Read the case study Apply Lean Six Sigma in a Financial Services Firms and address the following questions:

How was the lean effort at the financial services firm structured organizationally?

What role did the Kaizen event play in improving the way that the project was structured?

After the team had narrowed the focus to nine “quick hit” projects, what were the most significant results (outline for four of the projects)? Which lean tools may/could have been used in order to realize these results?

Applying Lean Six Sigma in a Financial Services Firm

This case study focuses on the fund accounting department of a financial services institution that is responsible for supplying net asset values (NAVs) to the NASDAQ stock exchange for more than 700 mutual funds at the close of each trading day. The department’s accountants calculate the NAV based on several inputs, such as the number of trades that day, expenses paid, and dividends, for mutual funds of more than 200 clients. Performance is measured by the timeliness of the NAV released to NASDAQ and its accuracy. The organization invested in extensive technology upgrades to boost efficiency and process control with the goals of improving quality and client experience, and was achieving timeliness and accuracy goals more than 99 percent of the time. However, two key questions remained unanswered, “Are we effective at what we are doing?” that is, what was the cost to the business in attaining 99percent accuracy and timeliness? And, “Do we know our operational risk points?” Working with a consulting firm, the orga-nization decided to introduce Lean Six Sigma to address these questions.The first step was forming a cross-functional team comprised of fund account-ing, quality, and the central operations employees. The team created flowcharts that defined the steps performed from the start of the business day until the NAVs were published to NASDAQ at the close of the day. During this time, the team also collected relevant data such as trade volume and rework and reject rates for each process step, as well as process touch time and wait time whenever possible. The goal was to identify areas that presented high levels of risk (i.e., generating an error or missing a step) or processing touch time. The team also collected informa-tion and data feeds coming into the department. It was important to understand the timeline for these data feeds as well as their accuracy as they could either delay or affect rework rates.The next step involved a kaizen event, which identified 30 possible improve-ment items and ranked them based on impact (high vs. low) and ease of imple-mentation (easy vs. difficult). Ultimately, the projects were divided into two categories: quick-hit projects that they could realistically solve and implement within 90 days, as well as longer, strategic infrastructure improvements that required additional time to address. The team quickly recognized that longer-term strategic projects— improving error tracking, creating a capacity model, and developing a project management process—were necessary to answer the funda-mental questions. Actively measuring these errors would allow managers to quickly identify process steps that present high levels of risk. The capacity model would help define utilization rates for each fund accountant and team. Ultimately, the project management process will ensure a robust process for getting everyone involved in process improvement.Eventually, nine quick hit projects were selected from the original list of 30. The projects were divided among the original five team members, and subject-matter experts and information technology resources were assigned to each project. The projects predominantly focused on simplifying, eliminating, or automating process steps. The goals were to increase capacity by eliminating non-value-added activities and reducing operational risk through simplification and automation of steps. Four of the nine projects are highlighted below.

1. Eliminating line-by-line comparison of pre- and post-trial balances. In the past, a fund accountant reviewed all inputs and outputs to the fund daily to ensure that the NAV was calculated correctly, a time-consuming, high-risk process. The improvement team developed a new value to be calculated on the pre- and post-trial balances to allow a quick comparison, thus eliminating the need for line-by-line reviews.

2. Simplifying the corporate action (CA) review process. To ensure that the correct CAs (example: dividend distribution) were applied to the funds, employees manually reviewed information from the core system and verified this information with a second source. Not only was this process cumbersome, but because it relied on people to catch discrepancies, four inspection and sign-off points were needed to ensure quality of information. The team developed a new daily automated report to compare the required values from the system to a secondary source, highlighting any discrepancies. Since its implementation, there have been zero errors in the application of CA and a daily time savings of four hours.

3. Creating an automatic feed of expense payments. Each day expense reports by fund were hand delivered to the fund accountants, who then manually entered the information into the core system. Managers would verify the information for accuracy later in the process. The team redesigned the process to automatically feed the expense information from the original source daily, thus eliminating the need for distribution, entry, and verification steps.

4. Eliminating manual price change sheets. In the past, fund accountants created daily spreadsheets to calculate the percentage change in the NAV by comparing each day’s price to that of the previous day. This time-consuming, manual process introduced the possibility of data entry errors and miscalculations. The improvement team redesigned and automated the report to replace the manual process. Now a percent NAV change report is generated daily, thus reducing or eliminating miscalculations and rework.

Since the solutions were implemented, the organization has sustained the improvements with random audits of work product to ensure that employees continue to follow the newly designed processes. To maintain project momentum as well as ensure buy-in from managers, a steering committee was formed of managers and executives from various levels in the organization. The kaizen team provided weekly updates on the status of the project. This ensured that all key stakeholders were kept up to date on the status of the project and the logic behind the solutions developed by the teams. In just four months, from the time the project began until the nine projects were completed, the organization realized a savings of $225,000. As a secondary benefit, members of the five subject-matter expert teams developed a more detailed understanding of how their co-workers performed daily tasks and how their work products and quality were dependent upon one another. After the projects were under way, the consulting firm conducted Lean Six Sigma Green Belt training for the members of the original cross-functional team so that these individuals could begin work on the larger-scale projects. That was soon followed by Champion training to provide the organization’s leaders with a clearer picture of their roles and responsibilities, as well as tips for coaching and mentoring the Green Belts in the future. The quick success of the project teams demonstrated how basic Lean Six Sigma principles could be used to simplify work and enhance controls. Managers began to identify further improvement opportunities and work with the Green Belts to vet the ideas and assign resources to develop and implement solutions.

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Apply Lean Six Sigma in a Financial Services Firms Introduction Six Sigma by definition is the mechanisms and techniques used by organizations to monitor and control the quality of their products The ... View the full answer