Bank of America's implementation of six-sigma methodology for service quality

Management Styles

Fool-proofing a service operation.

In the banking industry, a significant service industry in any country, optimized operations are essential to ensure that the public has maximum confidence in the operators of this industry. Bank of America and its operations have been selected for discussion in this study. The bank has grown tremendously in the past few years. CEO, Ken Lewis realized that the bank could gain a wider market share and customer base if it was able to streamline its operations and the level of service. Incorporating concepts of process management was considered essential to the improvement process. (Cox and Bossert, 2005) Some of the tools such as six-sigma were used to ensure that a high level of quality was maintained in the service that the provided to the customer.

Bank of America recognized that customer satisfaction was paramount in ensuring that the customer was loyal and would use the bank for all their financial needs. The company implemented the six-sigma methodology in 2001. Since then, it has observed a significant improvement in the quality of service that it provides the customer and this has reflected in the higher levels of customer satisfaction that has been observed. Unlike product and manufacturing operations, service operations are more difficult to manage and maintain with respect to quality. While many service-based products pride themselves on being "one-of-a-kind," many of the users of the services may expect some level of standardization and consistency in the service provided. Services are generally considered specialized. They require a great deal of knowledge and experience. Often, few similarities exist in the service industry even within the same business category or industry. (Peter and Donnelly, 2004)

Customers' needs in the financial industry differ significantly and extensive use of knowledge management is being considered to ensure that every customer gets the service that is best suited to his or her individual needs. Through customization, Bank of America has been able to ensure that customers get the best available service at any given time based on their individual needs. It is important that the quality of the services stays consistent over time and do not constantly change for no justifiable reason. Similarly, in a banking service, customers would like to conduct business with a bank whose mission and goals are parallel to their own. They also want to ensure that mission statements do not change drastically with time. By managing the quality control of the services that they provide the bank has been able to drop the number of defects across electronic channels by 88%.

Bank of America has been constantly growing through both internal methods as well as through mergers and acquisitions. Bank of America has a good record in managing mergers and acquisitions. (Stewart, 2005) They have been able to make transitions smoothly and allow customers to get acquainted with the different and sometimes varying policies of the bank. Bank of America's primary business is dealing serving retail customers. "The bank hopes to cross-sell other financial products like mortgages or home-equity lines" through the contacts that it has gained as a result of the MBNA deal that the company has made recently. (Creswell, 2005)

With markets getting smaller and more interlinked, many companies chose to acquire companies that they felt would help them expand and/or help gain capital for future expansion. This often however creates an issue of conflicting cultures and values within the merged operation. In the case of a bank these conflicting cultures and values can cause disruption in the processes and the way employees deal with the customers. As Bank of America's primary and significant customer base is retail banking with individual customers and small business owners' impressions of interactions of employees of the bank play a considerable role in shaping the perceptions and the satisfaction of services that customers experience.

Problems generally arise during any change. The adoption of new management methods, their implementation, changing past routines to suit the new methods of management is often a long and tedious process. (Morgan, 1997; Darnell, 1999) Any change that may be required to achieve the goals of the firm should again be clear -- the reasons for the change should not focused and comprehensible. Changes, whose final aim is not tangible or clear to the people on whom this change is implemented, create distrust and a sense of uncertainty. This affects productivity, and consequently, profitability. Maintaining the trust and respect of clients during change is critical as well. Bank of America has been working at maintaining high service levels during these changes. Bank of America, through its many mergers, has attempted to maintain as much normalcy as possible to its operations and services provided. (Talcott, 2005)

The bank has provided employees with all the necessary training and education to ensure that they are able to constantly ensure continuity of operations and provide customers will all the information and services. "Fool-proofing" is required in the initial stages to ensure that the employees make the decisions based on correct resources. There is an increased use of computerized databases for tracking and monitoring the type and nature of the services provided. By maintaining a centralized database, Bank of America has been able to track and monitor the changes that the customer makes and customize products for these needs. This centralized database is equipped to identify issues such as identity theft and fraud by comparing the past spending habits of the customer with the current spending habits of the customer. Over time, these databases have been able to reduce the errors and mistakes that customers have experience and made banking with the company a pleasant experience for the retail customers.

Successfully substituted workers for technology

While most companies have moved from replacing human workers with computers, there are relatively few that have tried computers and still persist with human workers. One of these examples is in the domain of biomedical research. In the eighties, with the development of computers, computer-speeds emboldened scientists to believe that computers could be used to process the spoken and written language. Computer scientists and linguists sought to parameterize language into processable units, such that computers could take the place of human communication. The cognitive component of human understanding and communication however, is far more evolved than can be handled by a computer. Steven Pinker in his popular "The Language Instinct" (Pinker, 1995) averred that a five-year-old could process language much better than the most modern computers. He declared that humans were several centuries from the development of a computer that will replace human communication skills.

Computers tried to process language using storehouses of the rules of grammar, linked with common dictionaries of terms. Heuristic (from previous experience) methods are then employed to process this information. Humans however, can cognate meaning from garbled words or even incorrect grammar. Teaching a computer to recognize all permutations of idiosyncrasies of personal styles of speech and writing is forbidding.

Wikipedia illustrates the problems with natural language processing, which is a branch of artificial intelligence, the same branch which includes the field of robotics, using the following two sentences: "We gave the monkey bananas because they were hungry" and "We gave the monkey bananas because they were overripe." The problems with recognition comes from the word "they." In the first case, "they" refers to the monkeys. In the second "they" refers to bananas. Experience allows humans to distinguish between the two senses of the word "they." But this kind of disambiguation is difficult for a computer. (http://en.wikipedia.org/wiki/Automatic_summarization)

The field of Artificial intelligence -- associated specifically with language -- can be divided into several parts: Text-to-speech, speech recognition, natural language generation, machine translation, question answering, information retrieval, information extraction, text-proofing, translation technology and automatic summarization. The use of computers to perform each of these tasks with even reasonable accuracy and precision has been deemed impossible.

The specific industry where this technology has been replaced by the human mind is in information management. Data-mining specific bits of data is not difficult for a database specialist. In databases are stored in specific areas in specific tables. These tables are then linked by relationships that are associated with the database architecture. These bits of information are retrieved and presented to an end-user. Researchers at the National Library Medicine, a subdivision of the National Institutes of Heath (http://www.ncbi.nlm.nih.gov/) have created a suite of state of the art software that gathers, collates and presents information freely to end users in the biomedical field. NLM has been the standard bearer of biomedical computing.

The one area of NLM's work where human input is preferred to technology is in the natural language processing of bio-medical research articles. This is a vast amount of literature, numbering in the tens of thousands of scientific articles published per day. In addition to the problems in processing written text mentioned previously, problems arise in creating domain-specific libraries and dictionaries of terms that belong to each field of the sciences. For example, a neuroscience dictionary is significantly different from a protein chemistry library. These are different from a library associated with medicinal chemistry. Links to scientific articles that can be accessed with generalized or advanced searches in two databases: PUBMED and MEDLINE. (http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?db=pubmed)

The precision and accuracy with which scientific articles can be processed using computers is not high enough to serve the research communities adequately. NLM therefore, hires several hundreds of researchers that are cognizant in each biomedical field. These workers identify articles based on their own knowledge and expertise. Each article is then manually identified with a specific biomedical domain. The article is then mapped to a list of words associated with that domain of biomedicine. These lists of words are called MeSH (Medical Subject Headings) terms (http://www.nlm.nih.gov/mesh/MBrowser.html). When an end user wishes to find an article, he or she will enter relevant keywords, which are connected by Boolean operators "AND," "OR" and "NOT." These keywords are not used to scan the text of the articles. They are used to scan the keyword lists. Only those articles manually identified as being associated with specific words are returned as relevant search results to the end user.

Though in this regard, human workers perform significantly better than computers, the results have to be further parsed by the end user for relevance to his or her work. This is done manually. Sometimes computers are used. Natural language processing programs have been created to further identify relevant neuroscience articles after an initial search of PUBMED. But these programs use knowledgebases, which are manually created. Creating such knowledgebases is feasible because they are specific to an area of work.

Worker input in this field is indispensable.

E-procurement for a small company to gain advantage in the market

Starbucks, the Seattle-based coffee and coffee related products retail sales corporation is considered. The company markets premium coffee, pastries and ice creams to the public through its stores and is traded on the Nasdaq National Market under the trading symbol "SBUX." By the end of 2003, there were 7,225 retail stores all over the world selling their products directly to the customer. In addition, Starbucks Corporation created strategic alliances with Barnes and Nobel Inc. where book shoppers and browsers can avail themselves of a cup of gourmet coffee. Many domestic airlines and hotels provide Starbucks' products. Starbucks targeted both the individual and the corporate customer.

The company sold many of its products and services to agencies and the service industry to infiltrate the coffee market. The mission of Starbucks is to make the company "the most recognized and respected brand in the world." Coffee selling can be considered a product of a service-oriented organization -- where the customer is in direct contact with the end product. (Foster, 2003) This is due to the fact that the company does not just sell the product but it sells the ambiance, which includes the concept of the European style, laid-back coffee shop. Starbucks has created a culture of making regular coffee drinking a sophisticated act for the regular American public.

While the corner Starbucks coffee shop is the growth plan for the company, Starbucks is aggressively using technology to improve its operations and business model. Starbucks already has a loyal customer base that is computer savvy and looking for ways to improve their experience. (Morebusiness.com, 2005) Starbucks has been looking overseas to increase its market share and profitability. By consolidating its supply chain and managing its stores through aggressive strategies Starbucks has been able in a short time to create a brand name for itself. The company has been actively using e-commerce with easy access to credit card for use in stores to encourage customers to use their products. (Anonymous, 2004) Procurement is becoming an important element in the supply chain management (SCM). E-business has been defined basically as "the transaction of business over an electronic medium such as the Internet" and can "involving the buying and selling of goods and services, customers relations management, and working jointly with business partners" for a wide variety of operations and services. (Google, 2004)

The company manages all Starbucks stores and this centralized management results in the company being able to purchase the raw materials needed for the business in bulk and at a much lower price. E-procurement has enabled the company to manage the quality and the brands that are sold. By mapping out the trend in each store at regular intervals the managers are able to customize the procurement for stores and the resulting supply chain to ensure that the most significant gain is obtained in the profits. (Maceda, Corbett and Altman, 2003) By harnessing technology to identify the value chain for each store and the level of profitability for each product sold, Starbucks could gain insights into the pricing strategies that it could use for many of its products.

Customer satisfaction is the one of the important strategies for the company. Quality in a product can ensure brand loyalty -- and this is the type of loyalty that Starbucks would like to develop amongst its customers -- corporate or otherwise. Quality of the products sold in Starbucks has been the differentiating tool that the company uses. By distributing fresh products in the shortest possible time to any store location, the company has been able to keep their customers happy. The company focuses on constantly introducing new and innovative products to the market. It works hard at ensuring that the products introduced are constantly of the highest quality grade.

Many Starbucks stores are increasingly monitoring their customer service in order to gauge customer-satisfaction while keeping an eye out for the community within which they operate. Knowledge "value often resides in its particular context and point-of-view" in the eyes of the stakeholder. (Cohen, 1998) It has therefore become important for Starbucks to use e-procurement based on needs of the customer segment. Starbucks is actively working to develop web-based customers that use their site to gain information and knowledge of the products and the services that they offer.

Starbucks through many of its policies has been able to address the issues and concerns of the coffee farmer and the fair trade coffee program. (Cray, 2000) "Fair-trade coffee" is coffee that is directly purchased at a fair price from an indigenous farmer and a third party certifies this transaction. Due to Starbuck's high profile it is well suited to inform the public and other coffee manufacturers of the need for fair trade agreements and the benefits that can be gained through dealing directly with individual farmers in coffee growing locations. (Coffeeresearch.org, 2000) By using e-procurements with common platform at different regional levels Starbuck can create the optimum medium for procuring raw or semi-processed coffee beans from the farmer. E-commerce requires extensive infrastructure and technology to set up, especially when dealing with multiple sellers located in different countries, as is often the case with coffee purchase.

The company has constantly worked at developing new technology to make the production and processing of coffee beans into finished products more efficient. In addition, the company has aggressive scouted for new beans (the shade grown Mexican coffee bean) and flavors, which they hope, can attract the customer. The company owns and operates its own roasting plants for the coffee beans in the U.S. Thus it has absolute control over the final quality of the product that is sent out into the market. In addition, the company has invested in the research and understanding of the entire value chain of the industry, from the coffee estates around the world to the proper proportions that are needed to brew a perfect cup of coffee. (Starbuck-Corporation, 2005) In order to sell quality products, the company has ensured that the suppliers from whom the coffee beans are purchased have the best quality raw materials. The processing of the raw bean to the finished product is a highly controlled process, with the company having specific roasting time and packaging facilities.