With its origins deep in the shop floor of Motorola, Six Sigma is not immune to the misconception it is a process improvement program only a manufacturing company could love.
But try telling that to Bank of America, which credits its 2001 embrace of the methodology with a resounding $2 billion in savings, as well as staggering growth in net new checking accounts. While virtually no other financial institution has adopted Six Sigma to the extent that BofA has, its experience alone offers ample proof that the process is not just for industrial companies anymore.
Technically, Six Sigma is a statistical measurement that measures quality at no more than 3.4 defects per million operations. In practice, it is a rigorous procedure aimed at delighting customers by continually improving processes.
Six Sigma first emerged in the mid-1980s when engineers at Motorola decided traditional methods for measuring the quality of TV sets and other consumer goods produced was not effective. It wanted to measure defects per million of operations, not just in thousands. Implementing Six Sigma in large-scale manufacturing operations like Motorola is fairly straightforward. With goods moving repetitively along the line, processes are easy to track and analyze. So engineers measuring defects per output can quickly assess how a different way of operating might improve productivity or quality.
Not so in a service industry like retail banking. Whereas manufacturers might pull out their slide rules or protractors, bankers often have to create their own metrics to measure results of new procedures.
Bank of America, for example, deploys mystery shoppers in its banking centers to make sure employees are carrying out very specific behaviors they've been asked to perform. The mystery shoppers might analyze how employees greet customers in terms of how often they do it, whether they do it with spirit, and if they connect with customers-not exactly dimensions that can be measured with a yardstick. "It's often harder to measure some of the attributes of financial services," said James Buchanan, a BofA svp and the quality and productivity executive for staff support and transition. "It's not as tangible a product."
Service organizations have another hurdle to jump that manufacturers do not face: their customers tend to put more value on hard-to-measure relationship factors. While Motorola customers may only want cellphones that work, bank customers want their bank to care about their needs, Buchanan said. "It's more emotional."
Not surprisingly, customer input is a central tenet of the Six Sigma service mandate. Bank of America surveys 10,000 customers a quarter by phone to get a barometer of how the corporation is delivering on its brand promise. It also calls around 90,000 customers who have recently visited a branch to inquire about their experience. And it collects real-time customer feedback from its call centers. "It's a great learning tool and a building block for us to deliver better processes," said Randall King, a svp and the quality and productivity executive for the global consumer and small business bank.
All that listening appears to have paid off. In a presentation he gave to analysts in February, CEO Kenneth Lewis said that the number of customers who described themselves as "highly satisfied" rose to 53.2 percent at the end of 2004 from 42.5 percent at the end of 2001. Bank of America is betting those very happy customers will create a feeding frenzy of loyalty, with more of them giving more of their business to BofA, while also recommending the bank to others. So far that logic seems to be bearing out. BofA added 2.1 million new checking accounts in 2004, up from1.3 million in 2003 and only 530,000 in 2002, King said.
Given BofA's success, it's a bit curious that more banks have not adopted Six Sigma with as much vigor. The sheer scope of making Six Sigma an integral part of a company's operations may be the reason. BofA, after all, now employs more than 5,250 "Green Belts" and "Black Belts" (Six Sigma lingo for highly trained individuals), and is fast reaching a point where Six Sigma is integral to almost everything it does.
But another reason for the lack of adoption may be that Six Sigma is not the only path to success. "Six Sigma offers a lot, but we don't think we need to use that full-fledged of a process," said Lisa Jennings Ducharme, director of customer experience at Wachovia Corp. Wachovia has improved customer satisfaction through a wide range of process improvement methodologies, only some of which are related to Six Sigma. For the fourth consecutive year, Wachovia outranked its peers in the University of Michigan Business School's American Customer Satisfaction Index, achieving a score of 78 in the latest survey released in February. That was six points higher than its nearest banking competitor: Bank of America.
