What is Lean Six Sigma :

Faced with the challenge of global recession leading to shrinking revenues and reducing margin financial service companies world over turning to tools like Lean Six Sigma for improving internal efficiencies and reducing costs and at the same time ensuring customer retention and acquisition of new customers by enhancing customer satisfaction.

Lean Six Sigma is a powerful combination of DMAIC problem solving methodology using rigorous statistical tools developed by Motorola in USA for reducing defects and the common sense method developed by Toyota in Japan for enhancing speed of the process by removing non-value added activities and eliminating waste.

Though this method was initially developed for manufacturing companies, service companies have found it very useful and applicable in their environment which is highly dependent on people. In India, several multinational, private sector and even public sector banks have taken it in a big way. Many insurance companies also have been at it for many years now. Telecom and call centers are also using it for quite some time.

Benefits of Six Sigma:

Financial services industry like any other industry is also looking for processes which are

• better,
• faster and
• cheaper.

The important process metrics used are turn around time (TAT) and errors in service delivery and cost per delivery.

“Higher quality costs less, not more”

Lean helps to identify non-value added activities and by removing them speeds up the process. With less number of activities defects comes down. Six Sigma helps to reduce defects, thereby removes reworks and this speeds up the process. This way Lean & Six Sigma act complementary to each other to speed up the process and at the same time reduce defects.

The most efficient way to acheive 6 Sigma level of performance is to simultaneously improve quality and apply lean principles to eliminate non-value-added process steps.

“[Quality is to ] give the customers what they want”

Deployment of Lean Six Sigma :

Deployment of Lean Six Sigma uses a similar to standard Six Sigma. The pictures below show the sequence and time line for deployment.

“He profits most who serve best”

In order to increase participation and involvement of more people some companies have yellow belts also and solve many simpler problems through yellow belt projects.

Some of the key success factors for Lean Six Sigma projects:

• Choose the right people
• Choose the right projects
• Review regularly
• Reward & recognize

“[Quality is to ] give the customers what they want”

Choose the right people:

It is important people at BB & GB level have good analytical skills to find root causes and innovation skills to find solutions. You need best brains for improvement. Don’t choose people who are available. Right people is the key to success of deployment.

Choose the right projects:

Select projects which have highest impact on company’s goals and produce good financial savings. Projects should also have an impact on customer satisfaction. Capture voice of customer and validate your projects are in line with customer requirements.

Don’t scope the projects too big. Project should aim to improve process output performance. “Improve profitability” or “Improve productivity” are not the right projects. Project theme should be actionable. If your projects goals are large, break them to smaller actionable goals which can be achieved in 4 to 6 months.

“ “Zero defects” is not good enough ”

Some examples of projects in financial sector:

Banking:

• Reducing cycle time for new account opening
• Reducing turnaround time for collections – Local & Outstation
• Reducing query/complaint resolution cycle time
• Minimizing of risk
• Reducing billing errors & disputes
• Reducing suspense and deferred Accounts
• Reducing account migration lead time account migration
• Reducing processing time of bills
• Reducing turnaround for issue of credit cards
• Reducing turnaround time for sanction of personal/vehicle/home loan

Insurance:

• Enhancing case rate & case size
• Increasing % of active agents
• Improving new agent productivity (Case rate of new agents)
• Reducing policy issuance turn around time
• Reduce claims settlement turn around time
• Reducing return of premium notices
• Improving % premium renewals (Persistency)
• Reducing employee attrition & enhancing employee retention time
• Increasing %agents contracted

“Nothing is fine but the ideal; or rather, excellence exists only by abstraction”

Review Regularly:

The key for success of Lean Six Sigma deployment is regular review. Multiple levels of reviews need to be conducted. Typically 3 levels of review namely steering committee review, champion review and MBB review are conducted.

The steering committee consists of top management team. They should meet at least once in 2 months and review the progress of all the projects and also take any policy level decisions which may be needed as a part of the solution. Some times project leaders don’t know where to go for decision on their solutions and solutions do not get implemented for months.

Champions should review progress of the project at least once a month and also take decisions on any resources like budget, etc needed by teams and give a business perspective to the team’s efforts.

MBB who may be an external consultant should review technically on fortnightly basis and give them advice on technical aspects of the project like the right tools to be used, etc and also ensure that toll gate reviews are conducted at the end of every phase of DMAIC.

Reward & Recognize:

Reward & recognition helps the team to remain motivated. Reward & recognition schemes should be publicized upfront and should be objective and transparent. Two levels of recognition are suggested. Recognize the teams as soon as project is completed. Don’t wait for an annual event. Create a competitive environment through an annual competition for best project. This recognition is done in the annual event.

“Quality is that which meets the customer’s expectations.”

Results:

Many organizations in the financial sector have benefited from Lean Six Sigma enormously.  They have achieved return on Investment (ROI) of the order of more than 1 to 10. Given below is one example of an Indian Insurance company. Over the last 4 years, this company spend about Rs 5 lakhs in direct training cost and the direct financial saving has been more than Rs 5 Crores. The results are shown table below:

“The quality you need, the price you want”