Building a Continuous Improvement Culture · Building a Continuous Improvement Culture March 16,...

Building a Continuous Improvement CultureBuilding a Continuous Improvement Culture

Peak Performance Consulting Group®

www.peakconsultinggroup.comMarch 16, 2009

http://www.peakconsultinggroup.com/

Peak Performance Consulting Group, Inc. Peak Performance Consulting Group, Inc. | 512512--607607--6332 6332 | page 2page 2

IntroductionIntroduction

David Kerstein, Peak Performance Consulting Group

About Peak PerformanceProcess approach

Tom Hunley, PNCPNC BackgroundCase study

BiographiesBiographies

David Kerstein is President of Peak Performance Consulting Group, which specializes in business strategy and productivity improvement for the financial services industry. His clients include PNC, Comerica, Chase Bank (JP Morgan Chase), Frost Bank, Wells Fargo, the Bank Administration Institute and many other regional and community banks.Mr. Kerstein has over 20 years experience in financial services management including senior management positions at Citibank, Bank One and Old Kent Financial Corp.Contact information: [email protected] or 512-607-6332

Tom Hunley is Chief Operating Officer for Branch Banking at PNC Bank where his responsibilities include 1200 branches in 8 states. Previously, he was CFO for Branch Banking, Business Banking and Technology where he was responsible for financial oversight and analysis for the majority of PNC’s Retail Banking Business.Tom began his career as a financial manager at J.C. Penney and Boston Market. He is a graduate of Robert Morris University, where he is President of the Alumni Association and a Member of the Board of Trustees. He received an MS in Finance from the University of Texas.Contact information: [email protected]


mailto:[email protected]

mailto:[email protected]


About Peak PerformanceAbout Peak Performance

Leading financial services process improvement providerProven methodologies tailored to financial servicesEffective implementation with sustainable resultsProven track record of success


Track record of success Track record of success –– sample clientssample clients

National and Regional Banks

Community Banks and Credit Unions

Specialized Financial Services Providers

http://www.jpmorganchase.com/

http://www.suntrust.com/index.asp

http://www.nrf.com/Thumbnail.asp?id=7234

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Customer satisfaction impacts revenueCustomer satisfaction impacts revenue

65% of customers who receive poor service, would be willing to bring more of their business to their bank, if they received better customer service.

87% of those who rate themselves as highly satisfied with the customer experience say they would ‘definitely recommend’ their bank to a friend, versus only 31% of those who rate their satisfaction as ‘medium’ and 5% who rate their satisfaction as ‘low’.

Highly satisfied customers report having actually made double the number of recommendations of those who had a medium level of satisfaction and six times the number of those with low satisfaction.

.

JD Power & Associates Consumer Branch Satisfaction Study


Prioritizing initiativesPrioritizing initiatives

Which service problems do you start with? Which are most important?

How do you prioritize?

How do you determine which the return on investment?

“We know how much it costs to fix, but who’s going to sign up for the revenue”


Defining the impactDefining the impact

Start with problems as customers define themCorrelate problem incidence to specific, tangible impact on customer revenue

Reduced attrition and account diminishmentImproved cross-sellReduced operational cost (simplified process, reduced complaint handling at branch and call center)

Our Value Model projects future revenue streamsKnown cost to eliminate problem (IT, equipment, staffing)Improved revenueReduced cost

ROI based on multi-year cash flows, as in any other capital investment model


Problem Resolution Outcomes- Percentage of Portfolio -

78%

7% 7% 2% 5%

Customers withoutproblem

Immediate CustomerAttrition

ImmediateDiminishment

Stagnation and FutureDiminishment

Remaining ProblemResolution Customers

with Full NPV

Not every problem is a Not every problem is a ““problemproblem”” ---- measuring the measuring the impactimpact

Real economic cost from increased runoff and lower cross-sell: client data

16% of customers with escalated problems closed an accountCustomers with problems opened new accounts at only half the rate of non- problem customers

Disguised client data


Problem Resolution Financial Cost in Lost Assets- Millions of Dollars -

$15

Total Lost Assets (f irst 3-years average)

Problem Resolution Financial Cost in Lost Revenue- Thousands of Dollars -

$1,555

$513

$189

Total Lost NPV Total Lost Annual Revenue Total Lost Annual Profit

Defining the ROIDefining the ROI

Example: problem affecting 3,000 customers with average HH balances of $4,000:

Elimination of the problem results in $15 million incremental assets over 3 years as a result of reduced attrition and increased cross-sellRevenue improvement would be $513,000 over a 3 year period

Capital Investment Model compares cash flows from the cost of problem reduction with the incremental revenue to determine the ROI


Creating sustainable continuous improvement cultureCreating sustainable continuous improvement culture

Strategic Objectives Strategic Objectives

Prioritization Matrix Prioritization Matrix (customer value) (customer value)

CustomerCustomerImpact Impact AnalysisAnalysis

ProblemProblemMetrics &Metrics &

Standards Standards

Service & Service & Quality Quality

ResolutionResolutionStandards Standards

Financial Financial ImpactImpact

Analysis Analysis

Monthly Measurement & ReportingMonthly Measurement & Reporting

DecisionDecisionModelsModels

PrioritizationPrioritizationProcessProcess

Root/Cause Analysis & Continuous ImprovementRoot/Cause Analysis & Continuous Improvement

StandardStandardProjectProject

MethodsMethods


Prioritizing initiativesPrioritizing initiatives

Cost/difficulty to implement

Impact

Low High

Low

High

Just Do It!

High Customer ValueMajor Changes, Requires Detailed Analysis

DeferInsufficient value for the effort

High Customer ValueMeasure benefit, Implement


Define process from customer point of viewDefine process from customer point of view

Traditional drivers of operational effectiveness (examples)

Speed of answerAbandon rateLength of call (time on phone)

Customer centric drivers of satisfaction (examples)One-and-done measures: “They provided a complete answer”, “I only had to tell my story once”

o # of transferso % first call resolutiono # re-keyed customer data

Speed of resolution: “My problem was resolved quickly”

o # calls unresolved after 24 hourso Member survey data

Personal interaction: “The rep took a personal interest in me”

o Call monitoring metrics


Contact Center Example

Deconstruct the customer experience (example)Deconstruct the customer experience (example)

Loan Set-upBrowser enable the Plastic Card SystemBB - Expand Tool Kit

Application of Promotional Codes

Error in Set Up3rd Party Vendor

Related Pricing Packaging

NewRefinance

Account vs. Relationship Driver

CIFBSH Support Required

KYC ExceptionsNon Standard Titling

Forms simplificationForms Flow assessment

Outbound calling on sensitive issuesCustomer on Boarding

Call follow-upprocess up to solidify Relationship

Issue Resolution Follow-up

Branches/Wealthvs. Mass Market

LOB CommunicationRelationship Model/Segmentation

Sales/Service leadsProduct conflictsManaging referralsUnderstandingrelationship valueand treatmentsLoans andinvestment coordination

BB loan pymts:on-linestatements/ loan paymentsredesign paymentcalculationrelease of collateral

Transaction SpeedGenesis speedCash handling skillsReverse trans.processing FX order vs. exchange

Debit / Credit Memo Advices

Customer doesnot understand

Travelers Checks/SalesPhotocopy requestprocess for Loans

Inquiry/problem tracking numberUse of shared notesService Level trackingCRISS interfaces with other applicationsManaging unresolved CRISS cases and/or cases closed prematurely

Pricing changesNotification onStatementsOnline Bankingnotices

Return ChecksExpand use of on-line auto alerts Email addresses

AccuracyRequired fieldin the set-up/acct. opening process

Dispute ProcessFee Related/NSFBB – issue tracking processWealth Mgmt.– large deposits & cashier’s checksIVR Tree Assessment

Faster routingService Model

Problem ownershipSeamlesshandoffs One contactresolution

When to escalate

Address ChangeAcct. vs. CIFPost Office(Customeruses wrongform)

KYC MaintenancePerformed inHost not Genesis

BB account closing by NFSC Statement Changes

Full cycle plus 1 toimplement

AccountOpening Maintenance Monetary

TransactionsInquiries/Requests NotificationsProblem

ResolutionBank Initiated

ContactAccountOpening Maintenance Monetary

TransactionsInquiries/Requests NotificationsProblem

ResolutionBank Initiated

Contact


Disciplined process creates resultsDisciplined process creates results

Define the Issues

Measure and

Analyze

Identify

Sustainand

Control

StabilizeEngineer

Re-engineerthe process

Pilot & Implement changes

Define business issues and project goalsCollect and analyze dataIdentify root causesDevelop potential solutions and impact

• Define new processes• Prioritize implementation• Develop project plans• Pilot and analyze results• Measure effectiveness

• Manage rollout • Define Performance

Metrics• Manage continuous

review process• Transfer knowledge

so client achieves sustained improvement


What weWhat we’’ve learned: ve learned: ““Finding the moneyFinding the money””


Process improvement means:

Improved revenue:Lower attritionDeeper relationships

Lower cost:Simplified processLess re-workLower labor cost

Disciplined process required to implement and sustain:

Analytical rigor: move from anecdote to financial measurementDefined and sustainable process

Building a Continuous Improvement Culture

March 16, 2009

About PNC

Leading market share across our footprint2,589 branches6,232 ATMs2.9 million customers$291 B assetsGrowing, profitable at a time when industry is under severe stress

18

Our business model has performed well

Commitment to moderate risk profileWell positioned balance sheetAbility to grow high quality, diverse revenue streamsFocus on continuous improvementStrong execution against clear strategies for growth

19

Our journey

Manage costs– One PNC initiative focused primarily on cost savings

(2004-5)– Tools in place at branch level to continue momentum

(2005-6)Win though improved service (2006-8)– Problem Resolution process– Monthly Gallup Survey

20

Jump-start with “One PNC”Comprehensive effort to save $300 million in costsInitiatives came from the ground up6,500 ideas, average value was $50,000Senior Management Steering Committee for quick implementationEstablished process that we still follow today for gathering, valuing and implementing ideas

21

Sustain with branch level tools and metrics

Quarterly branch P&L incents focus on the right metrics– Controllable expenses– Balance sheet/revenue– Household growth– Manager incentives and recognition tied to performance

Branch Staffing Model provides tool to manage largest controllable expense– Manage service levels and optimize staffing to meet demand– Improved part time and peak time staffing by 10%

22

Win with serviceFocus on the customer -- make it easier to bank with usProactive process simplification: measure and manage– Define source of problems and prioritize– Streamline operations: eliminate “scratch & dent”– Fuel revenue growth through deeper relationships, improved

retention

Customer driven measurement– Shift from annual customer satisfaction surveys to monthly

Gallup tracking– Immediate knowledge of problem levels, type of problem,

branch location

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Retail defines the experience

Retail’s size, number of branches, geographic coverage dominates the PNC experience– If we don’t get it right in Retail, we don’t get it right in the

customer’s mind– But…the very size and breadth of Retail makes it hard to

deliver the consistent quality service customers demand Strategies– Bank wide approach– Identify and inventory high problem sales, service and

fulfillment issues– Increase ability to solve problems at initial point of contact

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Making it workSenior Management Steering Committee

– Maintain organizational focus– Maintain staff enthusiasm and belief “it can be done”– Resolve conflicting organizational demands (e.g. IT resources)

Dedicated support: project leader– Maintain momentum– Provide analytical support– Keep teams moving forward, manage team composition

Working Teams– Subject matter experts– Typically department heads or managers of key operations groups

Proving success– Prioritizing key initiatives– Identifying “home runs” that can be used as proof of concept

25

Identify and prioritize key initiatives (working team example)

26

Complexity - Difficulty of Implementation LowHigh

Low

High

Cus

tom

er Im

pact

Acct. Opening (Multiple CIF keys) 3

CIF File Structure (3) Account Opening

MaintenanceMonetary Trans.Inquiries/RequestsProblem ResolutionNotificationsBank Initiated Contact

Shared Notes -- 4

Managing Unresolved CRSS Cases -- 3

Service Model (includes Relationship Model/Segmentation and LOB Communication) -- 5

Open book coverage (4)

50 initiatives identified

14 initiatives received votes

6 items received 3 or more votes

Disciplined improvement methodology

Make changethat results in improvement

from the viewpoint of the customer

27

Principles of performance improvement

Stay focused on the goal – “What are we

trying to accomplish”

It’s about the customer, not people or internal

organization

Manage by data vs. assumptions – “How do

we know this will result in improvement”

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Example: “Disputes Made Easy”

The problem: Reg. E Disputes– Dramatically improve the customer experience “in the moment” by

simplifying the process for the customer and employee Why?– 150,000 dispute transactions/year (ATM,POS, Adjustments, ACH) – Process is hard for customers and PNC staff to understand – multiple

forms and different back office procedures based on dispute types What changes did we make? – Simplified the internal process, ensured greater accuracy– Provide immediate credit to customers (based on established criteria)– Allow customers to file a dispute using the On-line Banking channel

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Disputes Made Easy: Results

Surveyed 1,596 employees (Branch/Asst. Mgrs., Financial Services Consultants)

30

86%

7% 6%

89%

8%2%

71%

18%11%

0%

20%

40%

60%

80%

100%

Easier forCustomers

Easier forEmployees

Better DisputesConversations

Yes No Don't Know

What they liked most:

All dispute types are found in one place

Forms print automatically without having to go into e-forms

Fast/Saving time - all the pop-ups were clear and fast; ACH prints directly saving time

No more guessing - employee appears to be more competent to the customer; we no longer have to guess what procedure to follow

Engage employees: Ideas for Leading the Way

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Ideas for Leading the Way

Help us make Ease, Confidence and Achievement come to life for customers and employees by sharing your great ideas with us!

Click the Ideas for Leading the Way link to submit your suggestions for ways to improve processes or systems or barriers that may get in the way of providing great service to our customers. When submitting your ideas and suggestions, please be as specific and as detailed as possible, providing examples if appropriate.

http://rcbpt.pncbank.com/ric/rcb/pop.nsf/12b16a5950672d54852568da004252c9/1d4b0a8f314e1de2852573e70049ea7c!OpenDocument

Leading the Way: Results

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Ideas for Leading The Way

7294

5827

159

212

0

50

100

150

200

250

Q1 07 Q2 Q3 Q4 Q1 08 Q2

Ideas for Leading the WayIdea Status as of July '08

651

269 147115120

0

100

200

300

400

500

600

700

Ideas Received PendingDecision

Go Ideas No Go Closed/Resolved

Customer and Financial Outcomes

Reduced customer problem incidents by over 25%An annual reduction of 750,000+ errors that lead to problemsIdentified process simplification initiatives impact over 1.5M customers annually Improved customer problem handing Established 12 Cross Functional Workgroups involving 140+ Service PartnersGenerated over 800 “Ideas for Leading the Way” employee suggestions to improve the customer experienceIncrease customer retention Reduced problem handling cost

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A final word…

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Strategy matters, but high

performing organizations

win on execution

ManagementManagement

PracticesPractices

Roles & Roles & ResponsibilitiesResponsibilities

TrainingTraining

ReportingReporting

Reward &Reward &RecognitionRecognition

Tools &Tools &ProcessesProcesses

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