e-Zsigma November
2003 Newsletter
Six Sigma SpotLight:Joseph Valasquez, Bank of America |
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Six Sigma SpotLight is a regular feature of the e-Zsigma newsletter, and allows us to introduce one of the global six sigma community's superstars. As Bank of America's Technology & Operations T&O Quality and Productivity executive, Joseph "Joe" L. Valasquez is responsible for leading efforts to improve customer satisfaction and productivity across the T&O organization by accelerating key customer results utilizing enterprise approaches and tools, such as Hoshin Planning, Six Sigma and Management by Fact (MBF). Joe also serves on the Bank of America Environmental Advisory Group, which is responsible for leadership, oversight and review of the Bank of America Environmental Commitment. Mr. Valasquez earned a bachelor's degree of science in industrial engineering from the University of Arizona and a master's degree in business administration in finance from Southern Illinois University. He also has additional training and numerous professional accreditations in engineering and the quality and productivity discipline. We were delighted when Joe agreed to our request for an interview for the Six Sigma Spotlight so that we, as well as our readers, could learn more about how Six Sigma is being incorporated into the strategies of the largest consumer bank in the United States... -------------------------------- 1. News: "Prior to taking on your senior leadership role in Technology & Operations Quality and Productivity, you were responsible for establishing and maintaining corporate policy and strategy for improvement at Sunbeam, which included their Coleman, First Alert and Signature Brands operations. Was your transition into the banking industry a difficult one, specifically in terms of the implementation of Six Sigma, versus your past experiences in manufacturing organizations?" 1. Joe: "Firstly, manufacturing companies typically are getting into Six Sigma often because it is a "do or die" kind of approach, meaning that they are either having to off-load their products offshore, or significantly increase productivity and dramatically reduce costs to become more competitive… kind of a burning platform. Here at the Bank (of America), we are counted in the top five corporations in the country in profits from quarter to quarter, so it is a very profitable organization, for good reason. Secondly, in manufacturing, the first focus on Six Sigma projects and the pilot programs all start out in manufacturing operations and that lasts two or more years before the transactional or support areas are ever affected. In the case of (banking), everything is a support area. Of the Master Black Belts available, it was very difficult to get ones that had any experience other than in manufacturing. That transition for them to come in was difficult all around. Thirdly, unlike the manufacturing or distribution industry where things are easily measured, in banking it is very much a relationship business where relationship is primary and results are secondary. That's a fairly huge change because manufacturing is about meeting monthly shipments or deliveries whereas in the bank, we are dealing with customers entrusting you with their money, so relationship is the number one item… that's how the bank does business. For those reasons, it was a significant "culture shock" difference." 2. News: "We have heard from Maple Leaf Foods on how they have applied Six Sigma to everything from commodity hedging and marketing analysis to agricultural feed formulations. What would be some of the applications of Six Sigma that Bank of America has undertaken that could be considered "unique" to the banking and finance industry?" 2. Joe: "One of the things we grabbed rather early (into our Six Sigma program) was operational risk management… risk management being very much a statistical application… the entire banking industry being a risk management industry. There were two elements of risk: market risk and credit risk. The Basel Accord which is coming out of Europe is now advocating a third type of risk: operating risk, which includes all types of things that are internally generated by an organization as well as things that are related to natural disasters, terrorist activities… things that are not credit or market related. We focused on the operating risk from the standpoint of our own inducement due to our processes, so what we did was create a framework that we call "Operational Risk Assessment Model". We used a modified FMEA (failure modes and effects analysis) to identify all of the factors that would affect risk in our core processes. There was a lot of work that had to be done just to set up the FMEA as well as set up the core processes. We've linked the risk management piece into our methodology for improvement of our core processes, and the Bank felt that it was industry impactful enough that we actually applied for a patent for this activity about a year and a half ago. With all that has occurred over the last two years, the need for having a system manage operational risk in financial institutions has grown. Having started with our operational risk and blending it in with past audit reports, we can now link it to the core processes we have developed… core processes which have four metrics: a quality metric, DPMO. A speed metric, completion time. A risk metric, which has an interesting calculation that I won't go into at this time. The fourth metric is a benchmarked cost per transaction. We have also simultaneously rolled out Six Sigma across our entire business, starting out with our Green Belt program, then to a Black Belt program, and now we've started our Master Black Belt program. Our training includes Lean, Design for Six Sigma, Sales Leadership, Marketing, and Supplier programs. To increase the effectiveness, we developed programs around the support functions. For example, our Green Belt program primarily is within credit card (services), software development, check processing, personnel, finance. Our marketing and Sales Leadership programs are combinations of our Green Belt program as well as elements of Design for Six Sigma, very much geared towards the voice of the customer." Editor's Note: For more information on the Basel Accord and related publications, please visit http://www.bis.org/bcbs/publ.htm. 3. News: "I read somewhere(1) in early 2002 that Bank of America's chairman and CEO, Ken Lewis, was promised a $1 billion savings from Six Sigma. That represents over 2% of your annual sales! Was that an overly aggressive target, or has Six Sigma actually delivered on that promise? What is the promise for the future?" 3. Joe: "I think that the way it was phrased is that the billion dollar savings was from quality and productivity efforts. The quality and productivity program is broader than just Six Sigma… I think this is a key point. Six Sigma is our "how to" while our quality and productivity program is our strategic approach. Certainly, under the quality and productivity umbrella, we have met the billion dollars in expense and revenue impact. To accomplish this as well as maintain this, we simultaneously developed our three-page Hoshin Plan, which is a three-page document that identifies our one and five-year strategies as well as our key corporate metrics, which was all done at the CEO level. Then each major line of business also developed their strategy which linked to the corporate strategy. Our greatest (project) successes have been where we started with our Hoshin metric - our strategic metric, completed an MBF (Management By Fact) to determine the key drivers, and then aligned the Green Belt projects and managed those Green Belt projects to achieve the improvement around the metric… Six Sigma is more about how we're going to do it, whereas what we're going to do is a bigger deal to us." Editor's Note: For more information on the Hoshin strategic planning process, please refer to Quality Digest's May, 1997 article on the subject at http://www.qualitydigest.com/may97/html/hoshin.html. 4. News: "Can you share with our readers a bit about Bank of America's Six Sigma program in terms of the number of dedicated and part-time resources, the infrastructure and reporting that supports your Six Sigma strategy, and how this is tied into and aligned with Bank of America's business goals?" 4. Joe: "I would estimate there to be 6,000 part-time and full-time resources involved, with full-time, dedicated resources accounting for several thousand surveys per month on a regular basis. In doing the analysis of the responses on a ten-point scale, we found that customers responding on the low end of the scale will probably leave the bank; in the middle, they would stay unless something better comes along, at which point they would leave. Customers really have to be at a 9 or 10 point level to really make an impact, which can be described in three ways: More of the share of their wallet, their willingness to invite new people to the Bank - word of mouth, and finally, they are less likely to leave. These are three elements that we measure. In our first year (of Six Sigma), our rating went up 10.4% which is a huge accomplishment in one year, and we also moved 1.2 million customer from other categories into the "delighted" category. The Bank was losing a million customers per year and we are now gaining double that. How we achieved the increase was establishing management by fact for each business unit, which then allowed us to define our Green Belt projects and align our resources so that we can achieve these type of results." 5. News: "What would you consider to be some of the key success factors in Bank of America's deployment of Six Sigma? Conversely, what would you differently if you had the chance to do it all over again?" 5. Joe: "I think that the people in Bank of America are extraordinarily intelligent - a really great group of driven people. If you think about Bank of America and what it has achieved over the last twenty years, it went from a small, North Carolina bank to the biggest consumer bank in the country, spanning from coast to coast, and being well-known throughout the world. This is quite a feat and says a lot for the people who were here at Bank of America… a very positive approach - a "can do" attitude. One of my biggest issues here at the Bank is keeping up with demand (for Six Sigma). Setting (Six Sigma) up at the strategic level was probably the best thing the Bank did in the very beginning. In some cases, we may have moved a little too fast to satisfy that demand. Remember that we are a very large organization, and we pulled a lot of stuff in very rapidly - had the Six Sigma up and running quickly. I think in some cases, it might have been better to communicate more in the beginning and allow more assimilation, rather than moving so quickly. With regard to (Six Sigma) penetration, we are just now really starting to get a lot of people on board that were previously disconnected. We could have refined the program a bit, had more trial runs and evolved what was a manufacturing program into a banking program in a more controlled environment. On another subject, I think we could have developed a more refined methodology earlier on for bringing in Master Black Belts from the outside, because they really did come in and get thrown into the fire, and had to learn about the environment and the relationship culture - we were all learning, with the bankers at one end of the extreme and the Master Black Belts at the other end, and trying to figure out how we operate together. Recognizing early the need for the human integration… would have been an advantage over the long term and perhaps less dramatic in the beginning." 6. News: "I understand that Bank of America chose a different, and perhaps courageous, approach to implementing Six Sigma, in that you built your own Six Sigma Leadership Team, developed your own training curriculum, and deployed Six Sigma using your own, rapidly-developed center of expertise. What were some of the challenges that you had to address by being less reliant on outside expertise for support, and how did you overcome those challenges? Were there any lessons learned that we could pass on to other companies who are considering this type of approach to deployment and competency?" Scroll up to right-hand side of page to continue interview... |
Joseph
Valasquez, SVP; LOB Quality and Productivity Executive Click on image to go to Bank of America website Continued from left panel... 6. Joe: "When we first established the Six Sigma program, we used minimal (outside) consultants - we hired people from all over - any companies you can think of that's a major player in Six Sigma. We have some of their best Master Black Belts working here. We brought those individuals on board and combined their knowledge, and developed a customized program for Bank of America, which was accomplished in about two months - we moved very, very quickly in putting together a program. There was four or five of us here in the beginning so it was very much a challenge to communicate to everyone what it was we were trying to accomplish, given that the Bank personnel were all very committed. In the beginning, we did use the services of IBM/PriceWaterhouse to provide us with Master Black Belts until we could staff up, so we did have some support from outside, although minimal, but enough to keep us moving as well as help us with some of the integration work. However, the demand was huge as well as almost instantaneous when we started "selling" the (Six Sigma) program, which we hadn't really expected - most companies you go into you have to sell it for six months before you finally start to get movement - so we had to figure out the process for signing up for classes, where to conduct them, how to produce the materials - all of the logistics were really overwhelming. We certainly underestimated the interest here at the Bank. What really helped the integration was the creation of two groups: a central training group headed up by Bruce Wray, and a group for Master Black Belts who provide mentoring as well as developed the projects headed up by myself in Technology and Operations. Then, by housing them all in a central location, we were able to bring to bring them together and allow them to work their way through this together. Even though these individuals have come in from the outside, with no prior banking experience, they've been able to be promoted out of my group at a 30% rate into non-Six Sigma roles - we can't create Master Black Belts internally fast enough to keep up with the demand, and likewise, we can't find excellent ones fast enough on the outside to backfill these positions. With all of this in mind, we have not experienced any voluntary turnover in T&O Master Black Belts whereby they have left the bank." 7. News: "Your chairman and chief executive officer, Kenneth D. Lewis, stated recently that success, in spite of economic challenges, has been partially due to "great progress on (Bank of America's)…customer-focused strategy. We added talent, launched new products that deepened relationships, improved our customers' satisfaction scores and increased retention". Was Six Sigma used in new product develop for the Bank? Would you be able to share with us some successful examples?" 7. Joe: "Absolutely! We developed a Six Sigma change process methodology that uses the DMIAC (Define, Measure, Analyze, Improve, Control) framework - I know a lot of companies use DMADV (Define, Measure, Analyze, Design, Verify), but the problem was that we were introducing so many new acronyms to the Bank that we wanted to limit our number of acronyms, sometimes more at the expense of the practitioner than the banker… the bankers don't necessarily see a difference - they just see a tool set to accomplish what they need to do… We wanted it to be a tollgate process that changed the way we funded initiatives. Over a three or four month period, we identified all the elements that would be required at each tollgate, and then constructed a training program around those tools - voice of the customer, affinity diagrams, etcetera, as well as have deliverables for Six Sigma that were along that defined path. Now, converting business requirements to technical requirements is always a challenge - especially when there is no set process. What we found was that projects were not being completed as planned, and not being completed within the budgeting framework, primarily because there was not a clear understanding of what was required, and there was no clear methodology to get approval, buy-in, and feedback along the way. From there, we linked in the financials so that a gated funding process emerged. Some of our first projects were projects that the company had been struggling with for quite some time to figure out what it was we wanted to do. A couple of good examples are anti-money laundering which is a huge initiative that is very much impacted by the Patriot Act (http://www.bankersonline.com/aml/aml.html) - What are the regulations?, What do we need to do?, What do we want to do?, and How do we do it in such a way that we don't infringe upon our customer's in a negative way? If you think about that, it is a huge endeavor when you consider the number of customers we have and the number of transactions we want to watch, (Editor's Note: Bank of America's consumer and commercial banking operations serve more than one in four households in the United States, transacting with more than 150 customers per second!), it was key to get all of the customer requirements with all of the other requirements, weighting them out, and putting them in a framework that would allow us to see what was desirable and what was most important, as well as taking into consideration our external customers - taking all of that information and the vast amount of channels that we have, and developing viable technology requirements around it was one of our first projects that piloted the Design for Six Sigma with very much success." Editor's Note: To learn more about DMADV or DMAIC, please visit http://www.isixsigma.com/me/dmaic/. For additional information on Bank of America's Anti-Money Laundering Policy, please visit http://www.bankofamerica.com/investor/index.cfm?section=laundering. 8. News: "Bank of America CEO, Ken Lewis, has been quoted as saying, "Drawing from a variety of industries, we have been bringing in executives who will challenge the status quo and help take Bank of America to the next level". In light of this statement, as well as the observation that Bank of America has often recruited industry outsiders for key positions, how important do you think Six Sigma experience and training is in terms of recruitment or advancement to key positions within Bank of America?" 8. Joe: "Many of the senior managers and leaders - remember that this is an organization with over 144,000 employees so they have huge responsibilities - have achieved Greenbelt certification and some are working on Black Belt certification, so I think that message at the top had proliferated throughout the organization. Even though Green Belt certification is not a requirement within the job description, it is something people are definitely looking at. If the rate of promotion for Master Black Belts is any indication, their expertise is in demand. We currently have 100 positions for Black Belt and Master Black Belt wanting (open) in Bank of America. Black Belts are heavily in demand and are courted by a variety of different areas (within the Bank). The (Master Black Belts) that have come in have moved on to other roles and continue to make a contribution and the bankers that have embraced Six Sigma are enhancing their careers as evidenced by the movement that they are experiencing. So, the answer is yes, it is a key requirement, but not in the job descriptions across the board." 9. News: "At the ISSSP Annual Six Sigma Conference in June this year, you delivered a presentation on how Six Sigma was an "enabler" for your Hoshin Strategic Planning Process. Can you share with our readers a bit of that discussion?" Editor's note: To view Joe Valasquez's entire presentation at ISSSP's 4th Annual Leadership Conference earlier this year, visit ISSSP's iKNOW site at http://www.isssp.com/index.asp?page=product_profile&show=653. If you are not already a member of ISSSP, you can register at http://www.isssp.com/index.asp?page=apply, or by contacting ISSSP at http://www.isssp.com/index.asp?page=contact (ph. 480-368-7083). 9. Joe: "The key message I've gotten from a lot of feedback is very valuable, and that is the matter of how to get management buy-in - this is a recurring theme at all of the (Six Sigma) conferences we have attended. Well, it is not through the Six Sigma program. I think that to get management buy-in, you need to talk in business terms, get a strategy that is around business terms, get metrics that people will be accountable to and which their performance will be based upon, and then put Six Sigma out there as the "how to do it". I think that if we had just come in with Six Sigma here, and just started doing projects, that it would have lasted about a year and a half. I think the reason why there is life to the program, and why it keeps growing and expanding is because we have it engrained in the strategic approach and objectives of the business. In the many articles he has written or participated in, you can see that our CEO, (Ken Lewis) very much uses Six Sigma to achieve his objectives… Strategically linking the results that Six Sigma can provide to business objectives at a very high level… not just warranty or DPMO (defects per million opportunities) in a factory, but real business needs: getting customers, increasing revenue… That is the key to making Six Sigma long lasting, integrated, and a part of the corporate culture and identity." References: (1) Source: http://www.technologyforfinance.com/PDF/MKS_Financial_whitepaper.pdf Rod Morgan, e-Zsigma, Inc. --------------------------------
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