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Quality In Financial Services

 

 

Customer Loyalty

Driving Organic Growth at Bank of America

by Daniel Cox and James Bossert

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Though many financial institutions claim they are striving to attain high customer satisfaction, the results of last year’s American Customer Satisfaction Index show the financial services industry has some of the lowest customer satisfaction ratings of any single industry. Customers view banks and other financial services organizations as a commodity, with no unique reason to form a business relationship with one particular bank.

Top executives at Bank of America seized this opportunity in 2001. In April of that year, newly elected CEO Ken Lewis began focusing the company on organic growth, which meant increasing the customer base while becoming more efficient by improving processes. This new strategy relied heavily on voice of the customer (VoC) and tied all planning efforts to factors that would drive customer satisfaction and loyalty.

To be successful, Lewis recognized the company would need to adopt a disciplined approach to process excellence and leverage the Six Sigma methodology and tools commonly found in the manufacturing industry. To demonstrate Bank of America was serious about quality and that Six Sigma would be the methodology of choice, Lewis hired Chuck Goslee, a seasoned quality professional, and appointed him to the executive leadership team.

The company quickly adopted a new way to manage the business. Goslee and his leadership team implemented disciplined planning processes such as hoshin to set the strategic direction and align resources across the organization, kanri to manage deployment and measure results and Six Sigma to enable execution through process excellence.

A COMPELLING OPPORTUNITY

The team immediately recognized customer satisfaction as the core component to organic growth, so Bank of America began to connect its quality and Six Sigma strategy to the voice of customer. With approximately 28 million customers at the time, the bank encountered nearly 200 customer interactions per second. Because each interaction was an opportunity to delight the customer, how could the customer not be at the center of all process improvements? Customers who are delighted are four times more likely to recommend Bank of America to their friends and family and three times more likely to open new accounts than customers who are simply satisfied.

After determining the importance of delighting customers, Bank of America set out to establish a customer satisfaction goal, create a measurement process to evaluate current performance and acquire the analytical capability to improve performance in a targeted way. Because the ultimate goal and tools used to measure the bank’s customer satisfaction had to be simple and easily understood by all Bank of America associates, the results had to be continuously communicated in clear, concise terms throughout the organization.

BAROMETER BASICS AND TEAM SPIRIT

With those requirements, the bank implemented a measurement process known as the customer satisfaction and loyalty barometer. The barometer measured customer satisfaction with an ongoing survey of channel (bank office, ATM or online banking) and product (checking account, credit card or mortgage) satisfaction.

The barometer also asked the key question, “Considering all the business you do with Bank of America, what is your overall satisfaction with Bank of America?” It used a scale of 1 to 10, with 9 and 10 representing delighted customers. Lower level product and channel surveys were also based on the 10-point scale, and all satisfaction results were communicated quarterly throughout the company.

Since implementing its quality and Six Sigma approach in 2001, Bank of America has seen a significant improvement in customer satisfaction. Customer delight has risen from the lower 40% range to more than 52% over the last three years—a whopping 25% improvement (see Figure 1). Given a base of 28 million customers, this means millions of customers who previously were not delighted with the company have since changed their minds.

Customer Satisfaction and Loyalty Barometer

So what contributed to this improvement? Simply put, the company recognized it had to deliver an improved overall customer experience. To do so, it implemented an associate training program called Bank of America Spirit. Initially modeled to mirror the associate behavior of Disney employees, Bank of America developed its own associate training program about the proper way to interact with customers.

Bank employees no longer simply stood behind the long teller platform. Instead, employees greeted customers as they walked into the bank office and immediately determined their needs. Change was beginning to take hold. Clearly, management had adopted the organic growth strategy and was beginning to leverage the disciplines of quality and Six Sigma to execute its strategy.

AGE WAS NO LONGER A PREDICTOR

Bank of America also reevaluated its business model and the model’s performance by comparing them to other Fortune 500 companies that focused on customer service. By doing so, it was able to appraise its performance from the customer’s perspective and connect the quality and Six Sigma strategy by building a continuous loop that ensured the strategy focused on making improvements.

Moving clockwise in Figure 2, processes became efficient and effective through the use of Six Sigma and quality improvement skills, and customer data were applied to create products and services that brought an improved value proposition. This led to delighted customers who bought more products and services, which generated revenue growth.

Focus on Improvement

Bank of America recognized its customers were more diverse than ever before, which made it more difficult to predict their financial needs. Unlike in the past, age was no longer an accurate way to predict a customer’s financial services needs. Take, for example, two customers who were both 45-year-old males. One customer’s daughter was graduating from high school, and he needed a creative way to finance her college tuition. The other customer was celebrating the birth of his son and wanted to start a college savings plan.

Both customers were the same age but at very different life stages, and their financial services needs were at opposite ends of the spectrum. That’s why Bank of America regularly surveyed customers to gather VoC and used those results to build its products and services.

Bank of America constantly analyzed data to identify customer needs and gain insights into developing unique products and ways of communicating what it could offer. Six Sigma tools and methodologies helped the bank leverage customer information to identify life triggers so compelling offers were made to the right customers at the right time.

The company also leveraged this information to develop innovative products focused on its customers’ needs. Enhancing both products and processes critical to customer satisfaction was producing results. It created more delighted customers and earned their loyalty while driving the company toward comprehensive process excellence.

EARLY RESULTS

By using Six Sigma tools and techniques, Bank of America focused on giving customers world-class reliability through its delivery channels. Here are a few results the bank achieved in the first year:

  • Defects across electronic channels dropped 88%.
  • Errors in all customer delivery channels and segments dropped 24%.
  • Problems taking more than one day to resolve dropped 56%.
  • New checking accounts had a 174% year-over-year net gain.

Without a doubt, quality and Six Sigma took hold, and quality became fundamental to achieving the bank’s goals for its customers and shareholders. By the end of 2003, the company experienced gains in customer delight across its customer segments, products and delivery channels. Quality produced top- and bottom-line benefits across the franchise.

Further illustrating this point, a design for Six Sigma (DFSS) project was created to improve the customer experience by introducing a new service allowing online banking customers to view pending transactions that were not yet posted to their accounts. This initiative exhibited how using VoC data to identify and understand customer satisfaction drivers could produce significant satisfaction improvement (see Figure 3).

Voice of the Customer in Action

The project directly contributed a 6% increase in the online banking channel’s customer satisfaction performance. Online banking was also recognized as a Best of Six Sigma finalist—a new Bank of America associate recognition program established to recognize and reinforce quality and Six Sigma contributions each year.

Management is pleased at how the company is applying Six Sigma disciplines to process improvements and the results it is achieving. For example, before Six Sigma was brought into the company, Bank of America was experiencing a lack of growth in one of its core products: checking accounts. For every new account that opened, another account was lost due to poor performance. To make the organic growth strategy work, customer retention had to improve dramatically.

Teams were formed to focus on projects that built deeper and more profitable relationships. Statement rendering, deposit processing and other high impact processes, all of which were determined by VoC, were initiated to reduce variation and dissatisfaction. Within a year, attrition was stabilized, and within two years, the number of new checking accounts began to exceed those lost.

Looking deeper, the bank found delighted and satisfied customers have a much lower attrition rate than do dissatisfied customers. The first big break came between two and four years (see Figure 4); as the years increased, the amount of attrition decreased at all levels of satisfaction.

Satisfaction and Retention

Customer data drove process improvement and changed the way the bank managed its business. Today, Bank of America can quickly identify special cause situations and analyze the changes from its customers’ perspective. Customer data are helping teams understand what customers expect, determine their mistake tolerance levels and realize when processes are not executed to their standards. Information is used to identify special cause occurrences, implement corrective actions and create a corporate memory so the mistakes are not repeated. As the bank learns more about its customers, trends are emerging and plans are being developed to enable the organization to grow the business. Customer data are reducing the time it takes for ideas to move from concept to implementation and are improving the bank’s speed to market.

Every day, quality and Six Sigma are at work at Bank of America, improving things for its customers, associates and shareholders. Looking back, we can see the company’s goals were so high and the promises to the customers so great, success could only be achieved by the relentless pursuit of process excellence. With that came the commitment to quality and Six Sigma not just as a program at Bank of America, but as a part of the culture, from the executive level down.

When Bank of America began its quality journey in 2001, Lewis said, “Six Sigma will enable Bank of America to make the breakthrough improvements in customer satisfaction and shareholder value that we must achieve to reach our goal of becoming one of the world’s most admired companies. That’s why I’m committed to using it as a performance management discipline throughout our company.” And four years later, after Bank of America put the customer at the center of all decisions, the results are proving him right.

DANIEL COX is the senior VP of process design at Bank of America in Charlotte, NC, where he leads the customer satisfaction and loyalty group.

JAMES BOSSERT is the senior VP of Six Sigma programs at Bank of America in Charlotte, NC. He earned a master’s degree in math and applied statistics from the Rochester Institute of Technology in Rochester, NY. Bossert is a Fellow of ASQ, a certified quality engineer, quality auditor and quality manager and editor of The Supplier Management Handbook published by ASQ Quality Press.

Quality Progress, February 2005

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