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Six Sigma Myth vs. Reality in Financial Services

The Six Sigma process-improvement methodology started with Motorola in 1986 and has yielded the company over $17B in process improvements ever since. In the five years from 1995 to 2000, another bellwether, GE, embraced Six Sigma practices and realized benefits of over $10B. These two companies and the thousands of others that have successfully implemented and utilized Six Sigma to improve their organizations are testaments to the fact that the methodology does work and can prove quite beneficial to a business.

Although originally developed for manufacturing and engineering practices, Six Sigma has found a home across virtually all industry sectors. While most have realized significant utility in its implementation and adoption, the financial services industry in particular has struggled to do so. Through my significant dealings with financial giants and their Six Sigma projects, I can tell you that the word on the financial street is that Six Sigma doesn’t work and is impossible to implement successfully. I have even heard countless financial firms attribute non-Six Sigma projects to being Six Sigma failures because they have come to lump anything process-related into a Six Sigma bucket. One of the many myths out there is that if you call it Six Sigma, then it is Six Sigma. I’ve written this article to help clarify some of these misnomers and explain how Six Sigma does in fact have a purpose and a place in the financial services industry (multinational banks, regional brokerages, etc.), where high volume transactions are the norm.

Among the many critical factors necessary for a successful Six Sigma implementation, perhaps some of the most important include:

1.     Creating a centralized process management function to consistently manage all Six Sigma projects

2.     Implementing a business process management (BPM) enterprise application at the corporate level to effectively manage all Six Sigma activity

3.     Diligently following a specified process from project inception through completion

4.     Properly managing all resources to ensure continued project momentum

5.     Controlling all critical timelines to make sure project is on track and approaching its target completion date

Once these critical factors are addressed, any financial institution can successfully implement and utilize Six Sigma across its organization, even overcoming the supposed challenges many have feared.

Given the high-volume transaction business most financial institutions are in today, even small increments of process improvement (e.g., a 2 percent increase in first call resolution) can have tremendous positive impact on the organization in terms of dollars, efficiency and better customer service.

Successful Six Sigma at the corporation level often starts in operations (printing, phone calls, etc.) where there is tremendous volume. Once the organization has successfully improved those operations through Six Sigma, the organization then deploys the methodology further and further throughout the business to transform the company into a “Six Sigma Shop”.

Challenges

It is difficult if not impossible to attribute the many failures in the financial services industry around Six Sigma to the methodology itself. It has proven the world over that it can very effectively optimize an organization’s business processes and streamline its overall performance. However, it is equally difficult to ignore the many challenges the financial services industry has faced making it work for them. I’ve tried to categorize the many areas in which these firms needed to focus more in order to realize the positive performance and bottom-line gains typically associated with Six Sigma. The areas include resources, rigor and performance, management and value.

Resources

Myth: Throw enough bodies at it, and it will be successful.

A successful Six Sigma project requires allocation of the right resources, not simply any resources. When unqualified and untrained individuals find themselves working on a Six Sigma project, big problems can ensue. Six Sigma is rooted very heavily in statistics, mathematics, structure and project management. Therefore, its projects require highly trained black belts devoted full time to the deployment and a larger number of hand-picked, high-performing green belts to manage the small scale projects. It is imperative to have sufficient green belts allocated to the project to ensure its success. Organizations also must consider diversity in terms of the business areas represented in the Six Sigma process. Most successful projects require support from technical experts, customers, partners, suppliers, and, of course, a strong working relationship with the business owners.

Rigor and Performance

Myth: The process isn’t all that important as long as it gets done.

Six Sigma comes with a strict analysis and implementation process that must be closely followed in order to achieve proper success. The process is designed to identify and address process defects as well as reduce variation in process outputs. Therefore, people within these organizations are often being asked to adapt to a new culture that embraces the practices of Six Sigma. This can be challenging for some, especially those with tight bureaucratic boundaries that are often slow to change. These resistances, however, must be overcome.

Other critical factors that many organizations fail to properly address include:

• Efficiency - in terms of meeting projected timelines. When a delay occurs at one stage it most certainly can affect the start of the next phase. A proper Six Sigma project is streamlined, structured and lays out phase by phase what actions are to occur and at what point.
• Measurement - They do not have an effective way to monitor and track progress, while others have incompatible systems as a result of a recent merger, acquisition or restructuring. This can lead to missed project steps, significant administrative resource drain, and so on.
• Follow-through and accountability – Often we find that the human resources allocated to a particular project are most part-time Six Sigma project participants as most have other responsibilities. Therefore, their dedication and focus can come into question. This can substantially derail a project, as will resulting missed deadlines and milestones.

Management and Commitment

Myth: Management is committed to Six Sigma. "I saw an email about it, so it must be true."

There are various aspects of “management” that must be taken very seriously to ensure a successful Six Sigma project. The following list outlines these critical elements, which are often overlooked or not strictly adhered to in many financial organizations. These include:

• Centralized project management – Many failed Six Sigma projects did not have a central deployment office to coordinate all projects on both a global and regional level. This centralized function is an imperative to maintain consistency, efficiency and high productivity. Equally important is the simultaneous use of a central business performance management software application to help manage all Six Sigma projects concurrently, consistently, efficiently and successfully. 
• Senior level sponsorship – Six Sigma can be very powerful in terms of business benefits but the organization itself (especially at the senior management level) must fully embrace and support the decision to employ Six Sigma. Many financial organizations likely make a concerted effort to make Six Sigma work but lacked true senior buy in, a focused strategy and direct linkages to the company’s bottom line. 
• Business owner buy-in – Six Sigma black belts are almost always dedicated 100 percent to one or more Six Sigma projects with no other company responsibilities vying for their time. Green belts and others, however, typically work on these projects on a part-time basis while still having their “day job”. This “part-time” status certainly puts the true commitment and buy-in from some of these individuals into question which can cause a project to derail and miss its target. It is imperative that each individual who has been given a certain area of responsibility treat that role as vital to the organization. Furthermore, green belts must be given ample time to focus on the project(s) at hand not be hampered by the “crisis” of the day.
• Integrated data systems – The result of company acquisitions and mergers is often conflicting IT systems, applications and perhaps business process optimization strategies. Successful Six Sigma requires standardization across the organization. Failing to integrate and bridge over isolated applications can spell doom for the organization’s Six Sigma initiatives.

Value and Communication

Myth: We tell our friends and coworkers how great of a job we did so everyone must know about our Six Sigma successes.

Big areas of failure among many organizations fall into the areas of communicating, realizing and sustaining value from these projects. Six Sigma is a culture in itself that must pervade the organization from the top down. Therefore, incorporating Six Sigma into the corporate patchwork is a great way to realize true value. Far too many businesses keep Six Sigma initiatives close the vest of only those directly involved and don’t communicate at the organizational level. This creates questions, budgetary concerns, doubts about preferential treatment and so on. An organization that keeps the entire organization involved will ferret out ways to leverage the methodology across the company and promote and sustain all Six Sigma successes.

This can be particularly beneficial to public financial institutions that report to investors. Wall Street loves to hear about a company’s bottom-line efficiency and productivity improvements and their resulting dollar savings.

A quality business performance management application, as I mentioned earlier, can really help ensure a continual loop of improvement by cyclically checking to ensure gains are sustained.

Solutions

With centralized deployment and management, Six Sigma can dramatically improve the business operations of a financial institution. But again, centralization is imperative and taking it a step further to include a BPM software layer on top is even better.

Many large financial institutions have upwards of 300 different Six Sigma projects going on simultaneously. Think about the synergies, streamlined workflow and realized company benefits that could be generated from having an easy and efficient means of aggregating all of this intelligence. A comprehensive BPM software program can provide this level of unification and standardization.

Following are some key areas where a BPM solution can add substantial value in terms of Six Sigma successes:

A.     Consistency – can integrate all of Six Sigma relevant data systems into one, unified database
B.     Flexibility – software is configurable and able to track and manage workflow; including resources, training, reporting, communication and more – in real time.
C.     Communication – these applications are typically Web-based and allow all authorized users to access and input data from anywhere in real time so the company and the Six Sigma teams benefit directly and timely from having the most current, accurate data to work from. 
D.     Automation – these programs typically come with e-mail notification capabilities to help ensure workers complete their tasks and business rules to spot trends, send emails, distribute automatic reports and escalate any process, function or task when necessary.
E.     Compliance - can provide real-time visibility into a compliance issue’s status, timeliness and overdue actions. It can automatically escalate high-risk situations, enforce strict role-based access controls including electronic signatures across departments, and record all activities for legal and regulatory validation.
F.     Intelligence - a BPM program will also provide very advanced trending and reporting capabilities to transform data into intelligence. Furthermore, authorized users can search the BPM database for desired information through ad-hoc querying.

Benefits

Six Sigma projects, when managed centrally and with an enterprise BPM software application, yield organizations tremendous value in a number of areas. At the top of this list are a few primary categories where this value lies. These include customer satisfaction, increased productivity and reduced costs.

Perhaps the single most important aspect of any business, customer satisfaction, is one of the foremost beneficiaries typically of Six Sigma projects. This is due to the fact that Six Sigma is very useful for optimizing customer touch points such as a call center, an email reply system, complaint tracking and so on. Furthermore, even the smallest of improvements in these areas can have a profound effect on the organization’s ability to better serve its clients. In turn, the company is enhancing its overall customer experience and strengthening its relationship with clients.

At the very heart of any Six Sigma project is likely some need to increase efficiency and/or decrease redundancy. This is accomplished – with the help of a BPM system – by standardizing, streamlining, measuring and improving business processes to reduce variations, defects and redundancies and build control into new and existing processes. Moreover, virtually any productivity enhancement can subsequently be directly tied to some sort of bottom-line benefit (cost savings, revenue increase, etc.) – whether it be getting more done with less, having more time for cross-selling and up-selling, decreasing customer churn, enhancing customer loyalty, and so on.

In the end, there are but a few true ways of improving one’s business operations – you do things better or get better people. The latter is something for you HR department to focus on, but BPM and Six Sigma can most certainly satisfy the former. From consistency in operations to cross-departmental visibility to centralized management reporting, BPM and Six Sigma can and will optimize the performance of today’s and tomorrow’s financial institutions. All it takes is some training, steadfast commitment, a dedicated staff and the right tools and methodology.

About the Author: Joseph Goodman

Joe Goodman is a certified Six Sigma Black Belt and an accomplished project facilitator. He is currently employed as a Solutions Architect and Six Sigma Expert Resource for Sparta Systems, Inc. Joe's expertise has been focused primarily in the financial industry with Top-five financial services institutions.

He has coached multiple Green Belts and cultivated years of experience implementing project solutions that have yielded process efficiency and improved client satisfaction. Prior to joining Sparta Systems, Joe spent seven years as a Six Sigma Black Belt at Merrill Lynch. During his tenure, he helped Merrill save $29 million bottom-line dollars as a result of facilitating Six Sigma projects.