Operations Strategy Presentation

Geneva Construction and Risk - Case

Cleardo Murray&

Yannick Harvey

CASE OVERVIEW• Geneva Construction and Risk (GCR) is an insurance company, founded in

1922, that specializes in supplying insurance for construction projects, especially intricate projects associated with high risks.

• GCR became a part of their larger parent company Wichita Mutual Insurance Group, who acquired them in the year 1983. The case accounts the company’s aim to adopt a Six Sigma improvement methodology. Regrettably, the company’s experience with ‘quality initiatives’ was poor. A few years before, Wichita Mutual had instructed all companies within its stable to adopt a total quality management (TQM) initiative.

• It carried out this initiative in a very authoritarian fashion, by issuing a handbook with detailed instructions of how to implement. Although the TQM initiative had never been officially pronounced a failure, it had faded over the years. In this new era, Tyko Mattson, the Six Sigma champion at GCR, is certain that an improvement initiative based on Six Sigma philosophy will be more of a success.

MAJOR ISSUE/ISSUES

• The Total Quality Management Initiative (TQM) was seen a burden, rather than being part of normal business life, taking time away from normal job tasks, so eventually employees got tired of it.

• Middle management and supervisors never really bought or adapted well into the system, because they felt threatened and decisions were made from the top level management.

• Hardly any of the local subsidiaries around the world adopted the TQM philosophy, arguing that they did not want to put out the extra effort, while arguing that it was most suitable for head office processes rather than, the dynamic client base around the world.

OPTIONS

• Adopt a revamped Total Quality Management approach.

• Commit to adopting the Six Sigma approach.

EVALUATION OF OPTIONSTQM

• Total quality management or TQM is an incorporative philosophy or viewpoint of management for continuously improving the quality of products and processes at every level. Its popularity reached its peak in the late 1980s and early 1990s.


• There are various methods for implementing this approach stemming from the works of quality gurus W. Edwards Deming, Kaoru Ishikawa and Joseph M. Jurann


• In TQM the involvement of all individuals within the organization is expected to go beyond understanding their contribution to lessen mistakes. Individuals are expected to bring have a positive attitude to improving the way they perform. As seen in the case, lack of communication among departments, supervisors and employees create a burden on the whole TQM process.


• Businesses often fail at implementing a complete quality management system because they underestimate the time required to establish and maintain a system, are understaffed, or have capital restrictions when investing in such an undertaking. There are, however, quality management software programs available that have been developed to aid companies in structuring a TQM program.


• The functions of the Quality Committee take into consideration the setting up of a quality management policy; conducting and coordinating the strategy of quality management among subsidiaries; planning, organizing and coordinating the construction and operation of TQM system; promoting and helping each subsidiaries' quality management activities; and analyzing the quality management performance of each subsidiaries and other decisions.



• DMS-Computer system (or set of computer programs) used to track and store electronic documents or images of paper documents.

• Can be used with other programs such as root-cause analysis databases, learning management systems, and email/tickler systems.


• RCA- Root cause analysis (RCA) is a class of problem solving methods aimed at identifying the root causes of problems or events. (Fish Bone/ Cause N Effect Diagram)

• Based on the belief that problems are best solved by attempting to address, correct or eliminate root causes, as opposed to merely addressing the immediately obvious symptoms.




• Learning management system are software applications for the administration, documentation, tracking, and reporting of training programs, classroom and online events, e-learning programs, and training content.



• Software for quality management systems ascertain and control advantages to businesses with limited resources, time, and money.

• Software developers have dedicated a lot of time to constructing quality management software that is comprehensive, easy to use, and customizable based on a company’s service offering. Overlooking such robust systems can be a huge disservice to a business and its clientele equally.

Advantages of Total Quality Management

• Lower Costs - Because it is a quality management program that is broad in scope and content, TQM helps various departments to communicate their needs, problems, and desires with each other, so that practical solutions can be established to help the organization cut costs throughout the many processes

Advantages of Total Quality Management

• Improves Reputation - Because errors and defective products are discovered quickly than under a non-TQM system, and often before they are ever sent to the market or found in the hands of the public.

Disadvantages of Total Quality Management:

• Resistance to change - Workers may feel that their jobs or occupations within the company are at risk under a complete TQM program, as seen with middle management. As a result, they may be slow or opposed to making the necessary changes for the TQM program to work correctly.


• Cost of time:The time it takes to implement a TQM program, and the fact that it may take several years for the program to be fully implemented before results and benefits are seen

• TQM should be considered, in most cases, a long-term investment.


• Cost of Introduction - Time spent instructing, training and guiding workers disrupts current production whilst being implemented.

EVALUATION OF OPTIONSSix Sigma

• Six Sigma is a management technique used to execute quality into its products and processes. It was first implemented by Motorola a U.S. company in the year 1986.


• Two methodologies utilized in projects in six sigma are referred to by the acronyms, DMAIC and DMADV. DMAIC stands for Define, Measure Analyse, Improve and Control.


• DMADV stands for Define, Measure, Analyse, Design and Verify.

• The DMAIC is utilized in the improvement of processes, while the DMADV is used the creation of new products and process designs.



• D – Define goals to develop the overall process between the company’s strategy and the customer’s demands

• M – Measure current processes. Collect the relevant data on the current processes and then use this information as a baseline for future comparisons.

• A – Analyze your relationship within the process. It is important to understand the relationship to determine factors that can ensure that the company’s strategy is in line with customer demands.

• I – Improve the process. It is important to constantly improve and optimize the process with analysis and other techniques

• C – Control. It is important to ensure that any variances can be controlled and corrected in order to avoid possible costly defects and loss of quality.



• D – Define goals that are consistent between the business strategy and customer demands.

• M – Measure CTOs (Critical To Qualities). CTOs consist of production process, capabilities producing a product, a product’s capability, and any risk assessments.

• A – Analyze and evaluate many different designs and choose the best design for its overall qualities.

• D – Design details. It is important not only to design a product, but to optimize the design features.

• V – Verify the design. Important steps to verifying a design include setting up pilot runs and running a short production.


Six Sigma uses many statistical tools to analyze the data. Some statistical tools used are:

• Box Plot provides an instinctive graphical illustration of the five number summary of a dataset. These five number summaries consists of Minimum, Q1, Q2 or Median, Q3, and Maximum of a dataset.

• A Pareto Chart depicts the rate at which certain events occur. It is a bar graph where each frequency (or frequency range) is shown in a descending order of importance of data, from left to right.

• The fishbone diagram (Cause n Effect) is a graphical method for finding the root causes of an effect.

• Voice of the customer is a qualitative statistical tool used to determine wants and needs of customers expressed with the customer’s own language.





Advantages adopting Six Sigma

• Policy conversion process: GCR has to be on the lookout regularly for new ideas and techniques that would help to reduce the policy conversion time. Using Six Sigma’s tools such as Voice of Customer (VOC), it would be able to determine the customer needs and requirements.


• Claims settlement process: The claims settlement process is a very critical process for insurance companies. Timely processing of claims helps to sort out issues with different construction jobs.


• Better decision-making: Six Sigma is useful for managers to base their decisions on statistical data collected for the purpose to provide the best possible insurance policy to policyholders.


• Structured approach: GCR will now have benefited from the disciplined approach that Six Sigma certification has brought to the entire process.


• Structured approach: GCR will now have benefited from the disciplined approach that Six Sigma certification has brought to the entire process.


• Improved customer satisfaction: Six Sigma certification aims to achieve customer satisfaction. The best tool that Six Sigma offers is Voice Of Customer , which enables the team to comprehend the prospective customers’ and policyholders’ needs.

Disadvantages adopting Six Sigma

• Although the Six Sigma process will likely improve the product and cut manufacturing costs by increased efficiency, the time and attention necessary for the process can be a disadvantage.

Disadvantages adopting Six Sigma

• Complex: Not only can Six Sigma be complex for untrained people to understand, the system itself may be too complex for some improvements. For example, if an office manager must deal with numerous forms to complete a task, the process may be overly dense.

RECOMMENDATIONS 1

• The option of choice we believe would be for Geneva construction and Risk to adopt the six sigma approach. This would prove to be of great use to the company as it would allow for speedier delivery of services to its customers and better decision making compared to the TQM approach that utilizes methods which originated solely from top managements judgments and decision-making. Top management would not necessarily be aware of the problems being faced by the employees at the lower level.

RECOMMENDATIONS 1

• As a result of the structure that is input by the six sigma method this gives processes a sense of stability and customer satisfaction should be increased based on the use of the Voice of Customers

RECOMMENDATIONS 1

• Because of the geographical spread of local offices it becomes tricky to engage them with any new idea. Local offices did not consistently practice TQM because they were focused on sales and support operations, and the high visibility processes that they ran were less susceptible to improvement initiatives that were designed for ‘back-office’ processes. It is harder to make improvements and measure variation from a ‘front office’ perspective.

RECOMMENDATIONS 2

• Six Sigma places a greater emphasis on strategic objectives. Many TQM initiatives focused solely on the customer. This may not have been how TQM was seen by many of its founders, but that is the way it was frequently implemented over time. In contrast, Six Sigma looks at the needs and contribution of three basics:

• the customer• the processes that the create the services for the

customer• the overall strategic objectives of the company

RECOMMENDATIONS 2

• “Be number one or number two in every market we compete in.” − Jack Welch, CEO, GE

• Be an industry leader by providing quality products to our customers, using the talents of our employees, and providing above average returns to our shareholders.

RECOMMENDATIONS 2

• To be on top consistently, companies must constantly innovate and generate new ideas

• To understand how innovation best practices can be used to augment a classic Six Sigma program, it is useful to consider the methods (or tools) that are in common use to implement Six Sigma. Some of these include: Voice of the Customer, Quality Function Deployment, Root Cause Analysis, Process Mapping, Failure Mode Effects Analysis, Value Engineering Analysis, TRIZ (Theory of Inventive Problem Solving), Robust Design, Design of Experiment, and Mistake Proofing. Each of these specific methods can be better with the use of innovation best practices.

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Operations Strategy Presentation