6 Sigma concepts and philosophies were originally developed for improving the overall quality of business processes in the manufacturing sector. Companies like Motorola and GE were among the first few that successfully introduced Six Sigma concepts in their business processes. However, with the development of newer tools and techniques, 6 Sigma is now deemed appropriate for the services sector as well. The usability of Six Sigma in the services sector is easily evident from the increasing number of finance and insurance companies that are opting for 6 Sigma.
Consumers are increasingly becoming aware of the quality of services being offered to them, making it essential for the services industry to implement quality improvement techniques like Six Sigma for conforming to customer expectations. This is especially true for the insurance industry where the relationship between the insurer and the insured is still largely governed by sustained personal contact. By implementing 6 Sigma programs, insurance companies have been able to offer quality services at affordable rates to their customers.
Identifies Key Business Processes
Unlike other quality management practices such as Total Quality Management (TQM) whose effectiveness is difficult to measure, Six Sigma based improvement programs make use of statistical tools, which can measure the effect of changes being made in a very short time. 6 Sigma focuses on process orientation, enabling organizations to identify key business processes that are necessary for improving customer satisfaction. This helps managers in understanding the exact requirements of their customers and in altering business processes to suit customer needs and expectation.
Follows A Disciplined Approach
Six Sigma has helped insurance companies in improving quality as well as reducing costs of services offered. It has enabled insurance companies to follow a disciplined approach, which has helped in preventing errors, minimizing hand-offs, and eliminating rework and workarounds. It has also helped in increasing the speed of business processes used in the insurance industry.
Helps In Making Informed Decisions
6 Sigma has enabled managers in taking informed decisions based on statistical data. With the use of Six Sigma tools and techniques, managers no longer have to rely on their perceptions or gut feelings for rendering the level of services promised to policyholders, clients, and prospects.
Helps In Building Customer Loyalty
6 Sigma emphasizes on understanding the needs of the customers before making any changes to business processes. This helps insurance companies in building customer loyalty among their policyholders, which is necessary for the long-term success of any business organization. Insurance companies can also hope to increase their market share, as satisfied customers are most likely to recommend a company that offers quality services while advising a friend, relative or business associate. Helps In Reducing Costs
Six Sigma tools and techniques aim at streamlining business processes in such a way that helps in reducing costs. This helps insurance companies to improve their savings and avoid drastic cost-saving measures such as downsizing, which can have a negative effect on employee morale. It can also create doubts in the mind of policyholders and prospects as downsizing usually attracts a lot of negative publicity.
6 Sigma has helped the insurance industry in bridging the gap between planned strategies and actual operations by providing analytical and in-process performance measurement tools. These tools are used for comparing planned goals and objectives with actual outcomes and for finding the reasons as to why a particular business process is not giving the desired results. Once the exact problem has been pinpointed, managers can make the necessary changes that will help in improving overall quality of services rendered to policyholders and prospects.
Six Sigma was developed in the 1980's to reduce defects that were quite common in the manufacturing industry. However, with the development of new concepts and methodologies, Six Sigma is now being used in the service sector as well. It helps to improve the quality of the services rendered. The Six Sigma methodology used in the banking industry is referred to as the DMAIC process. It denotes: define, measure, analyze, improve and control.
Define:
In the 'define' phase of DMAIC, Six Sigma professionals define the objectives and boundaries of a particular business process, in consultation with the employees and senior management. In most banks, customer satisfaction is the main objective, making it necessary to define all the processes that involve customer interactions and directly affect customer satisfaction. Some of the processes that involve customer interaction include address change request processing, new account openings, teller window transactions and CD rollovers.
Measure
In the 'measure' phase of DMAIC, Six Sigma professionals deploy quantitative procedures to collect statistical data in consultation with the business managers. The statistical data is then used for measuring the impact of the various business processes on customer satisfaction. Different processes have different impact on customer satisfaction. It is financially not viable to improve every business process. The measurement of impact of the individual processes helps the banks to concentrate on improving the processes that have the maximum impact on customer satisfaction. In the banking industry, wait times are said to have the maximum impact on customer satisfaction. Banks can employ observers at their different branches to measure the average wait time, under different work conditions.
Analyze
In the 'analyze' phase of DMAIC, Six Sigma professionals analyze the collected data according to predefined parameters to identify the processes that can be improved at minimum costs. The analysis covers every aspect of a business process that directly affects customer satisfaction. For example, a check cashing transaction involves the customer coming to the teller window, the teller receiving the customer's request and the teller seeking a manager's approval for processing the request. These three different, single transactions need to be analyzed individually to ascertain which one has the maximum impact on the overall transaction time.
Improve
In the 'improve' phase of DMAIC, Six Sigma professionals apply corrective measures to improve processes that cause problems in consultation with the bank staff and the branch manager. All improvement measures are based on facts and statistics. Advanced simulation tools can also be employed to study the impact of the proposed improvement initiative on business processes.
Control
In the 'control' phase of DMAIC, control systems are put in place to monitor the impact of the improvement initiatives. If a business process is still not performing in accordance to the desired Six Sigma levels, the process is referred back to the 'define' phase. However, if a small problem is affecting the performance, then corrective measures are taken and the whole process is not referred back.
Six Sigma methodology has been successfully implemented by banks in last few decades to improve service delivery and customer satisfaction.
Tony Jacowski has sinced written about articles on various topics from University, Six Sigma and Information Technology. Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online and certification classes for lean six sigm. Tony Jacowski's top article generates over 90500 views. to your Favourites.