Six Sigma: A Measureable Approach To Providing Quality Services

By and Dennis Attenello

The revolution continues. An ever-growing and nationwide audience of consumers is becoming increasingly aware of the quality of service they receive, giving it enlarged value and power in the marketplace.

This is especially true in the insurance/financial services industry where the relationship between the buyer and seller is still largely marked by sustained, personal contact. Consumers are becoming highly critical of any companies and agencies whose quality and service standards fall below their expectations.

In answer, many members of the insurance/financial services community have taken steps to provide quality services, but some — if not most— continue to stumble and haven’t met the challenge. Some sacrifice customer experience for efficiency sake.

The good news is that the methods leading to cost-effective and consistent excellent service can be found through a management approach known as Six Sigma.

Six Sigma integrates the statistical tools of total quality management and process improvement methods into a rigorous and disciplined change methodology. Unlike many management practices whose effectiveness can’t be measured for quite awhile, Six Sigma successes are quickly evident, measured in months.

Six Sigma, as part of a long-range business strategy, includes the following:
• Creating a strong process orientation. Insurance/financial services organizations learn to identify the core business processes critical to customer satisfaction. This in turn enables them to focus on improving their quality and reliability at a business process level—based upon a concise and more comprehensive understanding of their policyowners’ requirements.
• Improving quality while reducing costs. Six Sigma offers organizations a disciplined way to prevent errors, minimize hand-offs, and eliminate rework and workarounds. This aids greatly in expediting transactions and reducing costs.
• Using facts for management decisions. Six Sigma adds statistical rigor to improvement projects. Managers are able to make decisions based on data and hard facts—not perceptions or gut feelings, and more accurately establish what levels of performance can be achieved and promised to insureds, clients and prospects.
• Gaining and retaining customer loyalty. With its strong emphasis on the voice of the customer, Six Sigma provides a much better understanding of what creates and drives customer loyalty, and how to build long-term and more profitable relationships among current and prospective policyowners.
• Avoiding radical measures. Six Sigma programs also generate savings, which this allows organizations to self-fund needed improvements and avoid radical cost-saving measures (such as downsizing) that can damage morale and bring negative publicity.
• Creating strategies for action. Six Sigma helps companies bridge the gap between strategy and operations by providing predictive, in-process, performance measures (leading indicators) that can be linked to business goals and outcomes (lagging indicators). Also, some companies use Six Sigma to link their business and unit-level scorecards to their corporate goals.

This is an approach whose time has come. Six Sigma is helping its adopters in insurance/financial services successfully streamline processes, increase quality and accelerate growth. The results are impressive in an industry where consolidation continues and where companies cope with changes in markets and product lines and face increased competition from a variety of new sources, including global forces.

Companies with significant experience in quality and productivity improvement have found Six Sigma to be the next logical step in their ongoing efforts to provide superior service. Yet, even for companies and agencies less skilled at quality management, Six Sigma provides the means to develop a stronger process and customer focus and, in so doing, adds rigor to quality initiatives.

There are challenges to applying Six Sigma approaches within the insurance/financial services environment. However, a number of companies—including AIG, GE Capital, Bank of America, Vanguard, and JP Morgan Chase—have taken the plunge with some impressive productivity and quality improvement results.

Some contend that Six Sigma won’t work in industries such as insurance and banking because they are highly regulated and deal with financial risk. These are complicating factors that may limit the kinds of changes insurance/financial services providers can make. However, they are not impediments to improvement.

For example, no insurance company is going to eliminate its underwriting function just to please its policyowners. But it may apply Six Sigma methods, as one company has done, to develop underwriting processes that are more efficient and customer focused.

Some financial services companies now apply the Six Sigma toolkit to streamline mortgage applications, process error free lockbox payments, provide more accurate investor reports and reduce turnaround time.

Results from Six Sigma are typically achieved in a relatively short period of time. While other improvement results, such as reengineering, may take up to three years, the payback from Six Sigma projects often occurs in less than six months.

For example, a global insurance company used Six Sigma to expedite the issuance of reinsurance policies. The result: cycle time was cut by 40 percent, and the company gained $38 million in additional revenue the first year.

Companies and agencies that routinely apply Six Sigma methods are likely to experience significant benefits beyond such quick win process improvements. They can because this management approach promotes new ways of thinking and therefore drives operations to ever-higher levels of effectiveness and efficiency.

While this improvement approach is still relatively new to the insurance/financial services industry, there are a number of lessons that must be applied if the Six Sigma approach is going to prove to be all that it can be:

• Dedicated leadership is necessary. Senior management, by demonstrating ongoing visible and vocal support for quality improvement through Six Sigma, helps sustain interest over the long run. Also, their support is necessary to reinforce a continuous focus on process improvement—ensuring quality goals are met, results are tracked, and individual contributions are recognized.

• Extensive training is mandatory. Six Sigma requires extensive training in the use of quality tools and statistical measures. While targeted training in specific skills is usually more effective than mass training, you may need to enlist both internal and external training experts and implement training in stages.

• There’s a need to identify and prioritize high impact projects. Careful project selection is critical to the success of Six Sigma. All projects should have goals that relate to bottom-line improvement or customer satisfaction. Priority should be given to those projects that will have a high impact throughout your organization, contribute strongly to meeting strategic goals, and target processes that span regional or functional boundaries.

• All must recognize that Six Sigma is not a silver bullet. Six Sigma is not a solution for every business problem. While it can assist in building a quality-focused culture, it often works best when used in conjunction with other improvement tools, such as benchmarking and work process redesign.

• It’s paramount to communicate results. It’s important to share what is learned from improvement efforts throughout the organization. Doing so adds to an organization’s storehouse of best practices and works to build momentum for continued change. It also helps to convince everyone that the organization can achieve levels of service quality that were never envisioned.

Consumers want—and have every right to receive—quality service. The Six Sigma approach can assure that an organization will be able to furnish top-notch service on a consistent and admirable basis.

John A. Uzzi is president of Roy W. Walters & Associates, a nationwide management consulting firm headquartered in Paramus, N.J. He can be reached at (201) 967-1148 or johnuzzi@roywalters.com. Dennis Attenello is president of Attenello & Associates Inc., a consulting firm that specializes in designing and guiding organization-wide process improvements, headquartered in Livingston, N.J. He can be reached at (973) 535-5696 or attenello@aol.com.

Topics Numbers Training Development