In order to survive in the manufacturing
world, companies must be able to build
repeatable processes that create error-free products. Companies like General
Electric, Motorola and Allied Signal have
invested untold dollars creating teams of
experts in a methodology called “Six
Sigma.” General Electric claims that its
experts have saved the company more
than $10 billion in its first five years of
implementation. Reports like this have
helped to spread the methodology to thousands of other companies, including service organizations.
“Six Sigma is about process improvement
and reduction in variation. You want to be
able to create the same product time after
time, regardless of the machines or personnel involved in the process. The lessons
of Six Sigma apply just as well to insurance
as they do to aircraft engine manufacturing,” says David Merker, account manager
with The Graham Company and former
General Electric Six Sigma Black Belt.
Smart Business talked with Merker
about process improvement and Six Sigma
methodology.
What is Six Sigma?
It sounds fancy, doesn’t it? Six Sigma is
nothing more than a measure of quality that
strives for near perfection. It is a disciplined,
data-driven approach to eliminate defects
and rework in any process. The goal is to
reduce defects, or errors, to no more than
six standard deviations from the mean. To
put numbers to it, in order to achieve Six
Sigma-level quality, a process will have no
more than 3.4 defects per million.
What is a Six Sigma Master Black Belt?
I wish I could say that it meant I could beat
people up with one hand tied behind my
back; it’s actually just a title they give people
who have been through the certification
process and have used the methodology on
actual process improvement projects. While
I was at GE, in order to be certified as both
a Black Belt and Master Black Belt, I had to
complete 10 weeks of training, complete 20
projects and pass two exams. Master Black
Belts are responsible for mentoring Black Belts and operationalizing GE’s strategic
vision through the Six Sigma process.
How does this methodology apply to the
insurance business?
It’s kind of surprising. When I started in the
insurance business, I wasn’t sure what the
connection would be. As I got into the
processes, I started to see lots of similarities
and opportunities. For example, one of the
big products we produce is an insurance
policy. We design the specifications, out-source the manufacturing process to an
insurance company, check the product for
quality, and then send it to the customer.
Each step along the way is an area where an
error could be made. If not done correctly,
this process can be terribly inefficient. Our
challenge is to make this process as streamlined and efficient as possible.
How do you improve the insurance policy
production process?
The first step is to start with the right plans.
Just as you would when you build a building
or make a car, you need to have a good set of
plans. They must be accurate, easy for the
builders to understand and easy to repeat.
We have invested lots of time and energy in
building our insurance policy plans, something we call coverage specifications. We
have the ability to quickly tailor these to our
clients’ industries and operations, and put
them in a format with language that insurance company underwriters will understand.
Coverage specifications sound like a good
start; what comes next?
As an insurance broker, we essentially out-source the manufacturing process. We don’t
create the insurance policies — we just submit our plans and ask the insurance companies to build them for us. Before we send the
finished product to our customers, we have
to check the policies to be sure they are correct. The more the insurance company
understands what we are trying to achieve
and the more we know about how each
insurance company is able to build our product, the easier the process becomes. We are
constantly updating our knowledge of insurance company policy forms and endorsements. In the end, this process comes down
to comparing our plans, or coverage specifications, against the finished product — the
insurance policy. Our goal is to move this
process to the point where our policies come
back from the insurance company error free.
What are some of the keys to success in
implementing process improvement?
The biggest key to success is having the
support of upper management. If they don’t
think it’s important, the initiative will fail.
Next, I think it’s important to engage the right
people in the process. If you don’t have buyin from the people who actually touch the
process, it will be harder for you to get them
to accept the changes proposed. The teams
I’ve seen work the best are the ones that have
representation from each key part of the
process. Lastly, I think it’s important to pick
smaller achievable projects to build momentum. It’s much easier to tackle a small job and
get some quick success than to try to fix a
huge process all at once. You’ve got to keep
up the enthusiasm and optimism for the project to be successful in the long run.
DAVID MERKER is an account manager for The Graham Company. Reach him at (215) 701-5299 or [email protected].