Relevance & Application of Six Sigma in Services Sector
Athul George, Vivek Joseph, Kiran John Rajan
Christ University Institute of Management
Bangalore-560029
Abstract
Six Sigma is a quality improvement tool which was
developed by Motorola in 1980s with the sole
purpose of standardizing processes by eliminating
defects. It refers to the ability of processes to
produce output at defect levels below 3.4 defects
per million opportunities. The implicit goal of Six
Sigma is to improve the quality of all the processes
to a level equal or better than that.
Six Sigma was traditionally developed to improve
the quality standards in manufacturing sector, and it
achieved a huge amount of success in the same. But
now the focus is shifting from manufacturing to
services. Many service sector companies as well as
the service functions within every sector are
adopting it as a tool to boost their efficiencies. But
there is a lot more to achieve for Six Sigma in the
services sector and loads of hurdles exist in the way
to success.
General Electric, AlliedSignal, and many other
manufacturing firms have saved billions of dollars
due to the implementation of Six Sigma. But now
its scope is not limited to manufacturing only.
Companies are finding its use in non-manufacturing
processes as well such as sales, accounts
receivables, and R&D. For instance, Dow Chemical
estimates that the application of Six Sigma to
environmental, safety and health services has
helped the company save $ 130 Million in the past
two years. No surprise that the financial institutions,
consumer product and healthcare firms are also
jumping on to Six Sigma.
But different customers have different perspectives.
Some bankers and doctors might immediately warn
that standardizing processes will lead to inferior
services. And their worries are valid too to some
extent. Six Sigma won't work for every service and
adjustments may be required even for the services
for which it does apply. Nevertheless, many lessons
learned from production lines are relevant to service
processes as well.
Whether the adoption of the Six Sigma ethos by
service businesses is a response to increasing
expectations from customers, or whether this is an
opportunistic strategy determined as an innovative
means of achieving competitive advantage by a
small number of pioneering firms, is still unclear.
However, there are now clear indications that some
substantial service-based, or service-dependent
organizations like Citibank, Motorola, American
Express, see commercial possibilities in the pursuit
of perfection.
As Jack Welch, one of the best CEOs of all times,
has said, "Six Sigma is the most important initiative
we have ever undertaken." Welch indicated that
those who aspire for top-level positions in the GE
management must have both knowledge and
experience with Six Sigma to ensure that its values
become ingrained throughout the company.
Key Words
Six Sigma, DMAIC, critical-to-quality (CTQ),
Quality Control
Introduction
For a long time, quality control and improvement
has been considered an important means for
acquiring competitive advantage. Quality-control
methodologies like statistical quality control, zero
defects, and total quality management, are some of
the key methodologies undertaken for many years.
Six Sigma can be considered as the latest quality
improvement methodology in this series that has
gained popularity and acceptance in many
industries across the globe. Evolving continuously
over the past few years, today, it has acquired the
status of a business management strategy rather
than mere quality assurance methodology.
Moreover, the strategy has been utilized by many
world class organizations such as General Electric
(GE), Motorola, Honeywell, Bombardier, ABB, and
Sony, to name a few from the long list.
The concept of Six Sigma was introduced by Bill
Smith in 1986, a senior engineer and scientist
within Motorola’s Communication Division. Mikel
Harry formerly at Motorola is accredited with the
development of the Six Sigma concept in the late
1980s. Following this, for three consecutive years,
Motorola spent $ 170 Million on workers' education
and training, thus, saving $ 2.2 Billion in terms of
cost incurred as a result of poor quality, and was
honoured with the Malcom Baldridge Award in
1988.
Instrument of Quality Control
The main aim of Six Sigma methodology is to
reduce the drawbacks in any process and improve
its capability, thus, bringing the defects in the
output within tolerance limits. In a way, it strives
for perfection allowing only 3.4 defects per million
opportunities. The methodology strives on
assertions that, first of all, continuous efforts to
reduce variation in process outputs is key to
business success; secondly, manufacturing and
business processes can be measured, analyzed,
improved and controlled, and finally, successful
achievement of sustained quality improvement
requires commitment from the entire organization,
particularly from top-level management.
Initially applied to manufacturing sector, Six Sigma
methodology has evolved over a number of years
allowing its application in many fields such as
Services, Medical & Insurance Procedures, Call
Centers, etc. In current scenario, Six Sigma has
evolved into a tool for overall business
improvement and not just measurement of quality.
Advantages of Six Sigma over Other Tools
The following aspects of the Six Sigma were not
associated with previous quality improvement
initiatives mentioned above: -
 Six Sigma strategy focuses on achieving
measurable and quantifiable financial returns to
the bottom-line of an organization.
 Six Sigma methodology of problem solving
integrates the human elements (culture change,
customer focus, belt system infrastructure, etc.)
and process elements (process management,
statistical analysis of process data, measurement
system analysis, etc.) of improvement.
 Six Sigma methodology utilizes the tools and
techniques for fixing problems in business
processes in a sequential and disciplined
fashion. Each tool and technique within the Six
Sigma methodology has a role to play in the
process improvement or trouble shooting, and
the time, location, reason and method of
application of these tools or techniques marks
 the difference between success and failure of a process. Third, proper analysis is undertaken in
six sigma project. order to determine and verify the relationship and
inter-dependence of factors affecting the process.
 Six Sigma emphasizes on the importance of Fourth, the process is improved and optimized
data, and decision-making is undertaken based based on the analysis undertaken during the last
on facts and data rather than assumptions. step. Finally, an appropriate degree of control,
 Six Sigma utilizes the concept of statistical depending on the gravity of the flaw or aberration is
thinking and emphasizes on the application of exercised to ensure the correction of variance
well-proven statistical tools and techniques for before they result in defects.
defect reduction through process variability 2. Define, Measure, Analyze, Design, Verify
reduction methods (e.g., statistical process (DMADV) - The five steps involved in this
control and design of experiments). methodology include: First, the goals of the design
Implementation of Six Sigma activity in consistence with customer demands and
enterprise strategy are defined. This is followed by
Over the past few years, Six Sigma has evolved identification and measurement of factors critical to
from a mere strategy for improving quality to a qualities, product capabilities, production process
strategy that has become a necessity for achieving capabilities and risk assessments. Third, a proper
business goals. The requirements for analysis of these factors along with evaluation of
implementation of Six Sigma include, first of all, a design capability is undertaken in order to prepare
well-developed and well-defined infrastructure that and select the best design. Fourth, a proper design
ensures senior management support and provides a as per the details is prepared followed by
platform in the form of receptive culture and clear optimization of design. Finally, the design is
roles and job definitions. Secondly, a training verified and the production process is implemented
strategy is required to be developed in order to followed by handover to process owners.
convey the information and implementation of Six
Sigma methodology. Third and last, a well-defined
approach has to be followed in terms of project
selection and execution involving the participation Six Sigma: Service Sector Perspective
from customer / employee surveys and suggestions, Relevance
benchmarking studies, or existing projects helping
the management in figuring out the potential Research has shown that most of the service
improvement areas. processes are performing at less than 3.5 sigma
quality level with a defect rate of over 23,000 ppm
Following are the methodologies used for or yield of 97.7 per cent. If we improve the sigma
implementation of Six Sigma strategy: - quality level of service processes to four sigma
1. Define, Measure, Analyze, Improve, Control quality level, the defect rate will be dropped
(DMAIC) - It consists of five steps. First, the goals significantly to 6,210 ppm
of process improvement are defined as per the This clearly indicates a 3.5-fold improvement in
customer demands and firm strategy. Secondly, the process performance. The process yield will be
current process is measured and relevant data is increased to 99.38 per cent. This would bring
collected in order to enable comparison with future significant financial returns to the bottom-line of
any organizations (due to reduced defect rate,
reduced number of customer complaints, improved
customer satisfaction, etc.).

Most developed countries no longer have a

manufacturing based economy. The real economy Common Myths in Service Oriented
in these countries involves such fields as financial Organizations
services, health care, e-commerce, and logistics, but
less manufacturing, which has tended to move Six sigma applications in the services sector are still
offshore to low-cost locations. Six Sigma can be limited in spite of being embraced by many big
used in this case to reduce the costs of poor quality service oriented companies such as J. P. Morgan,
so that a more consistent process for service American Express, Lloyds TSB, Egg, City Bank,
delivery may be achieved. Another important Zurich Financial Services, BT, etc. A key argument
reason for the introduction of the Six Sigma here is that many service processes are unseen,
strategy in many service companies is that intangible, and even immeasurable. As such, they
customers of today feel "process variability" in the are not amendable to improvement using a six
delivery of the service provided and not just on sigma approach.
"process average or mean". The objective of a six
The most common reason why service-oriented
sigma strategy is to reduce "process variability"
organizations stay away from Six Sigma is their
around the acceptable target service performance.
notion about it being a manufacturing solution. One
Applications of the major hurdles service-oriented organizations
must overcome is their mind-set that because their
With the growth in application of Six Sigma in company is human-driven, there are no defects to
Service areas, there are certain areas that require measure. Moreover, it is a quite common view
emphasis in order to ensure proper and fruitful among many people engaged in service
application of the methodology to the sector. The organizations that Six Sigma requires complicated
required focus areas include identifying the areas of statistical tools and techniques. The truth is that Six
processes that are the best candidates for Sigma is not about a collection of statistical tools
improvement and categorizing them as highly and techniques, and service organizations simply do
customized, mass customized and standardized not need many of the tools and techniques of the six
service processes depending on the nature of tasks. sigma toolbox. The majority of the problems in
Apart from this a proper method of definition of service organizations can readily be tackled using
process defect along with defect measurement is the simple problem-solving tools of Six Sigma.
also required in order to design an effective method
to remove those defects. Defect definition and "Six sigma demands massive training costs and
measurement is followed by delving into the root additional effort," has become another
causes of the problem and prioritizing them for misconception among many employees in the
determining their solutions. Finally, it should be service sector. However, it is already a proven fact
noted that the scope of project covers a wider area that the benefits obtained from Six Sigma
and focuses on long term benefits rather than short implementation outweigh the investment costs.
term benefits, thus, stressing on a long-term
Advantages
commitment for quality and service.
As already mentioned, the major benefit of Six
Sigma is in the form of considerable improvement
in the bottom-line result for service oriented
organizations. Other benefits include: -
1. Effective management decisions due to
heavy reliance on data and facts instead of
gut-feelings and hunches. Hence, costs
associated with fire-fighting and misdirected
problem solving efforts with no structured
or disciplined methodology could be
significantly reduced.
2. Increased understanding of customer needs
and expectations, especially the critical-to-
quality (CTQ) service performance
characteristics, which will have the greatest
impact on customer satisfaction and loyalty.
3. Improved knowledge across the
organization on various tools and techniques
for problem solving, leading to greater job
satisfaction for employees.
4. Reduced number of non-value added
operations through systematic elimination,
leading to faster delivery of service.
5. Reduced variability in service performance,
leading to more predictable and consistent
level of service.
6. Improved cross-functional teamwork across
the entire organization.
7. Most important of all, Six Sigma is a means
for process improvement. It is a business
strategy along with a systematic approach,
which helps in financial benefits,
productivity, and customer satisfaction.
Disadvantages
Like any other technique developed in past, Six
Sigma also has some drawbacks which have created
opportunities for further research in this field: -
1. The challenge of having quality data
available, especially in processes where no
data is available to begin with.
2. Sometimes there is frustration as the
solutions driven by the data are expensive
and only a small part of the solution is
implemented at the end.
3. The prioritization of projects in many
service-oriented companies is still based on
pure subjective judgment because of
availability of very few tools for prioritizing
projects. Although selecting the right
projects is one of the critical success factors
of six sigma implementation.
4. In service processes, a defect may be
defined as anything which does not meet
customer needs or expectations. It would be
illogical to assume that all defects are
equally good when we calculate the sigma
capability level of a process. For instance, a
defect in a hospital could be a wrong
admission procedure, lack of training
required by a staff member, misbehavior of
staff members, unwillingness to help
patients when they have specific queries,
etc.
5. Non-standardization procedures in the
certification process of black belts, green
belts, etc. This means not all black belts or
green belts are equally capable. The
capabilities of black belts or green belts vary
enormously across the service organizations,
depending a great deal on the certification
body.
 6. The start-up cost for institutionalizing Six Lessons_Learned_in_6Sigma_Implementati
Sigma into a corporate culture can require on.pdf
significant investment. This particular
feature would discourage many small and e) Emerald Full Text: Online Database
medium size enterprises from the f) www.motorola.com/content.jsp?
introduction, development and globalObjectId=3074-5804#ss
implementation of Six Sigma strategy.
g) www.motorola.com/content.jsp?
Conclusion globalObjectId=3079
Six Sigma has been creating a buzz for a while now
in the manufacturing industry, but it has still to go a
long way in the services industry. It is one of the
ways to achieve business profitability and
professional excellence through improved quality
resulting in customer satisfaction and increased
market share. The popularity of Six Sigma is
growing day-by-day in the service oriented
organizations. Moreover, even some manufacturing
companies are putting some serious efforts to
implement Six Sigma in their service oriented
processes to improve their returns on investments.
Finally, from the overall study of the market, it can
be said that Six Sigma is going to be the buzzword
in the services sector in many more years to come.

References

a) Joseph A. De Feo & William W Barnard.

JURAN Institute's Six Sigma Breakthrough
and Beyond - Quality Performance
Breakthrough Methods, Tata McGraw-Hill
Publishing Company Limited, 2005

b) Six Sigma Meets the Service Economy: By

Jim Biolos - HBSPC

c) EBSCO Business Source Premier: Online

Database

d) www.providersedge.com/docs/leadership_ar
ticles/