CHALLENGES FOR IMPLEMENTING TOTAL QUALITY MANAGEMENT IN INDIAN BANKS – A STUDY

“CHALLENGES FOR IMPLEMENTING TOTAL QUALITY MANAGEMENT IN INDIAN BANKS – A STUDY” Dissertation submitted in partial fulfillment of the requirements For the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

DECLARATION

I, XYZ , studying at XYZ Academy, hereby state that this Dissertation report titled, “Challenges in implementing Total Quality Management in Indian Banks - A STUDY”, submitted by me to the department of Management, Bangalore university and is submitted in partial fulfillment of the requirement of the MBA Program of Bangalore University, is an original work carried out by me under the guidance and supervision of , faculty guide Prof.

XYZ and that the project or any part thereof has not been previously submitted for a degree/diploma of any University/ Institution elsewhere or published any time before.

Date: ………………

Place: XYZ

XYZ Register No. XYZ

ACKNOWLEDGEMENT

It’s my special privilege to extend words of thanks to all of those who have helped me and encouraged me in completing the internship successfully.

I sincerely thank Mr. XYZ, Honorable President – XYZ Academy, for giving me an opportunity to take up this research.

I feel extremely privileged that I completed my project under the guidance of Prof. XYZ, who spent his quality time even during his busy schedule to make me understand the each and every aspect about the procedure of carrying out research study and guiding me throughout the project.

I also thank Prof. XYZ, Academic co-ordinator for her constant support and advice and help during the project.

My gratitude will not be complete without thanking God and I am grateful to my beloved parents and friends who have been a constant source of inspiration and blessings in my pursuit for studies.

I would like to extend my thanks to all those unseen hands that made this project possible .

TABLE OF CONTENTS CHAPTER

TITLE

PAGE

Certificate and Declaration Acknowledgements Executive Summary List of Tables List of Graphs

1

Introduction 1.1

Introduction to Quality

1

1.2

Current Scenario

2

1.3

T.Q.M.- Precursor To Six Sigma

3

1.3.1

The Quality Movement

4

1.3.2

Total Quality Management

4

1.4 Pioneers of the Quality Movement 1.5 Dimensions of Quality 1.6

Quality in Services

1.7

SIX SIGMA

1.7.1 Concept of Six Sigma 1.7.2 The 1.5 Sigma Drift 1.7.3 1.8

2

5 6 8 10 13

Six Sigma for enhancing Service Quality

16

Tools of Six Sigma

18

Research Design 2.1

Introduction

22

2.2

Literature review

22

2.3

Statement of problem

35

2.4

Objectives of the study

36

2.5

Scope of the study

36

2.6

Research Methodology

36

2.7

Limitations of the study

40

2.8

Chapter scheme

40

3

Profiles 3.1

LIST OF GRAPHS

Introduction to Indian Economy

3.2 Recent growth trends in Indian economy NUMBER DETAIL

42 43 PAGE

3.3 History of banking industry in India Fig 1.1 Percentages of efficiency with varying Sigma levels 3.4 Overview of Indian banking sector Fig 1.2 1.5 Sigma shift

43

in India Fig 1.3 Scenario 1.5 Sigma shift on Six sigma process 3.6 Growth of Banking industry Fig 1.4 Fish Bone Diagram Types of banks 4.7 Fig 1.5 Creating Value to customers

48

3.8 Future prospects of Indian banking sector Fig 3.1 Customer Satisfaction and Loyalty Barometer SUCCESS STORIES OF BANKS Fig 3.2 Growth in HSBC's Net Income 2000-2004

51

3.5

Fig 4.1

Percentage of banks having vision and mission statements Bank of America Fig 4.2 Percentage of banks performing Benchmarking activities 2 National city bank U.S Fig 4.33 CitiBanks bank having Training strategy and plan 1

Fig 4.44 HSBC Frequency of Customer Surveys Morgan Chase Fig 4.55 JPPercentage of banks committed to change Employee Training towards TQM tools Fig 4.66 Merrill lynch 7

Country Wide Financial

8

Vanguard

46 49 50

13 14 15 19 21 54 60 85

52 54 86 87 56 57 89 60 90 63 92 63 1 64 1

4

Challenges for Implementing TQM in Indian banks – An Analysis.

67-94

5

Summary of Findings, Conclusions And Suggestions

95-102

My Learning

103

Bibliography Annexure A.QUESTIONNAIRE

LIST OF TABLES TABLE NO 4.1

TABLE NAME Complaint per Branch percentage of various banks.

PAGE N 68

4.2

Loan Sanctioning Cycle Time for various banks

69

4.3

70

4.4

Local Cheque Clearing Cycle Time for various banks Out of State Cheque Clearing Cycle Time for various banks

4.5

Interbank Cheque Clearing Cycle Time for various banks

72

4.6

Table showing Intrabranch Cheque Clearing Cycle Time for various banks

73

4.7

71

74

4.8

HDFC’s score regarding Process readiness Syndicate bank’s score regarding their Process readiness

4.9

Union bank of India’s score regarding their Process readiness

76

4.10

Bank of Baroda’s score regarding their Process readiness

77

4.11

Pragathi gramin bank’s score regarding their Process readiness

78

4.12

Oriental bank of commerce’s score regarding their Process readiness

79

75

4.13

State bank of India’s score regarding their Process readiness

80

4.14

Bank of India’s score regarding their Process readiness

81

4.15

Dena bank’s score regarding their Process readiness

82

4.16

United bank of India’s score regarding their Process readiness

83

4.17

Various factors contributing to the quality of service

84

4.18

Separate TQM division in banks

84

4.19

Percentage of banks identify CSF and KPI's

86

4.20

Contents of TQM training programmes in various bank

88

4.21

Frequency in which banks undertake customer satisfaction surveys

89

4.22

Organizations openness in receiving and implementing innovative ideas, suggestions

90

4.23 4.24 4.25

Top managements support for TQM implementation Banks providing employee training and education regarding TQM tools Level of employee response in quality programmes like QC circles etc

91 91 92 93

4.26

Employee empowerment to undertake quality initiatives

4.27

Organizational culture’s supportiveness to the quality programmes implemented

93

4.28

Factors which impedes Total quality management implementation in various banks

94

Challenges for implementing TQM in Indian banks

1.1. INTRODUCTION “Quality [means] conformance to requirements.”

-Philip B. Crosby.

Even the Thesaurus does not have a suitable substitute for the word quality. It’s a simple, seven letter word with three syllables and an accent on the first. You see it sprinkled liberally in any product literature. You hear it mouthed by manufacturers as they proudly proclaim their excellence. But when you look around, it’s as elusive as the child who breaks the window pane. Because, quality, though easy to pronounce, is not as easy to achieve. The organization has to be naturally tuned to its vibrations. You have to move mountains to acquire it. You have to toil endlessly – no sleep, no limits, and no pause. And it all starts with another simple, seven letter word called ‘respect’. You have to respect the customer and want to give him your best. Of course, in the Thesaurus, you may spot ‘merit’, ‘status’ and ‘refinement’. But we all know that they are a distant second. Let us take a look at what quality means to different people.

“Quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost.”

-Robert A. Broh.

Quality is prevention, constructing solutions to problems before they occur and designing excellence into a product or a service. Quality is customer satisfaction, the delight of the ultimate judge of how well products and services measure up. Quality is productivity, from employees who receive the training, tools, and instruction they need to execute their jobs. Quality is flexibility, the willingness to change to meet demands. Quality is efficiency, doing things quickly and correctly. Quality is meeting a schedule, a standard, a deadline, and being on time. Quality is a process of ongoing improvement. Quality is an investment, reaping a payoff, because, in the long run, doing it right the first time is less expensive than correcting it later. Quality is that elusive entity that everyone is talking about. Customers want it! The media promote it!

Whereas the manufacturers, developers, providers, suppliers, etc. seek it! True quality is like ghosts, whom everyone talks about but few have actually seen. Thus we often hear of the quote: Alliance Business Academy

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Challenges for implementing TQM in Indian banks

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Challenges for implementing TQM in Indian banks Quality is “fitness for use”.

-Joseph Juran.

Quality is thus a systematic approach to the search for excellence. It is an attitude of the mind. Any definition of quality must start with the customer perspective. The irony of the entire affair is that you know what it is, yet you don’t know what it is. But for all practical purposes it really does exist. Why else would people pay fortunes for some things and throw others in the trash pile? In the long run, the single most important factor affecting a business unit’s performance is the quality of its products and services relative to those of its competitors. Customers are ready to pay a premium for superior quality and that is enough to tell us how important quality is not just for customers, but for the company’s bottom line as well. That brings us to the concept of Total Quality Management (TQM).

1.2. CURRENT SCENARIO Total Quality Management is a concept that has been around for quite some time. This particular idea, at some point of time regarded as a management fad, actually stormed the manufacturing companies with mind-blowing benefits! What was considered to be a wonderful topic for speeches and articles was in no time a regular practice in every company wanting to improve their organization’s image. Thus the world got to know about concepts such as continuous improvement, Six sigma and so on. The manufacturing firms turned these concepts into reality and very soon the benefits arising out of these exercises far outweighed the costs that they had incurred in implementing these improvement techniques. In no time improvements in quality became a prerogative for all firms in the manufacturing sector. Those who kept pace with these new developments had their share of the pie and those who were reluctant were taught the same lessons the harder way. Thus emerged the band of the quality conscious organizations, the likes of Motorola, General Electric, Toyota and a hoard of companies that embraced quality improvement techniques at the first possible chance. The results were truly inspiring and clear. Quality was going to be a very important point for consideration by companies; the only question was how soon? With manufacturing concerns having tested and tasted the idea of quality, it is now the turn of services.

When manufacturing firms can reap in benefits out of improving the product quality, it is time that the service firms too rise up to the exacting levels demanded of them by the customers. Perhaps it is a long time that service firms have gotten away with average Alliance Business Academy

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Challenges for implementing TQM in Indian banks standards of quality. Even as the consumers are getting more and more particular about

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Challenges for implementing TQM in Indian banks the quality, it is the prerogative of service organizations to wake up, for a notvery- satisfied customer today may be an ex-customer tomorrow.

For any major change initiative like Six Sigma to endure in a Financial Services environment, it must become part of the culture of the business. Six sigma has become the new face of Total Quality Management that has taken the world by storm.

Six sigma tools such as benchmarking, control charts, and many others have become trends that every organization wants to implement. Tools such as these are enabling organizations to monitor and enhance the quality of goods and services provided by the organization.

1.3 TQM –PRECURSOR TO SIX SIGMA (6Ďƒ) In their international study of Total Quality Management practices, the Conference Board of Canada found one study which showed that "seven out of ten North American companies fail in their attempt to execute a total quality strategy". But before you conclude that TQM was just another passing fad - a "flavour of the month" – one has to take a closer look. Only a minuscule number of organizations in North America have truly tried Total Quality Management. Most have talked about TQM while implementing PQM (Partial Quality Management). In trying to define TQM it is well worth considering the relevance and meaning of the three words in its title.

Total - The responsibility for achieving quality rests with everyone in the business no matter what their function. It recognizes the necessity to develop processes across the business,

that

together

lead

to

the

reliable

delivery

of

exact,

agreed

customer requirements. This will achieve the most competitive cost position and a higher return on investment.

Quality - The prime task of any business is to understand the needs of the customer, then deliver the product or service at the agreed time, place and price, on every occasion. This will retain current customers, assist in acquiring new ones and lead to a subsequent increase in market share.

Management - Top management lead the drive to achieve quality for customers, by communicating the business vision and values to all employees; ensuring the right business processes are in the right place; introducing and maintaining a continuous Alliance Business Academy

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Challenges for implementing TQM in Indian banks improvement culture.

1.3.1 THE QUALITY MOVEMENT "Total Quality Control" was the key concept of Armand Feigenbaum’s 1951 book, Quality Control: Principles, Practice, and Administration, a book that was subsequently released in 1961 under the title, Total Quality Control. W. Edwards Deming, Joseph Juran, Philip B. Crosby, and Kaoru Ishikawa also contributed to the body of knowledge now known as Total Quality Management. The American Society for Quality says that the term Total Quality Management was first used by the U.S.

Naval

Air

Systems Command "to describe its Japanese-style management

approach to quality improvement." This is consistent with the story that the United States Navy Personnel Research and Development Centre began researching the use of statistical process control; the work of Juran, Crosby, and Ishikawa; and the philosophy of W. Edwards Deming to make performance improvements in 1984. This approach was first tested at the North Island Naval Aviation Depot. However in spite of being the origin Total Quality Management has nothing to do with Feigenbaum's Total Quality Control. Total Quality Control means the total control of quality and not the control of total quality.

1.3.2 TOTAL QUALITY MANAGEMENT TQM is an integrative philosophy of management for continuously improving the quality of products and processes. TQM functions on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organization. In other words, TQM capitalizes on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. We know that management consists of planning, organizing, directing, controlling, and assurance. Then, one has to define "total quality". Total quality is called total because it consists of three qualities: Quality of return to satisfy the needs of the shareholders, Quality of products and services to satisfy some specific needs of the consumers and Quality of life - at work and outside work - to satisfy the needs of the people in the organization. Therefore, Total Quality Management goes well beyond satisfying the customer, or merely offering quality

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Challenges for implementing TQM in Indian banks products or services. Total Quality is a description of the culture and attitude of a company that strives to provide customers with products and services that satisfy their needs. The culture requires quality in all aspects of the company's operations, with processes being done right the first time and defects and waste eradicated from operations.

TQM has evolved over the period of time and it is worth

considering the beliefs of the main quality gurus who have started it all, beginning with Deming himself.

1.4. PIONEERS OF THE QUALITY MOVEMENT Edward Deming's concepts of process management began with the use of statistical quality control. His real contribution was his ability to cut through academic theory and present ideas in a simple way that was meaningful and practical, right down to the shop floor. He interpreted quality in terms of reliability, dependability, predictability and consistency of product and service. He saw quality improvement as being analogous to reduction in process variation. By reducing this with the help of statistical control methods, variation in product quality is also reduced. The fact that processes are now under better control also means lower cost and improved productivity.

Deming's approach started with understanding the causes of two types of variation.

1.

External influences on the process which he described as uncontrolled variation due to "special causes". Examples are changes of operation procedures, change in raw materials. All of these interrupt the normal pattern of operation.

2. Controlled variations which are due to chance, random, or "common causes".

All of these by definition are due to the process itself, its design or installation..

For Deming, quality improvement must begin with identification of the two types of variation. The next stage is to eliminate the "special causes" and only then work on the "common causes". Identification and elimination of these is assisted by the use of Statistical Process Control (SPC) and various forms of simple control charts designed to be used on a shop floor environment. Management improves the process by redesigning it to improve it's capability to meet customer needs. Deming also stressed the crucial importance of the need for a deep understanding of businesses work processes.

Without this, he believed true progress will not be made. Over the years Deming

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Challenges for implementing TQM in Indian banks thoughts expanded, to cover issues of managing people, leadership and training in order to achieve quality goals. “Everyone doing his best is not the answer. It is necessary that people know what to do. Drastic changes are required. The responsibility for change rests management. The first step is to learn how to change.�

on

- Edward Deming.

Joseph Juran published "The Quality Control Handbook" in 1950 which became the standard reference book on quality world-wide. Juran developed his TQM philosophy around his "quality trilogy" represented by: * Quality planning: the process for preparing to meet the quality goals * Quality control: the process for meeting quality goals through operations * Quality improvement: the process for break through levels of performance.

Both he and Deming correctly stressed the need to involve people throughout the organization in quality improvement but in particular that most quality issues are down to management dealing with systems. The emphasis is on getting the system correct rather than blaming failure on operator error. Juran particularly emphasized the use of quality teams and training them in measurement and problem solving.

Kaoru Ishikawa is regarded as the father of the Quality Circle approach which was involved in building shop floor teams. His legacy is more directly linked to hands on, practical techniques and promoted many of the tools and techniques of measurement, analysis and problem solving commonly used as part of the TQM package. These include: Pareto analysis, Fishbone diagram (otherwise known as an Ishikawa diagram), Stratification, Histograms, Control Charts, and Scatter diagrams. All these tools help to reduce the costs of production. Together they will help out the organization to charter out its own improvement programme that will enhance its image in the minds of their customers. TQM is a management approach for an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society.

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Challenges for implementing TQM in Indian banks

1.5 DIMENSIONS OF QUALITY The various dimensions of quality are performance, features, reliability, durability, serviceability, response, aesthetics and perceived quality as in the eyes of the customers.

The perceived quality may be very much different from what the company sees as constituting the term quality. All these things have to be taken into consideration when the company is looking at providing total quality to all its customers. Let us understand these dimensions of quality taking a simple example of checking an account at the bank.

The dimension of performance would be measured by the amount of time taken to process customer queries or requests. Some of the features offered by the bank would be in the form of automatic bill payments and so on. Reliability or durability would be seen by the variability of time to process requests. These parameters can also be compared between organizations or with industry standards. Serviceability would be shown by the ease of getting updated information. Aesthetics is something that also goes to serve as an add-on to the customer’s perception which would be the appearance of the bank lobby or something more basic like the teller’s courtesy and such apparently unrelated matters. The perceived quality would be manipulated slightly by using the help of endorsement by community leaders.

Essentially what happens in most of the organizations today is that a lot of money is spent in correcting defects. We can call these costs as Cost of Poor Quality. In fact, it may not be an exaggeration to say that some of the companies have a greater cost of poor quality than their profit margins itself! Some of the critical factors that contribute to these costs can be in the form of the cost of failing to meet the expectations of the customers, the very first time. It can also arise out of the costs expended to correct the defective goods and faulty services. There is a lot of opportunity costs involved in increasing efficiencies, improving the production cycle time and a potential for higher profits. Thus it is clear that there is a lot of benefit in doing things right the first time.

Moreover it creates a positive image in the minds of the customers which can be great revenue source for the organization in terms of positive advertisement through wordof-mouth. Some of the major problems that have been affecting the quality of services

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Challenges for implementing TQM in Indian banks provided by organizations include factors such as lack of consistency in processes and procedures. There are low levels of customer satisfaction because what the customers expect is not offered by the service providers. There are also roadblocks within the organization that prevent effective implementation of quality initiatives. Apart from all of these factors, a very pressing reality is that even now there is some lack of unity between the various divisions of an organization. Together all of these contribute to poor quality as perceived in the eyes of their customers, directly resulting in poor performance.

1.6 QUALITY IN SERVICES The primary principles that govern what we refer to as quality in terms of services are given below. The customer defines quality and this is the starting point. The senior management team is responsible for taking the lead in setting the company strategy, values and culture with regard to quality. Quality depends upon the benchmarking and execution of systems and processes to a high standard. A key part of the philosophy is that of the need for continuous improvement and the need to reach for continually higher standards. Leadership in quality can only be achieved through management setting clear goals and forming the strategic and operational plans to achieve them. However it has to be ensured that there is an involvement by the employees at all levels in quality improvement activities through appropriate education, training and communication. Key parts of quality systems include designing quality into processes and error prevention. The shortening of response times for all processes is an objective of improvement efforts. Companies should communicate with and involve their suppliers in achieving their quality targets. These would be the broad parameters based on which quality is actually measured in organizations.

While howls of protest over poor customer service continue to fill the air, there remain some businesses that manage to consistently deliver superior customer service year in and year out. These are the organizations where highly motivated employees pursue customer delight with a passion; these are places that ignite a sort of contagious enthusiasm in employees and customers alike. Foremost among the lessons to be learned from such businesses are the blunders to avoid — those fatal mistakes that trip up Alliance Business Academy

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Challenges for implementing TQM in Indian banks just about everybody else. These are the things that need to be avoided so that the organization does not suffer from a poor image in the eyes of the customers. insincere; at worst, it intensifies worker resentment and cynicism. Instead of dictating what workers should be doing to delight customers, the better approach is to give workers opportunities to brainstorm their own ideas for delivering delight. It is then management’s role to help employees implement these ideas, and to allow workers to savor the motivational effect of the positive feedback that ensues from delighted customers. This level of employee ownership and involvement is a key cultural characteristic of virtually all businesses.

Secondly, businesses looking for ways to motivate their workers are almost always looking in the wrong places. Employee cynicism is the direct product of an organization’s visible preoccupation with self-interest above all else, a purely internal focus. The focus in businesses is directed outward, toward the interests of customers and the community at large. This shift in cultural focus changes the way the business operates at all levels. The reality in most business settings is that employees are demotivated because they can’t deliver delight. The existing policies and procedures make it impossible. Instead of “fixing” their employees, business set out to build a culture that unblocks them. Workers are encouraged to identify operational obstacles to customer delight, and participate in finding ways around them.

Third, businesses often use surveys and other feedback mechanisms to get to the causes of customer problems and complaints. Employees come to dread these measurement and data-gathering efforts, since they so often lead to what feels like witch-hunts

for employee scapegoats, formal exercises in finger-pointing and the

assigning of blame. However some businesses use customer feedback very differently.

In these organizations the object is to uncover everything that’s going right. Managers are forever on the lookout for "hero stories" - examples of employees going the extra mile to deliver delight. Such feedback becomes the basis for ongoing recognition and celebration. Employees see themselves as winners on a winning team, because in their workplace there’s always some new "win" being celebrated.

Fourth, it happens most of the time: something goes terribly wrong in a customer order Alliance Business Academy

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Challenges for implementing TQM in Indian banks or transaction, and a dedicated employee goes to tremendous lengths to make things right. The delighted customer

brings this employee’s

wonderful recovery to

management’s attention, and the employee receives special recognition for his or her efforts. This is a blunder? It is when such recoveries are the primary—if not the only—catalysts for employee recognition. In such a culture, foul-ups become almost a good thing from the workers’ point of view. By creating opportunities for splashy recoveries, foulups represent the only chance employees have to feel appreciated on the job. Attempts to correct operational problems won’t win much support if employees see these problems as their only opportunity to shine. Diligent businesses celebrate splashy recoveries, but they’re also careful to uncover and celebrate employee efforts to delight customers where no mistakes or problems were involved. This makes it easier to get workers participating in efforts to permanently eliminate the sources of problems.

Lastly, it’s one of the most common and perhaps most costly mistakes in business.

Price becomes the deciding factor in purchasing decisions only when everything else is equal— and everything else is almost never equal. Businesses compete on the perception of value, and this includes more than price. It’s shaped by the total customer experience and aspects such as “helpfulness,” “friendliness,” and “the personal touch” often give the competitive advantage to businesses that actually charge slightly more for their basic goods and services. Those businesses that deliver a superior total experience are typically those that enjoy a long-term competitive advantage, along with virtual immunity from the kinds of headaches that plague everybody else.

1.7.SIX SIGMA 1.7.1 CONCEPT OF SIX SIGMA Let us now turn our look towards another new development taking place in the services arena. This looks to be waiting to revolutionize the services sector for it has already done its bit in the manufacturing sector. No financial service company executive would deny superior service quality is critical to achieving customer satisfaction, value creation and growth. Yet only a handful of companies in this industry are making effective use of one of the most robust quality and cost improvement methods now Alliance Business Academy

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Challenges for implementing TQM in Indian banks available: Six sigma. This is not surprising because service organizations have historically been slow to adopt improvement methods that begin in manufacturing. Such companies often question the methods’ applicability and effectiveness. Companies with significant experience in quality and productivity improvement have found Six Sigma to be the next logical

step in their effort to achieve superior service

quality. Six Sigma helps companies less skilled at quality management develop a stronger process and customer focus and adds rigor to their quality initiatives.

The roots of Six Sigma as a measurement standard can be traced back to Carl Frederick Gauss (1777-1855) who introduced the concept of the normal curve. Six Sigma as a measurement standard in product variation can be traced back to the 1920's when Walter Shewhart showed that three sigma from the mean is the point where a process requires correction. Many measurement standards later came on the scene but the credit for coining the term “Six Sigma” goes to a Motorola engineer named Bill Smith. In the early and mid-1980s with Chairman Bob Galvin at the helm, Motorola engineers decided that the traditional quality levels - measuring defects in thousands of opportunities - didn't provide enough clarity. Instead, they wanted to measure the defects per million opportunities. Motorola developed this new standard and created the methodology and needed cultural change associated with it. Six Sigma helped Motorola realize powerful bottom-line results in their organization - in fact, they documented more than $16 Billion in savings as a result of Six Sigma efforts.

Six sigma quality became popular immediately following Motorola winning the Malcolm Balridge National Quality Award in 1988. The information package that Motorola distributed to explain their winning stated the following: “To accomplish its quality and total customer satisfaction goals, Motorola concentrates on several key operational initiatives. At the top of the list is Six sigma quality, a statistical measure of variation from a desired result. In concrete terms, Six sigma translates into a target of no more than 3.4 defects per million products, customer services included. At the manufacturing end, this requires designs that accommodate reasonable variation in component parts but production processes that yield consistently uniform final products. Motorola employees record the defects found

in every

function of the business, and statistical technologies are increasingly made part of each Alliance Business Academy

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Challenges for implementing TQM in Indian banks and every employee’s job.”

Six sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects. Like its predecessors, Six sigma asserts the following:  Continuous

effort to reduce variation in process outputs is the key to business

success. 

Manufacturing and business processes can be measured, analyzed, improved and controlled.



Succeeding at achieving sustained quality improvement requires commitment

from the entire organization, particularly from top-level management.

Sigma (a Greek letter shown as σ) is used to represent standard deviation (a measure of variation) of a population. The term "six sigma process" comes from the notion that if one has six standard deviations between the mean of a process and the nearest specification limit, there will be practically no items that fail to meet the specifications. This is the basis of the Process Capability Study, often used by quality professionals. The term "Six Sigma" has its roots in this tool, rather than in simple process standard deviation, which is also measured in sigmas. Sigma is nothing but a statistical unit of measure which reflects process capability. A company operating at one sigma would mean 7,00,000 defects per million opportunities. The same company operating at two sigma would mean 3,08,537 defects per million opportunities.

Thus the defects per million opportunities keep falling with every increase in sigma level and what six sigma refers to is literally 3.4 defects per million opportunities! What do these numbers mean to us? In reality 3.8 sigma would mean 99% efficiency! Is that not enough?

What it actually means is that operating at 3.8 sigma would mean 20,000 lost articles of mail every hour, whereas for a company having Six sigma it would be 7 lost articles per hour!

3.8 sigma would mean 5,000 incorrect surgical operations per week, whereas Six sigma would mean 1.7 incorrect operations per week! 3.8 sigma would talk of 2,00,000 wrong drug Alliance Business Academy

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Challenges for implementing TQM in Indian banks prescriptions each year, on the contrary Six sigma would bring only 68 wrong prescriptions per year! Electricity board operating at 3.8 sigma would translate to no electricity for almost seven hours each month, whereas Six sigma would mean one hour without electricity every 34 years! This makes it clear to us the significance of aiming for Six sigma Six sigma represents the culmination of a series of quality management strategies that have surfaced over the past several decades. It differs from earlier initiatives, such as Total Quality Management, in several key ways. First, Six sigma factors in customer needs and requirements into the quality specifications of a product or process (known as "Critical to Quality"). Second, unlike many traditional quality initiatives, Six

Sigma focuses on improvements across a process, rather than on individual

elements of it. And, third, Six Sigma emphasizes cost-effective business results. In fact, financial benefits are estimated before Six Sigma projects are launched, and often re-evaluated during the project to ensure the cost of improvements justifies the benefits.

On the following page is diagram showing the way multiples of sigma’s go closer and closer to the mark of perfection. With every increase in the level of Sigma there is a more than proportionate increase in the efficiency. It clearly explains to us how the accuracy changes as we go higher and higher in the sigma level.

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Challenges for implementing TQM in Indian banks

Figure 1.1: Percentages of efficiency with varying Sigma levels

1.7.2 THE 1.5 SIGMA DRIFT The ±1.5σ drift is the drift of a process mean, which is assumed to occur in all processes. If a product is manufactured to a target of 100 mm using a process capable of delivering σ = 1 mm performance, over time a ±1.5σ drift may cause the long term process mean to range from 98.5 to 101.5 mm. This could be of significance to customers. The ±1.5σ shift was introduced by Mikel Harry who founded Motorola’s Six Sigma Research Institute. Harry referred to a paper by Evans in 1975 (26) about tolerancing, which says that the overall error in an assembly is affected by the errors in components. Evans here refers to a paper by Bender in 1962 (27). He looked at the classical situation with a stack of disks and how the overall error in the size of the stack, relates

to

errors

in

the

individual

disks.

Based on “probability,

approximations and Experience", Bender suggests:

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Challenges for implementing TQM in Indian banks

Figure 1.2: 1.5 Sigma shift (Source: http://en.wikipedia.org/wiki/I mage:OneAndAHalfSigmaDrift.svg)

This is a sample chart depicting a +1.5Ďƒ drift in a 6Ďƒ process. USL and LSL refer to the upper and lower specification limits and UNL and LNL refer to the upper and lower natural tolerance limits.

Harry then took this a step further. Supposing that there is a process in which 5 samples are taken every half hour and plotted on a control chart, Harry considered the "instantaneous" initial 5 samples as being "short term" (Harry's n=5) and the samples throughout the day as being "long term" (Harry's g=50 points). Due to the random variation in the first 5 points, the mean of the initial sample is different from the overall mean. Harry derived a relationship between the short term and long term capability, using the equation above, to produce a capability shift or "Z shift" of 1.5.

Over time, the original meaning of "short term" and "long term" has been changed to result in "long term" drifting averages.

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Challenges for implementing TQM in Indian banks

Figure 1.3: 1.5 Sigma shift on Six sigma process In quality practice, 6σ means 3.4 defective parts per million (ppm). This is because the process variables have an impact on the process capability to the tune of 1.5σ (Therefore 6σ - 1.5σ = 4.5σ which is 3.4 ppm). However, 6σ is not twice as good as 3σ, but is 20,000 times better!

In a recent note from Harry, "We employed the value of 1.5 since no other empirical information was available at the time of reporting." In other words, 1.5 has now become an empirical rather than theoretical value. Harry further softened this by stating "... the 1.5 constant would not be needed as an approximation". Interestingly, 1.5σ is exactly one half of the commonly accepted natural tolerance limits of 3σ. Despite this, industry is resigned to the belief that it is impossible to keep processes on target and that process means will inevitably drift by ±1.5σ. In other words, if a process has a target value of 0.0, specification limits at 6σ, and natural tolerance limits of ±3σ, over the long term the mean may drift to +1.5 (or -1.5).

In truth, any process where the mean changes by 1.5σ, or any other statistically significant amount, is not in statistical control. Such a change can often be detected by a trend on a control chart. A process that is not in control is not predictable. It may begin to produce defects, no matter where specification limits have been set. Another concept that needs to be mentioned is Process Capability (Cp). A Process is said to be’ capable’ if it meets customer requirements and not capable if it fails meet customer requirements. It is calculated by the following formula: Alliance Business Academy

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Challenges for implementing TQM in Indian banks

1.7.3. SIX SIGMA FOR ENHANCING SERVICE QUALITY The ‘Six Sigma’ approach to improving the performance of business processes is enabling

an ever-increasing

number

of organizations to transform service

performance, enhance customer satisfaction and fatten the bottom line. Although the approach originated in manufacturing applications at Motorola, General Electric through their financial services business GE Capital subsequently demonstrated how his could be applied to service and transaction – and in doing so contributed at least $3 billion to profits over 3 years! Despite these potential benefits, there are several reasons financial services companies often adopt an “it doesn’t apply to us” mindset when it comes to Six sigma. Historically, service organizations have focused on lagging indicators of performance such as aggregate sales, revenues and operating costs.

Unaccustomed to developing and using leading indicators, which provide real-time information on how processes are performing, companies are sometimes reluctant to invest in the training needed to instill a process orientation. What these companies do not realize, however, is that such investments are recouped quickly in most cases, even when extensive training is required. Del Jones in his article (Ref. no. 24) states how GE actually invested $200 million in Six Sigma programs in 1996 and saved only $170 million in the first year. But the following year, GE’s savings from Six Sigma jumped to $700 million, and the company saved about $1 billion in 1998.

Surprisingly perhaps many manufacturers have been slower to extend the approach to their key transaction processes and operations. Indeed some manufacturers have experienced that there is more money to be saved and bigger opportunities for improved

customer

satisfaction

in

transactional

improvements

than

in

manufacturing ones. This may be in part due to previous improvement initiatives such as lean manufacturing having already addressed the issues in manufacturing. So there is considerable opportunity for gains in services for manufacturers as well as service

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Challenges for implementing TQM in Indian banks sector companies. Six sigma as a programme is probably best described as an improvement approach that seeks to improve processes to the point of near perfection.

This means that they consistently and profitably deliver outputs inclusive of goods, services and transactions to customers requirements in all but a handful of cases in a million times (strictly 3.4 defects per million opportunities). Such a high performance level is an entry-level requirement when we think of passenger safety in transportation services, but may more realistically be an aspiration when it comes to more mundane, although equally vital activities such as processing payroll cheques or employee expenses.

Probably it is the most common misconception that the be-all and end-all of Six sigma is to improve quality. But in Six sigma, improved quality is a means to an end, not the end itself. The goal is not simply to improve quality for the sake of improving quality, but to make customers happier and add money to the bottom line. If one is improving quality but still upsetting customers or losing money, we are missing the point. Six sigma scores much better than many other ‘quality’ approaches. It has a rigorous approach to understanding customer requirements and translating them into specific and measurable outputs. It aligns the ‘Voice of the Customer’ with the ‘Voice of the Process’ by improving the design and operation of key processes to consistently meet customer needs.

There is strong emphasis on management by fact and data and not merely relying on people’s opinions and experience which can be fallible. Furthermore Six sigma is focused on issues and problems important to both the business and the customer, and is delivered through manageable sized projects prioritized in line with the business’s strategy. Six sigma is results driven with a clear focus on the customer and the needs of all relevant stakeholders. Six sigma focuses on meeting the customers’ key requirement. So it is the customer who defines the key defects and not the organization. Measurement and management by fact are at the heart of six sigma process improvement activity. There is no space for gut feeling or sixth sense. It is management by facts and not by emotions.

Subir Chowdhury (Ref. no. 25) in his book says: “Six sigma does not try to manage the problem. It tries to eliminate it.”

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Challenges for implementing TQM in Indian banks

1.8. TOOLS OF TQM Having obtained the basic idea of Six sigma let us now turn our focus to some of the tools that are used in Six sigma projects. Some of them are Project Charter, Affinity diagram, cause and effect or the fishbone diagram, flowcharts, brainstorming, Control charts, histograms, Kano Analysis, Pareto charts, Poka-Yoke, Process mapping, Creativity or Out-of-the-Box thinking, Scatter Plots, Statistical Process Control, Benchmarking, Surveys, Focus Groups, Gantt charts, Activity based Costing, Gap Analysis, Moments of Truth, Cost/Benefit analysis, Continuous Improvement, Standardization and such other tools. A few of them are explained in the following section.  PROJECT CHARTER A project charter is the first step in the Six Sigma methodology. It takes place in the Define step of DMAIC, and the charter can make or break a successful project. It can make it by specifying necessary resources and boundaries that will in turn ensure success or it can break it by reducing team focus, effectiveness and motivation. Six Sigma Black Belts, Master Black Belts, and Project Champions, when embarking on a DMAIC, or DMADV, or Process Management project, need to be aware of importance of establishing a communication plan when developing and validating a team charter. A finely executed Black Belt project can suffer disappointing results if an efficient mechanism is not already in place to ensure that vital information is relayed to those members who need it.

Typically, team charters include such deliverables as a business case, problem and goal statements, scope, milestones, and roles. What should be added, perhaps in the team charter or as a separate Define phase deliverable, is a plan or strategy for communicating information that is related to the Six Sigma project to its appropriate recipients.  AFFINITY DIAGRAM The affinity diagram, or KJ method (after its author, Kawakita Jiro), wasn't originally Alliance Business Academy

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Challenges for implementing TQM in Indian banks intended for quality management. Nonetheless, it has become one of the most widely used of the Japanese management and planning tools. The affinity diagram was developed to discovering meaningful groups of ideas within a raw list. In doing so, it is important to let the groupings emerge naturally. Usually, an affinity diagram is used to refine a brainstorm into something that makes sense and can be dealt with more easily. In Seven New Quality Control Tools, Ishikawa recommends using the affinity diagram  CAUSE & EFFECT DIAGRAM The cause & effect diagram is the brainchild of Kaoru Ishikawa. The cause and effect diagram is used to explore all the potential or real causes/inputs that result in a single effect/output. Causes are arranged according to their level of importance or detail, resulting in a depiction of relationships and hierarchy of events. This can help you search for root causes, identify areas where there may be problems, and compare the relative importance of different causes. The C&E diagram is also known as the fishbone diagram because it was drawn to resemble the skeleton of a fish, with the main causal categories drawn as "bones" attached to the spine of the fish, as shown below:

Figure 1.4: Fish Bone Diagram (Source: www.isixsigma.com) Cause & effect diagrams can also be drawn as tree diagrams, resembling a tree turned on its side. From a single outcome or trunk, branches extend that represent major categories of inputs or causes that create that single outcome. These large branches then lead to smaller and smaller branches of causes all the way down to twigs at the ends. The tree structure has an advantage over the fishbone-style diagram. As a fishbone diagram Alliance Business Academy

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Challenges for implementing TQM in Indian banks becomes more and more complex, it becomes difficult to find and compare items that are the same distance from the effect because they are dispersed over the diagram. With the tree structure, all items on the same causal level are aligned vertically.

 HISTOGRAM A histogram is a specialized type of bar chart. Individual data points are grouped together in classes, so that we can get an idea of how frequently data in each class occur in the data set. High bars indicate more points in a class, and low bars indicate fewer points. In the histogram show below, the peak is in the 20-39 class, where there are five points. The strength of a histogram is that it provides an easy-to-read picture of the location and variation in a data set. There are, however, two weaknesses of histograms.

The first is that histograms can be manipulated to show different pictures. If too few or too many bars are used, the histogram can be misleading. This is an area which requires some judgment, and perhaps some experimentation, based on the analyst's experience. Secondly, histograms can also obscure the time differences among data sets.

For example, if we looked at data for number of births per day in the United States in 1996, we would miss any seasonal variations, e.g. peaks around the times of full moons.

Likewise, in quality control, a histogram of a process run tells only one part of a long story. There is a need to keep reviewing the histograms and control charts for consecutive process runs over an extended time to gain useful knowledge about a process.  KANO ANALYSIS Kano

analysis is a quality measurement

tool used to

prioritize customer

requirements based on their impact to customer satisfaction. It is used as a tool to determine which requirements are important. All identified requirements may not be of equal importance to all customers. Kano analysis can help us to rank requirements for different customers to determine which have the highest priority. It can also be used to Alliance Business Academy

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Challenges for implementing TQM in Indian banks classify and prioritize customer needs. This is useful because customer needs are not all of the same kind, not all have the same importance, and are different for different populations. The results can be used to prioritize our effort in satisfying different customers.

Figure 1.5: Creating Value to customers (Source: www.isixsigma.com)

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Challenges for implementing TQM in Indian banks.

2.1. INTRODUCTION In today’s competitive environment, banks are relying on efficiency and technology more than ever to deliver customer, shareholder and stakeholder value. Banks offer an ever-widening range of financial products through constantly expanding branch networks. To successfully market new products like investments and insurance, banks and financial institutions now find themselves cross-training branch employees for a much wider variety of roles. For a bank to make sure it has the right people with the right skills available at the right time is a growing challenge.

Optimizing staff levels is only one example of the challenges that banks and financial institutions face as they struggle to improve branch-customer satisfaction while simultaneously reducing costs. Today's customers demand a positive service experience - accurate, friendly and fast - every time. If they don't get it, they won't hesitate to defect to a nearby competitor. Six sigma is the new buzz word that is doing the rounds not only in the manufacturing firms but even in service organizations, it promises to transform the way in which services are rendered. The Six sigma methodology can help reduce the amount of wasted time and resources as well as reduce cycle time to create banking applications. Perhaps the greatest strength of the Six Sigma method is that it produces objective, measurable results that can be monitored continuously.

This study, limited to banks in India, reveals that only three banks have implemented concept of six sigma in their operations while a majority of others are seriously considering this initiative in order to achieve world class service quality. A small minority of the sample studied indicated significant shortcomings in their readiness to initiate this concept

2.2. LITERATURE REVIEW Arthur J. Adams et al (1) conducted a survey of ASQ (American Society for Quality) members, both quality professionals and educators, on their perceptions regarding management philosophies. The study focused on perceptions of Traditional Management (TM) theories versus Total Quality Management (TQM) and Constraint Management (CM) approaches. Once the authors established that respondents view the three philosophies of management as largely separate and distinct approaches, they also Alliance Business Academy

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Challenges for implementing TQM in Indian banks. investigated whether there were differences in views between educators and practitioners.

Results showed that educators and practitioners do differ along several dimensions. In general, respondents were most familiar with the TQM philosophy, although TM is still the dominant philosophy in most respondents' organizations. Finally, CM is gaining a foothold in certain areas such as production and inventory management, but the researchers concluded that it's too early to predict whether a paradigm shift to CM is in progress. Thus the paper presents an insight into the changing realities that organizations have got to face and cope up with. Ideas such as Total Quality Management are fast gaining hold in the lives of organizations, and firms will have to stand up to the growing demands of the modern age and be at par with the trends in vogue in the field of business.

Victor B. Wayhan et al (2) state that Total Quality Management (TQM) is arguably one of the most pervasive management strategies of the last several decades.

Given the ubiquitous nature of TQM, many attempts have been made to ascertain the impact that this strategy has had on subsequent financial performance. Key studies in the TQM- Financial Performance research stream are reviewed, including the most recent, which have generally brought increased rigor with each new project. Since the

particular research stream now includes hundreds of studies, only the most

relevant and important are reviewed. This review proceeds in the following order: anecdotal

research, practitioner-sponsored empirical research, individual TQM

dimensions and financial performance, and the entire TQM construct and financial performance. A brief review is provided regarding the major methodological limitations inherent in these studies and how future research can address them concludes this review. Thus this is a purely empirical study that states a large number of facts in different permutations and combinations that ultimately go to show the benefits that TQM programmes bring in terms of financial benefits. Of course there are a whole lot of other benefits that come along with such programmes but which are not directly measurable in terms of financial benefits, nevertheless these benefits continue to accrue to organizations bent on providing better and better quality to its customers. The conclusion obtained from this study is that despite two decades of research, the relationship between TQM Alliance Business Academy

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Challenges for implementing TQM in Indian banks. and financial performance is still controversial. In fact, both proponents and detractors can marshal an array of studies that provide support for their respective positions.

Methodological limitations and differences between studies are often cited as the predominant reason for the varied results.

K. Hafeez et al (3) provide an analysis of the essential characteristics of the TQM philosophy by comparing the work of ten notable authors in the field. A framework is thus produced which clusters the identified TQM enablers under the wellknown operations management dimensions of technology, organization and people.

These enablers are linked with business performance via balance scorecard type financial and non-financial measures. In order to capture a snapshot of European Companies efforts to implement the TQM, a questionnaire survey is designed and implemented. Results of the survey are presented showing the main differentiating factors between the sample companies, and a way of assessing the difference between the theoretical underpinning and the practitioners' undertakings. Survey results indicate that organizations are experiencing much difficulty in translating Total Quality Management theory into practice. Only a few organizations have successfully adopted a holistic approach to Total Quality Management philosophy, and most of these put relatively high emphasis on technology elements compared with soft issues of TQM. However, where companies can realize the financial outputs, the non-financial benefits such as workflow management, skills development and team learning are not realized.

In addition, overall, non-financial measures have secured low weightings compared with the financial measures. The authors believe that the framework presented in this paper can help an organization to concentrate its TQM implementation efforts in terms of technology, organizational and people management dimensions.

Tom Albright et al (4) believe that the role of management accountants has evolved from measuring and reporting business activities to participating with other disciplines in designing and implementing improvement initiatives. The recent years have witnessed an explosion of programs designed to increase quality, reduce costs, and improve

firm performance. Some researchers have argued there is no universally

appropriate management system. Yet the market continues to develop new initiatives, promising if the new system is implemented or specific tools are adopted, improved Alliance Business Academy

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Challenges for implementing TQM in Indian banks. firm performance. This article builds a framework for understanding differences and similarities among various initiatives such as Just-in-time (JIT) management, Total Quality Management (TQM), Kaizen, Kanban, Lean production, Statistical Process Control (SPC), Theory of Constraints (TOC),

Target

Costing,

Process Re-

engineering, Benchmarking, Activity- based Costing/Management (ABC/M), Balanced Scorecard (BSC), Six Sigma and Mass Customization. They also identify the historical and economic environment that contributed to the development of each of these initiatives.

The authors consider the evolution of management initiatives in response to changes in the global competitive environment. Finally, they illustrate a framework useful for understanding the relationships among various improvement initiatives.

John P. Kotter (5) believes that businesses hoping to survive over the long term will have to remake themselves into better competitors at least once along the way. These efforts have gone under many banners: Total Quality Management, reengineering, rightsizing, restructuring, cultural change, and turnarounds, to name a few. In almost every case, the goal has been to cope with a new and more challenging market by changing the way business is conducted. A few of these endeavors have been very successful. A few have been utter failures. However, most fall somewhere in between, with a distinct tilt toward the lower end of the scale. John P. Kotter is renowned for his work on leading organizational change. In 1995, when this article was first published, he had just completed a ten-year study of more than 100 companies that attempted such a transformation. Here he shares the results of his observations, outlining the eight largest errors that can doom these efforts and explaining the general lessons that encourage success. Unsuccessful transitions almost always make a mistake during at least one of the following

phases: generating

a sense of urgency,

establishing a powerful guiding coalition, developing a vision, communicating the vision clearly and often, removing obstacles, planning for and creating short-term wins, avoiding premature declarations of victory, and embedding changes in the corporate culture. Realizing that change usually takes a long time, says Kotter, can improve the chances of success.

Sandra

Waddock

et

al

(6)

present

a

comparison

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emerging

Total 28

Challenges for implementing TQM in Indian banks.

Responsibility

Management

(TRM)

approaches

with

existing

Total

Quality

Management (TQM) approaches, focusing on initial responses to managing quality.

They even deal with the skepticism about responsibility management approaches that often exist in organizations. Another aspect that they deal with is the common values underlying

both

quality

and

responsibility

management

systems.

Corporate

responsibility is defined as the ways in which a company's operating practices i.e. the policies, processes, and procedures affect its stakeholders and the natural environment.

Managing responsibility, however, is more complex than managing quality. There are several elements in responsibility management approaches that differ from quality management systems.

Thus they go on to say that a quality movement well done will guide the management regarding the effective handling of responsibility in organizations. Moreover such quality initiatives always go a long way in providing direction and continuous guidance to the people of the organization to better their products and services, in turn directly benefiting and delighting the customer which is actually the very core of sensible business.

Hsin Hsin Chang (7) examines the use of performance measurement techniques as the basis for the development of reward and recognition mechanisms in Total Quality Management. Two phases of fieldwork were undertaken, an in-depth case study of the effectiveness of performance measurement in promoting continuous improvement, followed by the development of a model of optimal total quality based performance measurement. Successful performance measurement systems tend to develop empirically, ensuring congruence between all elements of the measurement system, and involving all enterprise operations in the measurement process. They should form an integral part of an organizational information management strategy, progressively integrating customers and supplier systems and impacting all aspects of organizational culture. Thus the very culture of continuous improvement inspires the organization to develop and continuously improvise its processes that provide better and better quality to the main link in the service process namely the customer. Thus the very culture of change accelerates the intensity with which TQM programmes are implemented.

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Challenges for implementing TQM in Indian banks.

Daniel I. Prajogo et al (8) present a study which explores the relationship between total quality management (TQM) practices and organizational culture. The empirical data was acquired from 194 organizations in Australia. The research model uses the Malcolm Baldrige National Quality Award criteria as TQM framework and builds on the competing values model to frame organizational culture. The data was analyzed using structural equation modeling technique. The study's results support the pluralist view, in which different subsets of TQM practices are determined by different cultures.

The major implication of this finding is that organizations need to accommodate divergent goals by developing a system and structure that allows enough flexibility for adapting different at times even contrasting management styles, hence, swinging comfortably between control and flexibility and between internal and external orientations. Finally, this study considers organizational culture as the antecedent of TQM practices. The findings of the study provide evidence of the need for managing multidimensional elements within TQM that reflect multidimensional cultures.

Mark R. Testa et al (9) in their article tell us that rather than take the usually futile approach of repeatedly addressing the symptoms of service problems, managers should dig deeper until they reach the root causes of those problems. Even better is to enlist employees’ participation in determining the causes. To that purpose, managers could apply the time-tested approaches from Total Quality Management and systems thinking, i.e. repeatedly asking why until the cause is revealed and process flowcharting namely creating a timeline of the service process. The process of listing hot spots and touch points can help work groups see where problems exist i.e. the hot spots and identify chances to impress guests with excellent service at the touch points. Managers can also use an employee-tools grid, which lists specific steps that can be taken to improve service in any of the following five categories: (1) Define and communicate issues, (2) Train and educate employees, (3) Improve processes, (4) Evaluate results and provide feedback, and John A. Dotchin et al (10) in this article describe an investigation, in different types of services, of relationships between customers’ perception of service quality, and the importance which customers attach to elements of the service package. The scale for Alliance Business Academy

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Challenges for implementing TQM in Indian banks. measuring service quality, SERVQUAL, was used to assess both the quality and the importance of each of the dimensions: tangibles, reliability, responsiveness, assurance and empathy. The attributes of service operations namely labour intensity, contact,interaction, customization, service recipient and nature of the service, were used

to classify the sample. The influence of each of these attributes on quality

perceptions was also assessed. The investigation was designed to answer two broad questions: the first about the differences in consumers’ quality perceptions between services, and the second dealing

with the different

relative

importance which

dimensions of services have in formulation of consumers’ perceptions of service quality. The survey analyses support a number of conclusions. Many corroborate the concepts and principles raised in earlier work. Some other tentative conclusions, which have not been expressly stated in other work, provide potential areas for further study and for possible verification.

Daniel I. Prajogo (11) in this paper seeks to examine the difference between manufacturing and service firms with respect to the implementation of total quality management (TQM) practices, and the relationship of these practices to quality performance. The empirical data were collected from 194 managers of Australian firms with an approximately equal proportion of manufacturing and service firms. The findings indicate no significant difference in the level of most of TQM practices and quality performance between the two sectors. This supports the positive argument concerning the applicability of TQM practices in the service firms despite several differences in the nature of their operations compared to their manufacturing counterparts. Furthermore, using structural equation modeling (SEM) technique, this study has shown that TQM construct based on the Malcolm Baldrige National Quality Award (MBNQA) criteria is valid across both industry sectors, and its relationship with quality performance also indicates insignificant difference between the two sectors. The practical implications of this study from a managerial point of view is that the results confirm the applicability of TQM principles in both manufacturing and service sectors and the validity of the MBNQA criteria in operationalising TQM principles

into

a set of organizational practices. The study contributes to the

knowledge in terms of cross-validating the TQM construct in the manufacturing and service sectors. It also differentiates from the earlier studies in the area by Alliance Business Academy

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Challenges for implementing TQM in Indian banks. simultaneously testing the TQM construct and its relationship with quality performance in both sectors. Thus both quality and performance have been given the right focus and analyzed in detail. Once that has been looked into, it becomes very much easier for organizations to draw lessons that can help them serve better and grow better.

Forrest B. Green (12) in this paper suggests that Total Quality Management (TQM) is undergoing a revival under a new name- Six-sigma. Many organizations have discovered that such methodologies under appropriate leadership can be applied in such a way as to restore the strength of quality initiatives. Six-sigma provides a highly disciplined approach to quality improvement, assures follow-through using a five step process, namely Define, Measure, Analyze, Improve and Control, simply referred to as DMAIC. It very clearly assigns personnel responsibility as well apart from providing guidance and support. Specific customer oriented metrics are identified and tracked until a control system is in place to maintain the improved processes. All required features of TQM are found in the correct application of six-sigma. Thus the author goes son to explain that Six sigma is not an alien idea. The very nature of a Six sigma initiative is to enhance the quality and perhaps the same thing is found in TQM. Thus the author confirms that all that TQM stands for is well covered by Six sigma and the difference is that Six sigma goes on to the next level of intensity of implementation of TQM initiatives. Thus Six sigma comes to be like a superset of TQM, covering within itself everything that TQM claims to achieve and goes much beyond the coverage of TQM. Peter J. Sherman et al (13) in this article discuss the ways in which every company can use the Six sigma management tool to better evaluate and manage their business operations through a focus on the customer and relevant data. Though the vast majority of Fortune 500 companies utilize the system, few small and medium-sized companies use it, despite the fact that it would be hugely beneficial for them. The authors examine the common attributes between small firms that use Six sigma to discover the ways in which it can be maximized by all businesses. Thus they believe that Six sigma is not something only for the large organizations to implement. They strongly feel that even small sized organizations can very much implement these tools as they too will benefit Alliance Business Academy

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Challenges for implementing TQM in Indian banks. from the advantages arising out of such quality initiatives. The biggest worry of the financial ability of a company to manage the costs associated with Six sigma programmes is perhaps one of the factors that influence small organizations to not take up such programmes. Here the authors study to characteristics that

find

out

some of the

are common with small organizations that undertake process

improving tools such as TQM and Six sigma.

Sophronia Ward et al (14) in this article discuss the launch of Six sigma initiative, which restructures the role of the quality department. Six sigma management is divided into several areas such as, the Six sigma management, the management of projects within the Six sigma initiative and the management of everyday business activities during a Six sigma initiative. The launch of the initiative has changed the focus to reduce the defects in an organization's products and services by improving the process against inspection. Thus the authors try to impress the fact that only in a world of Six sigma, with the exacting rigor of Six sigma measures, quality in its true sense will prevail. All other means will only go somewhere close to the needed change. However Six sigma in a way hits the nail on its head when it comes to improving the quality of products and services of organizations.

Louise Davison et al (15) did a research to investigate empirically the influences on quality culture development, with particular reference to a Six sigma management programme. Questionnaires were designed to measure organizational factors, including the use of proposed cultural change agents, and relative quality culture development. 15 organizations of varying types were then surveyed. The Six sigma group was found to have higher mean scores for all quality culture dimensions, and also had slightly stronger i.e. homogeneous cultures. Organizational factors having significant relationships with the development of a quality culture were found to be a demonstration of management commitment to quality, creating awareness of quality, training, employee participation, and performance evaluations based on quality-related criteria. Six sigma organizations, on average, scored higher on these factors than did non Six sigma organizations. Hence, it was concluded that a Six sigma management programme may play a part in the development of a quality culture.

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Challenges for implementing TQM in Indian banks.

Kim Buch et al (16) in this paper examine employee perceptions of the rewards associated with their participation in a Six sigma program. Six sigma is an approach to organizational change that incorporates elements of Total Quality Management, business process reengineering, and employee involvement. A survey was completed using 215 employees with a 34 percent response rate. Respondents rated the extent to which they felt their participation in Six sigma was ‘instrumental’ for a range of outcomes, as well as desirability of each outcome. The outcomes were classified into four categories: extrinsic, intrinsic, social, and organizational. The findings were that the valence ratings revealed that all 12 outcomes were perceived as desirable. Instrumentality ratings showed that extrinsic outcomes were rated significantly lower than intrinsic, social, and organizational outcomes. Additional analyses revealed significant differences on all four outcome categories between participants and non-participants in the Six sigma program.

The practical implications of this study point out that the positive valence and instrumentality ratings for participants indicate that they believe in the fact that their participation will lead to valued outcomes for themselves and their organizations.

However, employees who choose not to get involved in Six sigma do not perceive that their participation would have led to desired outcomes. The results also show that while participants value extrinsic rewards, they do not see Six sigma as instrumental in their receipt. These perceptions have important implications for attracting and retaining program participants.

Originality or value provided by this study is that while much has been written about the use of reward systems in supporting a successful Six sigma effort, this study empirically examines how employees actually perceive the rewards associated with their participation. It also identifies which types of rewards are most instrumental for participants to perform better for the benefit of themselves and their organizations.

R. Eric Reidenbach et al (17) in this article discuss the framework and approach for aligning the Six sigma initiatives and competitive strategy of an organization.

According to the authors, Six sigma initiatives are the most useful strategies at the Alliance Business Academy

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Challenges for implementing TQM in Indian banks. competitive level. They cite that most organizations have three levels of strategy: corporate,

strategic business unit and competitive. In addition, they suggest that

listening to customers and directing projects toward improvements will set an organization ahead of its competitors. Thus they take a good look at the structure of organizations and how they affect the company and strategies implemented provide the direction in which the company moves. They try to emphasize on the fact that strategy of an organization is very important and any slips on this front can turn out to be hazardous to the organization. Keeping in mind the strategies of the organization, the Six sigma initiatives have to be add-ons and they must be in sync with each other. It is then that synergistic effects will arise out of having good strategies along with right quality initiatives.

Peter Carlivati (18) summarizes the Six Sigma methodology used by large, national banks in the U.S. to improve such functions as operations and customer service. It explains the concept of Six Sigma and its applications in manufacturing, service or other business processes. It compares Six Sigma from other quality management strategies such as the Total Quality Management. It explores the application of the Six Sigma in the banking industry, as well as its implications for bank marketing. Thus the author tries to impress upon us the fact that concepts such as TQM and Six sigma are applicable to institutions such as banks, where it is generally more difficult to have measures for checking quality. Perhaps the first thing that needs attention is that organizations have got to believe that it is possible to enhance quality of services as much as it is possible to monitor and enhance quality of production. After that it gets more convenient for organizations to implement the ideologies of TQM and then improvise to Six sigma.

Mohamed Mustafa (19) in this article tries to solve the trade-offs between marketing and R&D domains and to minimize information loss in new product development (NPD).

This study proposes an integrated design process as a new solution to the interface system between the two domains. The house of quality integrated with multivariate statistical analysis is used for determining important design features. These design features are used as parameters for conjoint analysis and Taguchi method, and then the Alliance Business Academy

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Challenges for implementing TQM in Indian banks. results of analyses are compared. Sequential application of conjoint analysis and Taguchi method is done, depending on the differences in utilities and signal to noise ratios, and that is applied for the integrated design process. An automotive interior design is illustrated for the validation of the integrated design process.The findings are that the integrated design process determines a point of compromise between the optimums of conjoint analysis and Taguchi method. Sequential application of two methods ensures full utilization of both methods and there is no loss of information. The practical implications are that the design process suggested in this study can be used for process innovation in Six sigma approach and can be integrated with value chain intelligently. This study proposes the strategic guideline of the integrated design process for enterprises which is to find a solution that is a trade-off between marketing domain that pursues the utility of product and R&D domain that emphasizes robustness

of product quality. This integrated design process will give enterprises

competitive advantages in NPD.

Rochelle Rucker (20) in this article on Citibank, a Citigroup company, says that the organization has set a goal to be the premier international financial company in the next millennium. To achieve this clearly ambitious goal, the global giant had to implement quality initiatives that

satisfied customers quickly and

flawlessly at

every

interaction anywhere in the world. Six Sigma quality was always in the domain of the manufacturing arena - could it work in the service industry? Could it work worldwide for a financial organization? Citibank undertook this challenge to improve total customer satisfaction by investigating well-known manufacturing management theories and attempted to apply them to their own nonmanufacturing environment.

Methodologies like cycle time reduction (CTR), coupled with the detection of defects using Six Sigma methods and implemented globally by using empowered teams, have resulted in significant improvements in process timelines, cash management and customer loyalty and satisfaction.

Dennis Attenello et al (21) say that no financial service company executive would deny superior service quality is critical to achieving customer satisfaction, value creation and growth. Yet only a handful of companies in this industry are making effective use of one of the most robust quality and cost improvement methods now available: Six Sigma.

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This is not surprising because service organizations have historically been slow to adopt improvement methods that begin in manufacturing. Such companies often question the methods’ applicability and effectiveness. Their work with financial services firms, however, indicates this is an approach whose time is now here. Both a blueprint and toolkit for improving the business processes, Six Sigma is helping its early adopters in financial services successfully streamline processes, increase quality and accelerate growth. These are impressive results in an industry that continues to consolidate, where new sources of competition are constantly emerging and where the need to meet high customer expectations and compete in a global marketplace are the new business realities. Six Sigma helps companies less skilled at quality management develop a stronger process and customer focus and adds rigor to their quality initiatives. Though there are challenges to applying Six Sigma methods in a financial services environment, companies such as GE Capital, Bank of America and JPMorgan Chase have taken the plunge. GE Capital’s productivity and quality improvement results have been impressive. Bank of America and JPMorgan Chase have also made executive level commitments to use Six Sigma as their engines for achieving world class service quality and billion dollar expense savings.

Soren Bisgaard et al (22) in this article focus on the next step in quality standards and management after Six sigma. Total quality management has morphed into Six sigma's current incarnation. Walter Shewhart's fundamental principle was the use of a systematic scientific approach to dealing with problems of variability that caused costly defects and quality problems. It has been assessed that the next step for quality professionals should be systematic innovation, which has been collectively termed by cynics as Seven Sigma. Systematic innovation involves carrying out a carefully managed sequence of steps using appropriate tools and roadmaps to improve an organization's competitive position, satisfy customers and reduce costs. Thus this paper is futuristic to the extent that it talks of a trend to grab headlines in the future.

It directly gives the understanding that even Six sigma will have its own shortcomings that need to be looked after. So in a way sooner or later the world will have to grow out of the Six sigma world and perhaps take a look at other better means of looking at quality.

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Frick (23) The study concluded that an organizational culture based on employee involvement, effective use of systems / procedures and technology, top management commitment and involvement of all levels of management facilitates the implementation of TQM in the banking sector

Pong et al. (24) While using the well established 5 point scale of Taylor and Baker of customer satisfaction, they concluded that perceived quality has a positive impact on customer satisfaction which eventually leads to service loyalty. The relationship between quality and customer satisfaction was supported with several empirical studies (Gotlieb et al., 1994; Lassar et al., 2000; Ostrowski et al., 1993; Spreng and Mackoy, 1996).

Nagware et al. (25) They examined the extent of TQM practices in secondary schools of Kenya. A convenient sample was drawn and data collected through a questionnaire developed on the basis of four following tenets of TQM: • Leadership • Empowerment • Strategic quality planning • Human resource development The study pointed out leadership not promoting TQM practices necessary for continuous improvement in schools. As far as employee empowerment is concerned, only a few head teachers were found empowering their employees. The majority of the schools were not committed to strategic quality planning. However, efforts were being made to promote and develop human resources.

Based on the significance of TQM as established in the literature review and based on knowledge of tangible benefits that are derived from its implementation in the banking sector abroad (as described hereinafter), it was concluded that a brief study on Challenges for implementing TQM in Indian banks would be appropriate, timely and possibly of some interest to this sector in India.

2.3. STATEMENT OF PROBLEM

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Challenges for implementing TQM in Indian banks.

This study has been taken up to understand the applicability of TQM and six sigma concepts in the banking sector. The concepts have for long remained in the manufacturing sector and thus the services industry has not been able to benefit from the same. However, of late companies have begun to realize what they missed until now and hence they are now beginning to make up for their delay.

Citibank began its quality training initiative in 1997. From May 1999 to October 1999, more than 650 senior managers were trained. Between November 2000 and the end of 2001, another 7,500 employees attended sessions as part of senior-manager-led teams. By early2002, 92,000 employees worldwide had been trained.

Citibank's goal of becoming the premier international financial company in the next millennium will require a devotion to excellence on the part of every employee. The goal is ambitious, but Citibank has implemented quality initiatives to make certain that it satisfies customers flawlessly and quickly at the point of every interaction anywhere around the world. By making innovative use of information technology and operations management through Six Sigma and TQM, employees are working faster and creating high levels of customer satisfaction. How ever implementing TQM in an environment not accustomed to improvement has naturally had its challenges only NEW age banks are becoming more quality and cost-conscious; six sigma is increasingly getting popular, only among these banks and is not widely used by other nationalized banks. This study is undertaken to study the various challenges in successful implementation of TQM in Indian banks.

2.4. OBJECTIVES OF THE STUDY The objectives of the study were: 1. To Ascertain the Need of TQM tools and techniques in indian banks 2. To study the extent to which Indian banks are equipped to implement TQM and six sigma concepts.

3. To study various process requirements needed to implement TQM in banks 4. To understand various challenges in successful implementation of TQM in banks.

2.5. SCOPE OF THE STUDY Alliance Business Academy

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The study specifically focused on the scenario in the banking sector in India. I n t h i s s t u d y i n f o r m a t i o n f r o m a t o t a l o f 1 0 b a n k s w e r e t a k e n a n d a n a l ys e d , a n d m a j o r i t y o f t h e m w e r e p u b l i c s e c t o r I n d i a n b a n k s . It attempts to study the applicability and various challenges of TQM and Six sigma concepts in Indian banks. It also aims to find out the current state of affairs that define readiness of Indian banks in the implementation of TQM.

2.6. RESEARCH METHODOLOGY The procedure of carrying out this research will be:

2.6.1 TYPE OF STUDY: The study was an exploratory study, as a new topic or issue has been explored in order to learn more about it and results will be used in developing specific techniques for further studies. The process of research will be more investigative in nature and of a qualitative type. The validity of known theories and models will be tested making the research an applied study.

2. 6.2 TYPE OF DATA: Objective 1. To Ascertain the Need of TQM tools and techniques in Banks •

The complaint per branch data for banks

•

The loan sanctioning cycle time for various banks.

•

The cheque clearing Time for various banks

Objective2: To study the Extent to which Indian banks are equipped to implement TQM and six sigma concepts..

•

The level of process documentation data for various banks.

•

Data relating to Employees understanding of processes.

•

Problem solving techniques used in banks.

•

Data relating to employees understanding toward their values, mission and vision statements.

•

Data regarding senior management support towards quality initiatives.

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•

Data regarding the organizational culture of various banks.

•

The TQM blueprints of various banks

Objective3: To study various process requirements needed to implement TQM in banks •

Data regarding Factors contributing to the Quality of service.

•

Number of banks having TQM or Quality departments in their banks.

•

The vision and mission statements of various banks

•

The critical success factors and KPIs used by various banks.

•

Bench marking process for various banks

•

The training strategy and plan for various banks

•

Evaluating the training manual for different banks.

Objective4: To understand various challenges in successful implementation of TQM in banks • To study the various challenges to implement TQM in banks.

• To study the level of employee empowerment in various banks • To rate the factors which impede the implementation of TQM in Indian banks.

Primary data: The primary data, was collected from the officials of various commercial banks. The data includes the level of process documentation for various banks, Data relating to Employees understanding of processes, Problem solving techniques used in banks Data relating to employees understanding toward their values, mission and vision statements, Data regarding senior management support towards quality initiatives, Data regarding the organizational culture of various banks.

2.6.3. METHOD OF COLLECTING PRIMARY DATA : Survey method was used to collect the required primary data for the research .It Included interviewing the officials of various commercial banks using structured Questionnaire. The questionnaire was framed based on four objectives of the study The responses for these questions throws light for the problem statement i.e.,

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Challenges for implementing TQM in Indian banks.

Challenges for implementing TQM in Indian banks.

2.6.4. TYPE OF SURVEY: As there are 118 commercial banks located all over India and about 27 public sectors bank in India. It is difficult to obtain data from each and every bank, and more over every bank has similar processes, structures, banking operations in place. The research was carried out using sample survey technique. In that out of the population of 118 commercial banks 10 samples were used to represent the total population, out of which 8 banks were public sector banks like SBI, Syndicate, OBC(Oriental bank of commerce), Bank of India, Union bank of India, United bank of India, Dena bank and Bank of Baroda . 1 bank was private sector bank i.e. HDFC bank and 1 regional rural bank i.e. Pragathi Gramin bank.

2.6.5. SAMPLING PLAN: -Sampling Method: Judgmental based convenience sampling method is used for my study, convenience sampling generally assumes homogenous population, as every bank has similar processes ,operations and structures in place there is a homogeneity among all banks. Thus it is justified to take convenience sampling method. And also not every branch manager is completely aware of these quality tools. So certain discretion is made to select the branches of various banks.

-Sampling size: 10 Indian banks from all over India were selected as samples for my study. Out of these 10 banks 1 bank was Private bank and 8 banks were public sector banks.8 Public sector banks were selected to know various challenges that these banks are facing for implementing TQM in there banks as many of the Public sector banks in India has not implemented TQM in their banks.

2.6.6. TOOL(S) FOR DATA COLLECTION: The tool used to collect the primary data was structured questionnaire. The structured questionnaire will be a proforma containing a set of questions, from which I will be able to extract the data that could answer the objectives of my study.

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2.6.7.TECHNIQUES OF ANALYSIS: Objective 1. To Ascertain the Need of TQM tools and techniques in Indian banks .

Data regarding complaint per branch, loan sanction cycle time and cheque clearing cycle time for various banks were collected and analysed and inferences are drawn.

Objective2: To study the Extent to which Indian banks are equipped to implement TQM and six sigma in banks in India.

In order to find out the Extent to which Indian banks are equipped to implement TQM in Indian banks a process readiness tool was used based 8 parameters and weighted average of these parameters are used to calculate the process readiness score for these objective.

Objective3:To study various process requirements needed to implement TQM in Banks

weights

1

2

3

4

5

Physical aesthetics Post service relations Flawless service Timely service customer relations

0 0 0 0 0

1 0 1 0 1

2 3 3 1 2

3 3 5 5 5

4 4 1 4 2

weighted Rankings average 4.0 3 4.1 2 3.6 5 4.3 1 3.8 4

In order to find the order of various process requirements needed to implement TQM a weighted average method was used .based on the scores of weighted average the ranking are given as shown in the above table.

Objective4: To understand various challenges in successful implementation of TQM in banks In order to find out the Factors which impede the implementation of TQM different Alliance Business Academy

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Challenges for implementing TQM in Indian banks. factors have been listed in the questionnaire, based the frequency for each factor weighted average was calculated and ranked in the order of their score.

2.7. LIMITATIONS OF THE STUDY 1. The sample taken for study is relatively small given the large number of banks that Exists in India.

2. The sample selected is mainly limited to the Public sector banks.

3. The challenges for TQM implementation were found out from the bank managers of various banks and no effort is made to find out from top management regarding challenges for TQM implementation.

2.8. CHAPTER SCHEME CHAPTER 1: INTRODUCTION This chapter provides a brief introduction to Quality. Here the importance of quality in goods and services with respect to the customer is highlighted. The current scenario with regards to quality in organizations is also seen.

CHAPTER 2: RESEARCH DESIGN This chapter contains a brief introduction to the subject background, statement of the problem, scope of study, objective of study, methodology of research project, tools for collection of data (primary and secondary sources), the techniques of analysis, and the limitations of the study.

CHAPTER 3: PROFILES This chapter includes the introduction to the Banking industry starting with a brief description of the industry, the present Indian scenario, major participants in the industry.

The future prospects of the industry will also be explained.

CHAPTER 4: CHALLENGES FOR IMPLEMENTING IN INDIAN BANKS – AN ANALYSIS. This chapter deals with the analysis and findings from the study. The responses of the Alliance Business Academy

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Challenges for implementing TQM in Indian banks. questionnaire have been analyzed in this section. Probable explanations for the answers are also provided. The questions were designed to understand the various parameters based on which an organization can finds it difficult to implement TQM in their operation process.

CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSIONS & SUGGESTIONS This chapter will provide a summary of the findings, suggestions, & conclusions from the analysis of data.

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3.1 INDIAN ECONOMY India has been one of the best performers in the world economy in recent years, but rapidly rising inflation and the complexities of running the world’s biggest democracy are proving challenging. India’s economy has been one of the stars of global economics in recent years, growing 9.2 percent in 2007 and 9.6 percent; in 2006. Growth had been supported by markets reforms, huge inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a flourishing capital market.

Like most of the world, however, India faced testing economic times in 2008. The Reserve Bank of India had set an inflation target of 4 percent, but by the middle of the year it was running at 11 percent, the highest level seen for a decade. The rising costs of oil, food and the resources needed for India’s construction boom all played a part.

The Indian stock market had fallen more than 40 percent; in six months from its January 2008 high. $6billion of foreign funds have flowed out of the country in that period, reacting both to slowing economic growth and perceptions that the market was over-valued.

As

a

result of the financial crisis of 2007–2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7% in 2008–09, but subsequently recovered to 7.2% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. India’s current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2009–2010, according to the state Labour Bureau, was 9.4% nationwide, rising to 10.1% in rural areas, where two-thirds of the 1.2 billion population live.

It views investment in the creaking infrastructure of the country as being a key requirement, and has ear-marked 23.8 trillion rupees, approximately $559 billion, for infrastructure upgrades during the 11th five year plan. It expects to fund 70 percent; of project costs, with the other 30 percent being supplied by the private sector. Ports, airports, roads and railways are all seen as vital for the Indian Economy and have been targeted for investment .

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3.2. RECENT GROWTH TRENDS IN INDIAN ECONOMY India’s Economy has grown by more than 8 percent over the last few years, and has seen a decade of 7 percent; growth. This has reduced poverty by 10 percent but with 60 percent of India’s 1.21 billion population living off agriculture and with droughts and floods increasing, poverty alleviation is still a major challenge.

During this period of stable growth, the performance of the Indian service sector has been particularly significant. The growth rate of the service sector was 8.7 percent in 2010 and now contributes 57.2 percent of GDP. The industrial sector grew 10.63 percent in the same period and is now 28.6 percent of GDP. Agriculture is 14.6 percent of the Indian economy.

Growth in the manufacturing sector has also complemented the country’s excellent growth momentum. The growth rate of the manufacturing sector rose steadily from 8.98 percent in 2005, to 12 percent in 2006. Manufacturing, which bore the brunt of the slowdown that began in 2008-09, grew by 12.4 per cent during April-June, 2010, against 3.8 per cent in the same period last fiscal. The storage and communication sector also registered a significant growth rate of 16.64 percent in the same year.

Additional factors that have contributed to this robust environment are sustained in investment and high savings rates. As far as the percentage of gross capital formation in GDP is concerned, there has been a significant rise from 22.8 percent; in the fiscal year 2001, to 35.9 percent in the fiscal year 2006. Further, the gross rate of savings as a proportion to GDP registered solid growth from 23.5 percent to 34.8 percent; for the same period. The country's per capita GDP (PPP) is $3,339 (IMF, 129th) in 2010.

3.3. HISTORY OF BANKING INDUSTRY IN INDIA For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India.

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Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: •

Early phase from 1786 to 1969 of Indian Banks

•

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

•

New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

PHASE I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. .

During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority.

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During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

PHASE II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of Nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised. Second phase of Nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: •

1955 : Nationalization of State Bank of India.

•

1959 : Nationalization of SBI subsidiaries.

•

1969 : Nationalization of 14 major banks.

•

1971 : Creation of credit guarantee corporation.

•

1975 : Creation of regional rural banks.

•

1980 : Nationalization of seven banks with deposits over 200 crore.

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After the Nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

.

Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

.

PHASE III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimhan, a committee was set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

3.4.OVER VIEW OF INDIAN BANKING SECTOR Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. A banker or bank is a financial institution that acts as a payment agent for customers, and borrows and lends money. Commercial lending today is a very intense activity, with banks carefully analyzing the financial condition of their business clients to determine the level of risk in each loan transaction. The name bank derives from the Italian word banco "desk/bench", used during the Renaissance

by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times. In fact, the word traces its origins back to the Ancient Roman Empire, where Alliance Business Academy

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Challenges for implementing TQM in Indian banks. moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome- that of the Imperial Mint.

Thus a bank is defined as a person who carries on the business of banking, which is: 

Conducting current accounts for customers



Paying cheques drawn on him, and



Collecting cheques for his customers.

Banks borrow money by accepting funds deposited on current account, accepting term deposits and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current account, by making installment loans, and by investing in marketable debt securities and other forms of lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.

The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years.

Banks acts as payment agents by conducting current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to the customer's current accounts. Each of the acts done by the bank whether it is with regard to cheque clearance, opening of a new account, or providing financial assistance, the ultimate beneficiary is the customer. So, quality becomes of paramount importance Alliance Business Academy

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Challenges for implementing TQM in Indian banks. because that becomes the parameter based on which customers make their impression about the banks. Now let us get a view of the state of affairs regarding the origins of banking in India.

3.5. SCENARIO IN INDIA Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. With years, banks are also adding services to their customers. The Indian banking industry is now passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the services provided by banks have become more easy and convenient for the customers.

However the commercial role of banks is wider than banking, and includes:  Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand),  Processing of payments by way of telegraphic transfer, internet banking or any other means of transfer,  Issuing bank drafts and bank cheques,  Accepting money on term deposits,  Lending money by way of overdraft, installment loan or otherwise,  Providing documentary and standby letters of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures,  Safekeeping of documents and other items in safe deposit boxes,  Currency exchange,  Sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a 'financial supermarket' and such things.

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Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at providing

large business

entities;

private

banking,

wealth management services to High Net Worth Individuals and

families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis. Banks are struggling to improve service and proclaim that they are customer-focused, yet outstanding, exceptional quality service is still the exception rather than the rule. Two routes to profit growth in financial organizations are cost-efficiency and differentiation.' Excellent service contributes to both. So the banks have to make it a matter of routine to provide the best of services to their customers. If not, then the customers will not hesitate to jump the wagon and board the competitor’s vehicle.

3.6 GROWTH OF BANKING INDUSTRY The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 is at Rs 40,90,000 crores. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03 The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks. Scheduled banks constitute of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going through a transitional phase.

The Public Sector Banks (PSBs), which are the base of the Banking sector in India account Alliance Business Academy

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Challenges for implementing TQM in Indian banks. for more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpower and lack of modern technology.

3.7. TYPES OF BANKS The various types of retail banks are as follows:  Commercial bank: A commercial bank is what is commonly considered a 'bank'.

The term 'commercial' is used to distinguish it from an 'investment bank', a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity). After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.  Community Banks are locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.  Community development banks are regulated banks that provide financial services and credit to underserved markets or populations.  Postal savings banks are savings banks associated with national postal systems.  Private banks manage the assets of high net worth individuals.  Offshore banks are banks located in jurisdictions with low taxation and regulation.  Savings banks take their roots to the 19th or sometimes even 18th century.

Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative, while in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks Alliance Business Academy

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Challenges for implementing TQM in Indian banks. have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly de-centralised distribution network, providing local and regional outreach and by their socially responsible approach to business and society.

3.8. FUTURE PROSPECTS OF INDIAN BANKING SECTOR In India, all the retail banking segments are expected to witness a tremendous growth owing to the low cost of borrowing, changing customer attitudes towards borrowing and optimism regarding economic growth. Retail lending constitutes just 12.36% of the Indian banking system. Given this macroeconomic scenario, the share of retail banking will grow dramatically and it is expected that about 35% of the incremental growth in net credit will come from retail banking. In the next five years ie till 2010, retail banking is expected to grow by a CAGR of 25% to touch the figure of Rs575,000 crore. This requires expansion and diversification of retail banking product portfolio, better penetration and faster service mechanism. Hitherto, the growth had come from metros and tier I cities. While the loan requirement from larger cities will continue to grow, explosive growth in credit is expected to register in tier II cities, semi-urban and rural areas.

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3.9. SUCCESS STORIES Many

large

companies

have

recently

adopted

a

business

improvement

methodology known as "Six sigma." Although this approach is usually applied to functions like operations or information technology, it also has value in other areas, including banks and other financial institutions. The myriad of and have put a big smile

innovative offerings

in personal

choices financial services

the face of the customer. The financial organizations, on the

other hand, are faced with the challenge of meeting ever- growing customer expectations, while keeping cost under control. To attract and retain customers today, a financial institution has to provide customer friendly service with proven reliability of delivery processes. Success is assured to those who offer a quick turn around time, hassle

free

transactions,

clear and error-free

customer

communication and most importantly, high quality of customer interactions.

Hence, in a fiercely competitive environment, winners will be decided on the basis of standards of service that set industry benchmarks. This is easier said than done. Many organizations have attempted and failed by depending only on technology to address these challenges. However, the tech quick fix comes at a very high price if it is not supported by robust business processes that eliminate all variability. To just get a peek into what quality means consider this example. If a bank processes about 3,00,000 transactions, with 99% accuracy there will be 3000 errors! The same act done under Six sigma would mean 1 error only! A look at some of the organizations that have implemented Six sigma will give us a bird’s eye view of the entire concept and the benefits arising out of its effective implementation.

1. BANK OF AMERICA Bank of America is one of the most prominent financial services company with a corporate-wide Six Sigma initiative, and they’re not afraid to talk about it. Their unique blend of Hoshin planning, Kanri management and Six Sigma separates them from the rest of the pack of financial organizations. Bank of America began their Six Sigma journey in 2001 as a corporate initiative supported by CEO Ken Lewis. Their deployment model Alliance Business Academy

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Challenges for implementing TQM in Indian banks was a blend of external hiring and internal training.

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Challenges for implementing TQM in Indian banks “Six Sigma will enable Bank of America to make the breakthrough improvements in customer satisfaction and shareholder value that we must achieve to reach our goal of becoming one of the world’s most admired companies. That’s why I’m committed to using it as a performance management discipline throughout our company.”

Ken Lewis, Chairman and Chief Executive Officer, Bank of America.

"When the program was first introduced, some employees were skeptical. But resistance subsided, officials said, when Lewis and his top lieutenants earned green belts.

Now Bank of America has certified about 3,000 green and black belts and has tallied $2 billion in either cost savings or added revenues."

-Miami Herald.

At the end of the first year with Six sigma this is what Ken Lewis had to say: “Sustaining the intensity of our Six Sigma work is critical for Bank of America to achieve its strategic goals. Six Sigma has enabled us to generate more than $300M in first-year productivity gains for the company. It has also had a significant impact upon the leadership team with our personal education and certification as Six Sigma Green Belts. As we look to the future, our leadership charge is to keep Six Sigma a top priority and use it to produce organic customer revenue growth.”

Milton H. Jones, Chief Quality & Productivity Executive for Bank of America, said on October 26, 2004 at the International Society of Six Sigma Practitioners Symposium in Charlotte: "Ken’s enthusiasm for quality and Six Sigma are infectious, so he didn’t need to talk me into taking the job. I share Ken’s belief that quality and Six Sigma are disciplines that are contributing to an ongoing revolution in American business. We now have more than 10,000 associates trained at different levels, as Black Belts, Green Belts, in DFSS, Lean and Champions. For the last two years, we’ve even been requiring that our key vendors use Six Sigma methods, and we’re now making sure that they participate in our own Six Sigma training programs."

They managed to save $1.3 M by reducing the cost of relocating new hires.

Improving the lockbox deposit availability has resulted in additional $5 M revenue. By Alliance Business Academy

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Challenges for implementing TQM in Indian banks retaining customers who move within footprint they could add $7.8 M to their revenue.

By completing the federal tax return faster they could bring $950,000 in the form of savings.

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Challenges for implementing TQM in Indian banks By reducing ID theft through “Account Takeover� they could prevent a $6.6 M loss. $2 M could be saved because of improved results from new sales hires. Also by improving Credit Card sales they could add $3.6 M to their revenues. Moreover with the introduction of online banking, customers could view intraday activity thus directly increasing the satisfaction of customers. It becomes clear that what was once an alien concept has now become their way of life. What was apprehension in the beginning got transformed belief.

Figure 3.1: Barometer

into

an

Customer

unshakeable

Satisfaction

and

Loyalty

(Source: Driving Organic Growth at Bank of America by Daniel Cox and James Bossart, Quality www.asq.org)

Progress,

Feb

2005,

2. NATIONAL CITY BANK, U.S. Another case regarding the implementation of Six sigma is National City Corp., Cleveland, parent company of National City Bank, which had been using Lean Six Alliance Business Academy

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Challenges for implementing TQM in Indian banks Sigma processes for several years in operations when, in 2005 it initiated a new quality management program known as Best in Class. As part of this new program, the bank applied Lean Six Sigma for the first time to a non-operations area. The particular project involved improving the ''on boarding" experience - that is, the experience of new

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Challenges for implementing TQM in Indian banks customers who had just come on baord. Corporate clients included in the study were those who received services such as business financing, cash management, global trade and treasury management. The goal was to streamline the on boarding process and improve client experience.

As its first step, the bank initiated the Voice of the Customer approach. This technique involved interviewing a significant number of corporate clients about their experiences.

The process uncovered how many steps the on boarding process involved and provided insight into the preferences of clients regarding the process and the number of times the bank contacted them for information. National City learnt that its customers preferred to deal with a single point of contact and appreciated fewer contacts for the purpose of gathering information. Through the interviews, the bank also uncovered additional cross- sell opportunities that it might never have known about otherwise. As a result, the bank reworked the process for bringing on new corporate clients, reducing the time and cutting back on the number of bank contacts during the period. A follow-up customer satisfaction survey showed a dramatic improvement in customer satisfaction, says Dale Klose, executive vice president and director of the bank's Best in Class program office. There was also a significant decrease in cycle time and operational defects. "The experience today of the customer is much, much better."

The bank now has a permanent process in place that employs Voice of the Customer.

Bankers interview all new corporate customers and periodically assess their level of customer satisfaction. Among other things, the process highlights customer success stories that are then forwarded to marketing for possible use as customer testimonials. In essence, the bank learned that Lean Six Sigma can be useful outside of operations - including areas such as marketing. "It provides a disciplined approach to looking at, measuring and learning from our processes," says Klose. "It sets a tone of continuous improvement." Executive leadership, the enthusiasm and involvement of staff, and successes to the bank in the from of improved customer satisfaction and financial impact have supported the bank's corporate culture, reinforcing a climate of continuous improvement and customer delight.

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3. CITIBANK Let us now take a look at another renowned institution that has taken to Six sigma and already started to derive benefits there from. Citibank, a Citigroup company, has set a goal to be the premier international financial company in the near future. To achieve this clearly ambitious goal, the global giant had to implement quality initiatives that satisfied customers quickly and flawlessly at every transaction, anywhere in the world.

Six Sigma quality was always in the playfield of the manufacturing arena - could it work in the service industry? Could it work worldwide for a financial organization?

A few years ago, John Podkowsky, managing director and business head for Citibank's Asset-Based Finance division, faced a serious problem when his back- office operation relocated from New York to Delaware. "The department went through a transition period, and when that period was completed, there were some people who chose not to relocate," he says. "So it was left in the hands of the new people who were basically inexperienced in the job they were handling. When problems came up, neither they nor their supervisors knew how to fix them." To address the problem, Podkowsky's department implemented the Asset-Based Finance Cross-Functional Performance Challenge. A crucial part of the Asset-Based Finance team's progress was vesting the authority to "sign off" on loan availment to his team. By reducing the number of "handoffs" necessary to make funds available, the cycle time for this segment of the availment process was reduced by an average of 75 percent, from two hours to 30 minutes.

Cycle Time Reduction (CTR) has met many challenges of Citibank, including the following:  Private Bank - Western Hemisphere, which serves wealthy individuals. This group reduced internal call backs by 80 percent, external call backs by 85 percent and the credit process time by 50 percent.  Global Equipment Finance, which provides global financing and leasing services to Citibank customers. This group improved all steps' cycle times from when a customer places an order to product delivery. The group also reduced the credit decision cycle by 67 percent, from three days to one day.  Copeland Companies, subsidiaries of Travelers Life & Annuity, which

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Challenges for implementing TQM in Indian banks are distributors and record keepers of financial service products, primarily through

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Challenges for implementing TQM in Indian banks defined contributions. This division used Cross Functional Process Mapping (CFPM) methods to improve the accuracy and timeliness of statements. The group achieved 100percent accuracy within a four-month period. It also reduced the cycle time of processing statements from 28 days to 15 days.

Citibank began its quality training initiative in 1997. From May 1997 to October 1997, more than 650 senior managers were trained. Between November 1997 and the end of 1998, another 7,500 employees attended sessions as part of senior-manager-led teams.

By early 1999, 92,000 employees worldwide had been trained. Citibank's goal of becoming the premier international financial company in the next millennium will require a devotion to excellence on the part of every employee. The goal is ambitious, but Citibank has implemented quality initiatives to make certain that it satisfies customers flawlessly and quickly at the point of every interaction anywhere around the world. By making innovative use of information technology and operations management through Six Sigma and CFPM, employees are working faster and creating high levels of customer satisfaction.

The learning that can be drawn from this study show the involvement of teams in Citibank The quality challenge needed to have full autonomy to make decisions about changes to the process. To champion the work, senior managers sponsored the quality initiatives or served on steering committees and kept an "open door" policy so that teams could gain access to them as needed. According to Peter Klimes, quality director for Citibank in the Czech Republic, the involvement of senior sponsors is a continuous process all the way from setting critical business issues and objectives to making the final presentation.

"We have had a well-balanced split between projects initiated by senior management and those initiated by staff," Klimes says. "Our senior country operations officer and our corporate bank head were our most active supporters of our CFPM projects.

Their commitment helps balance back and front office aspects of the projects."

4. HSBC SECURITIES The next case is a story starring Karl Fruecht, Managing Director and Head of Alliance Business Academy

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Challenges for implementing TQM in Indian banks U.S. Futures at HSBC Securities (USA) Inc.

Karl

was

responsible

for

a

business that generated over $30 million in revenue in 2002 yet was only marginally profitable. In a

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Challenges for implementing TQM in Indian banks business environment where many questioned the applicability of Six Sigma, the Quality team at HSBC transformed an under-performing unit in HSBC’s Investment Banking unit with a single DMAIC project, using Six Sigma tools such as Process Mapping and Activity Based Costing and data partitioning. While the potential of the Six Sigma approach was apparent, the problem to be attacked was not. The HSBC Quality Team, led by Dan Stusnick, a Certified Black Belt, interviewed and surveyed staff in New York and Chicago to identify problems that could be the focal point of improvement projects. The surveying process identified numerous issues worth exploring, but none seemed to have the potential to dramatically impact bottom-line performance. In a bold move, Karl decided to focus on a single project goal – to significantly improve the bottom line performance of the US Futures Business.

After doing due-diligence in defining the problem and measuring the problem, the issue became much clearer to the group. The Analyze Phase left them with a list of issues that influenced capacity to varying degrees, not the least of which was the need to refocus sales efforts on the right types of customers.

Other problems that had a

significant impact on net income were also identified, including:  Market losses on trading errors, usually miscommunicated orders, amounted to $765,000 in 2002, about 40% of their net income.  Due accounts receivables from the past were growing, and consuming a growing amount of back office time to resolve.  Research services, including a live “Squawk Box” narrative from the floor of the CBOT cost over $1 million, yet it was unclear if they were receiving adequate revenues from the customers who required the service.  Electronic order corrections – over $400,000 in effort wasted to correct orders each year.  Other issues were identified as productivity issues, such as the need to optimizing shift coverage of the 24-hour desk, and the need to reduce time spent on Administrative activities.

In a bold move, Karl decided to cease doing business with the bottom 50% of existing

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Challenges for implementing TQM in Indian banks customers in order to free up capacity to chase top-tier customers. While sacrificing

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Challenges for implementing TQM in Indian banks some revenue initially, this approach became very successful over the course of the year. The Futures business more than doubled net income over the period, and a large percentage of the gains coming from the new sales strategy – accomplished while reducing sales headcount by 10%! Furthermore, the bottom 25% of customers are now regularly reviewed, thus instilling continuous improvement into the sales management process. Trade Error Reduction was also a significant win for the team. When the project started, market losses on trading errors reached $765,000, which directly reduced net income.

The Trade Error Team reviewed 12 months of error data, and used a

Pareto analysis to focus on the causes that had the biggest impact in terms of dollar losses. The team addressed the problems by revising procedures, training sales staff, and through the implementation of monthly review meetings that analyze the cause of trade errors, and identify ways to mitigate them. The impact of this project can be measured in a reduction in market losses of approximately $600,000.

Ultimately, projects must show results, and the Futures Quality Initiative is no exception. When the project started, Net income stood at $1.9 million, and had been more or less unchanged for several years.

Furthermore,

the

business

was

in

jeopardy due to the changing dynamics of the markets as electronic trading became a factor. As a result of the project:  Net income climbed to an all time high of $3.1 million during 2003 even as many of the improvements were being implemented.  For 2004, Futures net income is projected to climb to $7.1 million, a 274% increase since the project began.  Project results were achieved with a 10% reduction in headcount and in a declining commission environment.  While not measured, the improvement in morale was noticeable. After the execution of the Improve Phase projects, the entire business had been mobilized to address problems that had a direct impact on net income, and each of the core team have gone the extra step of achieving Green Belt Certification.

Thus the team very correctly showed how DMAIC could be applied broadly as a

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Challenges for implementing TQM in Indian banks business assessment tool and a vehicle to implement rapid changes that directly impact the bottom-

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Challenges for implementing TQM in Indian banks line income of the company apart from bringing in better service quality and improved brand name. Ultimately all the above mentioned benefits directly come along with a happier and delighted customer.

Figure 3.2: Growth in Net Income 2000-2004 (Source: HSBC bank Manual 2004)

5. JPMORGAN CHASE JPMorgan Chase & Co. is the second largest bank in the US. The leading global financial services firm was built from the successful merger of JPMorgan and Chase Manhattan Bank in December 2000 and the recent merger with Bank One in July 2004. Dr. Alex Balbontin, Vice President of Productivity and Quality and Master Black Belt at JPMorgan Chase, recently spoke at the IXPERION Six Sigma in Financial Services Conference in New York. He presented an excellent overview of the evolution of Six Sigma at JPMorgan Chase and Bank One. Six Sigma dates back to 1998 at JPMorgan where it was introduced as a corporate-wide initiative focused on expense reduction projects.

Bank One has been using Six Sigma since 2000 where it was introduced in the National Enterprise Operations Group as a business process improvement tool. Today, Six Sigma is part of a broader Productivity and Quality (P&Q) initiative that includes Lean, Alliance Business Academy

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Challenges for implementing TQM in Indian banks Design

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Challenges for implementing TQM in Indian banks for Six Sigma (DFSS), Activity Based Costing, Project Management, Kaizen, and Change Leadership. Six Sigma Productivity & Quality became one of JPMorgan Chase’s top six strategic initiatives in 2002 and focuses not only on expense reduction but revenue increase and customer satisfaction as well. A unique addition to the traditional DMAIC steps, JPMorgan included another "I" into the methodology, creating "DMAIIC", which stands for Define, Measure, Analyze, Improve, Implement, and Control. A look at the company’s Annual Reports speaks a lot about the savings and benefits that they have received because of taking up Six sigma.

Their 2002 Annual Report has this to say: "Last year, the firm’s clients and shareholders benefited from Six Sigma – a set of tools that guides teams in understanding what clients need and then helps them meet those needs flawlessly. Emphasizing customer-focused operations and rigorous service levels, Six Sigma drove more than $400 million in financial benefits in 2002. Going forward, the launch of Six Sigma projects is expected to generate benefits of up to $1.0 billion per year. To realize the full power of our business model, we have devoted considerable resources to improving our efficiency. We have under way a broad range of re- engineering efforts, many using the rigorous methodology of Six Sigma...we nearly doubled the number of employees with expert Six Sigma certification."

Their 2003 Annual Report says: "In 2003, our productivity and quality efforts yielded more than $1 billion pre-tax in net financial benefits, more than doubling those achieved in 2002. Over one-half of these benefits came from re-engineering key business processes using the disciplined methodology of Six Sigma. We used Six Sigma in several key areas, including enhancing our customers’ experience and removing costs from our larger and more complex operations."

"Six Sigma is every bit as applicable to service processes as it is to manufacturing," says Dan Mailick, vice president of Six Sigma sustainability at J.P. Morgan Chase & Co. in New York. Three years ago, the firm began adopting Six Sigma techniques. Within J.P. Morgan's foreign exchange banking department, a team asked its customers what they Alliance Business Academy

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Challenges for implementing TQM in Indian banks valued and what made them choose one investment bank over another when conducting foreign exchange deals. Once these issues were understood, the team was able to define and measure the activities that most impact customers' needs. The analysis aided the bank in understanding why performance varied among different branches. These lessons helped yield higher margins for the foreign exchange group, as well as best practices for individual traders.

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6. MERRILL LYNCH Patricia Collins wrote an article in the September 2005 issue of iSixSigma Magazine titled, “Better Business Leaders." Patricia is the senior deployment champion for Merrill Lynch’s enterprise-wide Six Sigma program. Patricia writes: “The goal is not only to give the company’s future business leaders Six Sigma expertise, but also to ensure that the Six Sigma program develops better business leaders.”

Call Center Magazine published a Six Sigma case study on the Merrill Lynch Service Ownership project: “Service Ownership is a Six Sigma initiative in Merrill Lynch’s call centers that gives agents more responsibility and more tools to ensure that every caller is satisfied with their service. Here’s the process that a Six Sigma team followed to develop and implement just one aspect of Service Ownership…”

In 2002 Merrill Lynch won Gold and Bronze at the AQP National Team Excellence Awards projects:

for

two

outstanding

"Merrill Lynch’s Partnering Team consists of Merrill Lynch and its five major suppliers that were tasked with improving equipment efficiencies. Its mission consisted of increasing equipment processing throughput, reducing rework, and driving down cost.

The team exceeded all of its goals. Merrill Lynch achieved an annualized cost savings of $1,088,000 while simultaneously strengthening its supplier partnerships. Merrill Lynch Statement Efficiency, led by Jim Friscia, focused on decreasing the length of the statement without impacting client data. A 15% page reduction was achieved, with significant savings in postage and improvements in customer satisfaction."

7. COUNTRYWIDE FINANCIAL In 2001 Countrywide Financial, a diversified financial services company based in

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Challenges for implementing TQM in Indian banks America, launched an internally developed, proprietary program called FASTER. The six step methodology represented as Flow, Analyze, Solve, Target, Execute, and Review is modeled after Six Sigma and specifically designed for the financial services environment. FASTER as well as the customer satisfaction program PACE (Proudly Achieving Customer Expectations) are both helping Countrywide improve all aspects of the business from boosting efficiency and enhancing cost effectiveness to improving customer service. Their annual reports have consistently reported their progress to date.

Their 2002 Annual Report says, "Our Passion for excellence was epitomized by the increasing employee utilization of FASTER, a productivity program customized CULTURE for Countrywide. Similar to Six Sigma used in other industries, FASTER is aimed at making every aspect of our operation better. To date, nearly 5,000 employees have been trained in this discipline.

We have over 800

users of FASTER software and

approximately 350

registered

FASTER

projects under way. The cultural impact has been significant: FASTER has been made accessible to all employees, encouraging a continuous improvement mindset at every level of the Company. In 2002, the first full year of the program, FASTER delivered nearly $11 million in operating profit and identified potential future savings of close to $84 million. Given the

high degree of employee buy-in, we expect to

see

substantially increased results for 2003 — including a strong return on investment and thousands more training certifications among our 30,000-person workforce."

Move to the year 2004 and following is what the Annual Report has to say: “Since the program’s inception in 2001, FASTER has delivered $76 million in operating profit and has identified potential future savings of $560 million. Although FASTER continues to benefit the Company financially, the true benefit of the program is cultural – every employee can improve Countrywide’s processes, and FASTER gives them the tools and the recognition to do so. At the same time, the PACE group facilitated the gathering of customer service feedback from over 2 million consumers, business partners and employees during 2004.”

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8. VANGUARD Vanguard, headquartered in Pennsylvania, USA, is the America’s second-largest mutual fund firm and a leading provider of company-sponsored retirement plan services.

Vanguard manages more than $850 billion in U.S. mutual fund assets, including more than $245 billion in employer-sponsored retirement plans. The Vanguard Group found itself faced with a difficult kind of situation: How to better handle client account queries and questions over the phone? Customer calls and queries are, understandably, of great concern. Handling them quickly, efficiently and knowledgeably is a first priority. Vanguard's own Six Sigma program, Vanguard Unmatchable Excellence (VUE), played a major part in one initiative: to analyze calls, triage them, and find ways for problem resolution quickly.

The process improvement project was slated to run between 18 and 24 months. Stalled in the first attempt due to lack of staff resources, it was restarted, this time with a Black Belt and appropriate staff. Andrew Bevan, who is a supervisor in Vanguard's Valley Forge Core Contact Center, described himself as "all for it" from the outset. He had read the autobiography of Jack Welch, former GE chairman and promoter of Six Sigma, and was not entirely unfamiliar with Six Sigma methodology. But what about feeling protective of his processes? Bevan had taken part in training rotations which Vanguard provided to familiarize employees with VUE. Since VUE is all about making processes more efficient everywhere at Vanguard, individual implementations are natural extensions of that philosophy. Bevan was eager to "get his hands dirty" and implement change. Many clients, it was determined, send checks through a deposit system. If those checks were not credited correctly, the customer's account was wrong.

Bevan and his team found that if these situations can be handled by a contact person effectively, it builds even more client loyalty. After it had collected and analyzed the data, the team decided to "bucket" the calls into three tiers:  Tier 1: On-the-spot fixing (i.e., the problem could be handled and fixed in the initial phone call).  Tier 2: Sending to another department, but still a fairly straightforward fix.

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Challenges for implementing TQM in Indian banks  Tier 3: Sending to a "specialist" for fixing.

The resulting efficiency gained meant less time spent in a "work state" (i.e., researching or investigating). The gained time (25 to 30 seconds) created capacity in the frontline service centers to answer more calls – thus, each call is answered more quickly. Assigning the more complex problems to specialists translated to much happier clients. They felt that "ownership" of the problem was there, and that they would not be handed over to yet another customer service representative in subsequent calls. The savings was a reduction of approximately 50 percent of the "handle time" for calls, but the soft savings went much farther. Client loyalty was increased because the problem was recognized and fixed in a minimal amount of time. "Seeing it all come together at the end is the best reward," said Bevan. A result that looks different and better from what the company had at the outset becomes a "story" to tell other employees. That, in turn, gets those Employees interested in Six Sigma. And the apprehension lessens as the stories go on, and corporate "folklore" lets others know the methodology is not scary.

We have so far walked through a number of examples of banks and financial institutions that have very bravely embraced Six sigma and those who have done their homework well have stood to benefit from these quality improvement initiatives.

Initially the entire thing appears foggy because people are afraid if a thing such as this will ever work for them. But perhaps the first thing they need to remove is the fear of failure otherwise they will never be able to make the breakthrough. Once the fears have been overcome, the entire organization has to jump onto the Six sigma bandwagon simultaneously. It is then that the company will enter into a different realm of operations, a quantum leap in the minds and the work culture of the company. If due-diligence has been done, results cannot be far behind as is shown by the host of companies that have dared to take the risk and hitch their wagons to the star called as Six sigma.

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Challenges for Implementing TQM in Indian banks