Brenton Harder recently became General Manager of Service and Change at the Commonwealth Bank of Australia based in Sydney. His Letter to the Board of Directors, in which he outlines the 11 elements necessary for lean six sigma success, can be seen as a blueprint for the implementation of lean in a financial institution.

To the Board:

You’ve asked me to establish an overall vision for our Lean Six Sigma (LSS) deployment, including the key role senior management will play in the ownership and implementation. There are 11 elements we should consider:

  1. Deployment strategy: Full | Partial | Hybrid?
  2. Deployment plan: Agree to 12 elements?
  3. Executive Launch Workshop: Do we need one and when?
  4. Training: Do we start with green belts (GBs) or black belts (BBs)?
  5. GB Training: Let’s break away from tradition!
  6. Process performance measures: Specific or strategic?
  7. Project selection criteria: Agree to 6 criteria?
  8. Curricula and training system: Blended approach with integrated tool guide?
  9. Project review and tracking: We do NOT need a big system at first?
  10. Reward and recognition: Work with HR to get something in place?
  11. Communication: Phased release without initial bold statements?

1.    Full | Partial | Targeted Deployment?

2.   Developing the deployment plan

We want a quick launch, but we need to avoid the ready, fire, aim approach. We must start with the end in mind and have a good idea of the long-term direction (deployment plan). Once the long-term strategy is set, it will be much easier to develop a short-term implementation process taking us in the right direction. The strategy has to be specific enough to guide implementation as we will continually re-evaluate, update, and add detail to our deployment plan as we move forward.

3.     Executive Launch Workshop and Launch Plan

We should develop the deployment plan as quickly as possible and host an executive or business leadership workshop with our senior sponsor(s) and the targeted managers to get buy-in and ownership of the plan. The workshop should include all members of the executive team since they all have a role to play in LSS deployment. This is especially important if we choose to go with a targeted deployment since all parties are needed to make LSS successful regardless of the initial focus of the effort. In particular, it is important that the heads of the finance, human resources, and information technology departments participate in the executive workshop and subsequent LSS deployment updates and reviews. They need to feel ownership.

While some data acquisition systems may already be in place, LSS projects will most likely uncover other process measurements that are needed to improve and effectively control the process.

The executive workshop would deliver:

  • More in-depth understanding of our LSS management process (elements of the deployment plan)
  • Defined roles of the members of the management team
  • Identification of targeted areas for improvement
  • Champions for these areas
  • Full review of draft deployment plan
  • Sign-off on the plan so it becomes OUR deployment plan
  • Schedule for ongoing progress reports

We would come to the session with a draft version of the deployment plan, and leave with a finalised version. A key part of the workshop is the refinement of the list of project areas and associated targeted champions. The executive workshop is followed in approximately one month by a champion workshop for the champions identified. This workshop uses as input the initial deployment plan and the project areas that were outputs of the executive workshop, and refined in subsequent weeks. The outputs of the champion workshop include deeper understanding of six sigma and the roles of the players, a list of chartered projects, and assigned BBs.

This workshop is particularly important because we’ve seen inactive or ineffective champions as the cause of project failures.

4.     Do we start with BB or GB training?

GB training typically starts a few months after BB training. The theory is that we need BBs to deliver initial returns (for buy-in), develop training capability (to deliver training to GBs), develop coaching capability (to keep GB projects moving and on track), and essentially use them as leverage in a one to many model (20 BBs can train and coach 200 GBs)

We should start with BB training using a “targeted” and traditional approach for quality control. We should train BBs using a blended approach (web-based training + classroom) with heavy reliance on a solid Instructor’s Guide.

I would act as the MBB and “own” the first class of BBs. I would train them (in close cooperation with our head trainer), coach them, manage their projects, and develop them from start to finish.

  • Sequence would allow me to quickly identify the strongest players
  • It would allow me to get to know and partner with the targeted champions to develop trust and buy-in for our LSS efforts
  • I could probably manage 10 to 20 BBs

5.     GB Training – Let’s break away from tradition?

I’ve seen the power of teams and believe we would get better momentum and deliverables by thinking of GBs as teams – not individuals. I’ve seen an excellent best practice at ABB using the following approach:

  • We first train a cadre of BBs that identify and scope large-scale process-based projects
  • We then use the BB to help identify “teams” of employees that are involved/impacted by the processes. Each process project would have one or two teams of GBs that would be trained by the BB
  • The selected GBs would go through online training and then attend just-in-time sessions delivered by the BB using a Project Guide. Essentially, the BB would “walk” the GBs through the guide from start to finish, and by doing so complete a full project without realising that they have been trained
  • The Project Guide is a single document that provides clear line of sight from their project to the Bank’s key goals and objectives. It explains who the customers are, what LSS at the Bank is, how it provides a path to better service and value for customers, DMAIC and controls/risks

6.     What are our process performance measures?  

Do we get specific or stick with a few strategic areas? Performance measures define what’s important for success and are used to select projects. A pitfall to be avoided is selecting each project independently. This is analogous to spending five minutes starting to clean 10 different rooms in a house, versus spending 50 minutes to completely clean one room. In the first case, it is difficult to see what impact the effort has had; in the second case there is a visible, tangible success that will now be ready to be leveraged elsewhere. I would prefer we launch LSS by focusing on a few strategic areas, rather than 10 or 20.

We should use a simple CDC model, such as Customer – Delivery – Cost.

This provides three strategic focus areas for the initial projects. Capacity is added when additional capacity is needed for the market or to run a more efficient operation. If all the projects affect one of these three areas, we could have significant tangible results when they are completed. Customer obviously relates to customer satisfaction, and an emphasis on it will almost always have the fringe benefit of saving money because you will reduce the costs of rejecting or reworking defective finished products, dealing with customer returns, and so on. The only exception is likely to be the case where delivering the desired quality level requires significant upgrade to equipment or materials.

Delivery relates to the procurement, inventory, and logistics systems.

Cost means reducing internal sources of waste or rework, regardless of whether this effort directly affects the customer.

7.     Project Selection Criteria

We can use these metrics to develop more specific criteria to select projects, but at a high level I would recommend the following:

1)     Areas to improve

a)     Waste reduction

b)    Capacity improvement

c)     Downtime reduction

d)    Resource consumption (labor)

2)     Effect of CSAT

a)     On-time delivery in full

b)    Defect levels

3)     Effect on bottom line (P&L)

4)     > $250k per project

5)     Four to six months timeline

6)     < one year benefit realisation

These six criteria define areas that are important to improve and will produce significant bottom-line results. Note that the areas to improve are those that directly affect the customer satisfaction measurements.

8.     Curricula and training system

An overall training system for each of the LSS roles should be a key element of our deployment plan. At launch, a training schedule is needed only for the initial wave of BBs. As more and more people in various roles are involved in six sigma, new employees are hired, and the need is found for advanced training in certain areas, a functioning training system with diverse curricula will need to be developed. A wave of mass training does not make a training system; mass training is an event that usually has no lasting impact. What is needed is a well thought out system that identifies all the training needs of all the roles, and puts together a sustained, ongoing system to continuously satisfy these needs.

9.     Project reporting and tracking protocols and system?

A project review schedule will be key for the deployment plan and will be needed soon after the kick-off of the initial projects.  I would suggest I meet weekly with each of the BBs on the first wave, and monthly with each BB and his/her reporting manager.

We should have a review of the LSS deployment on a quarterly basis by both corporate and the key division(s) we are working in.

Our tracking system should document the results of the projects, and provide valuable managerial information.

Eventually, the project reporting and tracking system should keep a record of all the six sigma projects to date. The system should also generate managerial reports at several levels to keep management informed of progress. This should include financial results from the tracking system, as well as non-financial information, such as number of projects completed or in progress, time to completion of projects, and so on. The tracking part of this system is intended to document the financial benefits of closed projects.

10.  Rewards and recognition

HR needs to develop a reward and recognition plan to ensure that the organisation is able to obtain (and eventually promote) the best possible candidates for our LSS roles. I’m a big believer in the power of “intrinsic motivation” (the idea that people do something because they really want to do it), rather than solely relying on “extrinsic motivation” (people do something because they are coerced or “bribed” to do it). Therefore, those that have a fire in the belly for improvement will likely perform better in LSS roles than those solely looking for money or promotion.

However, it must be recognised that a total lack of extrinsic rewards for involvement in LSS is essentially a disincentive; therefore, we should consider rewarding these roles in such a way that top performers will be drawn to LSS.

11.  Communications

It should NOT be perceived as something separate or as big bold statements. LSS needs to be communicated as an integrated component of the bank. Communication about it typically utilises existing media, but we should think about new media leveraging a variety of platforms. There is variation in people as well as in processes. Some prefer personal contacts, either one-on-one or in groups. Others prefer to read newsletters or memos, while still others respond well to videos, webcasts, or emails. Leadership needs to carefully communicate why they chose to deploy LSS, what they hope to get out of it, and where it will take the organisation.

Do we make bold statements (aka GE and AlliedSignal) where the CEO will shout about LSS at the very beginning? Danger is that if too big a deal is made of LSS at the very beginning, unrealistic expectations will be set. Many organisations choose to begin the initiative in a fairly low-key manner.

Once actual projects are started, and results begin to flow in, the initiative will be more formally and broadly communicated. Leadership will be able to point to tangible savings and communicate the sequenced roll-out of projects and training.