These results look pretty amazing, don't they? So what is Six Sigma? Why is so hyped?
The term "sigma", a letter in the Greek alphabet, is used in the field of statistics as a measure of variation. Most companies function at a 3- to 4-level, which is defined as having the cost of defects equal to 20 to 30 percent of revenue. By striving for a six sigma total (defined as fewer than one defect per 3.4 million opportunities) the cost is reduced to less than 1 percent of sales.
The history of the six sigma methodology dates back to Dr. Mikel Harry's work for Motorola in 1986. Motorola embraced a culture of quality and it led them through a period of record growth and sales and recognition with the Malcolm Baldrige National Quality Award.
More recently, companies have used the Six Sigma techniques as a business strategy. The employees trained to manage the program are called 'Black Belt' practitioners who mentor their milder counterparts, the 'Green Belts.' They are encouraged to work on a project-by-project basis.
Organizations choose the best set of measurements for their business situation and add the statistical and other improvement tools to accomplish their goals. They can then streamline operations and eliminate defects, thereby improving quality in products and services. This results in better employee morale and loyalty and a better reputation for the company's products and services.
Since this management program is designed to guide companies into making fewer mistakes in everything they do -- from filling out simple forms to manufacturing complicated products -- there may be valuable lessons for real estate offices interested in increasing profitability and improving customer/client satisfaction.
The basic road map for Six Sigma quality improvement includes four steps (MAIC): MEASURE, ANALYZE, IMPROVE, and CONTROL. Your first step is to measure a problem, then thoroughly analyze the process, find the best way to improve it and finally implement controls to maintain the improvement.
Real estate offices are just starting to look at the business management techniques such as risk management and quality improvement in an effort to make their firms more profitable. Some of the lack of enthusiasm and confusion surrounding these conventional business practices is the independent contractor status of their labor pool. Since the associates generally don't work as employees, it is harder to design quality improvement programs and work under these constraints.
But if you look at the money saved by these large companies and, more importantly, the greater level of customer satisfaction, it may be time for REALTORS to adopt this philosophy. It could be of paramount importance for survival in the next few years as we transition to online services, menu of services, and web-based transaction monitoring.
Dr. Harry and his associate, Richard Schroeder, teach us these basic precepts in their book, Six Sigma: The Breakthrough Management Strategy Revolutionizing The World's Top Corporations:
We don't know what we don't know.
We can't do what we don't know.
We won't know until we measure.
We don't measure what we don't value.
We don't value what we don't measure.
Ask the questions that will lead to tangible, quantifiable answers that ultimately produce profitable results.
