The work that we do in this particular part of the Wachovia Corporation is to look across the enterprise at the multiple portfolios that we have in 10 strategic business units; each with their own P&L, each with the delivery model for driving success and valuing shareholder return. So a couple of years ago we began to do some comparisons with the amount of money that we were investing in the initiatives; whether they be Lean or Six Sigma, Process Improvement, Project Management, whatever that may be, we looked across multiple initiatives, and when we compared against the industry we found that we were spending up to two-thirds more in initiatives than other major corporations of the same size. The return on investment it was not as optimal as it could be.
So we began down a path to really optimize our capital investment portfolio. This was a bit of a challenge, given that each of the 10 separate strategic business units had their own model for how they wanted to look at the portfolio, the initiatives, the process improvement, the programs, the projects, whatever they may be, and make their own decisions. It was truly a collaborative effort to gain the buy in and the support and begin to look at a process that was governance related, but more of an influence model in how we were going to, as a financial institution, really drive home the need for better investment and the right projects, the right initiatives.
Think about for a moment how many of you have pet projects and things that you would really like to see up and running, you would like to have unlimited resources to get the job done. How many of you have unlimited resources to get the job done? I do not know about you but for us it’s a challenge. We always have more heart and more energy than we have people or time to get the work done.
We really started to look at what would be a value capture. How could we begin to have kind of a pull mentality as opposed to a push strategy.
This really falls into four buckets of categories that we want to focus on. One was spend effectiveness. We wanted to reduce our capital commitment substantially while improving return on capital deployed, and we also wanted to better align those investments.
Across these 10 strategic business units there were things that were done that made sense for a particular business unit. Perhaps we could create a forum or a community of practice where there was opportunity to look across the enterprise and ask the question, “Does it make sense for several of these business units to engage with each other and collaborate so that we get more synergy, more effectiveness and more efficiency out of a particular initiative?”
That also meant working with our program offices to look at the portfolios-the portfolios of Six Sigma initiatives, Lean initiatives that were taking place, Project initiatives that were taking place-and begin to balance the execution capacity and really look at the risk management. What we found within many of these initiatives is some of the cost that was not being optimized and we were not managing the risk in the business as well as we could.
Risk management became an important partner sitting at the table with us as we began to look at end-to-end processes and began to do enhancement.
The next one was around process efficiency, and this was around freeing up resources from those pet projects and really allocating them to specific initiatives where we could focus and have the most optimal impact.
The last area was performance accountability. There became a strong reemphasis on the validation process to ensure that we were maximizing and optimizing the return on investment.
We took a look at some of the elements for implementing the plan. We started with a very simple framework-Where are we today? How do we want to get there? Where do we need to go? and What support will be available to get this work done?
The implementation of what we call an investment rationalization process across these multiple business units included a syndication process, where we invited each of those key principles or key stakeholders to the table to become an active member of a community that would be decision makers, drivers and activists for the company in making decisions that would make an impact.
We began a diagnostic process. We wanted to understand where we are today, what does it look like and how we are spending money. What was interesting about this is if you sit down and have a conversation with each of these lines of business, the portfolio they are working on and their special projects, each of them would tell you, “Oh, I cannot do that with this other line of business because we are special.”
However, what we found is about 80 percent of what we do is common. It wasn’t until we really sat down and dissected it and started to look at each of the individual components and compartments that we found common ground for each of these organizations to work on. We told them upfront, “We recognize each of you are special and you will need some customized areas, but let us focus on what HULT PRIVATE CAPITAL is common first, and then absolutely, each of you can customize the program after we have got a common platform on which we can work.” So we got great buy in and support to do that, and we worked through the diagnostic process.
End-to-end, the implementation of the investment rationalization process for us took a year. We started this process three years ago; we are into out third year now.
The initial diagnostic evaluation took us about six weeks. We asked: Where are you? Who are we? Who are you? How do we show up with each other? What does that look like? What are the common elements? Then we put together a plan for action that said how we would partner together.
Next, we wanted to look at the design element: How do we get there? So what does that look like? What is in it for you? What is in it for me? What is in it for us collectively as we work together? That process took about two-and-a-half months.
Then we began to look at beta initiatives: Where do we need to go? We identified some common elements of enterprise initiatives that would span all 10 of the business and we picked one. Let us just start with that, let us do a pilot, let us do a design element, let us see if this works end-to-end, let us walk it through.
As we worked through that process what we found was that 95 percent of all the elements were on a common platform, and only 5 percent needed to be customized for each of those strategic business units in order for them to be able to deliver to the customer and to the market based on where they were.
So as an example, in financial services our investment bank needed to show up a little bit differently with a large customer than the general bank who might interact with you or I in our personal banking account, so certainly we can understand that.
But how we got there was based on a common platform and common elements from an end-to-end perspective that could be applied towards that specific customer.
We are in the process now of working through the last element, which we call institutionalization or available support. As we look across each of these 10 business units we have aligned portfolio offices for each of the individual units. This allows them to truly look at how much money we are investing in capital allocation today from improvements in our business, what is the anticipated return on investment, what is the actual return on investment and how we matched back against the expectations.
From a corporate perspective or a governance perspective, a financial organization gave limited dollars back to each of the lines of business in order to spend. We didn’t tell them how to spend the money, just that they had certain amount that they could spend. It was up to each of the lines of business to then determine their strategic plan, initiatives that support that, and how those things line up so that they could feel like were empowered to make their own decisions on what was most important to them.
That’s a critical point. There was a lot of what we call “noise” in the system, feedback while we were trying to work through this particular point. Initially there was a feeling that there was a top-down governance process that was not going to allow each of the business units to make their own decisions on how they invested their capital expenditures. That was not the case at all.
What it was was a pot of money that was given to them for investment purposes. They could make their own decisions on what they invested the money in; and then they were expected to make decisions based on what would give them the best return on investment. That worked very well.