The Challenges and Rewards of Six Sigma
There are three components of the Six Sigma approach that Nolan believes
are significant in both distinguishing it from other improvement
methodologies and contributing towards its success. These are: (1)
focusing on the business processes that are key to meeting strategic
performance objectives (2) measuring process performance in terms of the
ability to meet pre-defined customer requirements, and (3) applying
rigorous analysis to identify business problems and develop potential
solutions.
Elements of all three are found in Total Quality Management, Business
Process Reengineering and, one could argue, most performance improvement
techniques.
In
the financial services arena, quality improvement efforts have been far
too heavily task focused. We’ve seen many processes where every task in
that process could be performed properly, but the process still fails to
meet customer expectations. Reengineering, on the other hand, focuses on
the process and meeting customer needs. In financial services
organizations, however, companies are organized and managed by task, and
rigorous process analysis is extremely rare. These shortcomings have led
to redesign by anecdote or redesign to the benefit of task A at the
expense of task B.
Six Sigma has the opportunity to mitigate these weaknesses, but it won’t
be easy.
Process Focus
Six Sigma was developed in manufacturing where there is a natural emphasis
on processes because they’re so visible and obvious. A quick walk through
the plant, and you can see the process from receipt of raw materials
through assembly, inspection and shipping. It’s easy to see how
sub-processes integrate to create the final product.
The manufacturing sector also recognizes that process control is a
specialized skill that cannot be left to line management. Process
engineers design, control and maintain the manufacturing process. When new
products are introduced, engineers create the new processes to ensure
those processes can deliver products to meet specifications.
In
the service sector, it’s just the opposite. Processes are invisible. The
focus is on functions and tasks. Usually, no one is responsible for
processes. Executives and managers are responsible for functions. Process
design professionals are nearly non-existent. New products are sometimes
sold before operations even knows how to administer them.
Developing a process focus in this environment will be a challenge, but if
your Six Sigma efforts are going to be successful, it is absolutely
essential that you do so. You can start by assigning ownership to your
core business processes. Also, take an objective inventory of your process
management skills. If you’re going to develop a solid team of Six Sigma
Black Belts, they will need first rate skills in all areas of process
design, analysis and control. These new professionals will need skills,
background and training on par with those of manufacturing’s process
engineers.
In our opinion, the financial services sector will need to completely rethink
its approach to process management. Step one is to recognize that process
management is far more important than has historically been acknowledged
and doing it well requires specialized skills. Successful Six Sigma
requires process owners working with Black Belts and Green Belts to
analyze, measure, improve and control core processes and their key
sub-processes. These most critical processes are the ones that typically
cross functional departmental lines, and therein lies much of the
challenge.
Customer Segmentation
Six Sigma is essentially about controlling processes so they meet customer
requirements. It assumes that customer requirements and process
performance targets are already known. But we know from experience that
both defining customer needs and setting performance targets are difficult
tasks. There is extensive literature on defining customer needs, but one
aspect that is critical to your Six Sigma efforts is segmentation.
Most of our clients are well aware of their customer segments and the
unique needs and requirements of those segments. Yet, very few measure
process performance by customer segment. Six Sigma requires you to segment
your customers, understand their requirements and measure your ability to
meet them. The requirements should be developed using proven techniques
such as focus groups, surveys and benchmarking. Requirements must not be
arbitrary or whimsical.
What are your customer segments? What are your core processes? What points
of those processes are the most critical to quality? Do you know the
requirements for each segment at these critical touch points? Can you
measure your performance at these important junctures? Answering these
questions for your core processes and developing baseline performance data
for them is an excellent starting point for your Six Sigma initiative.
Analytical Rigor
Various definitions of Six Sigma contain phrases that underscore the
analytical rigor it requires. Examples include disciplined, data-driven
approach, rigorous methodology and uses data and statistical
analysis. This requisite feature is unique to Six Sigma and distinguishes
it from other performance improvement methodologies.
In
our experience working with our client companies, operations performance
data is usually very plentiful. Lots of things get measured and there is a
lot of data available. In order to pinpoint problem areas, however, we
frequently need either to present existing data in new ways, gather data
that did not previously exist or make use of data that’s historically been
ignored.
Broadly described as analytical rigor, it’s the ability to see things in
new and different ways, to understand causes and effects and to understand
how to gather, analyze and present data that clearly identifies root
causes and paves the way towards identifying corrective actions and later
measuring the impact of the changes.
In
a company with a successful Six Sigma program, this bias for analytical
rigor will be pervasive. For Black Belts, it should be second nature, but
managers and executives too must insist on fact based analysis. Process
redesign based on unsubstantiated beliefs must be eliminated. To
paraphrase Dr. Edward Deming, “If you can’t quantify it, you don’t know
anything about it.”
Conclusion
Six Sigma has a proven track record in manufacturing and it’s beginning to
catch on in financial services. To achieve similar success in this sector
will require new approaches, new skills and new ways of thinking.
