Gallup's Human Sigma

Excerpts from Manage your Human Sigma
John H. Fleming, Curt Coffman, and James K. Harter, in Harvard Business Review

In sales and service organizations value is created when an employee interacts with a customer. To achieve meaningful operational and financial improvements, the employee-customer encounter must be managed with great care.

Quality improvement methodologies such as Six Sigma are extremely useful in manufacturing contexts, but they’re less useful when it comes to the employee-customer encounter, with its volatile human dimensions. To address this problem of fit, Gallup developed a quality improvement approach that we call Human Sigma. Like Six Sigma, Human Sigma focuses on reducing variability and improving performance. But while Six Sigma applies to processes, systems, and output quality, our approach looks at the quality of the employee-customer encounter, weaving together a consistent method for assessing it and a disciplined process for managing and improving it.

As we developed our thinking about Human Sigma, we arrived at several core principles for measuring and managing interactions between customers and employees:

• Emotions inform both sides’ judgments and behavior even more powerfully than rationality does.
• The employee-customer encounter must be measured and managed locally, because there are enormous variations in quality at the work-group and individual levels.
• It’s possible to arrive at a single measure of effectiveness for the employee-customer encounter; this measure has a high correlation with financial performance.
• To improve the quality of the employee-customer interaction, organizations must conduct both short-term, transactional interventions (such as coaching) and long-term, transformational ones (such as changing the processes for hiring and promotion).
• The company’s organizational structure often must be adjusted so that the employee-customer encounter can be managed holistically.

Human Sigma grew out of a multiyear, research-based initiative designed to map the terrain of the employee-customer encounter. This work was based on direct experience with hundreds of companies and millions of customers and employees. We then tested and cross-validated our findings in 1,979 business units—involved in financial services, professional services, retail, and sales—within ten companies. The results thus far have been extraordinary. The ten companies, all of which have applied the best-practice principles for managing the employee-customer encounter, together outperformed their five largest peers during 2003 by 26% in gross margins and by 85% in sales growth. We can’t guarantee readers comparable results, but we believe that closely monitoring the health of a firm’s employee-customer relationships will result in dramatic performance improvements.