Accelerating Change and Continuous Improvement:

1. Accelerating Change and Continuous Improvement: How HR Led the Way at Leominster Credit Union . . . Presented by: Barbara Mahoney, SR VP, HR Leominster Credit Union & Ray Gagnon Gagnon Associates

2. Agenda • How it all began at LCU • A bit about “making change” • GE Work-Out • Where it came from & how it works • Work-Out at LCU: the “Pilot” Phase • Work-Out becomes “On-TRACK” • Developing LCU internal change capability • LCU: On its own with On-TRACK • Summary, Q&A

3. LCU’s Change Agenda: How It All Began • Strategic plan – 2001-2005 • Key Goal: “Achieve World-Class Productivity” • Supporting Strategy: “Analyze current business processes to determine if best suited to optimize productivity” • Organizational agenda: eliminate boundaries, barriers, to X-functional collaboration and teaming – “silos”

4. How to Do It? • Two sides of the question: • “We know this stuff better than anyone; we can do it on our own.” • Value of a “neutral, 3rd party” look? objectivity? • Decide on 3rd party • Key factor: “GEWork-Out” capability

5. LCU Change Objectives • Improve: • Effectiveness & efficiency of key business processes • Member experience • Bring about: • Improved communication • Increased employee knowledge, appreciation and understanding of practices/procedures in other departments • Break down “silos” to improve teamwork & collaboration across the Credit Union

6. A bit about “making change” “Change has no constituency.” -- former GE CEO Jack Welch

8. Change Management Model (ADKAR) • Making the Case for Change • Creating: • a Shared Need • a Sense of Urgency • Dissatisfaction with the Status Quo • Shaping and Sharing the Vision • Describing the Desired Future State • Building a Guiding Coalition • Mobilizing Commitment • Empowering Broad-based Action • Generating Short-term Wins • Making Change Last • Reinforcing/Celebrating Success • Anchoring Change in the Organization UNFREEZE Awareness Desire TRANSITION Knowledge Ability REFREEZE Reinforcement adapted from Kotter, Tichy, Lewin.

9. Work-Out: After a Decade “GE had another huge advantage that accelerated our quality effort: we had a Company that was open to change, hungry to learn and anxious to move quickly on a good idea. This learning environment came from a decade-long, soul-transforming cultural initiative called “Work-Out.” Work-Out is a continuing effort to achieve what we call ‘boundaryless behavior’-- business behavior that tramples or demolishes all barriers of rank, function, geography and bureaucracy in an endless pursuit of the best idea -- in the cause of engaging and involving every mind in the Company.” -- Jack Welch, former CEO, General Electric Letter to “Share Owners and Employees” 1997 Annual Report

10. Work-Out: A Proven Approach • GE • IBM • Philips • Frito-Lay • Bristol-Myers Squibb • Borden • Novartis • Joy Global • Serono

11. Work- Out: Empowering Internal “Experts” Traditional Perspective Work-Out Perspective Internal “Experts,” “ Closest to the Action” Managers (Directive) empower Doers (“Salute and execute”) Leaders (Facilitative)

12. Work-Out: How it works . . . • Carefully defines initiatives into discrete team ‘missions’ or ‘challenges’ • High focus • Fast-track • Enlists cross-functional teams of process owners and those with a vested interest • Uses “guerilla tactics”– “get in, get the job done, get out” • Puts pressure on management to lead vs. direct • Engages and empowers “end-users”

13. Accelerating Positive Change % Work-Out Scenario BAU Scenario RESULTS TIME

14. Work-Out: Implementation Phases Design Conduct Implement

15. Design Phase: Components • Due diligence • Sponsor’s “take” • Interviews • Design Team Meeting • define Team Challenge, Scope, Metrics, Deliverables • select participants; size session • Reference Data Package • Logistics

16. Conduct: Kickoff and Overview This is going to be great!! All teams start the session together with the Sponsor giving the overview of objectives and expectations Team #1 Team #3 Sponsor Decision- Making Team Lead Facilitator Team #4 Team #2

17. Conduct Phase: Sample Agenda • DAY ONE DAY TWODAY THREE • 8:00 KICK-OFF 8:00 Start 8:00 Start • Bus. Challenge - Spons. Team Work Sessions Team Work Sessions 8:15 Topic Overview - Champ. “Main Tent” • 8:45 Process Overview – GA “Main Tent” • Finalize Presentations • Teams Start-up • 12:00 LUNCH 12:00 LUNCH 12:00 LUNCH • 1:00 Team Work Sessions Team Work Session 1:00 Practice Presentations • 3:00 “TOWN MEETING” • -- Team Presentations • -- Decisions • 6:00 Adjourn DAY ONE 6:00 Adjourn DAY TWO 6:00 Adjourn DAY THREE • (Possible evening work) Decision-Makers Briefing

18. Work-Out Team Output: Action Plans Issue: Recommendation: Cost/Benefit Analysis: Owner: Action Steps: Who: When: 1. 2. 3., etc.

19. Work-Out: Sample Team Output • Issue # 2: • Global standards for quality control, testing and manufacturing of rollers are inconsistent between the regions due to: • Different product designs • Different machinery and requirements to produce rolls • Inherited production methods • Recommendation # 2 • Document global standards for roller quality control, testing and manufacturing practices • Owner • Daryl Robinson & Carl Weeks

20. Work-Out: Sample Team Output Cost/Benefit Analysis • Benefits • Creates documented global standards for: • Manufacturing processes • Quality Control • Testing • Packing & Shipping • Creates best practice for manufacturing using knowledge from existing regional processes • Potential increase for productivity • Cost • General travel and documentation cost

21. Work-Out: Sample Team Output Action Plan for Recommendation # 2

22. Conduct Phase: Sample Agenda • DAY ONE DAY TWODAY THREE • 8:00 KICK-OFF 8:00 Start 8:00 Start • Bus. Challenge - Spons. Team Work Sessions Team Work Sessions 8:15 Topic Overview - Champ. “Main Tent” • 8:45 Process Overview – GA “Main Tent” • Finalize Presentations • Teams Start-up • 12:00 LUNCH 12:00 LUNCH 12:00 LUNCH • 1:00 Team Work Sessions Team Work Session 1:00 Practice Presentations • 3:00 “TOWN MEETING” • -- Team Presentations • -- Decisions • 6:00 Adjourn DAY ONE 6:00 Adjourn DAY TWO 6:00 Adjourn DAY THREE • (Possible evening work) Decision-Makers Briefing

23. The Work-Out “Town Meeting” The teams then present their action plans to the Leadership Team to get feedback and immediate decisions. “Further Study” decisions must have a specific time frame for closure and usually require some additional data before a decision can be reached. Team Representative Lead Facilitator Action Plan Team #1 Yes No F.S. Team #3 x x x x x x x x Decision- Making Team I approve! Team #4 Team #2 Sponsor

24. Work-Out: 30/60/90 Check-Points Teams meet informally to share information and request help in removing roadblocks Progress Checkpoints 30 days 60 days 90 days All Work-Out participants meet to share results and CELEBRATE!! Teams meet with Decision-Makers to report progress Consultant/facilitator provides Team/Sponsor w/ support as needed. The time frame for implementation is usually 30-60-90 days

25. Work-Out at LCU The “Pilot” Phase

26. Pilot #1: Lost/Stolen Debit Card • Issue: • Goal: “Deliver ‘Best’ Customer Service” • Ave. 7-9 days to return lost/stolen card (occasional 13-15) • Approach: 2-day Work-Out • X-funct. team: Deposit Ops., IT, Contact Ctr., Retail Branches • “map” “as is” process; ID causes for excessive “cycle time” • problem-solve causes • “map” “to be” process to reduce “cycle time” • Results: • Replacement time reduced to ave. 3-4 days • “Greatly reduced FedEx costs” • Fixes leveraged across other “card-related” processes for bigger win

27. Pilot #2: Home Equity Line/Loan Approval • Issue: • Approval process too slow • Additional goal: increase rate of loans approved • Approach: 2-day Work-Out • X-funct. team: Consumer lending; IT; Contact Ctr.; Loan Servicing; Branch Mgmt.; Vendor on call • “map” “as is” process; ID causes for excessive “cycle time” • problem-solve causes • “map” “to be” process to reduce “cycle time” • Results: • Loan/line approval cycle-time improved by >30% • 13% increase in Lines/Loans approved

28. “On-TRACK” at LCU: Consultant-Led &Transition

29. On-TRACK Representative ResultsConsultant-Led & Transition • Key, internal file-maintenance procedures between Branches & Deposit Ops. better integrated • Steps reqd. by Branch personnel reduced by 56%, freeing up retail capacity to support CEO’s “sales culture” initiative • Reduced front-line file maintenance errors by >50% in key product area • Eased work-loads and reduced “system stress” between Branches and “back-office”

30. “On-TRACK” at LCU: Self-Sufficiency

31. On-TRACK Representative ResultsSelf-Sufficiency • Loan application process modified to collect more data to maximize cross-sell opportunities • Collections process cycle-time improvements: • Telepayment: –65% • Hold-harmless: –50% • Address changes: –40% • Set-off process: –100% (automated) • Payment shortages: –100% (automated) • IRA account opening process: –83% • IRA reduced error rate: –66% • Defined global, X-funct. “project-mgmt.” process

32. On-TRACK Representative ResultsSelf-Sufficiency • User/Responsibility Codes Simplification • Reduced from 2 to 1 per employee • Created efficiencies in tracking teller/MSR activity • Deactivated former employee codes eliminates member account inaccuracies • Improved accuracy of employee activity tracking

33. Qualitative Results “There were many intangibles that came out of this process improvement work. This process improved teamwork and collaboration across the credit union. . . . It has brought understanding among our people of how changes they make can impact other areas of the credit union and, based on this, how important it is to share information/policy/process changes across functions. In short, it has made us a more aware and better-functioning team as an organization.” -- Barbara Mahoney, VP HR, Leominster Credit Union, Leominster, MA

34. On-TRACK: “A Way of Life” at LCU • Integral part of annual Strategic Plan • Commitment to 2 On-TRACK’s yearly • L’ship recognizes sustainability as critical to success • Employees “waiting in line” to participate • Has become a part of our day-to-day – “the way we do things around here”

35. Critical Success Factors • Senior management commitment & active involvement, continuity • Executive Sponsor: CEO • Process Champion: Sr. VP HR • “Process” vs. “Event” Mindset • Resources – “calendar time,” $ investment, people • Clear “missions” and “boundaries” • Key players – not just most available • Offsite sessions • Follow-through during Implementation Phase • Publicized, celebrated “wins”

36. Change Management Model • Making the Case for Change • Creating: • a Shared Need • a Sense of Urgency • Dissatisfaction with the Status Quo • Shaping and Sharing the Vision • Describing the Desired Future State • Building a Guiding Coalition • Mobilizing Commitment • Empowering Broad-based Action • Generating Short-term Wins • Making Change Last • Reinforcing/Celebrating Success • Anchoring Change in the Organization UNFREEZE TRANSITION adapted from Kotter, Tichy, Lewin. REFREEZE

37. Thanks! Q&A, Discussion??

38. Your Presenters • Barbara Mahoney, Senior VP, HR • Leominster Credit Union • 978 466 7228 • bmahoney@leominstercu.com • Ray Gagnon, Principal • Gagnon Associates • 978 635 9836 • rgagnon@thinkgagnonassociates.com