Importance and Impact of Six Sigma in Hotel Industry
In The Name of God Importance and Impact of Six Sigma in Hotel Industry Maryam nematollahi and Mahsa Soltani Moghaddam
ABSTRACT Six Sigma (SS) is an important management tool in business that many companies are using worldwide to strive for perfection. Total Quality is achieved through SS as it defines a clear road map. Service Quality is the core in hotel management. The hotel has only on choice to remain in the competition; it is nothing but satisfied customers. Considering both sides of enterprises and customers, Six Sigma is a kind of management method which emphasizes flow-oriented performance improvement and takes efficiency as the center on the whole management process. This study reviews the significance and impacts of SS in hotel industry to show if SS can be a good quality tool in hospitality. To approach this, the papers which investigate Six Sigma in hospitality are discussed. As this review emphasizes, Six Sigma is a helpful methodology in hotels because of overcoming shortages, reducing mistakes and increasing satisfied customers. Key words: Six Sigma, DMAIC, services, hospitality, hotel industry
1.INTRODUCTION In a competitive environment, for all industries, whether related to products or services, being static is the danger itself. We need efficiency, but according to Tan, kay Chuan & Chakraborty, Ayon(2009) keeping cost low and becoming more efficient just help us to stay afloat in this very challenging economy. We should actually be ready to hear consumer’s sound because it is the only way we can improve, in this way 6 sigma is really helpful. Quality management has long been established as an important strategy for achieving competitive advantage. Traditional quality initiatives such as statistical quality control, zero defects, and total quality management have been key initiatives for many years. Six sigma can be considered as a recent quality improvement initiative that has gained popularity and acceptance in many industries across the globe (Chakrabarty & Chuan Tan, 2007) In recent years 6sigma as a quality improvement methodology has gained considerable attention (Basu, 2004). It introduced by Motorola in 1980s & General Electric popularized it in mid 1990s (Tan, kay Chuan & Chakraborty,Ayon ,2009). 6sigma is a management philosophy & a method starting from customer to reduce waste, enhance the quality level & change financial performance for organizational system (Bo Xiang Ping,WEN Can Hui, FANG Fei,2009). There is a growing recognition that 6 sigma can be applied to non- manufacturing operation. “The results of an extensive literature review on 6sigma in service organizations revealed that much of discussion on implementation issue focus on critical success factors”(Ayon Chakrabarty & Tan Kay Chuan,2009) As hospitality is a service-oriented industry, cutting cost and at the same time having high quality is an important issue that not only guarantees the survival of the service company but also the growth of it. So clear that hotels are not exceptions and need a program to reach this goal. In this article firstly we review 6sigma and its background literature and describe conceptual framework of it, then it is followed by how 6 sigma applied in services especially hotel industry using 9 research paper from 2007 up to now(2012), four of them discussed on Six Sigma in service Organization. the case of one is Singapore. Among 5 other , one is using Six Sigma DMAIC to design a high-quality summer lodge operation, second review the significance and impact of training through SS in hotels, third discussed on hotel giant resorts to SS to improve operation and the others are Application of SS to hotel Service management and SS in hospitality Management. 1.1.Definition Focus on quality measurement is crucial for managers .so, six sigma as a strategy can help them to improve their organizations .six sigma is actually a development of TQM and ISO900 system.(Bo XiangPing, WEN Can Hui, FANG Fei,2009) First, let’s know why we call this strategy by a Greek symbol, sigma and why six? As Iftikhar Ahmed said in his article; “sigma is a statistical term that measures process deviation from the process mean or target. Mean is also referred to as average in common language. The figure of six was arrived statistically by looking at the current average maturity for most business enterprises. It is important to recall that every customer always values consistent and predictable services and /or product with near zero faults. Therefore they experience the variation and not the mean. Mean is their expectation and our target (organizations).(Iftikhar Ahmed,2012) Implementation of six sigma is the key to success. So, it’s necessary to be defined: As Bo, Wea &Fang said: “six sigma is a management philosophy and a method starting from a customer to reduce waste, enhance the quality level and enhance financial performance for organizational system. “(Bo, Wea &Fang, 2009). Another definition stated by Breffni &Kathric is: “six sigma is a disciplined, data-driven approach to quality management. It seeks to improve process consistency, reduce cycle time, increase productivity and decrease overhead costs by eliminating defects, errors and non-value-added steps from a process, no matter it are a manufacturing or service environment.”(Breffni & Kathric , 2010). SS tools can assist the organization that all parts moving in the same direction (Lancaster, 2011) The basic philosophy behind six sigma is to reach customers, satisfaction and loyalty to a product or organization through limiting defects in outputs by eliminating wasteful steps and the variation in an operation. “It is actually based on “statistical thinking” paradigm: 1-everything is a process 2-all processes have inherent variability and 3-data is used to understand the variability and drive process improvement decision.”(Breffni & Kathric , 2010). Finally, its aim is achieving 3.4 defects per million opportunity and also creates a special infrastructure of people within the organization.(Iftikhar,2012&Lancaster,2011).
Table 1: Six Sigma Conversion Table “Long Term Yield” (basically the percentage of successful outputs or operation) % Defects per million opportunities (DPMO)Process sigma 99.999663.46 99.982335 99.46,2104 93.366,8073 69.1308,5382 30.9691,4621
1.2.History of Six Sigma “The roots of six sigma as a measurement standard can be traced back to Carl Fredrick Gauss (1777-1855) who introduced the concept of the normal curve. SS as a measurement standard in product variation can be traced to the 1920s when Walter Shewhart showed that three sigma from the mean is the point where a process requires correction. The credit for coining the term “six sigma “goes to a Motorola engineer named Bill Smith in 1986.in the early and mid-1980s with chairman Bob Galvin at the helm. Motorola engineers decided that the traditional quality levels measuring defects in thousands of opportunities didn’t provide enough granularity .instead; they wanted to measure the defect per million opportunities. Motorola developed this new standard and created the methodology and needed cultural change associated with it. SS helped Motorola realize powerful bottom-line results in their organization; in fact, they documented more than$16 billion in savings as a result of SS efforts.”(Iftikhar Ahmed, 2012) Besides Motorola, GE also saved $900 million across1997-1998, Honeywell International $2 billion (in direct cost) from 1994 to 2000.(Breffni & kathrik, 2010) As Justin M.Lancaster said in his article: “the road map at which six sigma identifies problems and inefficiencies and solves them is the DMAIC. The acronym stands for Define, Measure, Analyze, Implement, and Control. The DMAIC tool seeks to “decrease variation in the process by identifying and improving specific areas””.(Lancaster2011)
The most important goal of this study is to find out the importance of using SS as a quality tool in hotel industry. This survey is done to investigate whether SS is useful and practical in hospitality industry. 3.DMAIC in detail D stands for defining the goals of the improvement of activity .in this step, the main activities of the process should be shown that process maps or flow charts can help stands for measure; in this step valid or reliable metrics used to monitor process towards the goals defined in the first step. Besides, data related to current process is collected for establishing the base line performance of the process. A stands for analyzing the data for trends, patterns, causal relationships and “root cause “of the problems in the process. I stand for improving ways to remedy problems in the process. The output of this step is a streamlined “should be “process map and finally C stands for controlling the process improvement. (Breffni & karthic, 2010; Heathor 2010). DMAIC should be believed, trained and involved by all members of the organization in teams. (Lancaster2011) In the SS in hotels a good example of applying DMAIC is given (Stout’ Island lodge). Again, before explaining how SS is useful in service organizations and specially its usage in hotel industry it’s better to describe: critical success factors (CSFs), critical -to quality (CTQ) characteristics, sets of tools and techniques (STTs) and key performance indicators (KPIs). CSFs are the essential ingredients required for success of SS projects in an organization. Management commitment, team training, corporate culture, belt system and customer focused are some examples of these factors. CTQ is a measurable quality characteristic of products or services with the aim of satisfying customers, needs. It is actually generated from critical customer requirements derived from the customers, voice. KPI: it is a measure of performance in terms of costs, quality yield and capacity. STT is considered the same as DMAIC. (Ayon Chakrabarty & Tan Kay Chuan,2009)
4.SIX SIGMA IN SERVICES The real economy in the countries involves such fields as financial services, health care, e-commerce, and logistics, but less manufacturing, which has tended to move offshore to low-cost locations. Six Sigma can be used in this case to decreases the costs of poor quality so that a more consistent process for service delivery may be achieved. Another important reason for the introduction of the six sigma strategy in many service companies is that customers of today feel “process variability” in the delivery of the service provided and not just on “process average or mean”. The objective of a six sigma strategy is to reduce “process variability” around the acceptable target service performance (Antony et al, 2007). Using SS starts from manufacturing and then reached service organizations and the roots of Six Sigma are in industries that are heavy on producing and manufacturing items. In services ,health care and banking were the pioneers and then gradually other services like software, schools , transportation, hotel and lodging used it.(Bo,Fang,Wen,2009;Tan,Chakraborty,2009). The objective of a six sigma strategy in service processes is to understand how defects occur and then to devise process improvements to eliminate the happening of such defects which enhance the overall customer experience and thereby improve customer satisfaction (Jiju Antony,2007) Due to the deep manufacturing roots, there are pre-conceived notions by some that Six Sigma cannot work in the service industries. But many service enterprises show the advantages of using SS. A number of service organizations exemplify the advantages of SS. Citibank, for example, applied SS to streamline and mistake proof a number of its business process (Breffni M.Noone etal. 2010). According to Jiju Antony et al (2007) Service-oriented businesses adopting a six sigma business strategy will have the following benefits: – Improved cross-functional teamwork throughout the entire organization; – Transformation of the organizational culture from fire-fighting mode to fire- prevention mode; – Increased employee morale; -Reduced number of non-value added steps in critical business processes through Systematic elimination, leading to faster delivery of service; – Reduced cost of poor quality (costs associated with late delivery, customer complaints, misdirected problem solving, etc.); -Increased awareness of various problem solving tools and techniques, leading to greater job satisfaction for employees; – Improved consistency level of service through systematic reduction of variability in processes; and -Effective management decisions due to reliance on data and facts rather than assumptions and gut-feelings. After initial success in healthcare and banking, Six Sigma has gradually gained traction in other types of service industries, including hotels and lodging which is discussed in this paper in detail. It is worth mentioning according to Ayon Chakrabarty &Tan Kay Chuan (2009):” for six sigma to succeed, management commitment is very important. Management must not only support SS but they must show that they are into it. There are some problems, some obstacle along the way which the team members at their levels cannot resolve, so management has to step in.”
5.SIX SIGMA IN HOTELS Hotel industry deals with the customer non-stop, day and night, where the smallest mistake may cause dissatisfaction of the guest and in this way we simply lose a customer. The customers in hotel seek convenience and mistake proof services, Six Sigma decrease the errors to the least and increase customer satisfaction & loyalty. “Six Sigma DMAIC methodology implementations, specifically, in the hotel industry are non-existent” (Kumar, Phillips, & Rupp, 2009 p.173). The hospitality industry is dynamic, in which a given property may have a several departments that provide and manage different amenities. The tendency seems to be that these departments often operate as many different little businesses. For example, the marketing department may launch a new campaign that the gaming department may not know that. The convention sales department may roll out a new all-inclusive meeting package that the hotel reservations department is unaware of. Six Sigma principles foster open communication and collaboration amongst all departments ( lancaster , 2011). Justin M.Lancaster(2011) described the implementation of Six Sigma step by step. The following seven phases provide a roadmap and process in which to implement the programs: Phase1: Envisioning Goal: obtaining corporate support for Six Sigma Phase2: Strategizing This stage requires the formation of structure that will carry out Six Sigma program. The key to phase 2 is to have the complete infrastructure SS leaders in place to carry out the problem. Phase 3: Developing The black belt or six sigma managers will work with the green belts to identify projects and process to analyze. Phase4: Implementation Goal of this phase is to get some projects running, and to begin to create an environment in which the principle of Six Sigma are intertwined into the everyday operation.
Phase 5: Improving In this stage, the success of the program is analyzed. Six Sigma leadership will need to determine if the projects have been successful in making the operation more efficient and if a culture change is occurring.
Phase 6: Sustaining This phase is the execution of maintaining the successes of the program , and to overcome the failures. Employees who have refused to have embraced the program will have to be addressed at this time.
Phase7: Abandonment This can occur at any time of the process. It can happen for a number of reasons. One is the inability to create and maintain an infrastructure of strong committed leaders to carry out the program. This is truly the skeleton to the programs’ body.
At least one organization in the hotel industry, Starwood Hotels implemented Six Sigma in 2001. As a result of then implementation, that included launching 3500 Six Sigma projects at Starwood hotels worldwide, the company realized some quick financial wins. Incremental revenue increased 19% and overall spending by customers while staying at the properties increased by nearly 12% in the few months after implementation. By centralizing the spa reservations group by utilizing tools of Six Sigma, Starwood claimed a revenue increase from 91 to 141 million pounds. Actually, Starwood Hotels and Resorts, one of the largest hotel chains in terms of revenue, was the first hospitality giant to embrace Six Sigma. It adopted the method to develop innovative, customer-focused solutions and to transfer these solutions throughout the global organization (Justin M. Lancaster, 2011). “Six Sigma gives us the tools to eliminate variation and improve efficiency,” said Denise Coll, regional vice president of Starwood’s New England operations. “It has strong record in manufacturing productivity, perhaps most visibly at General Electric (GE). It’s also extremely adaptable; since its introduction at Starwood, we’ve refined it dramatically to reflect our focus on service quality and satisfying the voice of the customer.”(Tan, Kay Chuan and Chakraborty Ayon ,2009)
Although experience suggests the success of SS amongst many departments within a hotel, Starwood is the only hospitality organization to fully implement SS, into all aspects of the operation. So what is the reason of reluctance toward SS in Hospitality? The first one maybe the importance of setting up an infrastructure of trained leaders in SS. Another possible reason is that managers in the hospitality industry are not necessarily adept or see the need to analyze statistics and root causes to problems. The third one is the requirement of a commitment at all levels of organizations. The other reason is the stigma that these programs are only applicable in production and manufacturing environments. The largest obstacle to SS not becoming more prevalent in hospitality is that it requires a culture change, and demands a new way of thinking. (Justin M. Lancaster, 2011). One example at Starwood is that, Starwood team members used Six Sigma to formulate one program called “Unwind”, it suggest complimentary massage to the guests and prompt them to gather in the lobby in order to meet and mingle, Which was a good surprise to Starwood as increase the revenue 30% over the previous year. Another program, Star Meeting Concierge, grew from another Six Sigma project. The hotels now provide a meeting concierge assigned to a Meeting Organizer as a permanent point of contact, on hand to welcome delegates, explain how the technology works, anticipate needs and respond quickly to any requests for assistance, ensuring the best service. Outside meeting planners are given business cards with the photo of their concierge so they can recognize them in an area where several meeting groups may be gathered. The result was interesting, 95% of meeting planners rated their concierge’s responsiveness as excellent (Chuan and Ayon, 2009)
Sameer Kumar et al.(2009) used DMIAC tools to redesign an improved service system for a summer lodge operation in the Midwest United States in order to ensure that they can consistently deliver the high-quality product to their customer expects. Five phases of DMAIC are used to decrease the defects and create an improved service blueprint. After defining, in second phase (measure) Survqual survey is applied and the gaps make obvious. In the analyze phase, By fishbone diagram defects in reservation system (e.g. Not connected to Online Booking System-requires manual entry only) , people ( current budget does not allow for 24/7 staffing to take reservation) and methods ( limited reservation taking capacity in season, and inconsistent handling in off season) are decided.
Improvement phase implies proposed service process for Stout’s Island Lodge. It suggest both phone and online reservation and 24/7 process.
In the Control Phase, a plan would be established for continuous training, investment in top quality workforce and investment in systems and support.
And finally, what is the importance and Impact of training Through Six Sigma in hotels? Iftikhar Ahmed (2012) believed that “Training is a learning process that involves the acquisition of knowledge, sharpening of skills, concepts, and rules or changing of attitudes and behaviors to enhance the performance of employees. Training leads to skilled behavior. Training is one of those factors which helps in increasing the employee commitment and promotes long term employment. Six Sigma is applied to enhance employee efficiency and customer satisfaction. In modern Hotel business, the issue of competence and qualities in people is important. How well a Service is done, depends on the quality of employees. Knowledge, skills and thoughts are these qualities that lead to a hotel survival and development. So, staff training increases productivity while employees are armed with professional knowledge , experienced skills and valid thought. In case of training, Six sigma reduces the employees turnover and helps in increasing balance in employee’s work-life. Some of the department, areas/processes where this approach may add value: (i)throughout the hotel operation (ii)From office operations/ sales & marketing (iii)Food & beverage service / production (kitchen) (iv)Accommodation operation(housekeeping) (v)Purchase / store department (vi)Human Resource Now, what can be the impact of Six Sigma Training? “After undergoing SS training , one’s entire thought process changes & the person starts looking at problems as opportunities and current process/ work as improvement areas. It changes the entire attitude & way of looking at things, wherein one starts thinking “Out Of the Box”. Also implementing the SS learning at work / profession makes one streamline work better, thus increasing work efficiency & effectiveness leading to a higher level of professional satisfaction & growth.” (Iftikhar Ahmed,2012)
6.CONCLUSION In the world of hospitality, Success equals Customer Satisfaction. Hotel industry does not have any choice but being Customer oriented. Actually in service industry Customer (guest) is a king. If the hotel wants to be successful, it has to take care of its customer. Since its introduction by Motorola in the 1980s, Six Sigma and its philosophy have found widespread application in many manufacturing industries. It has also inspired applications in service industries (Chakrabarty & Chuan Tan, 2007). Although SS firstly used for manufacturing firms, researches show it can be helpful in services, too. Health care, banking, schools and transportation profited of it. Gradually hospitality and specifically hotel industry learned the benefits of SS. Six Sigma is a viable option to enhancing operational efficiency in hospitality organizations (Lancaster, 2011) In this world of competition, growth and survival of a hotel depends on keeping its guests. Today, Customers don’t ignore the errors; they seek the best not good. SS helps hotels to reduce their mistake and make the customer more and more satisfied, as experienced in Starwood, SS was their tool to overcome the shortages of services. Necessary to know satisfied customers return with a friend, non-satisfied customers don’t and live to tell someone else about it (Ahmed, 2012). REFERENCES Ahmed Iftikhar(2012), Significance and Impact of Training through Six Sigma in Hotels VSRD-IJBMR, Vol. 2 (7), 2012, 374-386.
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