Better Business and Better Performance: Defining Six Sigma

 S ix Sigma is the single most effective problem-solving methodology for improving business and organizational performance. There’s not a business, technical, or process challenge that Six Sigma can’t improve. The world’s top corporations have used it to increase their profits collectively by more than $100 billion over the past ten years. In certain corporations, indi cating Six Sigma proficiency on your résumé is now a prerequisite to moving into a position in management. If you’re part of a Fortune 500 company — particularly a manufacturing company — you’ve heard about Six Sigma. You may even have been through a training regimen and been part of a corporate initiative or an improvement project. If so, you know the capabilities of Six Sigma; you’ve witnessed its achievements firsthand. But if, like many people, you’re outside of the upper echelons of big busi ness, you may know Six Sigma by name only. It has been too expensive and complicated for small- and medium-sized businesses, public institutions, not-for-profit organizations, educational environments, and even aspiring individuals. Its potential has remained out of reach for the vast majority of professionals and organizations worldwide. All this is changing. As the methods and tools of Six Sigma have spread, it has become easier to understand and more straightforward to implement. The mysteries of Six Sigma have been revealed. Simply stated, Six Sigma is about applying a structured, scientific method to improve any aspect of a business, organization, process, or person. It’s about engaging in disciplined data collection and analysis to determine the best possible ways of meeting your customers’ needs while satisfying yours and minimizing wasted resources and maximizing profit in the process.

 Bridging science and leadership

 From a management standpoint, you use Six Sigma to achieve predictability and control of performance in a business or a business process by applying the methods of science to the domain of leadership. The achievements of machinery, technique, process, and specialization of labor have collectively enabled the explosion of mass production and the consumer society. Science dictates how all the parts, materials, machines, and people on the assembly line interact to turn out many “widgets” at the highest possible speed and the lowest possible cost.

Managerially speaking, the goal of Six Sigma is to inject control, predictabil ity, and consistency of results into the production of a successful organiza tion, such that the widgets are produced with great consistency and minimal variation. Early in the 20th century, Henry Ford applied the principles of science to the production of cars. By following set processes and by optimizing repeatable processes, Ford and others made goods that displayed little variation in their final states and could be mass-produced without requiring extensive educa tion and years of finely honed skills among the assembly-line staff. Countless times every day in the United States, people open a water faucet and experience the flow of clean, clear water, which is possible because reli able purification systems treat the water and pressure systems ensure the water is there. This kind of dependability is what Six Sigma provides: It treats the processes in a business so that they deliver their intended results reli ably and consistently. The methodology of Six Sigma was first applied in a manufacturing company, but it also works in service and transactional companies (such as banks and hospitals), where it has been implemented many times with great success. Six Sigma dramatically improves the way any process works — whether that process is in the chemical industry, the oil industry, the service industry, the entertainment industry, or any other field

Management system orientatio

Six Sigma is so appealing to managers because it delivers business management results. Managers need to see a return on investment, commitment, account ability, transparency, and a clear path to success. Six Sigma provides all these things.

Clear value proposition and ROI

Clear value proposition and ROI Six Sigma is characterized by an unwavering focus on business return on investment (ROI). A Six Sigma project can improve a business characteristic by 70 percent or more, stimulating increased operating margins for busi nesses while increasing the value those businesses provide to their custom ers. (More on this topic in Chapter 2). Six Sigma initiatives and projects have a direct, measurable financial focus and impact

Top commitment and accountability

A Six Sigma initiative begins at the top. The leadership and management of an organization must actively commit to the Six Sigma initiative, setting per formance goals and developing tactical implementation plans. Management team members must be personally accountable for achieving the performance improvement goals they set for their respective organizations and business units.

Customer focus

Six Sigma, through its voice of the customer (VOC) tools (see Chapter 11), drives business processes through customer requirements. No operational, process, and business improvements can occur without a definitive understanding of who the customers are and what they need, want, and are willing to buy. Six Sigma managers become savvy about the needs and requirements of customers in a way that also enables the business to become stronger and more profitable.

Connected business metrics

Six Sigma is different from other performance improvement approaches in its focus on business financials and measurable operational improvements. To support this focus, the Six Sigma management system must include perfor mance measures that are readily accessible and visible to everyone whose actions or decisions determine performance levels and operational quality. You can read about metrics and measures in Parts II and III.

Process orientation

Six Sigma improves the performance of any business or work process — spe cifically, how those processes effectively and efficiently transform material and other inputs into the desired outputs. This trait is the focal point of using Six Sigma to improve performance: the design, characterization, optimization, and validation of processes. Chapter 7 gives you the lowdown on processes. 

The historical perspective

 The Six Sigma methodology was formalized in the mid-1980s at Motorola. This organization combined new theories and ideas with basic principles and statistical methods that had existed in the quality engineering domain for decades. These building blocks, enhanced by business and leadership principles, formed the basis of a complete management system. The result was a staggering increase in the levels of quality for several Motorola products, and the inaugural Malcolm Baldrige National Quality Award was bestowed on the company in 1988. Everyone wanted to know how Motorola had done it. Then-president Robert Galvin chose to share Motorola’s Six Sigma secret openly, and by the mid-1990s, corporations like Texas Instruments, Asea Brown Boveri, Allied Signal, and General Electric had begun to reap similar rewards. By 2000, many of the world’s top cor porations had a Six Sigma initiative underway, and by 2003, over $100 billion in combined sav ings had been tallied. Project focus By the mid-2000s, Six Sigma became the global standard of quality business practice, embraced by the American Society for Quality. Universities worldwide now offer courses in Six Sigma, and dozens of consulting and software companies have brought Six Sigma products and tools to market. Six Sigma also became equally known by the market desig nations “Lean Six Sigma” and “Lean Sigma,” communicating the benefits of a combined Six Sigma and Lean approach. (For more on these topics, check out Lean For Dummies by Natalie Sayer and your trusty coauthor Bruce Williams [Wiley]). Today, over 2,000 books on Six Sigma are in print, and doing an Internet search for the term Six Sigma returns millions of hits. Six Sigma has quite literally become the de facto standard for operations and improvement everywhere in the world

Project focus

 The Six Sigma project is the tool by which processes and systems are char acterized and optimized. Program leadership identifies opportunities for Six Sigma improvement projects and assigns Six Sigma specialists to execute them. We provide details about how to select Six Sigma projects in Chapter 5, how to conduct projects in Chapters 6 through 20, and how to manage projects by using technology aids in Part V.

 Enabling technology tools

 Properly managing a Six Sigma initiative that spans an entire organization or a significant part of an organization requires the ability to simultaneously manage many projects, processes, analyses, data banks, training activities, and people. Generally speaking, several classes of technology tools help accomplish this feat

Tools for designing, modeling, managing, and optimizing processes

 Tools for the broadscale and enterprise-level management of multiple projects across multiple organizational units

 Better Business and Better Performance: Defining Six Sigma

 Tools for collecting data, conducting analytical calculations, and solving performance problems

 Tools for training, educating, transferring knowledge, and managing knowledge

 An infrastructure for change

 Installing and managing a Six Sigma management system requires a certain infrastructure — an underlying set of mechanisms and structures on which to develop the Six Sigma improvement strategies and enact project implementa tion and process improvement. The key elements of an effective Six Sigma infrastructure include the following. For more information on setting up this infrastructure,

A fully documented Six Sigma leadership system, strategic focus, and business goal configuration, plus deployment plans, implementation schedules, and activity tracking and reporting techniques. More on these items

A strategy, methodology, and system for training and preparing execu tives, managers, Champions, Black Belts, Green Belts, Yellow Belts, finan cial auditors, process owners, and all others involved in the Six Sigma initiative. We define and describe all the Six Sigma job roles

Competency models and compensation plans, Six Sigma participant and leader selection guidelines, position and role descriptions, reporting relationships, and career-advancement policies and plans.

Guidelines for defining project-savings criteria; aligning accounting cat egories with Six Sigma goals and metrics; forecasting and validating proj ect savings; and auditing, evaluating, and reporting project ROI.

Hard criteria for selecting projects, designating project-type categories, developing project problem-definition statements, targeting intended project savings and ROI, approving selected projects, and managing projects through to completion. We give you information about project management 

Information-technology-related structures, procedures, and dashboards, as well as tools and systems for designing and managing processes, tracking project and initiative progress, reporting results, storing infor mation and data, and performing analytical functions. We look at these tools in depth

A strategy for consistently communicating the Six Sigma initiative across the enterprise, including an Internet or intranet site that provides a common reference and knowledge base that contains important infor mation, motivational content, recognition stories, educational material, contact information, and so on.  

 

Getting Acquainted with Six Sigma Basics

 A management review process for assessing the effectiveness of Six Sigma from the top to the middle to the bottom of the organization:

 At the top, the focus is on the aggregate process, projects, and results for implementation in entire business units.

 In the middle, the focus is on the process and results of opera tional units with multiple Six Sigma projects.

At the lower levels, the focus of management review is on making sure individual projects are on track and yielding their intended process-improvement and financial results

 Complete culture change

A Six Sigma initiative often begins with outside consultants providing methods, tools, and training, but over time, the knowledge is internalized and applied organically within the organization. The ultimate goal is for everyone in the organization to have a working ability to understand customers’ requirements, collect data, map processes, measure performance, identify risks and oppor tunities, analyze inputs and outputs, and make continuous improvements. In Chapter 4, we provide more details about culture change

 Linking Quality and Business

Y ou make judgments on what is and what isn’t good quality all the time. For example, you recognize when you eat a lousy sandwich or when your cellphone provider has bad service. But in the world of Six Sigma, qual ity is a deeper topic. To understand quality in Six Sigma terms, you need a transformational definition of what quality actually is; you can then use that definition to guide and gauge your work activities. In the end, how closely you adopt this definition of quality largely determines the viability of your improvement efforts. In this chapter, we cover quality: how customers drive it and ask for it, what it looks like, and how to rate it. The discussions here give you a good grasp on why quality matters so much and prepare you to strive for the best

 Specifications: Listening to the Voice of the Customer

When you buy a Coca-Cola, you, as a customer, expect a certain experience. You expect your experience to be the same each time you open a new can. If the drink had too much sugar one time or not enough secret ingredient another time, you’d notice and feel dissatisfied. The Coca-Cola Company knows this fact about you, its customer, and so it very carefully controls the amount and makeup of each ingredient going into its drinks

The way that Coca-Cola controls its product (and your experience) is through specifications. Each specification represents what the customer requires to be satisfied. In this section, we explain how to set specifications appropriately.