Six Sigma is for Keeping the Integrity

We all know that Six Sigma is a methodology used by many Fortune 500 Companies to save them billions of dollars in operating costs as well as increase their effectiveness and efficiency.

So let’s discuss the financial industry, more specifically, let’s go back to the beginning of the subprime loans scandal, and see where we can apply some basic Six Sigma concepts. Collecting data (normally performed during the Measure phase of DMAIC) will help establish where there may be problems. One can use this tool to find out if something is efficiently working in a business.

There are two kinds of data, discrete and continuous. An example of discrete data would be feeling a child’s forehead for a fever — you can tell if the child has a fever by the fact he is warm to your touch. An example of continuous data would be if you used a thermometer to check the child’s fever, because that would give you the extent of the fever so you could proceed with a course of action.

In Six Sigma, variation is the enemy, because there is room for error. Discrete data has variation, while continuous data is measured out and tells us more about the exact process. One verifies each step along the way so consistency can be achieved.

Now back to the topic at hand: if someone would have closely reviewed the data gathered on the step-by-step process of obtaining an approval for a mortgage or a loan, a red flag would have popped up, since most of the data would have been considered discrete, with too much variation.

In Six Sigma, gut feeling or decisions based upon intuition leads to variation and variation leads to errors and defects.

Perhaps if Six Sigma’s tools had been brought into the financial institutions to verify that they were truly being efficient and effective (remember, it is efficiency that makes money) then many people wouldn’t have lost their homes and jobs, and the financial institutions would not have lost their integrity.

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