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Balanced scorecard interview


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Balanced scorecard interview

  1. 1. Leading process excellence experts from across global financial services sharebest practice and continuous improvement initiatives for a truly holistic processexcellence program - LIVE from your own desktop or on-demand at yourconvenience.Presenter Interview: Balanced Scorecard Business Metrics:How it Works Interview by Helen Winsor, Process Excellence NetworkSam Chari, Vice-President of Global Operations at AllianceBernstein, joins ProcessExcellence Network to discuss how the company is applying BPE Methodology to driveefficiency.Process Excellence Network: Could you tell us a little bit about how Process Excellencefits into the culture at AllianceBernstein?S Chari: Process Excellence has been, I would say, a relatively recent journey for us sincethe past two years. So, the primary emphasis in the Global Operations organisation that Ibelong to, the focus really was on reducing risk and supporting growth. From a legacyperspective, we had two firms, Alliance Capital and Sanford Bernstein come together in2000 and we had a lot of change related to that and we were obviously, like all otherfinancial institutions, going through a high growth scenario. So we were really focussing onthat and then, starting in 2008, we started an operational excellence journey where wetried to fit the whole Process Excellence umbrella using what we call the health ofexcellence, and it had basically five pillars, so resources, process, technology, metrics andrisk, 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 toenable managers to look at their processes, identify value added activities and that hasbeen actually quite a good success story in 2010 as well.Process Excellence Network: Thank you, Sam. And how do financial institutions typicallycollect and interpret performance measurement data and what should be done to improvethis, do you think?S Chari: Yes, that’s an interesting question because I come from a manufacturingbackground and my first sense when I came to this industry about five years back was, Idon’t think financial institutions really are as organised or disciplined. I like doingperformance metrics as maybe manufacturing does and there’s probably many reasons forthis, but I think one of the primary reasons is that in manufacturing you can easilyconceptualise what the product does. It’s easy to touch and feel, while that can be achallenge and it can be pretty vague. So what we’ve done at AllianceBernstein is, we’vetaken on the development of a proper framework that organises our entire business throughthe business processes, both within operations and across the firm. We’ve also designed keymetrics at every level of the organisation, so there’s summary level metrics for senior
  2. 2. management, for the process owners, and so on and so forth. We also introduced ourversion of the balance scorecard which basically has people focussed on different aspects oftheir organisation, not just purely on, let’s say, service quality. And then ultimately, Iguess, our guiding principle has been you really cannot manage or improve what you do notmeasure, so we’ve really focussed over the last two years on measuring what we think iscritical to our operations.Process Excellence Network: Now you mentioned balanced scorecard business metrics,could you give me some examples of how this has guided your improvement atAllianceBernstein, outlining the challenges and solutions?S Chari: So our balanced scorecard is maybe a slightly different interpretation of what youwill probably constantly see in the industry, but pretty much organised along the samecategories. So we have service quality, which is things like timeliness; financial orproductivity 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 errorsand a lot of error related metrics. So when we first started looking at organising themetrics, we found that most of our metrics are really geared more towards service qualityor risk, so we wanted to help our managers understand their organisation from a broadercontext, so we introduced the concept of a health scorecard, but in order to avoidproliferating the number of metrics we track, and frankly we were tracking too manydifferent things and not all of them are really key metrics, so we focussed on reallynarrowing down our focus to ones that are really critical in helping both operations as wellas our internal and external clients. So I think organising the metrics across all thesecategories instead of focussing on the important ones has really helped our managers focuson what’s critical to deliver against.Process Excellence Network: What top tips can you offer listeners looking to emulate yoursuccess?S Chari: So I think, as I mentioned, there’s a couple of things that I found personally prettyuseful. One is, let’s focus on key metrics, so let’s not proliferate the number of data pointsthat we constantly monitor because, before you know it, managers will just be flooded withlots of information and they really won’t know what to focus on. So I think that’s one key.The second is, I think what we’ve done over the last couple of years, we’ve linked keymetrics to our smart goals. So what that basically means is the ten to 15 key metrics ateach level of the organisation all end up as part of that critical process of smart goals andthen it filters down even to the individual levels. So what that basically means is thatagainst your goals will be your overall performance and then, starting last year, sincethey’re comfortable with the process now is we started linking a small percent of theirperformance against the smart goals to compensation, so now you have a real financialincentive to improve on your smart goals as well. And I think the third best practice that Iwould suggest is, metrics should not be a policeman or a cop, so our philosophy has been topartner the managers, both in operations and the firm, to help them understand themetrics, report on the metrics and also help them improve their processes based on data,and I think that’s where we’ve had a real success story.Process Excellence Network: It’s always useful to share some tips. How would you say thatProcess 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 Imentioned earlier, risk is one of our balanced scorecard categories. I think one thing thatwe learnt historically, we’ve just looked at errors after they have happened, so we look aterrors and we’ve actually made a lot of progress in reducing the number of errors, but whatwe want to do in 2011 especially is we want to focus on the leading indicators of risk, sohow do we come up with data points that would help us eliminate errors before theyactually happen; so things like attrition rates of our people, so if you have a lot of newhires, for example, that could be a leading indicator. In our reconciliation process, if westart seeing a lot of breaks that happen at month end, but are now not being resolved in atimely manner, but to a result in a future error. So we are trying to find what these keyleading indicators that can help us catch these negative trends actually during the processthat will help us prevent errors from happening in the future.In addition, what we’ve done is we’ve introduced a really comprehensive risk trainingprogramme this year. We’ve taken about 400 of our staff through it already this year, and
  3. 3. that focuses on various aspects of the process from a risk perspective, so things likedocumentation, how do you do failure mode ethics analysis for SMEs, how do you do riskmapping, how do you manage error in general? We try to educate our managers to be a lotmore proactive about thinking about risk.Process Excellence Network: Now, finally, can you tell us a little about your industrybenchmarking programme and how and why you’re doing it?S Chari: This is an interesting topic. I think we, like anyone else, want to compareourselves to how we stand against our competition in terms of the various elements of thebalanced scorecard, especially cost and service quality. Now, what we’ve foundtraditionally in our past is that the normal benchmarking efforts that we’ve participated inhave really not been very useful because they’re not actionable and the reason why they’remaybe not as actionable as we would have hoped, it’s really not easy to figure out whetherthe data you’re getting back compares your firm to another firm from a pure like to like orapple to apple comparison, plus the results are really anonymous, so there’s a third party inthe middle who aggregates all the data and then you see where you stack up against theothers, but you’re really not sure which firm you’re comparing yourself to and some firmsmay be better in some processes, other firms may be better in other processes, so it’sreally tough to look at this and say, okay, what can we do better? So that’s the strugglewe’ve always had in the past, so one thing we’ve tried to do recently is, we startedreaching out at a couple of like-minded firms who also want to get some more value out oftheir sparking and we’ve actually started doing this one on one just with them.So, as an example, I’ve sat with my counterpart at one of our competitor firms and said,this is all our data – we’re very upfront and try and spread with our data and they are thesame as well. Then we are quickly going through and saying, okay, this process is really notcomparable, let’s eliminate and let’s really come down to the ones that are like for like;and then let’s start drilling down into where they may be differences and why, and thatgives us... hopefully, as we haven’t completed it yet, but I’m already pretty comfortablewith the process so far, that we can start drilling down into the causes where one firm maybe better than the other, and then we can figure out what to do about it. So that’s theapproach we’ve started taking and hopefully in another month or so, we should have somepretty good information out of this.Hear more from Sam Chari at Business Process Excellence For Financial Services Online