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THE SERVICE QUALITY MODEL AND THE CHALLENGES OF SIX SIGMA IN SERVICES Behnam Nakhai, Department of Business Administration, Millersville University of Pennsylvania, Millersville, PA 17551, (717) 872-3753, [email protected] Joao S. Neves, Department of Management, The College of New Jersey, Ewing, NJ 08628, (609) 771-2242, [email protected]

ABSTRACT Since its development by Motorola Corporation in late 1980s, six sigma quality has gained considerable attention. The relentless drive in recent years towards adoption of six sigma in services has led to unrealistic expectations as to what six sigma is truly capable of achieving. Utilizing the SERVQUAL framework, also known as the Gap Model, this paper presents a new look into six sigma and the potential benefits and limitations of six sigma applications in service quality. Keywords: six sigma, service quality, SERVQUAL, quality management

INTRODUCTION Service quality continues to be a challenging topic in contemporary quality management theory and practice. Unlike products, services are not easily measured, tested or controlled for quality and this topic has been the subject of study from different perspectives since early 1980s. Researchers in the field of marketing have contributed significantly to our understanding of the core premises of service quality (e.g., Gronroos [20], Parasuraman, Zeithaml & Berry [34], Woodall [44]). The most consistent findings of two decades of service quality research are that: (i) service quality is more difficult for the consumer to evaluate than product quality; (ii) service quality perceptions result from a comparison of consumer expectations with actual service performance; and (iii) quality evaluations are not based solely on the outcome of a service but also involve evaluation of the delivery process. This paper summarizes the growing literature of six-sigma applications in services, highlighting the potential and possible limitations of six sigma applications in service industry particularly in a knowledge-based environment.

SIX SIGMA IN SERVICES Since its development by Motorola in late 1980s, six sigma has gained considerable attention, especially since high profile adoption by companies such as General Electric in the mid-1990s, six sigma has spread like "wildfire" [6] [19] [7]. Many organizations in manufacturing and services, public and private, large and small have joined the six sigma band wagon. In addition to Motorola and GE, many other Fortune 500 companies such as Allied Signal, Johnson and

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Johnson, Kodak, Caterpilar, Boeing, American Express, Fidelity Investments, Sony, J. P. Morgan Chase are using it. The six sigma wave has spread from the U.S. to the European Union, Japan, Canada and is gradually becoming popular in India and other LDCs in Asia, Middle East and Latin America [42]. Mellat-Parast et al. [32] highlight similarities between the six sigma improvement process and the Baldrige model. Table 1 summarizes recent studies that report six sigma applications broken down by specific service industry or sectors. It includes examples from service industries as well as from service operations of manufacturing companies. There is a growing number of descriptive and prescriptive articles, mostly authored by practitioners and consultants, that deal with six sigma applications in service industry (e.g. [4] [23] [1] [7]). Some researchers employ conceptual models to investigate the organizational requirements for effective six sigma implementation. Hensley and Dobie [23] propose a conceptual model for assessing organizational readiness for six sigma and utilize the model to analyze the readiness of a public transit company based on survey data. Chakrabarty and Tan [7] examine the current state of six sigma application in services based on quantitative and qualitative analysis of the literature and identify critical success factors and key performance indicators as management guidelines for effective applications of six sigma in the service industry. Biolos [4] prescribes ways how to effectively implement six sigma in service organizations. Some studies have investigated the success factors for implementing six sigma in world class organizations [10] [2] [1]. Antony [1] highlights the six sigma success factors: strong leadership and management commitment, organizational culture change, aligning six sigma projects to corporate business objectives, election of team members and teamwork, six sigma training, understanding the DMAIC methodology, tools, techniques and key metrics, selection of projects and project management skills, linking six sigma to customers, and accountability (tying results in financial terms to the bottom-line). Wessel and Burcher [43] and Fahmy [13] describe the situation surrounding small and medium enterprises and what can be done to help them succeed in implementing six sigma. While six sigma has been adopted by many companies both in the United States and around the world, the main areas in the service industry where six sigma has seen the most work are banking and financial services, healthcare, construction, supply chain management, accounting, customer relations, public utilities, material procurement, education, libraries, order processing, the airline industry, safety and even the government and non-for-profits. Antony [1] describes some of the potential areas in the service sector prime for six sigma adaptations and provides a comparison of six sigma with other quality approaches such as TQM. Edgeman et al. [11] describe how the government is using six sigma in order to increase the quality of service they are providing this country in this time of uncertainty. Furterer and Elshennawy [15] explain how the city's finance departments are trying to increase their efficiency through lean six sigma initiatives. Reece [38] describes how six sigma is aiding the Department of Defense with their fiscal constraints. Matchette [30] on the other hand describes the various other ways that the Department of Defense benefits from six sigma. The healthcare industry in particular is an area where there is considerable research into six sigma application. Benedetto [3] examines the potential benefits and drawbacks of implementing six sigma into a radiology film library and how that environment compares to some other

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hospital environments. D'Eredita [9] describes ways to use six sigma in the healthcare industry in order to lower costs in non-core departments, while Johnstone et al. [26] study the situation surrounding the implementation of six sigma into various areas of healthcare in order to save lives and money. There are numerous manufacturing companies applying six sigma to their various nonmanufacturing departments such as human resources, payroll, accounting, customer relations, supply chain management, safety and hazard engineering, organization change and innovation. Lanyon [29] describes how Raytheon is using six sigma to make their human resources department more efficient. Juras et al. [27] describe how chief financial officers can apply six sigma in order to guarantee compliance with the Sarbanes-Oxley Act. Fleming et al. [14] report how companies are applying six sigma to improve customer relations. Financial services is another area of the service sector that has been implementing six sigma rapidly. Taghaboni-Dutta and Moreland [41] report how six sigma is applied to improve the process surrounding student loan refinancing, while Roberts [39] reports how Credit Unions apply six sigma. Carlivati [5] specifically describes the situation surrounding six sigma in the banking industry and how six sigma can be applied to various non-core divisions like marketing. Antony [1] reports areas of potential application of six sigma in service processes. The adoption of six sigma by the service sector has been considerably slower than that by their manufacturing counterparts [15]. The biggest example of six sigma in the U.S. is without a doubt GE and that lead to enormous expansion of this approach to service operations of many large corporations [4] [40] [1] [30] [25] [7]. Large companies that have embraced six sigma in the United States include names like Honeywell (previously known as Allied Signal), Texas Instruments, Caterpillar, Maytag, Lockheed Martin, and Northrop Grumman. Since early on however, the application of six sigma is not without difficulties. An important part of the literature on six sigma applications regards the specific difficulties and useful advice for its implementation in the service sector. Patton [37] studied some of the limitations of six sigma in service industries; however, it is crucial to examine the effectiveness of six sigma in service quality in the context of available models in the service quality literature. In none of the articles we found on six sigma applications in the service sector did we find a development of a theoretical service framework; in only one article [28] did we find a brief reference to the service quality model, which is widely accepted in the marketing field. However, no formal treatment was presented or suggested. It appears that the application of six sigma to services will be severely limited if there is no deep understanding of the nature of services and the nature of how people judge quality in services.

SIX SIGMA AS A CHANGE AGENT AND MOTIVATIONAL TOOL Six sigma is a means to reduce process variation, but it is much more than that also. It is a philosophy that benefits everyone from the customer to the shareholder and even the suppliers and employees [7]. Unlike lean management which focuses on cost savings, six sigma is a means of saving both the company and the customer not only money but also all the problems

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that come along with poor quality. Chakrabarty and Tan [7] emphasize that six sigma "is also a customer focused methodology that drives out waste, raises levels of quality, and improves the financial performance of organizations to breakthrough levels." Six Sigma is not just a way of measuring the level of quality, it is a way of determining weaknesses; where the organization could do better; and how serve the customer better [11] [1]. Six sigma is a way of instilling on the people in the organization a new perspective on what's acceptable [19] [11] [43]. While the major benefit of six sigma may be the bottom line through process improvement there are also many other benefits: increased customer satisfaction, a higher understanding of problem solving, increased teamwork, and increased employee morale [7]. However, as Hensley and Dobie [23] remind us, six sigma is not a "quick fix" approach and will not save the organization over night: "It is not UPS with next day delivery". Six sigma's hierarchy of expertise is based on the belt system. Hoerl [24] presents a sample black belt curriculum for manufacturing application and compares it with the GE financeoriented curriculum model. Gitlow and Levine [18] and Evans and Lindsay [12] show fullblown six sigma curricula for black belts and master black belts. This system is credited with fostering a culture of quality where the ownership of quality is viewed as the responsibility of the entire organization, not just of those directly working in the quality related functions, and provides a common purpose and language [2]. The belt system is divided into five levels [22]: Champions--fully trained business leaders responsible for promoting and directing the six sigma strategy, selection of critical projects, and deployment Master Black Belts--fully trained quality leaders responsible for six sigma implementation, training, mentoring, and results Black Belts--fully trained experts who are experienced in leading improvement teams Green Belts--fully trained experts in six sigma tools and methodologies deployed in six sigma project teams Team members--individuals supporting specific projects working in teams in their areas

THE GAP MODEL Various functions of the organization use different measures of the quality depending upon their respective definitions of quality. Thus, many organizations fall often short of reflecting customer's perspectives in defining the quality [16] [17]. In the quality literature, five different perspectives in defining quality are indentified: transcendental (only through experience, not definable), product-based (performance, features, reliability, durability, serviceability, perceived quality), user-based (fitness for use, defined by the customer), manufacturing-base (conformance, defined by the producer), and value-based (balancing conformance and performance with price) [17] [16] [21] [31]. Another useful framework is that proposed by Nelson [33] and Darby and Karni [8] who distinguish among search, experience, and credence attributes of goods and services that use to judge their quality. Few studies have attempted to define and model service quality because of difficulties involved in identifying what to measure let alone how to measure it. In their now classics study on the

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notion of service quality, Parasuraman, Zeithaml and Berry [34] identified ten widely cited service quality determinants, i.e., the key criteria that customers use to evaluate quality regardless of the type of service: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer, and tangibles. The Service Quality framework is based on three propositions. Proposition I: Service quality is a function of the difference between perceived service and expected service. GAP 5 ­ Difference between expected service and perceived service Proposition II: The difference between perceived service and expected service is a function of four different gaps (i.e., Gap 5 = f(Gap1, Gap 2, Gap3, Gap4)). GAP 1 ­ difference between consumer expectations or quality determinants, and management's perception of such consumer expectations GAP 2 ­ difference between management's perceived quality determinants and service specifications (i.e., the critical-to-quality specifications) GAP 3 ­ difference between quality specifications and actual service delivery GAP 4 ­ difference between actual service delivery and the company's external communications about services delivery (e.g., word of mouth, past experience, promises, reputation, standard of care) Proposition III: People tend to evaluate service quality primarily based on experience characteristics. In this model, search attributes are credibility and tangibles; experience attributes are access, communication, courtesy, reliability, responsiveness, understanding; and credence attributes are competence and security. Using factor analysis, Parasuraman et al. [35] [36] developed a 22-item service quality scale in which the ten original determinants of quality were collapsed into five dimensions: Reliability - consistency of performance and dependability; performs service right at the first time; honors its promises; keeps accurate records, correct billing, and performs services at the designated times Responsiveness ­ readiness to provide the service; timeliness; setting up appointments promptly Assurance ­ knowledge, competence and courtesy of employees; convey trust and confidence; has the required skills and knowledge; polite, respectful, considerate, friendly; trustworthiness, believability, honesty Empathy ­ caring; individualized attention, approachability, ease of contact; effort in understanding the customers' needs Tangibles ­ physical evidence of the service; physical facilities, tools and equipment; appearance of providers; appearance of other customers in the service facility For each dimension, the SERVQUAL scale provides a score for customer expectations (E) and a score for customer perceptions (P) of service quality. The differences between the two scores on each dimension are called gap scores. According to Parasuraman and his colleagues, the key to

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optimizing service quality is to maximize these gap scores, and the associated gap equation (Q = P ­ E) has become the e = mc2 analog for service quality. As shown in Figure 1, perceived service quality is the result of the consumer's comparison of expected service with perceived service. The comparison of expectations with perceptions is suggested in the service quality literature: the relative importance of these criteria in shaping customer expectations prior to the delivery of service may differ from their relative importance in actual customer perceptions of the delivered service [34] [20]. The gap between producer's specifications and customers' expectations for the service level may lead to dissatisfaction even when the producer meets the exact design specifications.

Brand image Word of mouth

Past experience Customer's needs

Industry standards Company's messages

Dimensions of Service Quality

1. Tangibles 2. Reliability 3. Responsiveness 4. Assurance 5. Empathy Expected service Service Quality Perceived service

Figure 1. The Service Quality Model

CONCLUSION The gaps and quality dimensions identified in the SERVQUAL framework provide an avenue to address the difficulties that service organizations encounter when using six sigma to improve quality and reduce costs. Many of the methods used in six sigma are applicable to services as well as to manufacturing. In services, the DMAIC model and tools such as VOC, QFD, value added flow charts, root cause analysis, and process measurement are valuable. The number of successful applications reported in the literature attest to the usefulness of six sigma in services. However, the nature of services and the ways customers tend to evaluate service quality pose important challenges for six sigma. As evidence of this, all studies of six sigma applications to services that are reported in the literature focus on manufacturing-like situations, i.e., highly repetitive processes with no or very low human behavior component. This indicates that the six sigma methodology has limited application or that six sigma provides insufficient help in improving services and meeting customer expectations.

REFERENCES References are available upon request from [email protected]

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