Six Sigma is about defect reduction. It’s devoted to creating consistency. With Six Sigma, you’re allowed 3.4 mistakes for every million outcomes you create. That’s not a lot of wiggle room, and for some industries, it’s perhaps too ambitious of a target.
For example, if you get one flat tire for every 275,000 miles you drive, your tired treads have failed to reach Six Sigma. But that’s probably okay.
There are other industries, however, where Six Sigma (and general process improvement) is paramount. If one out of every 275,000 commercial airplanes failed to stay airborne (According to the FAA, more than 42,000 airplanes fly every day), we’d see a crash every week. And the airlines wouldn’t be in business for long.
Finance is a similar type of industry. Accuracy and precision are critical, because one rounding error can bring an entire organization to its knees. It can bring on audits. Penalties. It can cost people jobs, and it can land stakeholders in serious legal trouble.
That’s why defect reduction and finance were made for each other. Here are a few ways financial professionals can use Six Sigma and Lean to reduce errors in their work.
Measure Performance Indicators Instead of Outcomes
Finance is all about measurement – depending on the type of accounting, finance will either measure cash or economic events. And while cash might be a great measure of the financial health of an organization, it doesn’t say much about the health of the financial department’s employee acumen or processes.
Practicing Six Sigma means measuring performance. That’s what Key Performance Indicators (KPIs) are for. A financial department can actually predict and prepare for errors if they know what types of KPIs typically precede accounting snafus.
While You’re Measuring KPIs, Stop Measuring Things That Don’t Matter
Simplicity is a big part of Lean Six Sigma – how can you accomplish a task in the fewest steps, with the fewest people, with the least amount of information?
In many cases (especially in banks), financial departments are collecting far too much data about the people they’re working with. For example, someone’s marital status (or how many years they’ve had the same checking account) aren’t always clear indicators of their financial expertise.
By focusing on only the most critical data points, financial departments can conserve processing time (without sacrificing precision or accuracy).
Keep All Actionable Data in a Repository
Depending on the industry, the financial department uses more data than every other department within an organization. Almost every decision is handled by analyzing numbers, and if those numbers aren’t easy to find, financial professionals can spend an enormous amount of time searching for data.
That’s wasted effort and lost efficiency.
Creating a repository for important data (like client reports, financial figures, and contact information) can save countless hours every pay period. It saves employees in the finance department from digging through loose paperwork, checking old flash drives, and poring through long email chains in search of the figures they need.
Use Kaizen to Proactively Handle Issues
When problems do arise, adopt a mindset of proactive improvement. Don’t dwell on errors or bicker with team members. Instead, analyze the problem objectively, make note of how (or why) it occurred, and commit to avoid it in the future.