Dav Using Statistical Process Control (SPC) Kluck

¶ … DAV using Statistical Process Control (SPC)

Kluck had started a certain project abbreviated as PMV in order to use manufacturing-style improvement techniques in insurance. SPC would be helpful to see whether PMV worked, whether DAV should continue using the process, modify it, or drop it.

DAV used SPC for tracking performance measures over time in order to improve performance of its various operations. DAV had to most importantly deliver efficient customer service that consisted of delivering customer data on time and without mistakes. They also had to retrieve this customer data on time. However, given the size and complexity of DAV it could easily run into problems and the breadth of its tasks made it difficult to measure without a certain procedure. SPC was this procedure.

In other words, DAV wished to improve its quality and timeliness of its work. It therefore decided to transplant the statistical tools form a manufacturing industry in order to implement a program for improvement and evaluate progress of this program and hoped-for improvement of employees work. SPC was intended to measure the quality of the process and measure it in an objective way (measurement of improvement would not rest on subjective opinion of management) on a regular routine.

2. The major challenges and limitations for applying SPC to a service industry as opposed to a manufacturing industry

Operationalization and sampling is one of the largest problems. In manufacturing, you are dealing with something more concrete and tangible -- actual products. You can therefore choose a certain sampling frame (the larger the better), formulate benchmarks and investigate that. A service industry is, however, more abstract therefore it is harder to make a sampling frame / population.

Operationalization -- defining improvement in service -- was for the same reason hazy since the company was dealing with the abstraction of a service rather than the tangible components of a manufacturing product. For this reason too they had trouble measuring themselves and their work.

It is also harder to be more objective since the manufacturing industry which deals with aspects that can be touched, measured, tangible data which can be accorded quantitative tools. The service industry however deals with abstract conceptualizations such as 'good', 'intelligent' and so forth. These depend on subjective evaluations and therefore run the risk of conflictual opinion with no concrete tools to measure them.

For the same reason, there is a lack of standardization since people's opinion about what is 'good' differs. This makes it difficult to harmoniously evaluate improvement and may result in trouble to some who define their 'improvement' in a more humble way than others. It may also result in significant problems being overlooked (due to being inadequately labeled) whilst insignificant factors become exaggerated.

3. Priotrize problems facing Kluck ("Measuremnt Challenges")

a. The team inadequately defined what they were looking for or what they considered error and needed improvement, therefore definitions of right and wrong became hazy and aspects that should have been improved became little addressed, whilst insignificant aspects became magnified by the process. Implementation of SPC therefore aggravated DAV's performance instead of making it better.

b. Different divisions had difficulty applying the program to them even thought they wanted to. For instance, lawyers who wanted to produce 'good' work argued and differed over what the word 'good' meant. There was lack of standardization which resulted in conflict and confusion.

c. Groups differed about how the process could be charted and what benchmarks would be used. This may result in internal conflict

d. Different divisions measured their performance in different ways. Those who accorded more modest results ran the risk of reprimand and worse.

e. Certain groups had been working effectively before SPC was introduced. The introduction of this program bungled their work since they had to produce a big enough sample size for the statistical program to work. This gave them unnecessary work and stress. It was also ridiculous since although their work was accurate, they had to increase the sample size so that the statistical program had something to work on and could find errors

4. Determine why each problem is occurring and how it can be resolved

All of the problems are occurring due to the same reason: DAV used a quantitative tool (statistics/mathematical data) that is best used for a business that deals with quantitative aspects, such as a manufacturing industry.

DAV used this tool for attempting to improve its performance in insurance-related affairs. However, DAV is a service industry that is using this tool to measure abstract conceptualizations of 'good' work' custom 'satisfaction' and 'efficiency'. They therefore need to create some qualitative method to investigate these aspects. Qualitative instruments include observation, interviewing, surveys, focus groups, and so forth. Performance evaluations that is parsed on qualitative lines of investigation rather than quantitative. By so doing, not only would these problems be resolved but DAV may actually be helped to assess their performance and to improve it.

5. Once DAV implements accurate measurements, what actions can be taken to improve existing processes?

There are many types of performance appraisal method that work using qualitative tools. Some of them are observing the outcome of tasks; essay method (where employees detail their perceptions towards tasks); having employees rank their performance; behavioral checklist (where employees rank their behavior in regards to performance of task); behavioral anchored rating scales (BARS); and management by objectives (where both manager and employees collaboratively decide objectives and then sit together to grade them once accomplished). (Dransfield, 2000)