National City Corp. is making a hybrid Six Sigma strategy the heart of a cost-control effort it plans to institute companywide starting this year.
Other users of the Six Sigma performance-evaluation methodology include JPMorgan Chase & Co. and Bank of America Corp., which says it has increased revenue and cut costs by more than $2 billion using Six Sigma.
Chameli Naraine, a senior vice president at the $142.4 billion-asset National City, says her approach, incorporating employee collaboration and lean management theories, is quite different. The Cleveland banking company calls it Fusion.FSM because it fuses principles of financial services and manufacturing.
Six Sigma's advance through banking has been steady. Nat City is diverging from other large banking companies; most of the top 50 use Six Sigma in its pure form, and analysts say that smaller companies are more likely to modify the methodology to meet their specific needs.
Six Sigma is all about monitoring processes and reducing or eliminating defects. In its original incarnation as a manufacturing tool it improved the production process; in financial services it has been used in a variety of ways but always with the ultimate goal of driving cost savings or revenue.
Ms. Naraine, who is also National City's director of corporate operations and strategic sourcing, said that lean management focuses on eliminating waste - of space, time, effort - rather than sharpening performance, though there are certainly similarities between the two goals.
Soliciting employee collaboration makes the people directly involved in any given process more involved in perfecting it, she said. Merging all three ideas into a lean Six Sigma program is helping Nat City lower costs and raise employee performance across the board.
"No one in the financial services industry is bringing this whole pie together the way we envision," said Ms. Naraine, who developed collaborative work groups at NCR Corp. before joining National City in 2002.
Denise Valentine, a senior analyst at the Boston research and consulting firm Celent Communications LLC, said pure Six Sigma works best for large companies because it requires dedicated staff and the support of top management. "There are different kinds of Six Sigma today," she said. Nat City is "pulling from each of these separate worlds what makes the most sense to them."
Jon Gorney, the executive vice president in charge of National City's corporate operations and information systems, said the company has been developing Fusion.FSM for three years. It had grown through several acquisitions and needed to cut costs.
"We had accomplished all the obvious things," Mr. Gorney said in an interview last week. "The question became, How do we continue, each and every year, to drive down absolute expense?"
Nat City began a Fusion.FSM pilot program in October at a Chicago lockbox operation. Ms. Naraine said the mission was to redesign its production lines to streamline the process of moving payments from the incoming mail box until they are posted to the clients' accounts.
The health-care line, for example, now has ergonomic workstations and color-coded bins for remittance documents, checks, and other paperwork.
The workstations also use lights to indicate to managers "where we are at any given function at any given time at any part of the day," she said, which helps the staff meet the center's seven daily deadlines.
As a result, the center's operational costs are down 20%, customer inquiries and complaints are down 60%, and cycle times are down 50% in the check processing operation and 30% in automated clearing house processing.
Nat City plans to convert a Cleveland electronic funds transfer services center in April, and Jim Buller, the manager of the center's cash management electronic operations group, said that eliminating nonproductive space in the center would reduce the amount of space the site needs by 40%.
Though Ms. Naraine said those gains are unlikely to continue at such a rate once the overhaul is complete, annual performance improvements of 5% to 7% should be possible.
These projects are just the start. Nat City plans to add the methodology to its "day two" clearing operations, trust, securities, and mutual funds this year and to its capital markets operations, vaults, and couriers and mail in 2007.
"We plan to roll this out over '06 and '07 across our entire operation. We have a fairly aggressive road map," Ms. Naraine said. "We will have institutionalized Fusion as a way of life by the end of '07."
Cheryl Harris, a senior consultant at Pyramid ODI LLC in Denton, Tex., said the National City initiative appears to be unique.
"We see a lot of that in manufacturing, but this is the first I know of in financial services," Ms. Harris said. She has provided training to some National City workers at the Center for Collaborative Organizations, at the University of North Texas.
Combining Six Sigma's quality measurement with both the waste reduction of lean management and employee empowerment makes sense but can be tricky, Ms. Harris said. "Those three things can end up competing with each other," she said. "What National City is doing realizes how they go together."
Creating self-managed work teams is a key part of Fusion.FSM. Amber Stopher, a wire exceptions operator at the Cleveland EFT center, has taken on new duties as a quality associate for wire transfers. She said that in some cases the groups have come up with new ways to grade themselves.
For example, National City used to evaluate wire operators by the number of calls they could handle. "One call could take in 20 wires, and another call could take in one," Ms. Stopher said. "Management put in metrics before that didn't make sense for what we were doing."
Now, she said, performance is measured by the number of wires operators process, and "the metrics are relevant to what they are doing."
Employees at the Cleveland EFT center have been training in collaborative work strategies since last fall. Some got a crash course in self-management in October, when a team leader was stranded on vacation in Mexico for almost three weeks in the aftermath of Hurricane Wilma.
Diane Haskell, who processes ACH exceptions at the center, said that in the past the workers would have waited for the boss to reassign the missing worker's duties. In this case the group divvied up the assignments. "We farmed them out to the team," Ms. Haskell said. "The manager trusted us to move forward with a solution."
Mr. Buller said it can be hard for the boss to give up that direct control. "I am now more of a coach than a manager," but giving employees more control of their work pays off, he said. "In almost every case that we've found, they can do it better."
Ms. Naraine said Fusion.FSM is a long-term project. "You're never finished with this kind of work." National City "will have self-managed teams delivering more for less every year. It becomes a culture, as opposed to a program."
