Six sigma and its role in financial services

Citation

Antony, J. (2007), "Six sigma and its role in financial services", The TQM Magazine, Vol. 19 No. 5. https://doi.org/10.1108/tqmm.2007.10619eaa.001

Six sigma and its role in financial services

Six sigma is a process-focused and data driven methodology aimed at near elimination of defects in all processes (i.e. manufacturing, service and transactional) which are critical to customers. As a powerful business strategy, six sigma has been around for almost 20 years and has grown exponentially in financial services sector during the past seven years or so in the USA and probably four years in the UK. The financial service companies which have made significant impact to the bottom-line include Citigroup, Bank of America, American Express, J. P. Morgan Chase, Zurich Financial Services, HSBC, Credit Suisse, Royal Bank of Scotland, Barclays Bank to name but a few here. Although six sigma was developed in the late 1980s in Motorola, it has taken several years for service-oriented companies (such as financial services) to embark on six sigma initiative. Some of the possible reasons for this slow adoption process are:

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  lack of understanding the voice of the customer (VOC) across the financial services;

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  lack of process thinking across the business – people do not look at end-to-end processes from the eyes of the customer in order to fulfill a customer need;

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  people do not see mistakes as defects that need to be identified, measured and eliminated;

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  absence of quality mindset across the senior management team;

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  lack of awareness on the methodology of six sigma and its benefits to financial services;

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  ineffective leadership; and

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  lack of good measurement system in place, and so on.

A defect in the context of six sigma methodology can be anything which is not acceptable to customers (internal or external). When a service fails to perform as designed or as promised, then it will be classified as a defect (Antony et al., 2007). Some examples of defects in a typical financial service company may include:

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  incorrect terms and conditions on a mortgage loan application;

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  missing pages in a home insurance policy;

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  unavailability of an ATM;

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  attitude to the customer by a customer service advisor or representative;

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  accuracy of information provided to the customer on the phone by a customer service representative; and

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  error in processing a transaction, etc.

Here are some tips that can assist financial service organizations while embarking on a six sigma initiative (Brewer and Eighme, 2005).

(1) Committed Leadership. committed leadership goes well beyond being supportive in favour of six sigma. The key traits of committed leadership may include:

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  clear direction on overall strategic deployment of six sigma;

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  commitment of resources, time and people for the deployment;

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  clear communication to the organization regarding the need for six sigma; and

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  insistence on tangible bottom-line impact, etc.

(2) Selecting the top talent people. For the successful deployment of six sigma, it is essential to select the top talent people rather than those people who are available to engage in the initiative. It also ensures that future company leaders will continue to support the initiative and develop a six sigma mindset in the organization.

(3) Supporting infrastructure. Many companies fail in the deployment of six sigma after 18 months of the initiative due to lack of supporting infrastructure. A sound supporting infrastructure may include the role of six sigma project champions, six sigma Master Black Belts, six sigma Black Belts, Green Belts and Yellow Belts. The roles of the people involved in the six sigma deployment program can vary from one organization to another. However, it is absolutely crucial to have a supporting infrastructure with the top talent people.

(4) Project selection, prioritization, reporting and tracking system. Identification of right projects and their prioritization is an essential component for the success of six sigma initiative. A good project reporting system sharing the benefits of various projects and a tracking system to see the status of projects, time to completion of projects, types of projects, etc. should be considered as part of the six sigma deployment strategy. Projects which offer short-term wins are very crucial in the early days of the initiative. Successful projects in the initial stages build credibility and momentum to everyone involved in the initiative.

(5) Communication. The corporate six sigma leader and the top management team should communicate to everyone in the organization about the need for change and the overall strategic goals and objectives of the initiative. If the need for cultural change is not addressed properly at the outset of the initiative, the initiative will eventually fail.

As a final note, the author would like to accentuate the point that six sigma strategy in the financial services industry is relatively new in the UK. The applications of six sigma methodology and the use of basic tools of six sigma (process mapping, pareto analysis, cause and effect analysis, non-parametric tests, etc.) in financial service processes will continue to grow in the coming years. We will also see the integration of lean thinking with six sigma strategy in the next 3-5 years.

Jiju AntonyStrathclyde Institute for Operations Management,Centre for Research in Six Sigma and Process Improvement,University of Strathclyde, Scotland, UK