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Introduction
I was attending a leadership workshop while working for an insurance
broking organization. I mentioned how Six Sigma has major applications
and benefits for the organization. The air of dis-agreement amongst my
colleagues was total. The general consensus was that Six Sigma is for
manufacturing companies. People quoted case studies. They named
corporate successes like GE, Motorola, Honeywell and others. The point
was nailed – these are all manufacturing organizations. They sell products,
we sell services; Six Sigma works for them, not for us.
In that workshop, we chose not to argue it any further since it was out of
context of the workshop per se. The above anecdote sums up the popular
perception amongst people and organizations alike.
Six sigma in the manufacturing industry has been a credible story. Many
organizations have realised benefits from embedding six sigma
methodologies. Organizations have derived break-through strategies
applying these methodologies. Combined with Lean, the methodologies
have provided managers with tools to improve products. Also, embed a
culture of continuous improvement.
Does that mean Six Sigma does not work in service environments?
Perception says “no”, let’s do a reality check through this article.
There are many benefits to organizations that embrace Six Sigma. Some of
them are –
A major part of this tends to be cost of poor quality. Lower the defect rate,
higher the sigma and lower the costs. An organization operating at 4 sigma
incurs 15-25% of its sales on cost of quality. At 6 sigma, it goes down to 0-
10%. At this level, the costs are usually preventive and therefore essential.
No wonder then, organisations measuring performance using six sigma
techniques report financial gains consistently.
Image source: http://apppm.man.dtu.dk/index.php/File:CostOfQuality.PNG
Realisation crops up at this stage that we did not sell what the customer
wanted. Very often customers know what they want the product to do for
them. When selling they are sold as per specifications set by them. It is not
necessary that a product meeting customer specification fulfils the need.
Customers do not understand technicalities, need drives them.
9 out of 10 start-ups fail as per Forbes research. Reason being they do not
look at all the aspects for a business endeavour. They ignore the “boring”
stuff relating to business process, business model and scalability. Despite
having a great product and superb team, they fail. The contrary applies to
start-ups that succeed.
Six sigma strategies help build robust business processes, design new
products and services. It helps sustain the improvement and innovation
culture within the organization.
It benefits all organizations from large to start-ups. Six sigma strategies
help sustained improvement over a period of time.
Sets direction and goals – To get the teams working together as a well-
oiled machine is one of the biggest challenges for any CEO. Whatever the
size of the organization, Six Sigma helps define a common goal for
everyone.
“What does good mean” is a question asked by progressive customer-
oriented organizations. Six sigma methodologies help in defining this. All
parts of the organization think about quality delivery to the customer.
Since the goal is common, it improves cohesiveness between the different
teams.
Clear and defined measures exist across the organization. There is no
ambiguity around performance evaluation as well.
There are some views to support these perceptions. Let’s hear them.
That’s true! Service sector is about people and knowledge. People perform
many of the processes that need industry and functional knowledge. Since
people perform the tasks, there are no defects.
Six sigma sounds very technical. Some of the statistical tools and
techniques are not known to employees and leaders. How will they use it?
The above views are consistent across many service sector organizations. I
can say so, since I have worked within the service sector for the last two
decades.
The case study covers the claims department of a leading motor insurance
company. High cycle time of 112 days for claims processing was a cause for
concern.
Using Lean Six Sigma techniques, Genpact identified the reasons for the
high cycle time. They suggested measures for improving the same.
Imagine you are a customer of this company! Would you not appreciate if
your claims settle quick and without hassles? The obvious answer is “Yes”.
This is a classic case of how Lean and Six sigma techniques work. They
help achieve sustained improvements and business impact. Most
important, happy customers!
Let’s review some of the tips that will help a service organization adapt Six
Sigma.
Focus on pain points for the teams, look beyond the metrics at enablers as
well. Tools like process mapping or affinity diagrams are simple tools to
bring this to life.
As Late W. Edward Deming, the quality guru said, “People don’t cause
defects, systems do”. People perform service sector processes. The fact is
that service defects still exist. It is important to define, measure and
eliminate them.
The fact still remains – if you cannot measure it, how will you improve it. If
you wish to run your business on facts and data, there can be no excuse.
You will need to gather and analyse the data in a different manner.
Use Six Sigma tools like CTQ drill-down tree or IPO-FAT for project
identification. Control-Impact matrix or PICK matrix is a good tool to
prioritize.
Do not start with a problem that is unwieldy. This might raise frustration
towards the later stages. You might not want to take this risk at the start of
the program.
Tools like Root cause analysis and Five-Y analysis are easier to explain.
They can be applied with minimal guidance or intervention. As the
excellence culture seeps in, employees demand information on tools and
approach. Giving it to them when they demand increases the chances of
application. It’s better that they join the party when they are eager to do so;
force might be counter-productive.
Marty Beltz was a healthcare instructor with American Society for Quality
in Milwaukee. In the early 2000s, there were no books and no curriculum
dedicated to the healthcare field. Earlier, her work was restricted to clinical
units only. Now, it extends to support services in hospitals, rural clinics
and the like. Beltz believes that Lean Six Sigma can reap 20 to 50 per cent
return on investments to hospitals.
In a nutshell
Service sector pioneers have busted the myth in the last decade. Six Sigma
has significant application in the service sector. The case studies and
corporate success stories are visible.
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