Six Sigma stands for Six Standard Deviations (Sigma is the Greek letter used to represent standard deviation in statistics)

Six Sigma Tutorial

Six Sigma stands for Six Standard Deviations (Sigma is the Greek letter used to represent standard deviation in statistics) from mean. Six Sigma methodology provides the techniques and tools to improve the capability and reduce the defects in any process.

It was started in Motorola, in its manufacturing division, where millions of parts are made using the same process repeatedly. Eventually Six Sigma evolved and applied to other non manufacturing processes. Today you can apply Six Sigma to many fields such as Services, Medical and Insurance Procedures, Call Centers.

Six Sigma methodology improves any existing business process by constantly reviewing and re-tuning the process. To achieve this, Six Sigma uses a methodology known as DMAIC (Define opportunities, Measure performance, Analyze opportunity, Improve performance, Control performance) ...
Six Sigma Case Study - Vytra Call Center
Vytra Call Center reduced costs by 12% and improved customer service within 90 days of implementing AIM-Activity Information Modeling.
Vytra Inc. is a New York HMO with 250,000 customers and 30 basic product lines. They have used Six Sigma since 1997. "Six sigma is a philosophy of doing business with a focus on eliminating defects through fundamental process knowledge. Six sigma methods integrate principles of business, statistics and engineering to achieve tangible results".
Can A Call Center Simultaneously Improve Its Customer Service and Reduce Its Costs?
Yes! With AIM- Activity Information Modeling (TM)
Andrew Chiodo, Professor, Franklin University, Business & Technology MBA Program
Summary: Vytra implemented AIM in its Call Center, reduced its costs by over $500,000 (16%) and improved numerous dimensions of its service quality. They now know the exact cost of each service, product and customer that they use for accurate pricing, profit forecasting and product design.
James Karagiorgis, Chief Transformation Officer for Vytra, is responsible for determining the changes that are needed and leading Vytra's teams to achieve change results. Jim is a Six Sigma Master Black Belt.
Kerry Edwards is Director of Member Services and responsible for any interaction with members - including inbound calls, correspondence and maintaining strong customer relationships. She is the Six Sigma Project Leader for member loyalty and a Six Sigma Green Belt.
How the Improvement Project Started Jim Karagiorgis: "One of the biggest obstacles to implementing Six Sigma is determining the cost of quality, especially when you're trying to determine the costs resulting from not doing something correctly and then re-doing it."
"This is critical to Vytra, because we are a 'customer- intimate' company, providing value-added services rather than being the lowest-cost provider." According to Jim, "Vytra must provide excellent service to keep our customers. We have to balance adding value to customers' experiences with the Six Sigma philosophy of not increasing costs. Under that system, every cost improvement must generate more than enough savings to justify the initial expense."
Jim's focus was the "voice of the customer" – call center handling of customer inquiries and problems. "Some of the issues that made cost and quality calculations impossible were the result of multiple variations of plans issued under Vytra's basic lines of business. While Vytra has about 30 basic lines, its hundreds of employer clients have created literally hundreds of variations of health benefit programs. The total number of different combinations and permutations is staggering."
Six Sigma Case Study - Vytra Call Center - Continued..
"Until we implemented AIM, all we could do was derive an average cost per call- about $3.00 each with information from our ACD (Automated Call Director). But there was no way to determine if there were some calls and some customers that were more costly than others, and why, short of doing a (lengthy, disruptive and very expensive) full-blown activity costing process."
Using A New Tool for New Results
AIM-Activity Information ModelingTM provided the solution. It collected over 60,000 data points in four weeks. It only required Customer Service/Call Center personnel to answer 3 brief questions per hour that automatically popped-up on their computer screens. "Our result was a clear picture of costs per call- by call type, product, line of business and customer types. The time AIM required was extremely short and the cost of our AIM project was minimal. We determined that AIM delivered its information at plus 99% confidence level."
Finding Cost Opportunities In Poor Quality
Kerry Edwards' experience with AIM was focused on customer service, mostly in the call center. She knows that customer service is constantly going through change, with the most adaptable organization being the one that succeeds best. AIM was put in place in the Member Service Call Center because it is the largest part of customer service. According to Kerry, "There was a great need to understand the costs of incoming calls and what caused that cost. We were using an average cost per call, and that was misleading us. We knew, for instance, that costs for claim calls had to be larger than benefits inquiries because of the relative length of the calls. This was very important to determine because 50% of the calls from our single largest group was for claims issues. We knew that quality problems raise costs so finding and understanding our quality problems was critical to finding our cost opportunities."
New Information Achieved New Decisions
After AIM's implementation, Kerry reports, the initial results were very interesting. "We were able to identify right, away which lines of business cost more than others and why. We also had some surprises. Certainly AIM confirmed the areas we thought were costly, but it also showed us other high expense areas that we either only suspected or had not even had a clue about!"
"Some of our 'biggest surprises' were in the area of benefit inquiries. We were shocked to find that some simple benefit inquiry calls were among our most expensive. The cost came from the time staff needed to put a call on hold to get help from a more experienced or knowledgeable colleague." Jim agreed and added, "AIM identified, for each LOB (line of business) and call types, where these higher expense calls were occurring and why. By analyzing specific customers and their call types, it became clear that certain clients and client segments caused much higher costs. This pointed out the need to add specific content to the Vytra website that would allow these clients to find the information they needed quickly without calling us."
Kerry added, "We have made some corrections now, but many more are coming. Other AIM information showed that some costs were not a result of Vytra's actions, but our member employers' HR managers. Some employers weren't providing our HMO benefit information to their employees and this was causing lots of calls about basic benefits. We eliminated those by helping our largest clients provide better orientation programs about their healthcare benefit programs."
"With AIM's Models we now track inquiries, claims and complaints, for every one of our services and identify exactly the areas that need to be reviewed and addressed. We have real information so we institute re-training, new procedures and re-pricing strategies quickly and see results very quickly."
Six Sigma Case Study - Vytra Call Center - Continued..
The Bottom Line
Jim Karagiorgis: "Before AIM, we had no way at all of knowing our costs for inquiries or claims for all of our different services, line of business, type of calls or by customer types. Now, because of AIM we know our costs for those to the cent and we know what we can do to reduce them. Having the exact costs also means that we can align our pricing by customer and product segment- which we're doing now. Plus, by saving FTE expense on incoming calls, those resources are being used for outgoing calls to support the customer intimate/high value added effort to create high customer loyalty."
Kerry Edwards
· "By using AIM we have saved over $500,000 in our Call Center."
· "AIM tells you what you're doing that's not efficient."
· "AIM makes it possible for us to see, in time and cost, where our problems or mistakes are occurring and what's causing them."
· "AIM is a great tool to learn more about everything in your business environment in depth. We can track and trend quickly and make good business decisions."
· "It doesn't require a tremendous amount of effort, and it's such an easy tool that we don't even document all the issues that it's allowed us to fix."
· "We have been able to pin-point training and support issues that have cut costs and improved service."
· "We can now sell different products at different prices to accurately reflect what they cost us."
Six Sigma Metrics
AIM collected, analyzed and measured these Six Sigma metrics within Vytra's operations:
· The resolution of every call type in 22 quality dimensions such as "closed to the customer's satisfaction", "closed - customer no satisfied", "transferred to Care Management", etc.
· The quality metrics and process times of all 8 services the Call Center provides.
· The quality and process time of all 61 different call type procedures.
· The quality and service metrics for each of its 31 customer segments.
These were metrics that Vytra wanted and needed for its Six Sigma effort but could not determine without AIM. Now they have performance reports with quality measures as well as models that show the cause and effect of quality.
AIM-Activity Information ModelingTM was developed by Gary Meyer. It collects, organizes, analyses and models thousands of data points about activity, service-product and customers in a few weeks. AIM's models deliver precise cost and quality information as well as the causes and drivers of performance so changes can be made quickly. AIM and its related technologies and methodologies are being used by more than 300 organizations throughout the US and Canada. For more information contact Gary Meyer at Orient Point Consulting LLC, (888) 420-6200 or garymeyer@orientpoint.com
Balancing Your Legal Scorecard - A Performance Management Tool For The Legal Department

The Balanced Scorecard Perspectives
The four perspectives of the Scorecard provide a balance between short term and long-term objectives, between desired outcomes and drivers for those outcomes and between objective and subjective performance measures.Many measurement frameworks advocate a balanced range of measures. The Balanced Scorecard is prescriptive about this range, and about how one perspective defines the drivers for the next.

The Balanced Scorecard Perspectives - Financial Perspective
The Balanced Scorecard encourages legal departments to identify their specific financial objectives as relates to the financial objectives of the entire organization. Thus, the legal department embraces the organizations financial strategy. As such, the financial objectives serve as the focus for the legal department's objectives and measures of the other three perspectives.Every measure should be part of a cause-and-effect relationship that culminates in improving long-term sustainable financial performance. The Balanced Scorecard is an illustration of the strategy, starting with the long-term financial objectives of the organization and then linking them to other initiatives such as the operational processes of the legal department and its investment in employees, systems and outside resources that combine to produce the desired economic performance.Clearly it is important to get the 'right' measures. Although it is people, decisions and actions that change performance, measures set the goal, and the old adage "what gets measured gets managed" is still true today.Leading organizations are now finding new financial measures, as well as the non-financial measures. Rather than simply considering the obvious financial measures of revenue, profit, share value or dividend cover, consideration is being given to a recently developed measure: Economic Value Added. This expresses the amount of value added by the efforts of each department (the legal department for our purposes) in the organization and how those efforts help the overall financial objectives of the organization.
The Balanced Scorecard Perspectives -The Organizational Perspective
One of the key drivers for an organizations success, except in a few rare cases, is organizational efficiency and cost effectiveness. As such, how an organization performs from a bottom line point of view is clearly a top priority for management.With that in mind, all organizations have their marquee departments, the ones that deliver the maximum contribution to the specific type of financial measure that matters most to them. All organizations also have their average departments and the departments that cost them lots of money, but that they just can't operate without (many times the legal department, which is seen as a drain on the bottom line).To maximize financial return, it is the operational efficiency and cost effectiveness of the 'marquee' department that should be addressed. Departmental measures that reflect the issues that really matter to the organization need to be developed. From these, the key objectives and measures for how the other departments (such as legal) should operate can be established. In this way an even more powerful link can be established between organizational focused objectives and improved financial performance.
The Balanced Scorecard Perspectives - The Legal Department Perspective
Delivering added organizational satisfaction can be achieved through the operational activities of the legal department. Through the Balanced Scorecard framework organizational focused measures can be supported by measures of the legal management processes that are most critical in meeting the organizations expectations. The objectives and measures for this perspective thus enable a focus on maintaining and improving the performance of those processes that deliver the objectives established as key to satisfying the organizations financial objectives, which in turn satisfy stakeholders.With this approach, the Balanced Scorecard offers a vehicle to focus on a complete value chain of integrated business processes. It is this that represents one of the major opportunities for the benefits that the Balanced Scorecard can provide over traditional departmental performance measurement systems.This top-down value-chain process can reveal entirely new areas, within the legal department's business processes, where an organization can gain additional advantage.The effect can be phenomenal; a reduction in process costs of 1% when combined with an identical reduction in wastage can typically deliver an increase in profits of over 15%.
The Balanced Scorecard Perspectives - The Innovation and Learning Perspective
The adage 'our people are our greatest asset' has been honored more in breach than the observance in all too many organizations. It is an issue managers cannot afford to ignore, however. The operations of the organization are undertaken by the people within it. The ability, flexibility and motivation of staff are the foundation of most financial results, organizational objectives and departmental activities that are measured in the other quadrants of the scorecard.Organizational expectations are always changing and legal departments are, as a consequence, required to make continuous improvement. This relies heavily on the department's ability to innovate, learn and improve, which collectively delivers better results for the whole organization.The idea that everything else eventually depends upon the staff of an organization could suggest that the ultimate single indicator of long-term sustainable success, if there were such a thing, would be the speed at which the organization can learn to do new things successfully. Used in this way, the Balanced Scorecard framework gives consideration to the importance of investing for the future. Not just in traditional areas of investment such as R&D, but also in the human infrastructure of the organization - creating a 'learning organization' - if ambitious long term financial success objectives are to be achieved.In short, there is no doubt that the effective development of staff can have a direct impact on the bottom line and can also directly affect all of the increases in profit possible through operational improvements. Simply increasing staff efficiency by 1% can often have the effect of improving profitability by twice as much.
Linking The Balanced Scorecard To Strategy
The objective of any measurement system should be to motivate managers and staff to implement the organization's strategy. By translating strategy into measures within the Balanced Scorecard, objectives and targets can be communicated to everyone. They can then focus on the critical drivers and align initiatives and actions to the meeting of strategic goals.Why is it important for a Scorecard to communicate the strategy?
· It describes the organizational vision to all departments
· It ensures that the meeting of performance targets contributes to achieving strategic objectives
· It focuses effort on the key objectives and measures
How can we build a Scorecard that translates a strategy into action?
· By establishing cause-and-effect relationships between measures
· By creating a framework against which underpinning objectives and actions can be assessed, valued and prioritized
· By ensuring that cause-and-effect paths link through to on-going financial strength
An effective Scorecard enables an organization's strategy to be inferred simply from the cause-and-effect links between measures. Outcome measures signal the ultimate objectives of the strategy and performance drivers indicate actions or initiatives that are required in order to create future value. Ultimately, the Scorecard retains a strong emphasis on outcomes and financial outcomes in particular.
Benefits Of The Balanced Scorecard
The Balanced Scorecard's prescriptive approach to performance measurement requires performance measures defined in each of the non-financial perspectives to be linked to each other and to the financial measures, ensuring that the organization's ultimate goal that of continuing to be successfully in existence, remains paramount.The extent to which business results can be improved by decisions taken based on a Balanced Scorecard view of the organization is significant. Furthermore, these business results tend to be very sensitive to minor improvements in performance in key areas (such as the legal department). The following table illustrates the point:Balanced Scorecard Perspective Potential Impact Typical Profit Impact (*)Organization Decrease in legal costs 7%Legal Department Reduction in wastage 2%Innovation and Learning Improved efficiency and identify best practices 5%TOTAL Increase in profit 14%(*) Based on historical LexTech, Inc. figuresInformation Systems To Support The Balanced ScorecardInformation systems play an invaluable part in assisting managers to analyze beyond the summary level Balanced Scorecard measures. When an unexpected signal appears on the Balanced Scorecard, managers need access to underlying data to investigate the cause of any problem or to analyze trends and correlations.If the information system is unresponsive, however, it can significantly impact the effectiveness of performance measurement.Such an information system must then incorporate all of the following features:
· At-a-glance exception alerting
· Rapid access to summarized data
· Drill down to successive levels of detail
· Easy to follow dependency paths to identify the causes of performance Reporting initiative, objective and process information
· Reporting of impacts of underlying objectives upon Scorecard measures
· Reporting of the impacts of objectives upon each other
· Graphical creation and modification of objectives, measures and relationships
· Support for dynamic re-planning for change
· Integration with other office tools
· Inclusion of rich text information
· Graphical trending and tabular representation of data
· End user configuration and analysis options
· Integration with existing organizational data sources - with support of additional direct entry of values and annotations
SolutionsTo meet the challenges ahead, legal departments need to develop a perspective on the role of the legal function in both qualitative and quantitative business terms. They may use a Balanced Scorecard of metrics that integrates the law department's short-term actions with long-term organizational objectives. Effective solutions should meet this criteria:
· Be specifically designed to support the implementation and ongoing evolution of a Balanced Scorecard measurement system, alone or integrated with other performance management approaches and initiatives, such as Six Sigma, process review and benchmarking.
· Be backed by expert consultancy for strategy and training
· Implement services without the need of additional staff or technology.
· Enable corporate legal managers to put into every day use the best practice recommendations that in the past may have seemed impossible to achieve, with minimal additional overhead, time or other resources.
· Maximize the benefits to be attained from existing performance measurement and management.
The Balanced Scorecard, with a comprehensive information system to support it, provides a means to make a real difference throughout the legal department, and organization as a whole, from individual team member satisfaction right through to significant improvements in the bottom line.
About the Author
Richard Hall is founder/CEO of Hall's Benchmarks & LexTech, legal information companies that help public & private entities Manage the Business of Law. Rich's meld of technology & statistics produced a techno-analytical model of law practice. In 1994, he invented linguistic SW which automatically budget codes, reports GAAP accrual financials & conducts compliance analysis. t 530.820.4070, f 530.820.4071, rhall@hallenterprises.us, www.managingthebusinessoflaw.com