Integrating Continuous Improvement into the DNA of Your Organization for Success and Sustainability

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Integrating Continuous Improvement into the DNA of Your Organization for Success and Sustainability

  1. 1. Integrating Continuous Improvement into the DNA of Your Organization for Success and Sustainability Global Six Sigma Summit Countrywide Financial Corporation Karen Schoen, Managing Director June 28, 2006
  2. 2. Agenda <ul><li>Countrywide Financial Corporation Background </li></ul><ul><li>Embracing Continuous Improvement </li></ul><ul><li>Listening to Ideas </li></ul><ul><li>Providing Continuous Improvement Tools </li></ul><ul><li>Shepherding Business Process Transformation </li></ul><ul><li>Case Studies </li></ul><ul><li>Q&A </li></ul>
  3. 3. Countrywide Financial is a Fortune 150 Diversified Financial Services Provider & the #1 Residential Mortgage Originator & Servicer in the U.S. $2.5 Billion 2005 Net Earnings 38% Earnings CAGR #1 Servicer $1.1T 2005 Servicing Portfolio, representing 7.4M loans #1 Originator 15.7% 2005 Market Share, up from 12.4% in 2004 $175 Billion 2005 Total CFC Assets Bank Assets totaling $73B Dominate Mortgage Lending Achieve Long-Term Earnings Stability Maximize Shareholder Value Countrywide is a diversified financial services company serving the needs of households, investors, and institutions, with mortgage lending at its core 22% 2005 Return on Average Equity $23 Billion Market Capitalization (1) (2) (2) (1) As of May, 2006 (2) Source: Inside Mortgage Finance
  4. 4. Countrywide’s Foundation is in Mortgage Banking -- However We Have Grown Into a Dominant Diversified Financial Services Company Countrywide Insurance Group offers homeowners, home warranty, auto, life, disability, and health insurance for consumers and commercial businesses Insurance Countrywide Capital Markets is an investment banking firm engaged in the sales, trading, and underwriting of mortgage-backed and asset-backed securities Capital Markets Countrywide Bank offers retail and commercial banking, and document custody services Banking Countrywide Home Loans originates, purchases, securitizes, and services mortgage loans nationwide Mortgage Banking
  5. 5. CFC Has Experienced Extraordinary Growth In the Past Ten Years Growth in company size and revenue … and successful diversification efforts … … are reflected in our strong historical stock performance when compared with the S&P 500
  6. 6. We Credit This Growth to Our Entrepreneurial Spirit and a Culture That Inspires Employees to Actively Take Part in “Making It Better” <ul><li>We believe every employee has a voice worth hearing </li></ul><ul><li>We make it easy for employees to contribute </li></ul><ul><li>We expect employees to be change agents </li></ul><ul><li>We reward successes </li></ul><ul><li>We communicate this often </li></ul>
  7. 7. Cultivating a Culture That Inspires Every Employee to Take Part in “Making It Better”
  8. 8. We Address Continuous Improvement in Three Broad Categories Fundamental Rethinking of What and/or How We Do Things Incremental Tuning Ideas on How to “Make It Better” Employee Suggestions Process Improvement Strategic Business Transformation
  9. 9. Consider a Fast Food Restaurant Example Establish vision for Healthy Choice menu Improve placement of condiments based on traffic flow Have employees park remotely to leave prime spaces for customers Employee Suggestions Process Improvement Strategic Business Transformation
  10. 10. We Expect These CI Change Efforts to Emanate From Different Employee Groups Employee Suggestions Process Improvement Strategic Business Transformation
  11. 11. We Have a Tailored CI Program Targeted for Each Type of Change FASTER-PM Project Management Methodology FASTER Process Improvement Methodology CIdeas Employee Suggestion Program Employee Suggestions Process Improvement Strategic Business Transformation
  12. 12. Listening to Ideas Helps Us Enforce Our Culture of Making It Better Every Day <ul><ul><li>Provide employees a vehicle for speaking directly to </li></ul></ul><ul><ul><ul><li>management </li></ul></ul></ul><ul><ul><li>Ensure that ideas do not get stifled far down in the </li></ul></ul><ul><ul><ul><li>organization </li></ul></ul></ul><ul><ul><li>Encourage all employees to use online suggestion box – </li></ul></ul><ul><ul><ul><li>can be anonymous if employee chooses </li></ul></ul></ul><ul><ul><li>Rewards include 5% cash for first year’s cost savings </li></ul></ul><ul><ul><ul><li>($5,000 cap); Cultural and non-monetary ideas receive “CW reward points” </li></ul></ul></ul>
  13. 13. <ul><li>2005 Estimated 5-Year NPV: $5.7mm; Program-To-Date NPV: $37mm </li></ul>
  14. 14. Fixing Broken Processes is an Enterprise-Wide Effort – At CFC We Approach it Consistently <ul><li>Created FASTER process improvement methodology four years ago to ensure: </li></ul><ul><ul><li>Common language and consistent approach for process change </li></ul></ul><ul><ul><li>Focused effort on continuous improvement </li></ul></ul><ul><li>Designed for a broad cross-section of employees (team lead and up) </li></ul><ul><li>Six Sigma-esque methodology – simplified for CFC Culture </li></ul><ul><li>Emphasis on employee training and business-unit ownership </li></ul>
  15. 15. Process Improvement Methodology Map current processes Measure opportunities for improvement Brainstorm and prioritize solutions Set minimum and stretch performance levels Implement solutions Monitor and control impact Flow Analyze Solve Target Execute Review
  16. 16. FASTER Has Reached a Large Cross-Section of Employees and Has Improved CFC’s Bottom Line <ul><li>BRONZE </li></ul><ul><li>On-line training introduces all employees to basic FASTER concepts in 30 minutes </li></ul><ul><ul><li>18,243 employees Bronze-certified </li></ul></ul><ul><li>SILVER </li></ul><ul><li>3.5 day seminars engage employees in solving business problems real-time </li></ul><ul><ul><li>2,726 employees Silver-certified </li></ul></ul><ul><li>GOLD </li></ul><ul><li>Medals are awarded for completing projects with audited financial results </li></ul><ul><ul><li>784 employees Gold-certified </li></ul></ul><ul><li>PLATINUM </li></ul><ul><li>Medals are awarded to FASTER experts for completing multiple gold projects and mentoring others </li></ul><ul><ul><li>59 employees Platinum-certified </li></ul></ul><ul><li>Program-to-date NPV: $760M </li></ul><ul><li>2005 Hard Savings: $50M </li></ul>
  17. 17. Driving Business Process Transformation Requires a Structured Project Management Methodology <ul><li>Large complex strategy, business and/or technology integration projects </li></ul><ul><li>Often crosses business and corporate units </li></ul><ul><li>Step level change required vs incremental improvement </li></ul><ul><li>Often requires specific skill sets (analytic, technology ) </li></ul>
  18. 18. CFC Developed FASTER-PM to Support Project Management Across the Organization <ul><li>Jointly developed by business and technology professionals </li></ul><ul><li>Program includes: </li></ul><ul><ul><li>Methodology and Templates </li></ul></ul><ul><ul><li>Training and Certification </li></ul></ul><ul><ul><li>Supporting Systems </li></ul></ul><ul><li>Required of any project exceeding $250K </li></ul><ul><li>Compliance audited </li></ul>
  19. 19. Project Management Methodology Originate Initiate Plan Execute Close/Review <ul><li>Current state assessment </li></ul><ul><li>Problem definition </li></ul><ul><li>Examination of impact and strategic alignment </li></ul><ul><li>FLOW – Detailed current state assessment </li></ul><ul><li>ANALYZE – Analysis of processes </li></ul><ul><li>SOLVE – Identification of solutions </li></ul><ul><li>Agreement on solutions </li></ul><ul><li>Detailed scoping and success criteria </li></ul><ul><li>Development of plans for implementation, communication, risk, scheduling and resources </li></ul><ul><li>Risk and Change management </li></ul><ul><li>Quality control </li></ul><ul><li>Schedule and budget tracking </li></ul><ul><li>Approvals </li></ul><ul><li>Evaluation of business impact </li></ul><ul><li>Lessons learned </li></ul><ul><li>Project closure </li></ul>
  20. 20. Case Study: Prioritize Network Setup for Contractors CFC Confidential and Proprietary <ul><li>Significant hard savings </li></ul><ul><li>Contractors productive sooner </li></ul>Results <ul><li>Facilitated discussion between Business Unit and idea submitter </li></ul><ul><li>Monitored creation of new process incorporating contractors with new hires and prioritizing them in the request queue </li></ul><ul><li>Assisted with development of detailed cost-benefit analysis </li></ul>Our Approach <ul><li>Up to 2,000 contractors at any given time at up to $75/hour, with a 3.5-day turnaround for network access </li></ul><ul><li>Reduce downtime, save fees </li></ul>Business Opportunity
  21. 21. Case Study: Instruction Guides for Modifying Loan Terms CFC Confidential and Proprietary <ul><li>Significantly increased loan modifications closed resulting in increased incentives </li></ul><ul><li>Reduced average time to complete a loan modification from 55 days to 26 days in 6 months after implementation </li></ul>Results <ul><li>Facilitated discussion between Business Unit and idea submitter </li></ul><ul><li>Monitored creation of detailed instruction guide for completing forms correctly </li></ul><ul><li>Monitored measurement of error rates for 4 months prior to and 6 months after implementation </li></ul><ul><li>Assisted with development of detailed cost-benefit analysis </li></ul>Our Approach <ul><li>Reduce errors in paperwork received from notaries to process more loan modifications faster </li></ul><ul><ul><li>(A loan modification is a payment workout plan on a delinquent loan) </li></ul></ul>Business Opportunity
  22. 22. Case Study: Originating Loans Through Mortgage Brokers CFC Confidential and Proprietary <ul><li>Increased efficiency across branch network </li></ul><ul><li>Increased customer satisfaction resulting in greater loan volume </li></ul>Results <ul><li>Performed a gap analysis between high and low performing branches </li></ul><ul><li>Determined root causes for the largest gaps in performance </li></ul><ul><li>Measured level of impact and difficulty of implementation for best-in-class practices, processes and tools </li></ul><ul><li>Prioritized best-practices and shared highest impact solutions amongst entire branch network </li></ul>Our Approach <ul><li>CHL’s Wholesale Lending Division (WLD) originates loans through mortgage brokers. WLD’s fulfillment operations are distributed across a combination of large centers and small regional branches </li></ul><ul><li>There is a wide range of performance in efficiency (loans per employee) and customer satisfaction (surveys to brokers) amongst the regional branches, which fulfill the majority of WLD’s loans </li></ul>Business Opportunity
  23. 23. Case Study: Human Resources Shared Service Center CFC Confidential and Proprietary <ul><li>Increase use of self service </li></ul><ul><li>Improve knowledge sharing and escalation processes </li></ul><ul><li>Add other transactional HR functions to center </li></ul><ul><li>Leverage offshore resources </li></ul>Results <ul><li>Benchmarked against best-in-class companies </li></ul><ul><li>Performed root-cause analysis and hypothesis testing to derive recommendations </li></ul><ul><li>Determined optional service coverage in terms of functions included in the center and best support model </li></ul>Our Approach <ul><li>CFC’s HR Shared Services center provides first-level support and services to 50,000+ employees </li></ul><ul><li>Reduce costs, improve service levels, and establish ongoing performance metrics </li></ul>Business Opportunity
  24. 24. Questions?

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