To many people, Six Sigma is ‘something done in manufacturing’. To me having spent six months obtaining my Black Belt and reviewing the processes within my own business, At We Complement we totally disagree.
Although Six Sigma has its roots in the 1980’s it has been applied successfully within the services sector for decades. Banks, Universities, Hospitals, and local governments are some of the diverse places that have benefitted from Six Sigma. There is even a book written in 2003 by Michael L George dedicated to the topic.
It is not only large companies, Six Sigma can be introduced into small businesses to improve processes. Including growing financial planning practices.
Six Sigma ranks among the foremost methodologies for making business processes more effective and efficient. In addition to establishing a culture dedicated to continuous process improvement, Six Sigma offers tools and techniques that reduce variance, eliminate defects and help identify the root causes of errors, allowing organizations to create better products and services for consumers.
People develop expertise in Six Sigma by earning belts at each level of accomplishment. These include White Belts, Yellow Belts, Green Belts, Black Belts, and Master Black Belts.
Does it work? Motorola reported in 2006 that the company had saved $17 billion using Six Sigma.
Experts credit Shewhart with first developing the idea that any part of the process that deviates three sigma from the mean requires improvement. One sigma is one standard deviation.
The Six Sigma methodology calls for bringing operations to a “Six Sigma” level, which essentially means 3.4 defects for every one million opportunities. The goal is to use continuous process improvement and refine processes until they produce stable and predictable results.
Six Sigma is a data-driven methodology that provides tools and techniques to define and evaluate each step of a process. It provides methods to improve efficiencies in a business structure, improve the quality of the process and increase the bottom-line profit.
A key component of a successful Six Sigma implementation is buy-in and support from executives. The methodology does not work as well when the entire organization has not bought in.
Six Sigma uses a DMAIC methodology for improving existing business processes. The letters stand for:
- Define the problem and the project goals
- Measure in detail the various aspects of the current process
- Analyze data to, among other things, find the root defects in a process
- Improve the process
- Control how the process is done in the future
If you are creating new processes then the DMADV methodology is used:
- Define the project goals
- Measure critical components of the process and the product capabilities
- Analyze the data and develop various designs for the process, eventually picking the best one
- Design and test details of the process
- Verify the design by running simulations and a pilot program, and then handing over the process to the client
The other big methodology is the Five Whys. This is a method that uses questions (typically five) to get to the root cause of a problem. The method is simple: simply state the final problem (the car wouldn’t start, I was late to work again today) and then ask the question “why,” breaking down the issue to its root cause. In these two cases, it might be: because I didn’t maintain the car properly and because I need to leave my house earlier to get to work on time.
Six Sigma in Financial Planning?
All the Six Sigma tools and methodologies serve one purpose: to streamline business processes to produce the best products and services possible with the smallest number of defects. Its adoption by corporations around the globe is an indicator of its remarkable success in today’s business environment.
Whether you are looking to improve your complete advice processes, your annual review process, your CIP, CRP or any element of your business speak to us about how we could use Six Sigma to improve the effectiveness of your financial planning business.
I now know this methodology can be applied into financial planning practices too. Read a case study here.
Tony Slimmings – MD