GE-Quality-Processes-AMF-June-17

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1See Important Disclosure Notes at End

GE Asset Management

GE Company's Quality Processes

A presentation to

Asset Managers Forum

June 17, 2010

This material has been created solely for use in a presentation to the Asset Managers Forum and only for the purpose of discussing GE AssetManagement (GEAM) operational practices. It may not be used for any other purpose. The information presented herein is confidential and should

not be copied or distributed without the prior written consent of GEAM.

Copyright © 2010 GE Asset Management Incorporated. All rights reserved.

Presented by:

Bill RuoffManager – Business Process Management & Quality




Topics For Discussion

• What is Lean Six Sigma?

• Why do it? . . . What are the benefits?

• How does Lean Six Sigma apply to an investment

management business?

• How does Lean Six Sigma enable operational risk assessmentand mitigation / elimination?

• What is required to deploy and sustain Lean Six Sigma?




Topic For Discussion

What is Lean Six Sigma?




Result is faster Cycle Timeand Better Quality

Wait / Waste . . .Non Value Add Time

Work . . .Value Add Time

Lead Time / Cycle Time

After

Before

Lean is used to attack lack of coordination, lack of flow, and waste

What Is Lean?

The relentless pursuit of the perfect process throughwaste elimination, resulting in cycle time reduction




A BUSINESS STRATEGY• Improve all processes to:

- Raise quality- Lower costs- Make customers happier

A PHILOSOPHY & MINDSET• Data-driven decision making

A STATISTICAL MEASUREMENT• Statistical scale (Defects Per Million)• Tells you how good your products and

services really are• Allows comparison to other products and

services on a common scale

Practical Problem

(CustomerPerspective . . .Define-Measure)

Statistical Problem

(ProcessPerspective . . .

Analyze)

Statistical Solution

(ProcessPerspective . . .

Analyze)

Practical Solution

(CustomerPerspective . . .Improve-Control)

What Is Six Sigma?

Making decisions backed by data, not hunches . . .

Helps to validate operating assumptions




Lean & Six Sigma Work Together… HenceLean Six Sigma!

Lead Time / Cycle Time

Wait / Waste . . .Non Value Add Time

Work . . .Value Add Time

• Identify the Customer and theircritical-to-quality (CTQ) need

• Map the entire process value-added versus waste / delay steps

• Identify and diagnose causes of long waits and defects

• Use Lean to address waste,reducing overall process cycle timemaximizing customer

responsiveness• Use Six Sigma to design solutions

or to address defects in eachprocess step for complex problemswith unclear root causes

Six Sigma

Reducedefects

Before

AfterLead Time / Cycle Time

Lean:

Reducewaste





Why do it? . . . What are the benefits?




Lean is about speed, cycle time, and waste

elimination . . .

Six Sigma is about defect reduction using data andstatistical control . . .

Lean Six Sigma maximizes value to the firm byachieving the fastest rate of improvement in:

- Customer satisfaction

- Quality of products and services- Process speed / responsiveness- Cost- Invested capital

Why Adopt Lean Six Sigma?




What Are The Benefits Of Lean Six Sigma?“HARD”, MEASURABLE BENEFITS

INVESTMENTS BUSINESS IMPACT:- Enabling investment decisions “Data To Decision” . . .

Accurate data, right granularity, timely

- Efficient transaction processing “Capability And Capacity” . . .Via speed, higher throughput

CUSTOMER FOCUS:- Identifying customers – both external and internal . . .

Prioritizing their needs

- Understanding how processes impact customers . . .Via objective, quantitative metrics




What Are The Benefits Of Lean Six Sigma?“SOFT”, CULTURAL BENEFITS

CROSS FUNCTIONAL LEADERSHIP:- Value continuous improvement . . . Understand up-stream /

down-stream work the same way

- Institutionalize across organization . . . Develop high-potential associates in rotational roles

COMMON WAY OF SOLVING PROBLEMS:- Process mind-set and terminology. . . Repeatable way of

thinking about and framing problems

- Common methodology and tool sets . . . Many are visual andeasy to understand





How does Lean Six Sigma apply to

an investment managementbusiness?






Example Of Applying Lean Six Sigma ToEnable Investment Management ….

Investment Research: Confidence QuotientBUSINESS OBJECTIVE: Include qualitative risk factors as an explicit part of the daily investment process forsecurities held by GEAM.

BUSINESS SPONSOR AND GREEN BELT: Chief Investment Officer – International Equities.

PROCESS IMPROVEMENT: Solicit analyst ratings of multiple underlying qualitative risk elements for eachsecurity, quantify into single risk parameter (Confidence Quotient – CQ), stimulate investment team discussion/ debates and supplement portfolio analysis.

CRITICAL TO QUALITY (C-T-Q) RESULTS:- Capacity – To produce timely communication of CQs for each security held and on-going changes in CQs.- Capability – To analyze sectors and portfolios based on P/CE/G valuation and CQs.- Consistency – In expression and measurement of qualitative risk factors and associated documentation.

CONFIDENCEQUOTIENT

(C Q)

Quality Of Management

TransparencyOf Reporting

FinancialCondition

MarketPosition

FundamentalsMomentum




Example Of Applying Lean Six Sigma ToEnable Investment Management ….

Equity Trading: Trading Effectiveness MeasurementBUSINESS OBJECTIVE: Improve Equity Trade Performance measurement process andstrengthen GEAM’s ability to demonstrate “Best Execution”.

BUSINESS SPONSOR AND GREEN BELT: Head of Equity Trading.

PROCESS IMPROVEMENT: Assess multiple equity trade performance metrics and related benchmark(s), align“industry standard” metrics to GEAM investment philosophy and process, set targets for team / individual

traders and develop tool to provide timely feedback to traders on a daily basis.

CRITICAL TO QUALITY (C-T-Q) RESULTS:- Capability – To analyze daily equity trading results to improve execution.- Capacity – With minimal impact on traders’ time.

- Customer – Provide enhanced data regarding execution costs, impact of trading and portfolio analysis.- Compliance / Controllership – Robust response to periodic regulatory examinations.

0Subgr oup 10 2 0 30 4 0 5 0 6 0 70 8 0 9 0 100

0

10

20

30

40

50

Days to Report Received

6/30/199

4

12/31/199

6

6/30/199

9

12/31/200

1

6/9/200

3

6/23/200

3

7/8/200

3

7/22/200

3

8/5/200

3

DateofReport

I Chart for Days to Produce TCA Report

1

X=1.196

3.0SL=2.141

LB=1.000

2 Before Improve After Improve

2.5 Hours 30 seconds

$6,000 ~$0

Quarterly Daily

Time to Compile Data

Yearly Report Cost

Report Frequency






Prioritize

Functions

Identify

Risks

Analyze

Risks

Reduce

Risks

Monitor

Risks

A Six Sigma Approach

A process to identify, quantify, mitigate and implement controls

on the controllership, compliance, and business process thatrepresent the greatest potential for financial and reputationalrisk to the firm and its customers.

(Define) (Measure) (Analyze) (Improve) (Control)

Operational Risk Management Focus






Provides a systematic, repeatable methodology for risk identification,prioritization, reduction and control

Approach by dividing business into manageable pieces

Everyone participates in the process

Strong functional process ownership

Senior Leader buy-in and report-outs by function

Review of high risks on a semi-annual basis

Review RCSAs every two years or any time the process changes

Integrated with new product introduction (NPI) to stay ahead of the curve

Continually strengthens business foundationand helps drive the right behavior

Operational Risk Management Benefits








Keys to Effective Change … GE’s Research

100% of all changes evaluated as “Successful”had a good technical solution or approach

Over 98% of all changes evaluated as “Unsuccessful”also had a good technical solution or approach

What is the differentiating factor between success and failure?

Effective Change Equation Q x A = EQ= Quality Solution / ApproachA= Acceptance and EngagementE= Overall Effectiveness




Why Should Leaders Care?

66% of change initiatives fail to achieve desired outcomes

• 2006 study in Harvard Business Review

57% of organizations experience a decline in workforceproductivity during change management initiatives

• Recent research by Accenture

34% of organizations failed to achieve desired (M&A) dealoutcomes primarily due to poor cultural integration

• 2006 research by Corporate Leadership Council

41% of organizations experienced decline in employeeengagement following M&A activity

• 2005 M&A report from Towers Perrin




GEAM Lessons Learned With Lean Six SigmaSenior Management Ownership: Engaged, visible, “walk the talk”

Improvement Team Sponsors: Identify and drive meaningful improvements

Commitment To Invest Time, Resources: Up-front and steadily afterwards

Communications: Share the vision (“from … to…”), frequent updates / results

Cross Functional Teams: End-to-end functional participation for valid results

Employee Engagement: Solicit “bottom up” ideas on how to solve problems

Business Context: Apply rigor when and where it matters, avoid bureaucracy

Sensitivity To Change Acceptance: Each associate asks “What is in it for me?”

Some “Leap Of Faith” Required: Getting started involves a few “hic-ups”,mis-queues . . . but still the right thing to do






BiographiesWilliam F. Ruoff III; Manager – Business Process Management & QualityBill is responsible for establishing optimal business operational processes across GEAM. He manages critical capabilitygap assessments, including the assessment of GEAM's wing-to-wing processes, workflow and outsourced / internal

operating paradigms. Bill’s role is intended to support GEAM's growth objectives and changing business dynamics,and improve business responsiveness. Bill also serves as GEAM's Crisis Management Leader for maintaining businesscontinuity and planning for disaster recovery. Prior to joining GEAM in 2000, he held functional roles in Marketing,Sales, Operations, Sourcing, and Six Sigma Quality across GE Company. Bill’s business assignments have largely beenfocused on serving consumer customers at GE Appliances, GE Capital Global Consumer Finance, and other GECorporate components. Prior to joining GE Company in 1987, he served as an officer in the U.S. Navy submarine forcefor 5 years. He holds a Bachelor of Science from the United States Naval Academy and a Master of BusinessAdministration from the University Of Chicago.



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Disclosure NotesCopyright © 2010 GE Asset Management Incorporated. All rights reserved.Nothing presented herein is intended to constitute investment advice, nor sales material, and no investment decisionshould be made based on any information provided herein. Information provided reflects GE Asset Management’s

views as of a particular time. Such views are subject to change at any point and GE Asset Management shall not beobligated to provide notice of any change. While GE Asset Management has used reasonable efforts to obtaininformation from reliable sources, we make no representations or warranties as to the accuracy, reliability orcompleteness of third party information presented herein. The information provided is confidential and shall not becopied or distributed.

The information contained in this document is disclosed in confidence to GE customer / partners. It is the property of the General Electric Company and should be used only within your company – This notice shall appear on any

reproduction, in whole or in part. It should not be disclosed to others without the expressed written consent of theGeneral Electric Company.

Lean Six Sigma and other processes are shown for illustrative purposes only. GEAM makes no representation orwarranty that similar processes would be successful for your entity or any other entity.

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GE-Quality-Processes-AMF-June-17