4 March 2009
Total Quality Management (TQM) vs. Six Sigma: Measuring Success in the Insurance Industry One of the most frequently asked questions among those in the organizational management world is the difference between Six Sigma and Total Quality Management (TQM). According to BNet Business Dictionary, Six Sigma is defined as “a data-driven method for achieving near perfect quality, analysis can be focused upon any part of production or service activities, and has a strong emphasis on statistical analysis in design, manufacturing, and customer-oriented activities;” TQM as “a philosophy and style of management that gives everyone in an organization responsibility for delivering quality to the customer (http://dictionary.bnet.com).” At first glance the definitions appear to be similar in context; in that both focus on the customer and may yield similar outcomes (i.e. better quality/products, improving a process). However, the basic difference between the two is the approach. The TQM approach views quality as a conformity to internal requirements or a collections of processes, while Six Sigma focuses on improving quality by reducing the number of defects. This research paper will implore the reader to understand the differences between TQM and Six Sigma and cite examples of how each approach is used in the insurance industry. It will also demonstrate why Six Sigma is the most used by modern business managers. Paradoxically, some managers (non-seasoned) see no real difference between Six Sigma and TQM. They believe Six Sigma employs some of the same tried-and-true tools and techniques of TQM. Both Six Sigma and TQM highlight the importance of top-down support and leadership. But there are critical differences. And these differences explain why TQM has taken the back seat in the car that is driven by Six Sigma. For example, each concept uses a cycle as a framework for the improvement of a process or system. TQM, uses the Deming Cycle (PDSA), it consists of a logical order of repetitive steps for continuous improvement and learning. The four parts of the steps are paraphrased as follows: 1.
Plan - a change or a test, aimed at improvement. In this phase, analyze what you intend to improve, looking for areas that hold opportunities for change. The first step is to choose areas that offer the most return for the effort you put in-the biggest bang for your buck. 2.
Do - Carry out the change or test (preferably on a small scale). Implement the change you decided on in the plan phase. 3.
Check or Study - the results. What was learned? What went wrong? This is a crucial step in the PDCA cycle. After you have implemented the change for a short time, you must determine how well it is working. Is it really leading to improvement in the way you had hoped? You must decide on several measures with which you can monitor the level of improvement. 4.
Act - Adopt the change, abandon it, or run through the cycle again. After planning changes, implementing and then monitoring it, decide whether it is worth continuing that particular change. If it consumed too much time, was difficult to adhere to, or even led to no improvement, consider aborting the change and planning a new one. However, if the change led to a desirable improvement or outcome, consider expanding the trial to a different area, or slightly increasing the complexity. This sends you back into the Plan phase and can be the beginning of the ramp of improvement (Watson p.132). The PDSA cycle can be used to guide the entire improvement project, or to develop specific projects once target improvement areas have been identified. On the other hand, Six Sigma uses the DMAIC cycle. “The Define-Measure-Analyze-Improve-Control is used when a project’s goal can be accomplished by improving an existing product, process, or service. (See Figure 7 following chart explanation) D
Define the goals of the improvement activity. The most important goals are...
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