Efficiency principles in high STP environment - … 2013/Presentations 2013... · Efficiency...

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Confidential

Efficiency principles in high STP environment

A presentation for EPCA

Vincent Van Lierde, Head of Lean Programme, Euroclear

March, 2013

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Euroclear is the world’s leader in x-border settlement

of securities in euro.

816 European Participants

719 non-European Participants

20 European markets

15 non-European markets

EUR 2700 Billion moved everyday

Value of securities held:

> EUR 23,5 Trillion

97% STP rate achieved in 2013

Operations in Belgium, France, UK, The

Netherlands, Sweden, Finland and Hong-

Kong

More than 170 Mio transactions

per year for a revenue of 525 Trillion

4,500 FTE (before Lean in 2007)

3,400FTE (today)

Stock exchange or over the counter

Clearing & Netting

Settlement system

Seller B

Seller B

Buyer A

Buyer A

Trade date

Settlement date

Multi-cultural group (70 nationalities) / University degree population (>75%)

/ Engineering mindset / Risk adverse company / Very stable business model

NOVEMBER MON TUE WED THU FRI SAT SUN

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30


1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30


1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30


1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30

3

At Euroclear, the increase in efficiency has historically

always been done through IT (increase STP rate).

Benchmarking data confirmed that this strategy paid-out

Service 1

Service 3

Service 4

Service 5

Service 8

Service 6

Service 9

Service 2

Service 10

Service 7

2006 ZYen Bonds European benchmarking survey based on Costs per Wholesale transactions

Euroclear

Tier 50% Top Tier 25%

97%

55%

2005 2013 2009

Evolution of Euroclear STP rate over 8 years

•Massive investment in IT •Up to 50% of the company resources focused in IT

•Main senior management focus

•Benchmarking comparing all major US and European bank to Euroclear confirms that out of 10 service lines,

Euroclear is the best in class for 8

//upload.wikimedia.org/wikipedia/commons/c/c2/Millimeterpapier.svg

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However, Euroclear cost structure was not decreasing,

pushing the management to go and look beyond IT and

classical cost cutting program to deliver impact

From 2005 to 2007, despite

the increase in STP rate, our

cost structure was increasing

• Strong volume growth

requiring strong recruitment

• Increase request from clients

for dedicated client services

•Increase pressure from

regulators to invest in

compliancy, risk management

and audit

• Continue massive

investment in IT to anticipate

the future

Efficiency

Gains (>25%)

People

Engagement (varies every year)

Quality

Improvement

&

Risk

Reduction (typ. > 20%)

Clients

End 2007, Euroclear

started an enterprise-

wide transformation, to

‘do more with less’:

Lean Management

In 2007, the pressure from

clients and shareholders to

get cost under control raised

• Decouple volume growth

and headcount

• Decrease people turnover

• Reduce cost as competitive

pressure was raising

• Free-up time from senior

resource as the all company

was embarked in complex IT

programs eating up all

management attention

• Four objectives were set:

•On top of this program,

Euroclear conducted a

purchasing cost-cutting program

and increased IT outsourcing

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5 years in the program, results : productivity, quality

improvement and risk reduction objectives are met!

Quality improvement as demonstrated by our client survey

People engagement measured

by the employee Climate Survey Number of incidents at Euroclear Bank

70%

72%

74%

76%

78%

80%

82%

2007 2008 2009 2010 2011 2012

0

200

400

600

800

1000

1200

1400

2007 2008 2009 2010 2011 2012

Productivity gains in line with committed savings: 25% FTE less and

30% more volume delivered Lean saving (in FTE) across Euroclear Group

40%

45%

50%

55%

60%

65%

70%

75%

2007 2008 2009 2010 2011 2012

0

200

400

600

800

1000

1200

2007 2008 2009 2010 2011 2012

Committed Realized

-8%

-4%

0%

4%

8%

12%

16%

<12 months <24 months >24 months

-8%

-4%

0%

4%

8%

12%

16%

-8%

-4%

0%

4%

8%

12%

16%

<12 months <24 months >24 months

In 2010, differences

between Leaned and

non-Leaned teams

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To achieve a significant impact, Euroclear has gone

through a few fundamental changes

• « Each demand is specific »

• « The financial market is unpredictable so we need to be firefighters »

• « Expert based culture and promotions »

• « Management focusing on projects, on their stakeholders »

• « I leverage my own experience to deliver »

• « Improvement comes from managers and investments »

• « I have a 5 years degree and spend all my time on transactional business »

• « Every country and divisions have their common language and managerial practice around the all group »

• « We have company values… but I do not understand what it means »

Customer

relation

From… … to

Managers

Employees

• We organize people and processes to deliver the exact value required

• We plan our demand and align our capacity on a daily basis

• Focus on people management and shop floor presence at all level has boosted

• Primary duty of a manager is to manage performance of their team

• We share and codify our collective experience to improve

• We are responsible for delivering and improving our business

• Common language and managerial practice around the all group

• The new company values are supported by new managerial principles and tools enabling people to live their values

Culture

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The Lean transformation of Euroclear group was

conducted in four years. Further work is done by looking

through end to end transformations

2007 2008 2009 2010 2011 2012

Operations

IT

Product

Application

Development

Front, back office

and marketing

Infrastructure

Support

functions

Local CSD’s

Commercial

Bank

Activity

McKinsey support

W1 W2 W3 W4 W5 W6 W7 W8 W9

1 3 4 6 8 11 12 11 10

42 75 145 233 373 519 639 721 850

Waves

# of streams

# of mgt attending Bootcamp

W1 W2 W3 W4 W5 W6 W7 W8 W9

1 3 4 6 8 11 12 11 10

6 9 14 26 34 40 46 44 36

Waves

# of streams

# of Lean Navigators

W10

34

9

W11

24

7

W12

6

W13

5

W14

3

W15

3

6 11 12 12 # of Lean Stream Leaders 0 3 4 8 12 11 9

4 # of Lean Architects 0 1 1 2 2 3 4 4 4 4

20

8

4

12

5

3

10

5

3

10

5

3

Finance, Audit;

Risk, HR, Legal, Communication

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It requires a real transformation of the management

culture of the services companies…

Performance

Step-change Stability Sustainability Time

"Technical"

improvement

Behavioral

effect

Program achieves

objectives

Employee

resistance

Other

obstacles

Insufficient

resources/budget

Senior management

behavior does not

support change

30 27

23 10

10

70% of transformation fail…

Success Failure

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To successfully implement Lean, Euroclear has

designed a transformation called “wave” which will

follow a standard process

4 weeks 2 weeks 2 weeks 1 week 7 weeks Continuous

for life

Project team: 4 – 6 Navigators (one stream lead)

(100% time) 2 – 4 Experts from the line

Business team: All layers of management of the business

(30 to 50% time) group to transform

Sustain/

Control Implement

Technical

Implemen-

tation Plan

(“TIP”)

Define future

state vision Diagnose

Prepare and

train

Clients

Process

Efficiency Performance

Management

Mindsets

& Behaviors

Organization

& Skills

Diagnose and Future State

covering five dimensions!

The approach does not

rely only on experts

(navigators, “black

belts”,…) but change the

line management so that

they become the key

leaders of efficiency gains

through continuous

improvements!

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For the “process” lense, we have started to

look, not only at deliverables but at what

people spent their time on… and taking the

client view, opportunities became huge!

5-20%

25%

55-70%

100%

What the client is willing to pay for

Other processing

Resources invested elsewhere

Total resources invested (FTE)

Typical focus of IT, BPR and other “technical”

optimization projects

► Optimizing the core process

► Automating

i.e. optimizing 5-20% of resources invested

Main focus of Lean Management

► Eliminating non-core

► Shortening learning curve

► Sharing best-practices

► Performance management

► Capacity management

i.e. optimizing the 55-70% invested else where

•What is easier, faster and more impactful:

►Gain 20-40% on the 5–20% “processing” via redesign and IT developments?

►and/or gain 40% on the 55%-70% invested elsewhere via “common sense executed with discipline”

Performance Management

Organization and SkillsMindsets and Behaviors

Process Efficiency

Delivering on customer outcomes is continuously improved, in a structured and focused approach. Overall standardization

in processes without waste

Individual and organizational

capabilities have the skills and knowledge to always

deliver on their accountabilities

Waves of projects focused on maximum customer impact: deliver customers what they want, when they want and to the quality they want and no less than that

People individually and collectively

working together to put the customerat the heart of the business

ClientClientClientClient

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Variability among people and rigidity due to

a lack of capacity management is a strong

lever to gain productivity in services

Codes per day (normalised)

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

1

2

3

4

5

6

7

8

9

10

11

12

Codes per day (normalised)

Total individual variability for

this group

represents 36% of loss capacity

How People variability affects productivity

Distribution of individual performance of

an Ops team

If everyone reaches 75% of the target of

27.25 codes (normalized)/day, capacity

will increase by 27%

400

400

400

400

400

400

400

? / X = 62% ¯

? / X = 50% ¯

? / X = 69% ¯

? / X = 63% ¯

? / X = 72% ¯

? / X = 66% ¯

? / X = 77% ¯

Pooling of workload intra - site and across client portfolio would increase

productivity by 32%

400

400

400

400

400

400

400

? / X = 62% ¯ ? / X = 62% ¯

? / X = 50% ¯ ? / X = 50% ¯

? / X = 69% ¯ ? / X = 69% ¯

? / X = 63% ¯ ? / X = 63% ¯

? / X = 72% ¯ ? / X = 72% ¯

? / X = 66% ¯ ? / X = 66% ¯

? / X = 77% ¯ ? / X = 77% ¯

Current average 64.7 %

Pooling of workload intra - site and across client portfolio would increase

productivity by 32%

How rigidity affects productivity

Pooling of workload intra-site and across client

portfolio would increase productivity by 32%



Process Efficiency










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These gains can only be capture and

sustained by a thorough performance

management cycle. The daily meeting, is the

first step of a cascade of meetings.

A totally new group dynamic



Process Efficiency










Breaking down long sales process or long item development in fragments of days… Transparency of what people do and of all issues…

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… but can not subsist without all

hierarchical line involved in a cascade of

meeting

Single Process Owner

Division Head

Daily

Supervisors

Staff

Department

head

alignment

Divisional

Balanced Scorecard

Translation into

Process objectives

Translation into

Team objectives

Translation into

Individual objectives

Every 6 weeks

Weekly Bi-weekly Monthly

Divisional Board

•CI environment

•OPE results <> BSC•Transversal

stream’s highlights

Process Board

• ‘Process’ Morale

• KPIs• ‘Process TIP’

follow-up / highlights

Department Board

• CI environment (incl. morale,

people engagement)

• OPE results

• Issues solving(not solved within

TIP deadline)

Team Board

• Cap. mgmt• Team morale

• KPIs• Problems/Issue

BOTTOM - UP

alignment

Quarterly

TOP - DOWN

Single Process Owner

Division Head

Daily

Supervisors

Staff

Department

head

alignment

Divisional

Balanced Scorecard

Translation into

Process objectives

Translation into

Team objectives

Translation into

Individual objectives

Every 6 weeks

Weekly Bi-weekly Monthly

Divisional Board

•CI environment

•OPE results <> BSC•Transversal

stream’s highlights

Process Board

• ‘Process’ Morale

• KPIs• ‘Process TIP’

follow-up / highlights

Department Board

• CI environment (incl. morale,

people engagement)

• OPE results

• Issues solving(not solved within

TIP deadline)

Team Board

• Cap. mgmt• Team morale

• KPIs• Problems/Issue

BOTTOM - UP

alignment

Quarterly

TOP - DOWN



Process Efficiency










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Role of management at all level has been

defined… all had to adapt to fuel

continuous improvement

Staff

• Perform his tasks/assignments

• Contribute to continuous improvements

- Assist and contribute to daily brief

- Apply SOP and detect deviations

- Participate in problem solving sessions

- Bring improvement ideas

- Constructively dissent to their

management

First level(s) of management

• Projects and medium-term improvements

• Day to day

- Meeting coordination

- Recruiting- Reporting, Admin

• Day to day continuous improvement

- Daily brief

- Sit-ins and coaching

- Performs problem-solving with the operators

50%-60%

First level(s) of management

• Projects and medium-term improvements

• Day to day

- Meeting coordination

- Recruiting- Reporting, Admin

• Day to day continuous improvement

- Daily brief

- Sit-ins and coaching

- Performs problem-solving with the operators

50%-60%

Middle to Senior management

• Strategy and day to day

- Meeting, coordination

- Reporting, Admin

• Process ownership / Projects

- Run capacity managementand set daily objectives

- Ownership of Business Process flows

- TIP ownership

• Shop floor presence – Continuous

Improvement- Assist to Daily brief and coach

- Problem solving

30%-40%

Top management (C-levels and N-1)

• Define visions and strategy

• Manage day to day

• Role Modeling

- Assist to daily briefs and provide

feedback- Encourage problem solving

- Align support function

into Lean mgt

• Drive structure performance management• Coach Direct report into Lean mindset

25%

Top management (C-levels and N-1)

• Define visions and strategy

• Manage day to day

• Role Modeling

- Assist to daily briefs and provide

feedback- Encourage problem solving

- Align support function

into Lean mgt

• Drive structure performance management• Coach Direct report into Lean mindset

25%



Process Efficiency










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Euroclear identified 9 critical success factors ensure

success

It was wrong to always look at IT as a way to get all the improvements. Developing

management skills via an holistic Lean transformation delivered also strong results 1 You can transform all areas of the companies (it works everywhere!) with the same

approach and concept but adapt to the local realities 2 Top Management needs to be and demonstrate commitment (presence time!): “If you do

not like Lean, you will discover that you will not like Euroclear anymore”,… 3

Large investment in high caliber change leaders (“navigators”), in quantity and quality –

Any compromises made here had a systematic results impact

4

Listen first, and then address the needs of the employees and managers;

people management change comes before process change

5

HR consequences have to be planned and quickly addressed

6

Obtain commitment from any external consultant to transfer their knowledge and use

them to gain extra capacity

7

Maintain continuous improvement: Lean is common sense executed with discipline. Empower the bottom and constraint the organization

8

SOURCE: Euroclear Lean Team

Line Managers drive their transformation, are accountable of the success and of the

sustainability. They invest a minimum of 30 percent time during transformation

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