Applying the KANO model

for developing an
objective based
performance
measurement and
incentive plan
Raj Shroff Das Madhavan
VP, Engineering and Planning VP, Engineering and Planning
Citi Cards Citi Cards
Kansas City, MO Kansas City, MO
Raj.Shroff@Citigroup.com Das.Madhavan@Citigroup.com
(816) 505-6569 (816) 505-6568

June 2005
This presentation and the information contained in it are the confidential and proprietary work product of Citi Cards and may not be copied or distributed without the
specific written consent of Citi Cards. Copyright c 2005 Citicorp Credit Services, Inc. 1
 Topics
1. Background
2. Why this project ?
3. Approach
4. What is the KANO model ?
5. KANO questionnaire for the project
6. Basis for KANO questionnaire
7. KANO analysis
8. Building the foundation
9. Historical Data Analysis
10. The Objectives Matrix Method for Performance
Measurement
11. Primary Components of Objectives Matrix
12. Benefits of Using the Objectives Matrix Method
13. Alternative Matrix Development and Selection
14. Implementation Planning
15.This presentation
Post and Implementation Evaluation
the information contained in it are the confidential and proprietary work product of Citi Cards and may not be copied or distributed without the
specific written consent of Citi Cards. Copyright c 2005 Citicorp Credit Services, Inc. 2
Background

Who we are ?

Engineering and Planning: An Internal Consulting Group within

Citi Cards

Provides strategic consulting across Citi Cards and beyond

Staffed by MBBs and BBs

Offices located in Kansas City, New York, and Hagerstown

Project Focus

Development of performance standards & associated incentives

Area of Implementation: Fraud Department

Objective: Improve associate productivity and quality, while

also promoting knowledge sharing

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Why this project ?

Fraud Department is a critical customer touch point that could

impact customer experience positively or negatively

The associates need to make judgmental decisions on making

proactive customer calls
The management would like to enhance customer experience while
meeting business objectives
Well aligned with Citigroups five point plan

Set appropriate productivity/quality thresholds, while

fostering an environment for strengthening employee
capabilities

Retain high performing associates

Maintain effective communication within the organization

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Approach
Assess employee needs
Focus Groups
Kano Model: Basic (Must-be), One-dimensional (Performance), and
Attractive (Delightful) Needs
Identify gaps, develop and implement action items
This is imperative for ensuring that right success elements are in place prior
to implementation of performance measurement system

Baseline current performance

Historical data analysis
Exploratory
Deductive

Set performance qualification criteria & goals

Develop an incentive plan

Acquire Unit Manager and Associate Buy-in

Acquire senior management approval, including HR and Legal

Develop communication, pilot, roll-out and tracking plan

Acquire employee feedback post pilot phase

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What is Kano Model ?
Proposed in 1984 by Dr. Noriaki Kano of Tokyo Rika University

Based on his study of Herzbergs Motivation Hygiene Theory

The model distinguishes between three types of customer

requirements
Must-Be One Dimensional Attractive
requirements requirements requirements

Basis for entry into Satisfaction is The very minimal

the consideration proportional to the level presence can create
set of fulfillment satisfaction
High dissatisfaction, Requirements are These are
if requirements are usually explicitly unexpected,
not met demanded thoughtful, and
delightful surprises
Fulfillment of Requirements can cause
requirements will reactions ranging from Not much
not increase dissatisfaction, through dissatisfaction, if the
satisfaction indifference, to requirements are less
satisfaction functional
Relevant data is generally obtained by administering a KANO
questionnaire
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What is Kano Model ?

Delightful Performance
Features: Features:
Initiate satisfaction if Attributes that lead
they are offered. as well to
They increase the satisfaction as to
noticed benefits of dissatisfaction
the core functionality
Does not meet Exceeds all
customer customer
requirements requirements
Basic Features:
Minimum features
which represent the
core functionality of
The bigger the a product or
descending slope, the service
higher the benefits
rating. The customer
dissatisfaction increases
if the basic requirements Dissatisfaction
are not fulfilled . of the customer
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Developing a Kano Questionnaire
Functional Form versus Dysfunctional Form
How would you feel if the service had feature X
How would you feel if the service did not have feature X

Kano Questionnaire choices:

I like it
I expect it
I am neutral
I can tolerate it
I dislike it

Example
Question Choices

Upon calling into a call center, how would I like it (5)

you feel, if IVR is present ? I expect it (4)
I am neutral (3)
I can tolerate it (2)
I dislike it (1)
Upon calling into a call center, how would I like it
you feel, if IVR is not present ? I expect it
I am neutral
I can tolerate it
I dislike it
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 Kano questionnaire for the project
Functional Assoc-1 Assoc-2 Assoc-3 Assoc-4 Assoc-5
Question

How would you feel, if the RPH thresholds were Rating Scale
al

1a 1 1 4 2 3
increased from the current levels ?
n

5. This would be
ctio

1b
How would you feel, if the RPH stayed at the
3 5 3 3 3 very helpful
current levels ?
for me
fun

How would you feel, if the adjustment factors

Dys

2a
were revised to lower levels ?
1 2 2 1 3 4. This is a basic
requirement
2b
How would you feel, if the adjustment factors
3 5 3 3 3
for me
stayed at the current levels ?

How would you feel, if efforts were made to 3. This would not
3a educate you on how adjustment factors were 5 5 4 3 5 affect me
computed ?
How would you feel, if efforts were not made to 2. This would be
3b educate you on how adjustment factors were 2 3 4 2 4
computed ?
a minor
How would you feel, if the people who set the
inconvenience
4a adjustment factors knew how the HRAM process 3 5 4 5 4
works ? 1. This would be
How would you feel, if the people who set the a major
4b adjustment factors did not fully know how the 3 1 2 1 1 problem for
HRAM process works ?
me
How would you feel, if you were given prior
5a notice in regards to changes in the adjustment 5 5 5 5 4
factors ?
How would you feel, if you were not given prior
5b notice in regards to changes in the adjustment 1 2 2 2 2
factors ?

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Basis for Kano questionnaire for the Project
Voice of Employees (Associates) at the focus groups. A few
examples:

Primary focus on productivity, which may not be conducive for

coaching or helping your neighbors.
Adjustment factor may not be representative of actual work.
The way the performance measurement system is setup today,
there is no reason to over-perform.
Whenever an associate is used for coaching, his/her time is
counted as non-prod time.
Quality monitoring is neither consistent nor fair.
Write-ups or missed opportunities are not fair. Reasoning given is
unclear.
With quality monitors- - no discussion of how-to-do things better,
only focus on what-to-do.
There is no communication between different groups resulting in
inconsistency on procedures.

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Basis for Kano questionnaire for the Project
Management concerns. A few examples:

Associates not applying clear, concise, accurate notes on the

account.

Lack of proper risk assessment resulting in potential losses to the

Banks financial interest by utilizing educated risk assessments.

Not attempting customer contact at all available numbers or

failure to call financial institutions or Creditors.

Incorrect/incomplete processing of requests made by customer

such as, address change, add/remove authorized users, request
for or cancellation of card/PIN/checks.

Failing to update any discrepancies.

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 Kano Analysis

Several methods of
analysis
5 12 15
8
One
Attractive 4
9 3
Dimensional Pictorial format much
14
5 7
10 6
easier to understand
11
4
13 The chart is divided
into four quadrants
Functional (Y)

3
2
The quadrants are
obtained by using
overall mean scores
2
1 for X and Y
questions

1 The point is plotted

at the intersection of
Indifferent Must Be the mean scores for
0 individual X and Y
0 1 2 3 4 5
question
Dysfunctional (X)

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Building the Foundation
Initiatives identified as a result of Kano Analysis:

Clearly define policies and procedures

Communicate changes in the environmental elements in a timely

manner

If possible, move away from adjustment factors or minimize its

use

Ensure a more supportive environment, in which associates

improve their skill-set

Establish attainable baselines and goals for performance

measurement

Restructure Unit Manager jobs so that they spend more time on

the floor

Ensure the Quality monitoring group understands how decision

making in Fraud Department works and are able to render
consistency in their judgments

Ensure that the Quality monitoring group meets regularly with

the associates to discuss scoring, feedback, etc.
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 Historical Data Analysis
Between site differences Team to Team differences
are significant at 99 % are not significant within
Confidence Level, but not both sites at 95%
at 95 % Confidence Level Confidence Level (ANOVA)
(ANOVA)
30
30

59
158
59
Outliers 175
175 174
155
174
20 201
97
20 204
147

75th percentile
75 percentile
th 10
Median
Median
10 25th percentile
25th percentile

51
RPH
0
51
N= 15 14 18 19 7 17 14 21 12 16 19 6 7 17 18
Outliers
RPH

42
3051

3053

3055

3056

3057

3058

3060

7011

7012

7013

7017

7018
3054

3061

7016
43
0
N= 85 137

JX MD
Team

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Historical Data Analysis

Processes at the two sites seem to be stable with a very few special
causes

Control Chart: RPH

25.899
Control Chart: RPH
26.284

18.553
19.292

11.208 12.300

RPH RPH

3.862 UCL = 17.1404

5.307 UCL =

Average = 11.2078 Avera

-3.483 -1.685
LCL = 5.2752 LCL =
1 11 21 31 41 51 61 71 81 1 15 29 43 57 71 85 99 113 127

6 16 26 36 46 56 66 76 8 22 36 50 64 78 92 106 120 134

Sigma level: 3 JAX Sigma level: 3

HAG

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The Objectives Matrix Method for Performance
Measurement

Originally developed by Dr. James L. Riggs of Oregon Productivity

and Technology Center at Oregon State University. He named it the
Objectives Matrix (OMAX)

An improvement focused performance measurement and reward

system that integrates multiple mission critical performance
measures in a balanced fashion

Can be designed to measure individual, group, or process

performances

The measures included should be within an individuals control

Widely used by many of fortune 500 companies (TI, Raytheon, HP,

Boeing, Pepsi, Mutual of Omaha, Coldwell Bankers, Northrop, etc.)

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Primary Components of Objectives Matrix
Matrix Criteria Quantifiable metrics that measure the performance

Milestones comprises three components:

Baseline performance level

Performance goal for each criterion

Milestones expressed as a percentage ranging from 0% to 100%

Current Performance The current level of performance for each

criterion in the current measurement period

Current Milestone The current performance level of each criterion

translated to a percentage of goal attainment

Relative Weight A weighting factor assigned to each criterion that

indicates its relative importance

Weighted Milestones The current milestone of each criterion

multiplied by its relative weight

Performance Index The sum of all weighted milestones

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Objectives Matrix Example

R e la tiv e w e ig h t
P e rfo rm a n ce
D e fin itio n

C u rre n t
C rite ria

C rite ria

100% Goal
-0 .2 0

-0 .1 0

B ase

m ile s to n e
M ile s to n e

W e ig h te d
Milestones

C u rre n t
Quality Phones PMW 98.0% 96% 97% 98% 98.5% 99.00% 99.5% 100% 0.5 50 25

UPH cases worked

26 25 27 29 31 33 34 35 0.1 15 1.5
(Predictive) Total hours

cases worked
UPH (Preview) 194 170 174 185 196 207 218 229 0.41 15 6.10
Total hours

Hrs completed
Adherence 94.0% 96.5% 95.0% 96.0% 97.0% 98.0% 99.0% 99.5% 100% 0.3 10 3
Hrs scheduled

Hrs avlbl-Hrs unavlb

Attendance 99.0% 98.0% 98.5% 99.0% 99.25% 99.5% 99.75% 100% 0.5 10 5
Hrs available

Performance Index 40.6

Baseline should be satisfied for all measures to qualify for the incentive plan
Current mile stone = (Base Current)/(Base Goal)
Maximum payout of $200/Mo, if goals for all the criteria are met
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Benefits of Objectives Matrix Method

Easy to comprehend

Process focused with clearly defined objectives and goals

Capable of normalizing the units of different measures

Flexibility in accommodating measures of quality, timeliness,

employee attitude, and productivity

Results/Outcome orientation as against simply measuring activities

Ability to measure trade-offs and produce a single measure of

performance

Can be useful in action planning for individual employees

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 Alternative Development and Selection
Option 1
Tear 1 (75th percentile and above)

Current
Metric $ Available Performance Gate 1 2 3 4 5 Goal
Productivity 150 27.04 24.04 25.00 26.00 27.04 28.12 29.25 30.42
$ 111.93 $ 117.53 $ 123.41 $ 129.58 $ 136.05 $ 142.86 $ 150.00
Quality Opportunities 150 1.00 1.00 0.00
150.00
Team Work 75

Tear 2 (50th percentile and above)

Current
Metric $ Available Performance Gate 1 2 3 4 5 Goal
Productivity 75 21.50 18.99 19.75 20.54 21.36 22.22 23.10 24.03
$ 55.97 $ 58.76 $ 61.70 $ 64.79 $ 68.03 $ 71.43 $ 75.00
Quality Opportunities 75 0.00 1.00 0.00
$ 30.00 75.00
Team Work 50

Tear 3 (25th percentile and above)

Financial Perspective Internal and Customer Perspective
Current
Metric $ Available Performance Gate 1 2 3 4 5 Goal
Productivity 50 8.00 15.00 15.60 16.22 16.87 17.55 18.25 18.98
$ 37.31 $ 39.18 $ 41.14 $ 43.19 $ 45.35 $ 47.62 $ 50.00
Quality Opportunities 50 1.00 1.00 0.00
0.00 50.00
Team Work 50

Learning and Growth Perspective

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Alternative Development and Selection
Option 2
Current
Metric $ Available Performance Gate 1 2 3 4 5 Goal
Productivity 150 19.00 15.00 16.88 18.99 21.36 24.03 27.04 30.42
$ 26.70 $ 35.60 $ 47.46 $ 63.28 $ 84.38 $ 112.50 $ 150.00
Quality Opportunities 50 1.00 1.00 0.00
$ - 50.00
Team Work 25

JAX 25 15 5 5 2 0 0
# of people qualifying
based on RPH alone HAG 42 11 8 4 3 0 1
JAX (1 opp+ 0 opp) 4+3=7 5+8=13 1+2=3 1+2=3 0+1=1 0+0=0 0+0=0
# of people qualifying
based on RPH & Quality HAG (1 opp+ 0 opp) 3+11 = 14 3+7=10 2+5=7 1+3=4 0+1=1 0+0=0 0+1=1

Option 2
Simple to execute
Is our starting point

Option 1
Requires additional segmentation work based on RPH
Bit difficult to execute
Is our end vision

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Implementation Planning

Receive formal approval from HR, Legal, and the senior

management team

Develop an Employee Communication Plan

Develop an Employee Training Plan

Develop an MIS Reporting Process

Develop incentive fulfillment process

Capture Lessons Learned

Refinement and Institutionalization

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Post Implementation Evaluation
Employee Surveys
What is your overall impression of the incentive plan ?

Do you agree that the right criteria were selected for your
performance improvement ?
Do you agree that you have complete control over the criteria ?

Do you agree that criteria weighting was done appropriately ?

Do you agree that the baseline/goal for each criterion was

reasonable ?
Do you agree that the incentive amount was adequate ?

Overall, do you agree that the reward system reflected your

performance accurately ?
Do you agree that your overall performance has improved due
to the incentive program ?
What other changes do you suggest we make to the
performance measurement/incentive system ?
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 Q&A

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