Author: Ash Mehta
Six Sigma is often viewed as a hugely statistical, complicated and costly method of looking at problems within large corporate businesses. Many businesses hear of the success stories that Six Sigma has brought to different companies, but are then often put-off starting their own Six Sigma project when they see examples of a whole host of complex analytical models.
Six Sigma does not have to be limited to the Motorola's and General Electric's of this world; it can be used across any business, any sector and any function.
Essentially, it provides a framework for a business to:-
understand its strategy
understand the services its customers need most
better organise the main business processes that deliver these customer requirements
measure and improve the effectiveness of these processes
increase the use of the metrics that most reflect success (KPI's)
train its people to focus on key performance areas
i.e. Understand your business and what your customers expect, and make sure your processes fit these expectations without too many deviations!
There are some core components to every Six Sigma project, and here's where you hear some of the jargon
Voice of the Customer (VOC) - what the customer wants
Critical to Quality (CTQ's) - the most important deliverables of the process
Defects - how many times a process fails to deliver what the customer wants
Variation - what the customer sees and feels
Stability - ensuring consistent, predictable processes to reduce variation
There are two main modelling methods behind every project, and it depends on whether it is an existing or new process within the business.
DMAIC Model (existing business processes)
Define the opportunity
Measure the performance
Analyse the opportunity
DMADV Model (new processes - prevention is better than cure!)
Define - design processes consistent with customer expectations and strategy
Measure - process capabilities, risk
Analyse - develop alternatives, create best design
Design - optimization and planning
Verify - pilot runs, implementation
These methodologies can be tailored to be as simple or as complex as you want them to be, dependent on the project the business has in mind.
Successful projects have been completed across a wide range of business sectors and functions, eg: manufacturing of an aircraft engine, stabilising of financial margins in the Financial Services sector, and customer retention within a call centre.
I will go into a little more detail on the customer retention project, as this shows how problems that are perceived to be at the "end" of a process are actually shown to be issues arising earlier on.
"The company was experiencing problems within the customer call centre. It was inundated with calls, mostly problems. Significant money had been spent on extra staff, new training, looking at limiting the time taken per customer call etc. The call centre was deemed crucial as the business had 50? customer churn annually, and had made no real effort to focus on, and improve, customer retention. The business then decided to a begin a Six Sigma project to look at the problem, which began by identifying who the call centre was actually trying to serve - the company or the customer!
Initial analysis captured how their customers defined "value", and one of the key CTQ's was "customer focus"."Six Sigma customer focus" was defined and included: - Responsiveness, Consistency, Problem Resolution, Ease of dealing with call centre, Understanding of Customer Needs, Proactive communications on new products/services and Simple Contract Renewal processes.
These key elements all scored low when applied to the business - in fact, they were the worst in the market.The business then used this data to map out the "order to delivery" process and identify areas where improvement could be made. Interestingly, whilst many of the problems were within the call centre, some problems were earlier in the sales process:-
Example 1 - sales people were being paid commission on the number of new customers. This led to incomplete applications creating a loop between sales and call centre staff requiring more info. Unfortunately, some customers became "stuck" in the process, generating more calls to the call centre asking about the status of their order!
Example 2 - customers were not being trained how to use equipment properly at the time of the sale, leading to more calls to the call centre saying their equipment does not work!
Six Sigma solution:-
1. The business introduced an electronic order form that could not be submitted until all fields had been completed - this reduced the order to delivery time significantly and also cut down the number of calls into the call centre regarding order status
2. Sales team job descriptions were changed to make sure that customer training was emphasised. This was then tracked in the call centre by linking customer training enquiries to their initial sales contacts. Again, this reduced inbound calls.
3. Call centre personnel were offered training on how to retain customers (now they had some time!)
Outcome - customer churn reduced from 50% to 25%
Moral -customer service was not the sole responsibility of the call centre, but was also the responsibility of all those involved in any process that "touched" the customer
As you can see from the above example, this is not really rocket science, all that was needed to fix the call centre issue was an examination of the process that the customer was subject to, (order to delivery), and to fix any areas that were deemed as problematic to the customer. This did not involve any extra cost or any staff redundancies, and customer retention was greatly improved.
All businesses can benefit from this type of project/process management technique, but potential projects do require absolute buy-in from senior management. This support for the project needs to be visible throughout the business, and the management of the "human" side of changes in working processes needs to be an integral part. Successes should be rewarded, and best practices should be transferred.
This example shows that Six Sigma can be used effectively in the SME marketplace, and it can be made simple and relevant, to many sectors and functions.
About the Author
Founded in 2006, Orchard Growth Partners provides part-time finance director services. Orchard's high calibre and commercial Principals across the UK work closely with CEOs, entrepreneurs and management teams in companies to assist them in managing the growth of their businesses. Orchard's clients obtain a strategic finance director working as part of their management team without the full time cost of an FD, enabling tomorrow's capability today. Telephone: 0845 3700 303 http://www.orchardgrowth.com