"Manage Your Human Sigma"
Harvard Business Review
July-August 2005, pp. 107-114
The authors of this article argue that the employee-customer encounter is the key dimension of non-manufacturing success, and it is the "factory floor of sales and service." The Six Sigma approach has been very useful in manufacturing settings, but the authors say a modification is necessary for the employee-customer encounter with its less predictable human dimensions. Four core principles are identified in what the authors term the Human Sigma approach to managing and improving the employee-customer encounter:
- Emotions are very important in the employee-customer encounter-They affect judgments more than rationality does;
- Because of large variation at the individual and work-group level, the employee-customer encounter must be measured and managed locally;
- A single measure of effectiveness for the employee-customer encounter can be created, and it will correlate highly with financial performance;
- The organizational structure must often be adjusted, and the company must address hiring and promotion, as well as coaching.
In a study that examined 1,979 business units in 10 "best practice" employee-customer encounter companies, the companies studied outperformed their five largest peers by 26% in gross margin and 85% in sales growth.
The authors (all of whom work for the Gallup Organization) have developed a measure of customer engagement that combines customer loyalty metrics with items that assess the emotional nature (confidence, integrity, pride, and passion) of their customer commitment. Organizations that fall within the top 15-20% on this measure of customer engagement receive a 23% premium in profitability and revenue over the average customer.
Highly-engaged employees are also reported to "have higher levels of productivity and profitability, better safety and attendance records, and higher levels of retention...they're also more effective at engaging the customers they serve."
The authors claim that performance metrics must acknowledge the importance of engagement on the part of both customers and employees. However, the employee-customer encounter must be measured locally: Local business units that score high on both types of engagement metrics are 3.4 times more effective than low-engagement units in terms of total sales and revenue, performance to target and other measures. They are also about twice as effective as units that score high on one of the engagement measures but not the other.
The article concludes with three key points:
- Responsibility for Human Sigma must be centralized in a single organizational structure, with an executive champion
- The local manager is the single most important factor in local group performance
- Some companies will need to overhaul their HR practices
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