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Six
Sigma performance - how much is enough?
There is no doubt that Six Sigma offers a very structured
methodology for reducing process variations and then in improving
process capability. This eventually translates into more customer
satisfaction and increased loyalty.
All six sigma projects call for lot of investment in terms
of resources, effort and it takes a certain amount of time
to reach six sigma level of performance. How far the results
at the end of the project achieved justify the investment
?
Many organizations get on to the six sigma journey without
answering the following questions,
- What sigma level of performance would be good for a particular
process?
- Is it worth trying for attaining six sigma level performance?
In my opinion, for most processes in service industry, particularly
insurance, it would be sufficient to reach up to 4.5 sigma
level of performance on key processes. 4 sigma process means
having only 1350 defects per million opportunities or a yield
of 99.87%. This itself would be a tremendous improvement because
most processes in an average insurance company perform around
2.5 or 3 sigma levels. Reaching 4.5 sigma level would reflect
very positively on the business results and customer service.
The reason I recommend reaching 4.5 sigma level, particularly
for insurance industry, is that the customer requirements
are changing very fast and so is the competitive landscape.
By the time the company expends resources in reaching six
sigma level, the customer requirements have changed and because
of this the six sigma level falls to 1 sigma or 2 sigma level.
Therefore, while deploying six sigma methodology it is important
to keep an eye on customer requirements and expectations so
that any change can be incorporated in the process improvement
effort.
Even companies like GE, Motorola etc., who are known to have
passion for deploying six sigma and are considered as leaders
in mastering the art of six sigma deployment, would not have
all their processes operating at six sigma level. I believe
only their critical processes would be touching the six sigma
level performance. This is right since, it is not required
of any organization to have all their processes to operate
at six sigma level.
To illustrate my point, a process like aircraft landing has
to be more than six sigma level because of the obvious risks
involved, whereas a process like the baggage handing at the
airport would be rated as excellent even at 4.5 sigma level.
Improving the baggage handling process six sigma level might
be a good thing but whether the difference would be perceived
by the customer is as issue. In this situation, would it be
wise to invest resources to take the process performance to
six sigma level? Many times, the results gained by improving
a process from 4.5 sigma level to 6 sigma level may not justify
the resources invested and hence would not make a good business
case.
In view of this, it is very important that project selection
for six sigma is done prudently and there should be clarity
about the optimum sigma level of performance that a process
should ideally operate on to get the desired results. After
all, it is the results which matter the most.
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