better yet, if that is really the case, why they heck did they wait 5 months to tell me this critical piece of information?  By the end of the conversation even the claims manager was beginning to realize the absurdity of the situation, talk about a snow ball effect.  After several more phone calls, we are finally in the clear, the pitch of our roof does not have to change, we no longer live in a hazardous house, but I am going to change my insurance company.

S.Shaffie, ProcessArc, Inc. 

S. Shaffie, ProcessArc, Inc. 

One of the biggest challenges in the financial sector is collecting data in an organized and cohesive fashion.  While there is plenty of customer data in banks, it resides in product-centered silos: lending, retail, insurance… And every time you compartmentalize data you are bound to experience revenue leakage. 

Historically I have not been a big fan of CRM tools, partially because I don’t think they have been ever implemented or leveraged correctly.  But the logic behind CRM has potential – to centralize key customer data so that accurate and timely decisions can be made by all in the organization.  The part that was missed by the CRM wave was the required culture change in an organization to reap its benefits.  But the timing maybe just right now.  Because if banks are going to restore their liquidity, they have to learn how to turn their retail business into a cash machine by providing service excellence.  And to accomplish this they need access to timely and accurate customer data.

S. Shaffie, ProcessArc Inc.  

1. The increase in complexity of large IT systems

2. The fact that companies have been left to themselves to determine how to bolt-on these various software and hardware

The end result according to Bob Zukis, a partner at PwC  is “ unchecked IT spending, unnecessary complexity, redundant systems, under-utilized hardware and data centers, the need for expensive IT security and inevitably diminishing returns from IT”.

From our perspective, two additional key elements have led to the diminishing ROI alluded to above:

1. The processes that the software/hardware are intended to support are not always well defined/designed

2. The end users of the system are not always engaged adequately (sometimes not at all) in the need-definition/selection process

This adds to the complexity of the system, as this (not really) “off-the-shelf” platform has to get further customized or band-aided to function as intended.

What has all of this meant in real terms for companies and their multi-million dollar IT budgets:  only 13% of the average IT budget goes into supporting process or product innovation.  The other 87% is simply spent on general maintenance and upkeep.

Our key take away from this over the years has been that as Six Sigma experts we need to help bridge the gap between operations and IT.  IT for the most part is a support function for branches and back-office …Operations is the internal customer.  While we cannot fight the companies that make the software/hardware systems, we can create more educated buyers.  Which means that the:

1. End users should clearly define their needs (CTQs) and provide a design for optimal information/process flow

2. The IT department should help identify the best provider based on the end users’ expectation and how well it will interface with exiting systems (incremental cost).  Ensuring that brings us an end-to-end solution.

S. Shaffie ProcessArc, Inc. Financial Services Six Sigma 

1. That the SEC did not have enough authority to effectively oversee the banks

2. Enforcement cases were stalled in part because the agency’s staff were asked to jump through additional loops

3. The idea of rapid deregulation (change) and having enough staff to keep up with audits was briefly discussed

Oddly enough these are the root causes for the failure of any once-healthy organization.  So it goes for the Quality team of a firm that is falling apart before the team can even take form.  This team is put in a position of leadership without any authority to drive change…textbook case of a paper tiger.  The Quality leader is given the charge to drive improvements and changes across the organization.  But the speed and the quality of the change are suffocated by the various committees and subcommittees that have to buy in before anything is accepted.  The concept of leadership is totally lost in the process.

Because leadership is afraid to take a decision, various layers of red tap are introduced.  And before you know it what was once the right thing to do for the company (based on data) has morphed into something unrecognizable.  As we sit (literally and figuratively) on the side lines and watch, we cannot help but to feel sorry, helpless and frustrated for the Quality team.  We know it is just a matter of time before the whole concept gets abandoned.  What once was a good and necessary idea (an independent team to drive unbiased change) is cast aside because the foundation (read leadership) from the start was weak (read not completely on board).  This the most unfortunate and also the least  controllable outcome from an external consultant’s perspective.  If anyone has ideas as to how we can combat this please share!

S. Shaffie ProcessArc, Financial Services Six Sigma

Having had a good taste of both supporting managers and straight up road blockers, I’ve realized the importance of the “soft skills” we’re not often required to work on.  More specifically, I am referring to a strong knowledge of negotiation tools. The truth is that change, no matter how subtle or inconsequential, is often the result of a negotiation between the current state of doing things and a more desired future state. But the success of this “change” most often relies on those who are very comfortable with the status quo. After all, it’s very likely they created it!

As Black Belts we can always find someone to help us gather data, calculate values and understand variables, but when the time comes to push for a Quality-focused measurement system or data driven decisions, it’s up to us to deliver the message. Having the right set of tools to negotiate, creating a need, and sharing a vision are not to be looked at as commodities, but rather an intrinsic necessity. My advice is for you to go to the library – old school – and pick up a few titles on negotiation (Harvard’s Negotiation Model is my personal favorite) and start trying out some tools, I believe you’ll find that most road blockers in your way are potentially your biggest sponsors, they just haven’t seen “what’s in it for me” yet.. And that, folks, is one fun job for a Black Belt…

Luis G - Black Belt, Fortune 100 Financial Company, Venezuela

I recently encountered a situation that left me wondering, “What happened to the communication in my organization?”

I was scheduled to attend a mandatory 12:00 p.m. meeting with several other team members. I arrived at the conference room with only four minutes to spare. When I stepped into the room, I quickly realized that I must have been in the wrong place because the room was empty.

I frantically shuffled through my belongings to check my calendar, as now I only had three minutes to get where I needed to be. The calendar check confirmed I was in the correct place and at the correct time. I then stuck my head out of the room to verify I was in the room I thought I was in. When I was checking the room number, I saw another team member briskly walking towards me. I called out to him, “Do you know what’s going on? No one else is here.” He replied curiously, “No, I didn’t see a meeting cancellation.”

We decided, with the two remaining minutes before officially being tardy, we would try to contact the meeting organizer. We called her office, but as we had anticipated, there was no answer. We decided to have her paged over the loudspeaker. Again, there was no response. We then decided to call a few of the other team members to determine if they were in their offices, but they didn’t answer their phones either.

We were out of time. Wherever the meeting was being held, if it was being held, it had probably started without us. We decided to contact the company operator and have her call the conference room phones in two other commonly used conference rooms. No one answered at either of the extensions.

As we stood there contemplating what to do next, we discussed how we felt about the situation. We both felt confused, frustrated and hungry (because the meeting was scheduled over the lunch hour).

At that point, we both realized we had been in meetings since 8:00 a.m. that morning and neither of us had been able to check e-mail since approximately 7:45 a.m. We decided to walk up the two flights of stairs to my team member’s office so we could check his e-mail for a cancellation notice. As we walked through the building, we checked the other team members’ offices to see if they could clue us into what had happened to the noon meeting, but none of them were in their offices.

We arrived at my team member’s office and began to search through his e-mails from that morning. We decided checking the calendar would be quicker, as the updates post automatically. However, there wasn’t an update on the calendar. We resumed scrolling through hundreds of e-mails until we came across one from the meeting organizer. We joyously opened the e-mail only to find that it had nothing to do with the noon meeting. We continued our treasure hunt through the rest of his e-mail until we finally found the golden nugget for which we had been searching for so desperately. We both intensely focused on the e-mail, time stamped 7:48 a.m., which read “…the noon meeting is being moved to conference room... we will be discussing our communication plan.”

We looked at each other and began to laugh uncontrollably. We packed up our paperwork and headed for the conference room at the end of the floor.

When we reached the door of the conference room, we both had to regain our composure. We checked the time, 12:30 p.m. We both knew this wasn’t going to go well. As we stepped into the room, the other members glared at us. Finally, as we scurried to sit down, one of the other members called out, “Were your ears burning? We were just talking about you.”

We can glean a few lessons from this story:

No matter how effective you think your communication is, it is only as effective as the person receiving it feels it is.

It doesn’t matter how much time, effort and energy you spend discussing and creating a communication if it’s going to be distributed too late.

Don’t assume people will get a communication just because you send it, and don’t assume that because some people received, everyone did.

Communication is two-sided; it's talking and listening.  Seek feedbcak regarding your communication

S Shaffie, ProcessArc Inc. - Financial Services Six Sigma 

Recently I left a meeting feeling frustrated, my only solace being that I wasn’t the only one feeling uneasy.  For what felt like the millionth time, issues around communication were discussed during our team meeting.  We seem to keep going around in circles when it comes to the communication plan:  challenges never seem to get resolved.  At the start of the project we put together what seemed to be a robust plan:

1. We set up monthly Champion meetings, bi-weekly key-stakeholder sessions and twice weekly team meetings – this was to ensure that all parties were kept abreast of recent developments & were engaged to identify critical issues & solutions.
2. We also leveraged existing corporate communication channels to keep employees updated, i.e., monthly newsletters, executive leadership meetings, etc…
3. The team even set up an intranet file--sharing location, where presentations & work results were posted in case someone wanted more detail
4. Yes…this list goes on…we created a feedback loop between the employees and the core team for idea exchange
   

But all of this didn’t seem to be enough.  Employees (outside the scope of the projects) were complaining to the team that they weren’t being kept abreast of the project sufficiently.  At first we thought that perhaps the frequency and method of communication was not appropriate.  But then we realized that this malaise had nothing to do with our communication strategy rather it was a byproduct of the firm’s corporate culture.  At this firm the following precedent had been set: Every employee’s voice needed to be heard and considered in the final solution.   

There are several issues with this – no initiative (regardless of its brilliance):

1. Will get everyone to accept the proposed approach to solving a challenges and the required changes
2. It is impossible to maintain momentum if everyone has to been to kept in the loop to the n^th degree
3. It is wrong to expect that the ultimate solution will incorporate everyone’s voice
   

There is a reason why every project has a Champion, Key-Stakeholder, Team Leader, Team Members & ad-hoc resources allocated to it.  There is an inherent assumption that this group of people (depending on their role) will remove barriers, come up with reasonable solutions and ultimately own the new process.  Everyone else just needs to understand the general direction of the project and escalate issues that other parties in the project have missed or ignored.  Over-communication can not only hurt the momentum of the project but give people an “out” if they don’t like the solutions or proposed changes.  Because, after-all, you didn’t take their recommendation/solution into consideration.

S. Shaffie ProcessArc, Inc. - Financial Services Six Sigma 

This first case study focuses on the application of Six Sigma to Lending - it is all about increasing revenue.  We are currently working on the second one which is about Retail Banking and hopefully by the third one we can get to back-office brokerage processes. 

We would love to hear from you...let us know what you think. The link to the case study is below:

http://www.asq.org/economic-case/markets/pdf/case-study-improved-response-time.pdf

 Sheila Shaffie - Financial Services Six Sigma

If You Can’t Measure It, Don’t Bother Trying to Improve It 

To a person who has been involved in Six Sigma for some time, this is likely to be a mantra; a sort of Golden Rule not to be violated under any conditions.  To others, some might think it is a statement born out of common sense, while yet others are surely saying that something that cannot be measured is precisely something that should be improved to the point that it can be measured.  In a sense, all of you are correct, but there are pitfalls to navigate.

Starting with the basics, it’s essential to understand that the single fundamental assumption in Six Sigma methodology is that the inputs and outputs of any process as a whole and even the individual steps of a process can be precisely observed, measured, and reported.  If any part if missing, then you don’t have a Six Sigma project in the true sense, because you cannot state the problem in terms of a measurable defect, you cannot calculate the potential improvement, you cannot state the expected outcome the project in a measurable way, and consequently, you will never know if the project was ever truly successful, or even if the project has reached a conclusion of some kind, successful or otherwise.

I remember a project I supervised while working for a commercial lender.  We had observed for some time that there was tremendous variation in the cycle times for loan origination.  This was creating inefficiencies in a number of areas with direct impact to the income statement, including employment costs, treasury cost, and cash management to name a few.  As we discussed the best way to tackle the problem, the greatest challenge facing the Black Belts was the fact that all employees were salaried employees, and while the company did have macro data regarding total cycle time, we did not have any data at all about the time spent on each step in each stage of the process.  If it was you in this situation, what would you do to overcome this problem? 

Without some way to gather data about how much time each person touching the process spent at each step in each stage of the larger process, it was impossible for us to undertake a DMAIC project to reduce variation in the cycle times to originate our loan products.  (Incidentally, we wanted to reduce that cycle time overall as well—a Lean concept, but I want to keep thing simple for this example.)  Consequently, we lost a full year of time as we had to develop a data gathering mechanism and procedures to accumulate the missing data to support the subsequent development of the DMAIC project.

Gathering data about a process is almost always a tedious and expensive proposition for a company.  Technology can overcome some of these negative points, but only if the systems supporting the process in question were designed to gather, store and report data about the process.  If not, you are facing an uphill battle to get the data you will need.  You will encounter ardent resistance from those employees impacted by the changes in process required to gather data, as it typically adds steps to the process and increases the complexity and need for attention to detail in their jobs.  You will also encounter resistance from managers who either do not understand the need for the data or are too short-sighted to care.  These are the most dangerous situations, because you will typically experience pressure to make improvements in these areas where you have no data, and will feel you need to do something to show results for your group.  Don’t give in to this temptation!  It is the greatest mistake that you can make. 

So the most important question you can ask yourself or your group if you are leading a project selection discussion is whether the necessary data is available to support a DMAIC project.  If not, can the data be obtained within an acceptable budget?  If the answer is still no, then you cannot proceed, no matter how desperately you would like to improve a process.  Your choices are limited to devising a data-gathering mechanism with acceptable costs, or designing an entirely new process or supporting technology that will meet your data needs.  Incidentally, this is why it is so essential for the Six Sigma team to be involved in the design and implementation of any new process or technology in the company.

S. Shahbazi ProcessArc, Inc. - Financial Services Six Sigma 

Where is the accountability in the financial sector?  A few weeks back I read an article by Landon Thomas Jr. in the Sunday NY Times titled What’s $34 Billion on Wall St.?  The story focused on Dow Kim and Thomas G. Maheras – two highly successful - before the sub-prime mess that is - executives at Merrill Lynch and Citigroup, respectively.  The two gentlemen swiftly exited from their institutions in January of 2008, when the enormity of their gambling became known.  However, rather than laying low for a while and allowing the short-term memory of the public to work its magic, Mr. Kim “has been crisscrossing the globe in recent months raising money for his new hedge fund…” and Mr. Maheras “has had serious discussions with several investment banks…about taking on a top management position”.

I don’t point this out to re-iterate the obvious, rather it dawned on me that as consultants in the sector, we have to dig, slice, probe, and wrestle to create share holder value and help our clients realize savings that are in the millions of dollars.  It takes a Herculean effort to convince executives to adopt a Quality methodology.  And it should.  Laying out dollars in promise of future savings or revenue increase ought to be an exercise that comes with a near guarantee.  It is disheartening to see that those Quality efforts are not complimented with similar rigor when investment vehicle decisions are made (for all the responses that I know will come saying that investing should not have constraints, I say balderdash).  Contrasting our efforts in delivering shareholder value is the brazenness of executives who seemingly dismiss losses of the kind incurred by Mr. Kim and Mr. Maheras. 

I despise those ‘I told you so’ columns appearing after every debacle hits and the media feeding frenzy ensues.  But it should be standard industry practice to demand accountability from those who are investing our dollars in lieu of rewarding their losing of $34 Billion.  Charles Prince and Stanley O’Neal are partially to blame - if for no other reason - for failing to assess the risks (theoretically their core competency) associated with an endeavor of this magnitude.  In any other sector, Mr. Kim and Mr. Maheras would be outcast as untouchables, but on Wall Street they apparently are celebrities.

I wonder how many Six Sigma projects must be undertaken to recover this kind of loss?

S. Shahbazi ProcessArc, Inc. - Financial Services Six Sigma

1. Recognition/compensation for the team
2. Finalizing the financial benefits for their projects
   

While Black Belt roles are meant to be stretch assignments – almost like corporate boot camp – their hard work (or lack thereof) needs to be assessed and recognized accordingly. The BB position is not an easy one: it involves constantly uncovering issues which some managers may not take to too kindly.  As a BB you have to diplomatically gain consensus on recognizing the issue, come up with a fix and then hope that the area manager ensures control of the improvements. 

These same series of concepts apply to the team members involved in the project.  I think it is even more critical to recognize them:  they have full time jobs, yet go beyond the call of duty to support the BBs and the Six Sigma corporate initiative.  While recognition will boost the Six Sigma initiative, create more buy-in and improve morale, it has another benefit.  It helps identify people who didn’t fully support the project (potential risk for future projects) or did not possess the level of talent that was originally assumed (will need to be replaced).

But the most gratifying part for a BB and MBB is calculating the financial benefits delivered for the given year.  And please, if the numbers are good, i.e., you met or exceeded your target, advertise it.  If you didn’t meet your targets, hopefully it is not a surprise, but if it is the MBB/BB need to determine its root cause and mitigate it for future projects.

By completing the steps above you can be assured that you have completed part of your due diligence on your Six Sigma initiative – ensuring future success: making certain that you have the right people on the team, they are kept motivated and that the financial targets are met & communicated.
S. Shaffie ProcessArc, Inc - Financial Services Six Sigma