Six Sigma & BPO

                              Wither Six Sigma?

There's been a lot written lately about a Six Sigma and whether those companies who use are using it will get the benefits they hoped for. One firm, QualPro, Inc. (http://www.qualproinc.com/) has been touting their solution, Multi-Variable Testing, as an alternative to Six Sigma and their name figures prominently in many of these pieces.

Many outsourcers, particularly business process outsourcers (BPO), use Six Sigma to tune, perfect and improve outsourced business processes. Frankly, they need to use some methodology to tune these processes for optimal results. Nothing I've seen suggests that Six Sigma is bad for this role.

Furthermore, services firms have a ways to go when it comes to adopting other best practices from manufacturers and others firms. Manufacturers evolved mightily over the last 3-4 decades and adopted many new ways of doing business in that time frame. Manufacturers used offshore/contract manufacturers decades before most service firms dreamed of using offshore labor. Manufacturers have had to improve their internal operations because their margins have been under fire and more constrained than most service firms could imagine. Six Sigma and other quality control/continuous process improvement techniques like it have helped manufacturers reduce scrap, lower defect rates, reduce warranty claims, lower reverse logistics costs, etc. When a product is exactly what it's supposed to be 99.999% of the time, a lot of other costs fall away.

Service firms didn't use to embrace such mechanisms as TQM as new assignments (e.g., consulting studies) seldom had enough repeat work to warrant more than a basic methodology. Methodologies have always been more of a guideline with many options that individual project managers choose to accept or decline. Most methodologies help project managers identify steps to complete a task first and foremost. While improving project outcomes is also a goal of methodologies, it occurs more or less as a consequence of identifying all the necessary work steps and doing them in a specific sequence.

Total Quality Improvement techniques work well when tasks are routine and repeated. These quality tools are well-suited for BPO actions as the workers are constantly performing routine tasks (e.g., payment processing, journal entries, invoice matching, etc.).

No matter what the technique, any discipline that improves BPO outcomes should be embraced. Let's look a bit longer term, though.

Initially, when some BPO providers get started, they take over a client's processes and run them as-is. Rarely would this represent an optimal process design. This is the initial entry point for a quality improvement technique like Six Sigma. If this technique gets these processes to behave more reliably and at lower cost great.

Longer term, this will not be enough. BPO providers have to tie process designs to performance benchmarks (like those produced by firms like Hackett Group division of AnswerThink).Process designs have to deliver world-class (think first quartile) performance.  At this level of performance, processes are low cost and high quality.

Next, BPO firms will need to offer tailoring capabilities so that clients can have vertical industry relevance and competitive advantage. No tool or method will solve this. What's needed here are deep industry and market-facing knowledge. At this level of performance, processes are low cost, high quality and market relevant.

Any quality improvement technique is relevant at each of these levels. What the market for services is telling us today is that low cost is not enough. Labor arbitrage is so last Tuesday now. Customers/Clients need and want more. Quality outcomes are desirable and this drives demand for quality/continuous improvement techniques.

Bottom line: Attacking Six Sigma is focusing one's attention on the wrong 'problem'. Six Sigma has its place, certainly in service firms, and the real problem is people using it for the wrong reason or wrong solution. As a profession, service executives should look at all sorts of quality, productivity and economic enhancement tools and determine which of these could help clients. I'll bet that there are several of your offerings that could use spiffing up. Which ones will you enhance first?  

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