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Balance Scorecard Business Metrics: How it Works Interview by Helen Winsor, Six Sigma IQ Twitter Helen: IQPC_UK Sam

Chari, Vice-President of Global Operations at AllianceBernstein, joins Six Sigma & Process Excellence IQ to discuss how the company is applying BPE Methodology to drive efficiency. Six Sigma IQ: Could you tell us a little bit about how Process Excellence fits into the culture at AllianceBernstein? S Chari: Process Excellence has been, I would say, a relatively recent journey for us since the past two years. So, the primary emphasis in the Global Operations organisation that I belong to, the focus really was on reducing risk and supporting growth. From a legacy perspective, we had two firms, Alliance Capital and Sanford Bernstein come together in 2000 and we had a lot of change related to that and we were obviously, like all other financial institutions, going through a high growth scenario. So we were really focussing on that and then, starting in 2008, we started an operational excellence journey where we tried to fit the whole Process Excellence umbrella using what we call the health of excellence, and it had basically five pillars, so resources, process, technology, metrics and risk, and the goal was to support our overall goal of consistently providing superior service, supporting new products, managing risk and reducing costs. And then also last year, in 2009, we introduced an overall concept of Lean Six Sigma to enable managers to look at their processes, identify value added activities and that has been actually quite a good success story in 2010 as well. Six Sigma IQ: Thank you, Sam. And how do financial institutions typically collect and interpret performance measurement data and what should be done to improve this, do you think? S Chari: Yes, thats an interesting question because I come from a manufacturing background and my first sense when I came to this industry about five years back was, I dont think financial institutions really are as organised or disciplined. I like doing performance metrics as maybe manufacturing does and theres probably many reasons for this, but I think one of the primary reasons is that in manufacturing you can easily conceptualise what the product does. Its easy to touch and feel, while that can be a challenge and it can be pretty vague. So what weve done at AllianceBernstein is, weve taken on the development of a proper framework that organises our entire business through the business processes, both within operations and across the firm. Weve also designed key metrics at every level of the organisation, so theres summary level metrics for senior management, for the process owners, and so on and so forth. We also introduced our version of the balance scorecard which basically has people focussed on different aspects of their organisation, not just purely on, lets say, service quality. And then ultimately, I guess, our guiding principle has been you really cannot manage or improve what you do not measure, so weve really focussed over the last two years on measuring what we think is critical to our operations. Six Sigma IQ: Now you mentioned balanced scorecard business metrics, could you give me some examples of how this has guided your improvement at AllianceBernstein, outlining the challenges and solutions? S Chari: So our balanced scorecard is maybe a slightly different interpretation of what you will probably constantly see in the industry, but pretty much organised along the same categories. So we have service quality, which is things like timeliness; financial or productivity metrics most around cost, cost per unit, capacity and things like that; talent, which would voluntary progressive rates, mobility and so on; excellence risk, which is errors and a lot of error related metrics. So when we first started looking at organising the metrics, we found that most of our metrics are really geared more towards service quality or risk, so we wanted to help our managers understand their organisation from a broader context, so we introduced the concept of a health scorecard, but in order to avoid proliferating the number of metrics we track, and frankly we were tracking too many different things and not all of them are really key metrics, so we focussed on really narrowing down our focus to ones that are really critical in helping both operations as well as our internal and external clients. So I think organising the metrics across all these categories instead of focussing on the important ones has really helped our managers focus on whats critical to deliver against.

Six Sigma IQ: What top tips can you offer listeners looking to emulate your success? S Chari: So I think, as I mentioned, theres a couple of things that I found personally pretty useful. One is, lets focus on key metrics, so lets not proliferate the number of data points that we constantly monitor because, before you know it, managers will just be flooded with lots of information and they really wont know what to focus on. So I think thats one key. The second is, I think what weve done over the last couple of years, weve linked key metrics to our smart goals. So what that basically means is the ten to 15 key metrics at each level of the organisation all end up as part of that critical process of smart goals and then it filters down even to the individual levels. So what that basically means is that against your goals will be your overall performance and then, starting last year, since theyre comfortable with the process now is we started linking a small percent of their performance against the smart goals to compensation, so now you have a real financial incentive to improve on your smart goals as well. And I think the third best practice that I would suggest is, metrics should not be a policeman or a cop, so our philosophy has been to partner the managers, both in operations and the firm, to help them understand the metrics, report on the metrics and also help them improve their processes based on data, and I think thats where weve had a real success story. Six Sigma IQ: Its always useful to share some tips. Now, youre going to be running a workshop on Risk Mitigation at the BPE for Financial Services event. How would you say that Process Excellence metrics can be used to improve risk management? S Chari: We see risk as maybe just one of our components of our overall metrics, so as I mentioned earlier, risk is one of our balanced scorecard categories. I think one thing that we learnt historically, weve just looked at errors after they have happened, so we look at errors and weve actually made a lot of progress in reducing the number of errors, but what we want to do in 2011 especially is we want to focus on the leading indicators of risk, so how do we come up with data points that would help us eliminate errors before they actually happen; so things like attrition rates of our people, so if you have a lot of new hires, for example, that could be a leading indicator. In our reconciliation process, if we start seeing a lot of breaks that happen at month end, but are now not being resolved in a timely manner, but to a result in a future error. So we are trying to find what these key leading indicators that can help us catch these negative trends actually during the process that will help us prevent errors from happening in the future. In addition, what weve done is weve introduced a really comprehensive risk training programme this year. Weve taken about 400 of our staff through it already this year, and that focuses on various aspects of the process from a risk perspective, so things like documentation, how do you do failure mode ethics analysis for SMEs, how do you do risk mapping, how do you manage error in general? We try to educate our managers to be a lot more proactive about thinking about risk. Six Sigma IQ: Now, finally, can you tell us a little about your industry benchmarking programme and how and why youre doing it? S Chari: This is an interesting topic. I think we, like anyone else, want to compare ourselves to how we stand against our competition in terms of the various elements of the balanced scorecard, especially cost and service quality. Now, what weve found traditionally in our past is that the normal benchmarking efforts that weve participated in have really not been very useful because theyre not actionable and the reason why theyre maybe not as actionable as we would have hoped, its really not easy to figure out whether the data youre getting back compares your firm to another firm from a pure like to like or apple to apple comparison, plus the results are really anonymous, so theres a third party in the middle who aggregates all the data and then you see where you stack up against the others, but youre really not sure which firm youre comparing yourself to and some firms may be better in some processes, other firms may be better in other processes, so its really tough to look at this and say, okay, what can we do better? So thats the struggle weve always had in the past, so one thing weve tried to do recently is, we started reaching out at a couple of like-minded firms who also want to get some more value out of their sparking and weve actually started doing this one on one just with them.

So, as an example, Ive sat with my counterpart at one of our competitor firms and said, this is all our data were very upfront and try and spread with our data and they are the same as well. Then we are quickly going through and saying, okay, this process is really not comparable, lets eliminate and lets really come down to the ones that are like for like; and then lets start drilling down into where they may be differences and why, and that gives us... hopefully, as we havent completed it yet, but Im already pretty comfortable with the process so far, that we can start drilling down into the causes where one firm may be better than the other, and then we can figure out what to do about it. So thats the approach weve started taking and hopefully in another month or so, we should have some pretty good information out of this. To Learn more about Sam you can view his Sams Profile LinkedIn Sam Chari Bio or Follow Sam on Twitter at About Process Excellence Network Process Excellence Network is a free to join online community, providing critical knowledge on the development of Process Excellence including Business Process Management (BPM), Lean, Change Management, Operational Excellence, Six Sigma, Risk Management, Customer Experience and more. We provide the forum where key industry experts and organizations share their experience, knowledge and tools, and your practitioner peers connect with one another all over the world, both face-to-face and online. Membership is free, the content is priceless. Join the Process Excellence Network Linked In Group today! LinkedIn Process Excellence Network (PEXN)

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