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Six sigma in action: how NCR has used it to improve its critical services.

The pace of business demands that organizations be nimble enough to improve business operations on the go. Some equate this with a need for rapid change, quickly implemented. Six Sigma, for instance, does change businesses, but it's a gradual process. It systematically identifies and eliminates defects from business processes, creating stability and better control of processes by quantifying customer-defined defect levels. It has certainly worked well for NCR Corporation and could fit your business model as well.

Six Sigma is a disciplined change management process that uses data to analyze and measure how far a given process deviates from 3.4 failures in one million attempts. The central idea is to measure the defects in a process, and to systemically eliminate them.

A process attains Six Sigma by quantifiably demonstrating a sustained defect rate of 3.4 defects per 1 million opportunities--or a 99.9997% defect free environment. Anything less than that is ranked on a scale between 0 and 6. Some processes, like airline safety or drug testing, actually operate at a higher level than Six Sigma. It's all about measuring the cost of the defects versus the benefit derived from their elimination.

As a philosophy, Six Sigma seeks to first understand the voice of the customer by determining quantifiable limits for the specified output from them. Armed with this information the defects in the process are measured, and a strategic direction for the process improvement in chosen.

The Six Sigma process improvement approach is structured to systematically deconstruct complex problems. Starting with broad strokes, the problem is defined and granularity is added with available data.

Services are an essential component of NCR's business, and NCR's Worldwide Customer Services division is a leader in information technology services. The company provides support and management services for ATMs for banks, point-of-sale terminals for retailers, and data warehouses for many industries. Six Sigma was used by the company to improve its service call resolution process. This is how the company did it.

Step 1 - Define the Project

It's important to understand what end result the client wants to see as early as possible, to keep the team focused on that goal. This is done by gathering the customers' needs in a quantifiable way. Once this is done, specification limits known as Key Quality. Characteristics (KQCs) are developed. These KQCs are later used to measure the performance of the process under review. The objective is to ensure the team, and the team sponsor or executive leader, all have a clearly defined problem, and understand what the solution will improve for the customer.

For instance, NCR's Worldwide Customer Services organization wanted to reduce the number of calls that miss their customer contracted resolution times. By reviewing the work orders that failed to meet customer expectations (in resolution hours), NCR planned to identify processes that perform poorly and lead to poor customer satisfaction.

The ultimate goal was to reduce the number and severity of "extended out-age calls" by identifying the failures in the service delivery process. Prioritizing the areas of process failure will impact the financial and service levels of the company.

Step 2 - Describe the current situation

For any Six Sigma team, describing the current situation means gathering a lot of data. The team must clearly define and quantify how well their organization's current process works.

Two common pitfalls in this process are:

1) Paralysis by analysis -This occurs when the emphasis is on gathering data rather than actually defining the problem. Massive amounts of data are gathered and analyzed until a clear idea of all the problems in the company are developed--except perhaps the original problem.

2) Jumping to solutions--This is a worse situation. The project plan, the team, and the leadership's commitment are all in place. At this point the problem can shift from, "What is actually wrong with the process?" to "When are you going to fix it?" This scenario invariably leads in the short term to eye-catching PowerPoint slides, but little else.

To avoid these problems, the team needs to create a dear and detailed problem statement.

The detailed problem statement is developed using a data-based customer understanding (from step 1). The problem statement is further refined with the addition of process boundaries and specification limits. This more granular version of the problem statement is used to gather data on the performance of the process as it pertains to the problem statement. Once this is done the problem shifts from a fuzzy imperative of needing to do something, to a data-based fundamental understanding of how the business works.

For NCR, the extended outage project posed two major challenges:

1) A project with no specific process to improve, and no easily defined specification threshold could have easily fallen into both of the pitfalls discussed above. With no specification threshold it becomes impossible to define a defect, because there is nothing to identify and improve.

2) With no identifiable process to focus on, the team would likely try to attack everything at the same time.

To get around the first pitfall, the team created a profile of all successful service calls. By setting the specification limit at the 99.97% threshold the team felt comfortable that any call greater t-resolution hours (see Exhibit 1) are generated by a different process than the one that generated the successful calls.

[GRAPHIC OMITTED]

To solve the second problem, the NCR team reviewed the entire history of a sample of "defect" work orders (see Exhibit 2). These work orders were segmented initially in high-level, broad-stroke problem statements. The team then continued to break down each of these problem statements until a specific process and an actionable problem statement was developed.

[GRAPHIC OMITTED]

Step 3 - Root Causes

The third step focuses on identifying and proving that a relationship exists between the root cause(s) and the improvement target(s). Without getting into specifics, there are many ways of verifying whether relationships exist or do not exist. Statistics can help identify these relationships.

At this step, the mere mention of statistics may serve to mystify and deter many people from doing a good job. If statistical analysis is done correctly, it's a good way of summarizing extremely complex relationships and presenting the information on one presentation slide. More importantly, the cost of having a professional like a CMA in the organization that can perform some basic scatter plots, ANOVAs or regressions, far out-weighs the cost of deploying a solution that doesn't address the problem and may, in fact, make things worse.

Using the NCR experience, the fishbone diagram here represents one root cause that was uncovered by the team. The purpose of this fishbone was to summarize and intuitively communicate the nature of the problem faced by the team.

In this case the team arrived at the root causes by systematically disaggregating the defects into component parts. Within the "Supplier Related Parts Delay" problem statement, the defect sample is scrutinized by tracing the historic movement of the defect sample through the parts sourcing process. By combining the data and experience gained from the process analysis and some brainstorming techniques the team is able to list some potential root causes that are later verified using data.

Step 4 - Improvements: risks and results

This step involves developing and piloting the solution. With Six Sigma, the NCR team took advantage of structured tools such as brainstorming techniques, solution evaluation matrices, and risk assessment tools. For many organizations, risk assessment can often be one of the least understood elements.

Risk can be quantified in terms of severity, occurrence and the detection. You must ask yourself these questions:

1. If something were to break, how bad would it be?

2. If something were to break, how often would it occur?

3. If something were to break, how well/easily could I detect it and mitigate it?

Assessing the solution and the pilot program using these elements can greatly improve the solution design and reduce the risk of the pilot.

Evaluating the results is done using the same logic and procedures used to define the defects in Step 2.

Following the deployment of the complete solution, NCR realized a 10% improvement in service level performance. This 10% service performance improvement represented a 52 % return on investment for the project and significant P&L impacting cost reduction savings.

Step 5 - Control

This is a technically simple step but it's often poorly managed. The organization needs to document how the new practices will be executed and by whom. Long-term, reproducible training should be created, and metrics and ongoing monitoring developed. This is the step where all the money is made. Standardizing the improvements within the original target process and identifying other areas of the organization that could also benefit from the same solution will further enhance the benefits of the project. In simple terms, your team has made a cookie cutter, so why not enhance its value by using it as many times as possible?

The team then summarizes the lessons learned from the project and communicates them to the organization at large. This is also a good opportunity to communicate all other issues identified, but not specifically addressed, in the project.

Change management tactics & the corporate strategy

Solving individual problems effectively and efficiently using the best and the brightest guarantees only limited Success.

Although several things are required for world-class execution, the best place to start is leadership clarity. Leadership is a function of the clarity one brings to a business goal or problem. Leadership also requires aligning the goal with the business owner who has the most to gain by the completion of the project. This is accomplished by:

1. Developing executable elements to the corporate strategy.

2. Not trying to execute all of it at the same time (unless you have the resources to do it all at the same time).

3. Recognizing short-term goals as those that have buy-in, skills, resources and a recognizable process to fix. Short-term goals are not necessarily those that are required the most. Recognizing this fact will create a situation where the simple successes provide data and the intellectual capital to fix the more complex problems. At the same time, you can realize tangible benefits from the process improvements.

4. Starting the project prioritization process by choosing those key processes that need to be improved. For example, if you are trying to make red cars mad your supplier is sending you black doors, you won't be making very good red cam. In fact, if the supplier problem were resolved, production would probably speed up (cycle time would improve and therefore increase revenue) and cut your rework costs at the same time.

Also, plan for the skills and leadership talent you will need to tackle the next hurdle.

From NCR's point of view, the extended outage project was a strategic initiative. The team quantified the extent and the impact of the worst performing processes in NCR. It then took a comprehensive look at the problems and decided which to attack based on the timeline imposed, the skills at hand and the infrastructure available. The team developed and deployed some solutions initially that did not necessarily have the biggest impact. However, by the time the first phase of this initiative was completed the team had developed the infrastructure and skills to successfully handle the larger, more complex problems.

Change management and CMAs

There is nothing new in Six Sigma that CMAs in the private and public sectors have not trained for and likely already do. Six Sigma combines cost accounting, project management and business operations disciplines, areas where CMAs have demonstrated competence.

When it comes to change management, do not underestimate the importance of systemically involving every individual in the organization. Indeed, when used properly, that is what Six Sigma can do best.

Six Sigma standardizes the change management process and stratifies the knowledge and skills required in the change. In other words, the value of the system is that of a cookie crater for change management so that organizations don't require everyone in the organization to be professionally competent in these disciplines.

The one common thread that CMAs have is the management aspect of our jobs. No matter what discipline we are in, whether accounting, finance or business operations, on day-to-day activities involve dealing with people, using numbers, and managing change in strategic ways.

Change management is really a niche in which CMAs play an important role. With the Six Sigma methodology, you can help create an organization with a culture based on driving consistent, high-performance results from products and processes--every time.

Mathew Xagoraris, CMA, Honours BComm., is a senior quality consultant with NCR Corporation's Worldwide Customer Services organization. He is a Six Sigma Master Black Belt and a member of the company's Global Six Sigma Services team.
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Title Annotation:NCR Corporation
Author:Xagoraris, Mathew
Publication:CMA Management
Geographic Code:1USA
Date:Nov 1, 2003
Words:2130
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