What You Can Learn From Six Sigma
Reducing additional resources efficiently to complete tasks is just the tip of the iceberg.April 7, 2011
by Allen Liebnick, CPA, CFF
Six Sigma has become more of a buzz word in both the corporate world and the service industry. While Six Sigma has been around for some time, especially in the manufacturing sector, this article divulges how Six Sigma concepts are now being used in business and industry and service organizations.
Bryan Liebnick, CIA, is a vice president in the audit division of a Dallas, Texas-based bank and incorporates its concepts in his operations and internal engagements.
What Is Six Sigma?
Six Sigma refers to a measure of near-perfect quality with the objective being reduced variation across a process. The Greek term "sigma" refers to the statistic standard deviation or distance between the mean from a pre-determined specification limit. For a process to be considered Six Sigma there can be no more than 3.4 defects per million opportunities or 99.9999966 percent should be error-free. Six Sigma follows a methodology known as DMAIC (pronounced Da-Mai-Ic) an acronym for Design, Measure, Analyze, Improve and Control, that ultimately achieves the objective of minimal variation, process stability and an increased throughput (profitability, efficiency, waste-reduction, etc.).
Although Six Sigma dates back to the 1700s, Motorola introduced it in the 1980s and it eventually gained popularity in other large manufacturing organizations such as GE.
Six Sigma's Use in Business & Industry
Financial services as well as other client service organizations have found practical applications for Six Sigma. "Banks, for example, use its principles to better identify customer service level variations among branches across several cities and states," said Liebnick. "They can also identify defective/unsuccessful customer interactions strategically and use tools to isolate the critical few areas that need improvement," he added.
As a bank auditor, Liebnick has incorporated Six Sigma and its methodology into internal audit test work. "I now use statistical sampling to test a population of transactions when to draw statistical conclusions about the representation of the sample to an entire population and use "hypothesis testing" to validate and prove whether implemented remediation has effectively minimized a particular risk," he pointed out. In addition, he uses control charts regularly to monitor business risk. "The charts enable me to quickly identify whether a process is stable or if there variation that could be an indication of an increasing risk or exposure to the operation."
The main benefits of Six Sigma's use are efficiency, reduction of time and additional resources needed to complete a task and the overall credibility that is driven through proving defensibly through statistics whether a process has been improved.
"CPA firms can minimize additional resources needed for tax preparation and client-billing through various specific Lean tools," said Liebnick. "Firms are able to pinpoint some of the areas that are not adding value and decreasing throughput yield. By leaning down the process, CPA firms can deliver more efficiently," he noted.
ConclusionAs you can see Six Sigma's methodology can not only streamline your business operations, but also reduce extra unnecessary manpower. Start today and let us know how it works in your firm by sending an e-mail to Corporate Finance Insider.
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Allen M. Liebnick, CPA, CFF, is president of Overpaid Payables Recovery, Inc. and a former associate professor. Liebnick has been providing accounts payable, sales tax and telecommunications post-audit recovery services for over 18 years. He serves clients in the U.S., Canada and Mexico and is a member of the New York State Society of CPAs as well as Texas Society of Certified Public Accountants and is chair of the 2011 Texas State Society of CPAs State Tax Conference. Contact Bryan directly to ask any questions.