Quality Culture to Support CU’s Core Conversion

Ask employees at any financial institution to pick two words to describe a typical core system conversion, and "major headache" is likely the nicest description you’ll hear. Ask that question at $1 billion South Carolina Federal Credit Union, North Charleston, South Carolina, and prepare to hand over a quarter. The "C word" was retired from acceptable office language in the aftermath of a stressful 1996 conversion project, and just uttering it within that credit union’s halls will earn you a 25-cent fine.

Why such visceral reactions? Because converting the entire body of financial data an institution holds from one software system to another is fraught with potential pitfalls. If intricate dependencies aren’t properly mapped, firing up the new system can trigger serious errors that lead to jammed phone lines, online balance outages, brutally long lines at branch offices, and stressed out members and employees.

South Carolina FCU is converting again in 2005 and this time, its leaders expect the process to be much smoother. The 136,000 members who together hold $1 billion in assets with the credit union—not to mention the 363 employees who work in its 16 branches—will have the organization’s culture of quality to thank for the smooth transition.

“DIRTFT Culture” translates to logical, methodical conversion planning
South Carolina FCU initiated a relationship with Philip Crosby Associates in 1998, when senior executives saw quality as a way the organization could differentiate itself in a marketplace full of cookie-cutter loans and accounts. To undertake such a transformation, South Carolina FCU counted on PCA to install a corporate culture focused on identifying ways to prevent errors, instead of inspecting work to find errors after the fact. This “culture of prevention” was pioneered and honed by quality guru Philip B. Crosby.

Every day since, South Carolina FCU has been perfecting its "DIRTFT Culture." DIRTFT, pronounced "dirt foot," is Crosby’s acronym for "Do It Right the First Time"—a concept now woven into the credit union’s mind set.

"Our focus on doing things right the first time has produced incredible gains over the years," says Scott Woods, CFO and acting CEO of South Carolina FCU. For instance, the DIRTFT culture last year led the South Carolina FCU team to dramatically streamline its lending process.

“Doing things right the first time ensures we all fully understand our job requirements,” continues Woods. “To date, it has slashed our application processing costs by more than 80 percent, cut incredible amounts of time from more than 200 work processes and eliminated untold hassle for our members. The conversion process is the latest example of what the credit union accomplishes by focusing on DIRTFT."

SVP/Human Resources Dawn Rumney agrees. "The last time we converted systems was back in the mid-90s. We had no quality program in place and, boy, you could tell," says Rumney. "We didn’t have the background to fully appreciate and address requirements up-front and, once the system went live, we spent a huge amount of time fixing errors.

"This time, the Crosby philosophy has impacted everything from our data mapping to how we are structuring training. Today, we have a companywide language of quality and dedicated quality process specialists—people whose sole function is to work with the staff to ensure the overall integrity of the effort—and that is an incredible relief."

Quality process identified need for new system
South Carolina FCU extensively trains all employees in quality principles and encourages them to constantly critique their work processes. When an employee finds room for improvement, he or she logs the idea on a Process Improvement Form (PIF) and often works with a corrective action team to improve the process.

"The conversion project was initiated because the PIF process made everyone painfully aware our current systems were the root cause of many problems," says Rumney. "This built the business case and enthusiasm for the new system, despite the pain associated with the last conversion."

Employee participation in the quality initiative also drove an early change in the project’s ’go live’ date. South Carolina FCU originally planned to complete the transition in November of 2004, but when it became apparent that some of the vendor’s components were still under development, employees used their quality training to realize early on the serious downstream problems this would cause.

"Using knowledge gained through our quality training [such as talking constructively about the real-world situation and not looking for someone to ’blame’], the team identified that this time compression was going to have a domino effect: If we stuck to our original date, we’d have less time to write the procedures, conduct training for associates and do all the things we need to make the rollout a smooth one for ourselves and our members," Woods explains. "We made the decision to move the conversion date so we can do it right the first time.

"We don’t see this as a negative," he says. "It is a positive sign that the quality initiative is working. To delay early on is one thing; to delay just weeks before the planned date is a different story. Without our focus on quality, we would have gone full steam ahead and weeks before the planned rollout realized we had an unfavorable situation on our hands. Our culture of quality put us in the driver’s seat, allowing us to identify the problem and solve the issue before it ever reached crisis status. In the end, everyone will remember that the conversion was a smooth one—not whether we stuck to the original schedule."

Learning: an ongoing process
South Carolina FCU didn’t become an organization capable of pulling off a tough conversion project in such a logical, methodical manner overnight. It took years of training and practice to turn the credit union’s quality process into a well-oiled machine.
Learning is an ongoing process necessary to sustain a quality culture. Six-week quality work group classes run year-round, and every employee has an individual learning plan with a specific quality component. New employees are introduced to Crosby’s DIRTFT concepts at orientation and begin formal Crosby quality training on their six-month anniversary.

All this adds up to an organization that functions like few others. "We handle things very differently as a result of our quality culture. We think very long-term at all levels," says Marie Bedard, VP/project management. A good example is the team created to deliver a courtesy pay program, South Carolina FCU’s largest project in 2003.

According to Bedard, "Many institutions would have disbanded the team once courtesy pay was live, but the team understood the job won’t be entirely done until courtesy pay is live on our new system. So the team will stay together until the core processor switch occurs and the job is done. The bottom line is that it’s no longer good enough to put something out there and walk away. You don’t make those mistakes when you are a quality-minded company."

If your organization is undergoing change, focusing on The Absolutes of Quality Management will help. Thousands of companies have embraced the Absolutes, which were defined by Philip B. Crosby in his industry-changing book, Quality Is Free:

First absolute: Quality must be defined as conformance to requirements, not as “goodness.”

Quality improvement is about getting people to do things right the first time. The key is to get requirements clearly understood and not put things in people’s way.

Second absolute: The system for causing quality is prevention, not appraisal.

Appraisal, checking, inspection and testing are all words for the same thing—an expensive and unreliable way to get quality. Checking, sorting and evaluating only sift what is done. What has to happen is prevention. The error that doesn’t exist can’t be missed.

Third absolute: The performance standard must be zero defects, not, “That’s close enough."

Setting requirements is a process that’s readily understood. The need for meeting those requirements each and every time isn’t so readily understood. Each and every action has to be done as planned to make everything come out right.

Fourth absolute: The measurement of quality is the price of nonconformance.

Prices of nonconformance are all the expenses involved in doing things wrong. When you add all the costs together—including the effort to do work over—you’ll find it to be an enormous amount of money, representing 20 percent or more of sales for manufacturing companies and 35 percent of operating costs for service companies. To calculate your price of nonconformance, calculate everything that wouldn’t have to be done if everything were done right the first time.

Focusing on the Absolutes and avoiding the pitfall of letting schedule and cost come before quality will make any process more palatable.

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