CI pilot Discussion document December 2012

1. CI pilot Discussion document December 2012 date

2. CI initiative targets 3 objectives in parallel... Customer A better customer experience We’ll get a better understanding of what our customers want through the Voice of the Customer dialogue. This focus will drive improvements in customer experience Service Engagement Cost Our financial goals delivered Lean methodology is an enabler to help us meet the financial targets from our business plans CI Costs Time People Improved employee engagement Lean ways of working engages our people and empowers them to be involved in how things are delivered

4. It will seek to profoundly change the mindset of our staff and will need strong leadership support Change targeted by CI initiative Interventions planned • Make sure supporting leadership behaviors enable and sustain change: • Create space for teams to lead CI in their area • Provide support infrastructure (e.g., escalation route) • Adjust KPI cascade/performance management • Reward proactive improvement not only fire fighting • Coach line managers • Visits frontline teams • Series of leadership workshops at different levels to identify behaviors required to enable and sustain change • Workshop with all involved line managers and leadership team to • Define cascade of KPI boards • Agree escalation mechanism Team members Line managers Leadership • Embed way of working based on CI methodology (‘the BT Way’): • Focus on value adding activities and time spend with the team • Establish regular team huddles and KPI boards • Use structured problem solving approach • Formal training of line managers in coaching concepts and CI methodology • Workshop with all involved line managers and leadership team to • Define cascade of KPI boards • Agree escalation mechanism • Coaching on the job by CI Coaches to embed mindset change • Continuous improvement to become a core part of everyone’s job each day: • Proactively identify operational issues and opportunities and raise them with their manager • Provide input into identifying root causes and solutions • Drive problem resolution for local problems as agreed with their line manager • Line managers to coach staff on an ongoing basis • Managers to use The BT Way toolkit with staff to give a structured way to make improvements

5. Overall timeline and objectives for pilot deployment Establish customer focused performance dialogue Embed structure problem solving practices Embed capabilities to sustain CI Sustain new way of working Mobilisation Timing 3weeks 5 weeks 4 weeks ongoing Objectives • Refine and align KPIs across all levels of the organisation • Introduce and use performance dialogue and visual management techniques to manage the business: • develop a performance board and establish daily performance huddles • perforamnce management cascade through all layers of leadership • Assess change readiness • Engage senior leadership • Communicate to all staff • On-board and train local coaches • Provide initial training for managers • Run value stream (VSM) workshop to identify key improvement areas • Introduce common set of problem solving techniques • Establish escalation mechanisams • Empower line managers and their teams to implement day-to-day improvements • Establish mechanisms to share best practice and improvement opportunities across teams • Introduce demand and supply planning methods • Establish skill matrix, map against requirements and align with development plans • Align job standards and performance management with refreshed KPIs • Use influence model to sustain new way of working • Role modelling • Foster understandings and conviction • Reinforcing with formal mechanisms • Develop talent and skills

6. CI Training - Summary • 10 days • 5 x 1 days • 2 hrs • 3 x 0.5 days • 3 x 2 hrs • 0.5 days • 3 x 1 day • 5-6 days Coaches dedicated 100% GMs involved in implementation as well as leadership events Ensure involvement and coaching during VSM work • CI Coach Training/ Support events • Formal training (classroom based) • Development sessions (informal, off site) • Ongoing coaching throughout duration of deployment • Leadership Events (Director and Tier 3 managers) • Initial 1:1 coaching session on making the roll out a success • 3 leadership master-classes (1/2 day events chaired by thought leaders in Continuous Improvement and Lean) • 3no. ‘Go and See’ events (2hr coaching sessions interwoven with site visits to see best practice or conduct reviews • Role modelling workshop to support sustaining the change • Manager Events (Tier 2/3 and First Line) • 3 Training events (1 day each) – Interactive classroom based, typically by business area on location • 4 Workshops (Case for change – ½ day, Voice of Customer and KPIs 1 day, VSM – 3-5 days over 3 weeks, and Job role refinement ½ day) with Director involvement

7. Pilot success will be measured across 6 levels, with specific business KPIs to be defined for each area What are the measures and targets you are looking for? *Source: ROI Institute Methodology

8. In addition to an uplift in customer experience (e.g., vsat, net easy), and employee engagement (e.g., EEI) the CI initiative targets a 10% uplift in performance Customer A better customer experience We’ll get a better understanding of what our customers want through the Voice of the Customer dialogue. This focus will drive improvements in customer experience • CI has a 10% performance improvement target, to be achieved by a combination of 3 options • Cost reduction: direct reduction of either total labour cost (TLC) or external spend (e.g., with outsourcing providers) • Cost avoidance: absorption of additional volume without increase in TLC. Volume increase must be clearly trackable and not relate to volume reduction in other areas. Where it is related to volume reduction in ohter areas, there needs to be a reduction in either TLC or external spend linked • Revenue uplift: direct increase of revenues (e.g., avoided churn, sales uplift) on the back of the CI initiative Cost Our financial goals delivered Lean methodology is an enabler to help us meet the financial targets from our business plans People Improved employee engagement Lean ways of working engages our people and empowers them to be involved in how things are delivered • Annualised impact to be delivered within 3 months of project completion • Substantiation of existing challenges will count against CI target

9. Focus of next phase The approach will be tested and refined in an initial pilot phase before the wider rollout commences in Q1 2013/14 Group-wide rollout CI Pilots Mobilisation Objective Objectives, approach, supporting infrastructure in place Approach tested and refined CI culture being embedded in the organisation Description • Objectives of the initiative defined and agreed with the OC • Continuous improvement methodology and deployment approach developed based on internal and external best practices • Initial infrastructure in terms of CI team and academy setup • Pilot areas and objectives agreed with stakeholders • Pilot teams mobilised • Pilot projects successfully implemented and benefits delivered • CI methodology and deployment approach refined based on learnings • Group-wide rollout plan defined and overall business case developed • Continuous improvement initiative being rolled out across all LOBs • Culture change and performance improvements being embeded in the organisation Timeframe Until end of Nov ‘12 Nov ‘12 – Apr ‘13 From Apr ‘13

10. Backup

11. Overall 2 pilot waves will be used to test the CI approach and its deployment 2013 2012 Q2 Q3 Q4 Q1 Q2 Q3 Activity Agree pilots Programme design Design & resourcing Set-up new governance model and PMO delivery Governance and PMO Design Test and refine Toolkit, branding and comms Resourcing (ext.) Design Test and refine Training and coaching programme Design & set-up Recruit and assess pilot CI Coaches Assess and recruit CI Coaches Training of pilot CI Coaches Pilot 1 implementation Phase 1 completed Pilot 1 continuous improvement (BAU) Phase 2 - BAU Implementation and BAU reviews Pilot 2 implementation Phase 1 completed Pilot 2 continuous improvement (BAU) Phase 2 - BAU Implementation and BAU reviews Go-No go decision Scope and agree roll-out plan, detailed planning Full roll-out Assessment Centres for CI coaches On-going training and accreditation for CI Coaches

12. Each deployment will be carried out in 12 week waves followed by continuous support for teams and leadership Establish cascade of team huddles Embed structure problem solving practices Overlay people dimension Sustain new way of working Mobilisation Timing 3 weeks 5 weeks 4 weeks ongoing Objectives • Assess change readiness • Engage and sign-on senior leadership • Develop and deliver comms to all staff • On-board and train coaches recruited from the local BI community • Initial preparatory training for managers • Refine and align KPIs across all levels of the organisation: • apply voice of the customer (VOC) lense to establish the right measures • develop cascade of KPIs through management layers • Use perforamnce dialogue and visual management techniques to manage the business: • line managers to develop a KPI board and establish daily team huddles • perforamnce management cascade through all layers of leadership • Introduce common set of problem solving techniques, based around an ‘A3’ approach • Establish escalation mechanisams for issues that cannot be addressed by line managers and their teams • Empower line managers and their teams to implement day-to-day improvements to how they work • Establish mechanisms to share best practice and improvement opportunities across teams • Introduce demand and supply planning methods • Establish skill matrix, map against requirements and align with development plans • Align job standards and performance management with refreshed KPIs • Use influence model to sustain new way of working: • Role modelling • Foster understandings and conviction • Reinforcing with formal mechanisms • Develop talent and skills To be aligned with meritocracy theme Line manager activities • 1 day foundation training (TBD), to convey technical and coaching concepts • Participate in the development of comms • Delviery of comms to teams • 1 week setup, including: • 1 day of training (TBD) • joint workshop with leadership to define KPI and KPI board cascade • 3 weeks of practice using the team hudle, supported by CI coach • 1 week setup, including: • 1 day of training (TBD) • joint workshop with senior leadrship to develop the escalation method • initial introduction of problem solving with team, half day • 3 weeks practice, supported by CI coach • 1 week setup, including: • 1 day of training (TBD) • develop current state skills matrix and map against demand / supply analysis • participation in a workshop with leadership to establish new job standards • 3 weeks practice, supported by CI coach • Continue to use new ways of wokring, driving continuous improvement • Regular sessions with CI coaches To be a-ligned with leadership behaviour initiative Leadership activities • Sign-on call (scope, benefits, roles and resources) • Comms workshop to develop case for change and change story • Delivery of comms • Initial workshop with director and all his line managers for the respective area • Leadership to role model new ways of working, e.g. participating in team huddle • Provide point of escalation • Devolve responsiubility for continuous improvement to empower front line managers • Create space and time for managers to make change happen, e.g. agree to stop certain non-value adding management activities • Implement escalation mechanism • Workshop to develop refinments on job standards • Engagement with HR to enact change • Continue to use and role model new ways of wokring • Spend time with line managers and their teams to reinforce change • Regular sessions with CI coaches CI coaching support/mgr • - • 1-2 days / week • 1-2 days / week • 1-2 days / week • 1-2 days / month

13. A dedicated team of CI Coaches will support line managers to drive continuous improvement as part of their day job Role in relation to CI Required skills Planned training • Coaching direct reports to improve their performance • Knowledge of the CI methodology (e.g., Lean Way of Working, SixSigma, problem solving) • Coaching on the job to • Develop coaching skills • Embed continuous improvement • Technical training on • Lean Way of Working • SixSigma • Root cause problem solving • Workshop with CI Coach • Run regular team huddles to • Manage performance of the team • Identify problems • Drive resolution of identified problems with the team or Coach/BI support where required • Escalate problems that cannot be resolved in the team in team huddles with his line manager • Take broader change programmes into account when addressing local problems • Coach team in their job as well as problem identification and resolution Line manager Line employees Senior leadership Approach • Line manager to identify and address problems in regular team huddles with his team • Line managers to escalate problems that cannot be addressed within his team in the team huddles with his manager • CI Coach to support line manager to prepare and run meetings as well as to solve identified problems with his team and BI support where required • Re-inforce cultural change (e.g., visit perf. meetings of teams, delegate CI to managers) • Provide escalation point for complex problems • Cascade information down the line / ensure cross-team best practice sharing • Identify problems and raise in perf. meeting • Support identificaiton of solution during perf. meeetings / root cause problem solving • Resolve local problems as agreed in perf. meeting • Basic problem solving skills • Coaching of managers • Understanding of CI methodology and their role to enable it • Coaching by line managers supported by CI Coach • Workshop with CI Coach • Coach line managers on the CI methodology, i.e., support line manager by preparing and debriefing interactions with the team (e.g., team huddles, root cause problem solving) • Provide technical knowledge where required and train and coach line managers • Share best practices across LOBs and the CI coaching community • Coaching of line managers to • Build capabilities in the CI methodology • Change mindsets and embed CI in the organisation • Technical knowledge of CI metho-dology (e.g., Lean Way of Working, SixSigma, problem solving) • Coaching training • Technical training on • Lean management • Root cause problem solving CI Coach BI resources • Provide MI where required • Provide change support where required • Knowledge of the CI methodology (e.g., Lean management, root cause problem solving techniques) • Technical training on • Lean management • Root cause problem solving • CI management techniques should be fully integrated into BAU and require no incremental effort / resource • Resource requirements for analysing problems and defining solutions should be offset by achieved performance improvment

14. The mindset shift towards CI will need to be supported by corresponding leadership behavior I spend more than 10% of my time in the shop floor I regularly participate in frontline CI sessions I actively engage employees in problem solving I ensure problem solving is fact based and root cause oriented I ask about the frontline performance of transformation areas I ensure root causes for performance gaps are uncovered I ensure my project teams are staffed across different areas I develop HR rotation programmes at all levels I have written a compelling change story I regularly tell and reiterate my change story I hold structured feedback sessions with my direct reports I hold regular coaching sessions with my team members 1 Process 2 3 Problem solving 4 5 To be aligned with leadership behaviours initiative Performance 6 7 8 Partnering 9 10 Purpose 11 12 People

15. The 5 lenses of CI / Lean Process Efficiency Performance Management Waves of projects focused on maximum customer impact: deliver customers what they want, when they want and to the quality they want and no less than that Delivering on customer outcomes is continuously improved, in a structured and focused approach. Overall standardisation in processes without waste Voice of our CLIENTS Organisation and Skills Mindsets and behaviours People individuallyand collectively working together to put the customer at the heartof the business Individual and organisational capabilities have the skills and knowledge to always deliver on their accountabilities • Critical for sustainability • Often neglected • Communication makes a key success factor