Once Bank of America Corp. and FleetBoston Financial Corp. close their merger deal on April 1, one of the first major developments in their tech operations will be to open a Six Sigma training center in Boston.
Fleet is about two years behind B of A in implementing the Six Sigma management methodology; the center will be responsible for bringing it up to speed. The primary mission will be to quickly increase the number of green, black, and master black belt candidates from Fleet, said Jim Buchanan, B of A's quality and productivity executive for transitions.
"We expect that within two years Fleet will be caught up," he said.
With savings of more than $2 billion under its belt from earlier Six Sigma initiatives, B of A is now making Six Sigma methods a key component of its efforts to incorporate Fleet's operations. The Federal Reserve's board of governors officially approved the deal Monday.
Though speed is generally considered a desirable goal in merger integration, because of the cost savings, Six Sigma will not necessarily speed up the process, said Milton H. Jones Jr., B of A's quality and productivity executive.
Rather, Six Sigma - which emphasizes listening to customers - will help "make sure we consider elements important to the customer," Mr. Jones said. "We'll be more effective at that than we would have been without Six Sigma."
Already, Mr. Jones said, each line of business at B of A has a highly trained Six Sigma expert assigned to help guide it through the transition. These experts, black belts or master black belts in Six Sigma's martial arts lingo, are devising strategic plans.
The transition teams are now developing Six Sigma-driven plans that incorporate aspects of the combined company, he said.
The $2 billion-plus of savings that Bank of America has earned through Six Sigma came from various projects completed last year. For example, the company reduced the time needed to open a new branch from 500 days to 350 and reduced by 88% the number of errors in ATM, telephone, and online banking services.
One project reduced from three days to less than 10 minutes the response time for certain requests related to individual retirement accounts. Others sped up the processing of same-day payments by 22% and of same-day deposits by 35%.
If Bank of America just wanted its transition to happen quickly, nothing would be better than the "brute force" method of simply swallowing Fleet's systems into its own, said Guillermo Kopp, a director at the TowerGroup market research firm in Needham, Mass.
But that approach tends to inflict "long-term collateral damage" on customers, reputation, and the work environment, Mr. Kopp said. In contrast, "the important thing about the application of Six Sigma is that it puts customers first."
Bank of America decided to adopt Six Sigma in 2001 as a way to add customers. The process "has become part of the culture," Mr. Jones said.
In contrast, Fleet had just begun implementing some Six Sigma programs, he said. Now "we'll see a very strong acceleration."
Kenneth D. Lewis, B of A's chairman and chief executive officer, has been Six Sigma's biggest booster there.
"Ken led by example," said Vele J. Galovski, the company's "core capabilities and customer delight executive." Mr. Lewis "got his green belt," Mr. Galovski said, "and now 95% of the senior leadership team is green-belt certified." Getting a green belt requires two weeks of training, he said.
That top-down approach is unusual at financial institutions, Mr. Galovski said. Typically, Six Sigma initiatives begin two to three levels below the CEO, he said - an approach that can produce "great things in one area but … becomes frustrating - because sooner or later you hit a wall."
But at Bank of America, Six Sigma started with Mr. Lewis and then flowed to every line of business that reports to him, Mr. Galovski said. The company is now deploying Six Sigma plans four levels down from the CEO, he said. From there, Six Sigma will get translated into individual performance plans.
So far, almost 8,000 B of A employees have been formally trained in Six Sigma, and another 65,000 have received basic quality training, Mr. Galovski said.
B of A's approach also incorporates another tool not often found in financial services Six Sigma initiatives: the Hoshin Kanri planning process. Originated in Japan in the 1960s, Hoshin Kanri starts with a three-page plan (the hoshin) that defines an organization's mission, tactics, and metrics. The kanri is the scorecard for monitoring performance against the plan.
"Hoshin planning … makes the difference," said Mr. Kopp of TowerGroup.
Mr. Buchanan of Bank of America elaborated, saying that a main difference between the way Fleet uses Six Sigma and B of A does "is the degree to which B of A is driven by the Hoshin planning process."
"That strong connection is pretty unique to B of A," Mr. Buchanan said. "The future of the company is being mapped out via Hoshin planning. That's where we're headed as a company, and within each business line, that's how we execute. We believe that the most effective use of Six Sigma is to work with Hoshin planning."
At Fleet, on the other hand, Six Sigma is executed "more on a project basis," Mr. Buchanan said. "It's not so closely tied to business strategy and service levels."
Mr. Buchanan has three full-time executives dedicated to his quality and productivity transition support team. "A plan is in place to accelerate Six Sigma within the Fleet franchise," he said. "It's already in motion through the folks working on the transition. More importantly, black belts or master black belts have been assigned to each transition team. There are just over 30 BBs or MBBs assigned at this point."
Though Mr. Galovski said that B of A executives are pleased with the cost savings Six Sigma has delivered, even more gratifying are the improvements in customer satisfaction. Since the company began using Six Sigma the percentage of "delighted customers" - those who rank their satisfaction at nine or 10 on a 10-point scale - has increased from 40% to 51%, he said.
These delighted customers are four times as likely as the average customer to recommend B of A to family and friends, Mr. Galovski said, and three times as likely to expand their relationship with the company.
Mr. Galovski gives the most credit for Six Sigma's success at B of A to support from senior management.
"Ken set a big goal for the company," he said. "It's different from the incremental approach most banks take. It forces us to stretch."
