Assessing the Status of Six Sigma in the UK Service Organisations : Some Key Observations and Findings
Dr Jiju Antony Director of Six Sigma and Process Improvement Research Centre Caledonian Business School, Glasgow Caledonian University Glasgow, G4 OBA E-mail:
[email protected]
Abstract Six Sigma is a breakthrough process improvement strategy that yields dramatic reduction in defects or errors or mistakes in service processes. Improved processes lead to improved customer satisfaction, increased market share, business profitability and so on. Due to the predominant Six Sigma success stories in manufacturing organisations, many service organisations are yet to be convinced about the benefits from the introduction, development, implementation and deployment of Six Sigma within service industry. The paper presents the results of an empirical study carried out by the author in the UK service organisations to understand the status of Six Sigma. The paper finally reports the Critical Success Factors (CSFs) which are required for the successful deployment of Six Sigma in the UK Service Sector.
Key words: Six Sigma
DMAIC
Service Processes
Critical Success Factors
Introduction Six Sigma is a powerful strategy developed to accelerate improvement in product, process and service quality by relentlessly focusing on reducing variation and eliminating waste (Antony and Banuelas, 2001). It is a comprehensive and flexible system for achieving, sustaining and maximising business profitability. It is uniquely
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driven by close understanding of customer needs of today and tomorrow, disciplined and systematic use of data to support decisions and diligent attention to managing and improving business processes (Pande et al., 2000). Although Six Sigma approach to quality and process improvement have been predominantly used by manufacturing organisations, today the popularity of Six Sigma in the service organisations is growing exponentially, especially in banks, hospital sector, financial services, airline industry, utility services and so on.
Unlike manufacturing organisations, in service organisations we do not relate activities in process terms and therefore the linkage between process metrics and service performance characteristics is not straight forward (Does et al., 2002). In many service organisations, the purpose of introducing a Six Sigma program is to establish and map the key processes which are critical to customer satisfaction. According to Pande et al. (2000), most service organisations operate at sigma quality levels of between 1.5 and 3.0 (i.e., a defect rate between 455,000 and 66800). This is not surprising, considering that service sectors over decades have been neglected in the context of quality improvement efforts (Does et al., 2002).
Six Sigma offers a disciplined approach to improve service effectiveness (i.e., meeting the desirable attributes of a service) and service efficiency (i.e., time and costs). For example, in a hospital environment, the cleanliness is a measure of service effectiveness whereas the waiting time to be admitted into an emergency room is a measure of service efficiency. It is quite important to make a clear definition of ‘defect’ before embarking on Six Sigma projects. A defect in the context of Six Sigma is defined as ‘anything that does not meet the customer requirements’ (Adams et al.,
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2003). For example, in a call centre, the following opportunities could result in defects which ultimately causes customer dissatisfaction and hence lost customers.
ü The accuracy of information provided by the CSR to the customer ü The number of abandoned calls ü The waiting time to get hold of an available CSR ü The manner in which the customer is greeted by the CSR ü Time taken to resolve the problem once the data is entered in the system ü Time taken to send out the requested follow- up material ü Politeness, eagerness to help the customer on the other end of the telephone line ü The manner in which the call is ended, etc.
Why Six Sigma is require d in the Service Industry? Research carried out by Yilmaz and Chatterjee (2000) has shown that most of the service processes like shipping, invoicing, billing, payroll processing, customer order entry processing, baggage handling processing, etc. are performing less than 3.5 sigma quality level with a defect rate of over 23000 ppm or 97.7% yield. If we improve the sigma quality level of the above mentioned processes to 4 sigma quality level, the defect rate will be dropped to 6210 ppm. This clearly indicates a 3.7- fold improvement in process performance. The process yield will be increased to 99.38%. This would bring significant financial returns to the bottom- line of any organisations engaged in continuous improvement programs such as Six Sigma. The benefits may include reduction in the number of customer complaints, reduction in operational
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costs, reduction in the costs of poor quality, reduction in the number of defects in processes, increase in the level of customer satisfaction, etc.).
Benefits of Six Sigma in the Service Industry Service-oriented businesses adopting Six Sigma business strategy will have the following benefits: •
Improved cross- functional teamwork across the entire organisation
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Transformation of organisational culture from fire- fighting mode to fireprevention mode
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Increased employee morale
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Reduced number of non- value added steps in critical business processes through systematic elimination, leading to faster delivery of service
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Reduced Cost of Poor Quality (costs associated with late delivery, customer complaints, costs associated with misdirected problem solving, etc.)
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Increased awareness of various problem solving tools and techniques, leading to greater job satisfaction for employees
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Improved consistency level of service through systematic reduction of variability in processes
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Effective management decisions due to reliance on data and facts rather than assumptions and gut-feelings
Six Sigma in Service Processes : Some Common Challenges and Difficulties Some of the potential difficulties and challenges encountered when implementing Six Sigma in a service environment include:
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Ø Data is not readily available for the analysis and very often it is difficult to collect data in service settings than in manufacturing. The fundamental problem is with the accuracy and completeness of data. Ø The measurement of customer satisfaction in a service environment is more difficult task due to the human behavioural interaction associated with the delivery of service. Human behavioural characteristics such as friendliness, eagerness to help, honesty, etc. are thought to have major influence on service processes which determines the quality of service provided to customers. Ø As service processes often deal with discrete data, the data collection process takes longer time due to requirement of large sample size for statistical validity reasons. Ø In service industry, it is quite often that we do not relate activities in process terms. The use of flowcharts and process maps are therefore uncommon in many service processes. Ø In service processes, we often deal with individual measurements. Hence subgroups may be defined by a certain time interval, e.g.: a week or a month. Ø Services processes are subjected to more noise or uncontrollable factors (psychological factors, sociological factors, personal factors, etc.) compared to manufacturing processes. Ø A transfer function is often not explicitly developed for many service processes and hence the application of advanced statistical techniques such as Design of Experiments and Taguchi Methods is limited. Ø Much of the data in services is collected manually in face-to-face interactions compared to automatic data collection methods used in many manufacturing processes.
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Ø The data from service processes follow non- normality and such non- normality situations can be mitigated through the effective use of data-transformation techniques (e.g.: Box-Cox transformation).
Research Methodology and Data Collection The questionnaire developed in this study consists of two main sections. The first section was intended to determine the fundamental issues such as type of service industry, the size of the company, whether the company has a quality management system, the sigma quality level of the company, the common six sigma metrics used by service companies, common six sigma tools and techniques employed by the participant organisations, etc. The second section was designed to identify the Critical Success Factors (CSFs) of Six Sigma in Service organisations. The second part of the questionnaire consists of 40 variables or statements, which were extracted from the published literature of leading Six Sigma practitioners and academics (Harry and Schroeder (2000); Pande et al. (2000), Smith et al. (2003), Eckes (2000); Breyfogle III et al. (2001), Snee and Hoerl (2003)). The 40 variables were grouped under 13 Critical Success Factors (CSFs) using the Affinity Diagram tool. Using the FAME database as a source of corporate information, questionnaires were sent to 200 service organisations in the UK. The response rate from the survey was about 12.5% (i.e., a sample size of 25 companies). The type of industries participated in the survey include banking, healthcare, transport, utilities, insurance, hospitality, financial services, recruitment consultancy, etc. The percentage distribution of the size of the companies participated in the study is shown in Figure 1.
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Figure 1 Percentage distribution of the Size of the Companies
39% Large 61%
SMEs
Figure 2 illustrates the percentage distribution of respondents from companies to this study. The majority of the respondents were Black Belts and Six Sigma Project Champions, followed by General Managers, Service Quality Managers, HR Managers and so on.
Figure 2 Percentage Distribution of Respondents Participated in the Survey Black Belts 7%
6% Project Champions 32%
12%
General Managers Service Quality Managers
18%
HR Managers 25%
Others
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The analysis of results also revealed that 74% of companies responded to the study have some sort of a quality system such as ISO 9001:2000, TS 16949, ISO 14001 etc. and 26% of companies responded were not aware of any formal quality systems in their organisations. It was also found that the most popular quality management initiatives used were Quality Assurance (QA) and To tal Quality Management (TQM). It was noted that 64% of the organisations (16 companies) involved in the survey has been using Six Sigma for less than 3 years on average. 32% of the organisations (8 companies) has been engaged in a Six Sigma program for 3 to 5 years and 1 company claimed to have been using Six Sigma for over 5 years.
It was interesting to observe that 20% respondents were either unsure or not aware of the sigma quality levels of their core business processes. The average sigma quality level of the companies was between 2.8 and 3.3. The author strongly believes that this figure might change with the increased sample size. Many service companies were even over predicting their sigma quality levels.
The most common Six Sigma metrics used by the companies include Cost of Poor Quality (COPQ), Defects Per Million Opportunities (DPMO), Time to respond to customer complains, Yield, Process capability and Number of customer complaints. The least common metrics were Throughput yield, Delivery time, Service reliability, Punctuality, Rolled Throughput Yield, etc.
The most commonly used tools and techniques in the service organisations were: •
Process mapping
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Brainstorming
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Root cause analysis
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Run charts
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Benchmarking
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Pareto analysis
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Change management tools (GE work-out, CAP)
The least commonly used tools and techniq ues include: •
Kano Model
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Statistical Process Control
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Quality Function Deployment
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Design of Experiments
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Process Capability Analysis
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Poka-Yoke
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Gap Model (service quality), etc.
Benefits of Six Sigma Projects to Service Organisations from Survey Traditionally Six Sigma has been associated with defect reduction and cost reduction exercises in many manufacturing companies. The following are the benefits achieved from the successful completion of Six Sigma projects reported by companies participated in the survey. Ø Improved customer satisfaction Ø Reduced defect rate in service processes Ø Reduced variability of key service processes Ø Improved culture with the attitude of continuous improvement of service process performance Ø Reduced process cycle time and hence achieve faster service delivery
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Ø
Reduced service operational costs
Ø Increased market share
Key Ingredients for the Successful Deployment of Six Sigma Program in Service Organisations: results from the survey The respondents were asked to rank the key ingredients (also called Critical Success Factors) on a scale of 1-5 (1= least important, 2=less important, 3=important, 4=very important and 5=crucial) which are imperative for the successful deployme nt of a Six Sigma initiative. Table 1 shows the results of the analysis showing the mean scores and standard deviation of each essential ingredient or Critical Success Factor.
Critical Success Factors (Essential Ingredients)
Mean
Linking 6sigma to business strategy
4.55
Customer Focus
4.40
Project Management skills
4.40
Management commitment and involvement
4.20
Organisational infrastructure
4.15
Understanding of Six Sigma Methodology
4.10
Project selection and prioritisation
4.05
Integration of six sigma with financial accountability
3.70
Management of cultural change
3.55
Training and Education
3.25
Project Tracking and Reviews
3.10
Incentive program
2.90
Company-wide commitment
2.80
Table 1 Key Ingredients for Successful Six Sigma Deployment
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Project Selection and Prioritisation Criteria Projects are the primary vehicle used to drive improvements in quality and productivity. Juran has always advocated a project oriented approach to improving quality. Selecting, managing and completing projects successfully is an integral component of any business improvement effort. The selection of right projects is a vital factor to gain early and long-term acceptance of Six Sigma program among the senior managers and other employees in any organisation. According to Adams et al. (2003), “doing Black Belt training before project selection is the classic –getting the cart before the horse”. The project selection process within a Six Sigma program must be listening to four important voices: -
Voice of the Customer
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Voice of the Business
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Voice of the Process
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Voice of the Stakeholders
The following are some of the characteristics of good Six Sigma projects: The project should be clearly connected to strategic objectives of the business The problem is recognised to be of major importance to your business, both in terms of cost, quality and customer satisfaction. Select projects which are doable in less than 6 months. If the project scope is too large, the costs associated with project deployment will increase and this will result in frustration among the key players due to lack of progress, diversion of manpower away from other activities, delay in realisation of financial impact on the bottom-line, etc.
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Project objectives must be succinct, measurable, attainable, and can be completed within the pre-defined time bound. There should be quantitative measures of success that can be evaluated both before and after the project is completed. Projects should have the support and approval of senior management
The respondents of service companies were asked about their project selection and project prioritisation criteria. The following factors were considered by the respondents in selecting the Six Sigma projects. Project impact on bottom- line (in financial terms) Project impact on customer satisfaction Cost involved in running the project Project impact on the cost of poor quality Project alignment to business goals in strategic terms Risk involved in the project Level of expertise required for project, etc.
Limitations of the Study This research project was carried out with some boundaries such as the number of companies, available resources, areas of industry, etc. As Six Sigma is still new to many service organisations, the big picture could not be determined using this first pilot study. Moreover, different service industries should be taken into account in the future research. The scaled questions used in the study have disadvantages as we never know why a particular response was chosen by the person completing the questionnaire. In order to have a deeper understanding of the Six Sigma status within
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service sector, it is decided to perform semi- structured interviews in the near future. The author also would like to carry out a longitudinal study on Six Sigma within service organisations in the UK and other countries such as Australia, USA, Korea, India, Germany and Japan.
Conclusion Six Sigma has been widely accepted as a business strategy to improve business profitability and achieve service excellence through the effective application of both statistical and non-statistical tools. The popularity of Six Sigma in service organisations is growing everyday and even many manufacturing companies today are focusing their Six Sigma efforts on service-oriented processes where they achieve maximum return on investment. Research has shown that the current and future focus of Six Sigma will be on financial and healthcare sectors. The paper presents the results of a pilot study on Six Sigma carried out in UK service organisations. In order to obtain a deeper understanding of Six Sigma implementation in service industries, it is decided to carry out a number of semi-structured interviews with people at different levels of Six Sigma knowledge and expertise.
References Antony, J. and Banuelas, R. (2001), A Strategy for Survival, Manufacturing Engineer, Vol.80, No.3, pp. 119-121. Adams, C.W. et al. (2003), Six Sigma Deployment, Elsevier Science, USA. Does, R. et al. (2002), Comparing Non-manufacturing with Traditional Applications of Six Sigma, Quality Engineering, Vol.15, No.1, pp. 177-182.
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Breyfogle III, F.W., Cupello, J.M. and Meadows, B. (2001), Managing Six Sigma: A Practical Guide to Understanding, Assessing and Implementing the Strategy that Yield Bottom- line Success, John Wiley and Sons, USA. Eckes, G.(2000), The Six Sigma Revolution, John Wiley and Sons, USA. Harry, M. and Schroeder, R. (2000), Six Sigma: the Breakthrough Management Strategy Revolutionizing the World’s Top Companies, Currency/Doubleday, NY. Pande, P.S., Neuman, R.P. and Cavanagh, R.R. (2000), The Six Sigma Way: How Smith, D., Blakeslee, J. and Koonce, R.(2003), Strategic Six Sigma: Best Practices from the Executive Suite, John Wiley, USA. Snee, R.D. and Hoerl, R.W. (2003), Leading Six Sigma, Prentice Hall, NJ. Yilmaz, M.R. and Chatterjee, S. (2000), Six Sigma Beyond Manufacturing – a concept for Robust Management, IEEE Engineering Management Review, Vol.28, No.4, pp. 73-80.
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