Six sigma holds that any process outcomes that are within sixstandard deviations from the mean must be acceptable. (The Greek letter sigmais the traditional symbol for standard deviation in statistics.)
For Motorola, theoriginator of Six Sigma, the answer to the question “Why Six Sigma?”was simple: survival. Motorola came to Six Sigma because it was beingconsistently beaten in the competitive marketplace by foreign firms that wereable to produce higher quality products at a lower cost. When a Japanese firmtook over a Motorola factory that manufactured Quasar television sets in the United Statesin the 1970s, they promptly set about making drastic changes in the way the factoryoperated. Under Japanese management, thefactory was soon producing TV sets with 1/20th the number of defectsthey had produced under Motorola management. They did this using the sameworkforce, technology, and designs, making it clear that the problem wasMotorola’s management. Eventually, even Motorola’s own executives had to admit”our quality stinks,”
Finally, in themid 1980s, Motorola decided to take quality seriously. Motorola’s CEO at thetime, Bob Galvin, started the company on the quality path known as Six Sigmaand became a business icon largely as a result of what he accomplished inquality at Motorola. Today, Motorola is known worldwide as a quality leader anda profit leader. After Motorola won the Malcolm Baldrige National Quality Awardin 1988 the secret of their success became public knowledge and the Six Sigmarevolution was on. Today it’s hotter than ever.
It would be amistake to think that Six Sigma is about quality in the traditional sense.Quality, defined traditionally as conformance to internal requirements, haslittle to do with Six Sigma. Six Sigma is about helping the organization makemore money. To link this objective of Six Sigma with quality requires a newdefinition of quality. For Six Sigma purposes I define quality as the valueadded by a productive endeavor. Quality comes in two flavors: potentialquality and actual quality. Potential quality is the known maximumpossible value added per unit of input. Actual quality is the current valueadded per unit of input. The difference between potential and actual quality iswaste. Six Sigma focuses on improving quality (i.e., reducing waste) byhelping organizations produce products and services better, faster and cheaper.In more traditional terms, Six Sigma focuses on defect prevention, cycle timereduction, and cost savings. Unlike mindless cost-cutting programs which reducevalue and quality, Six Sigma identifies and eliminates costs which provide novalue to customers: waste costs.
For non-Six Sigmacompanies, these costs are often extremely high. Companies operating at threeor four sigma typically spend between 25 and 40 percent of their revenuesfixing problems. This is known as the cost of quality, or more accurately thecost of poor quality. Companies operating at Six Sigma typically spend lessthan 5 percent of their revenues fixing problems (Figure 1). The dollar cost ofthis gap can be huge. General Electric estimates that the gap between three orfour sigma and Six Sigma was costing them between $8 billion and $12 billionper year.
What isSix Sigma?
Six Sigma is arigorous, focused and highly effective implementation of proven qualityprinciples and techniques. Incorporating elements from the work of many qualitypioneers, Six Sigma aims for virtually error free business performance. Sigma,, is a letter in the Greek alphabet used by statisticians to measure thevariability in any process. A company’s performance is measured by the sigmalevel of their business processes. Traditionally companies accepted three orfour sigma performance levels as the norm, despite the fact that theseprocesses created between 6,200 and 67,000 problems per million opportunities!The Six Sigma standard of 3.4 problems per million opportunities is a responseto the increasing expectations of customers and the increased complexity ofmodern products and processes.
If you’re looking for new techniques, don’t bother. Six Sigma’smagic isn’t in statistical or high-tech razzle-dazzle. Six Sigma relies ontried and true methods that have been around for decades. In fact, Six Sigmadiscards a great deal of the complexity that characterized Total QualityManagement (TQM). By one expert’s count, there were over 400 TQM tools andtechniques. Six Sigma takes a handful of proven methods and trains a smallcadre of in-house technical leaders, known as Six Sigma Black Belts, to ahigh level of proficiency in the application of these techniques. To be sure,some of the methods used by Black Belts are highly advanced, including the useof up-to-date computer technology. But the tools are applied within a simpleperformance improvement model known as DMAIC, or Define-Measure-Analyze-Improve-Control.DMAIC can be described as follows:
|D||Define the goals of the improvement activity. At the top level the goals will be the strategic objectives of the organization, such as a higher ROI or market share. At the operations level, a goal might be to increase the throughput of a production department. At the project level goals might be to reduce the defect level and increase throughput. Apply data mining methods to identify potential improvement opportunities.|
|M||Measure the existing system. Establish valid and reliable metrics to help monitor progress towards the goal(s) defined at the previous step. Begin by determining the current baseline. Use exploratory and descriptive data analysis to help you understand the data.|
|A||Analyze the system to identify ways to eliminate the gap between the current performance of the system or process and the desired goal. Apply statistical tools to guide the analysis.|
|I||Improve the system. Be creative in finding new ways to do things better, cheaper, or faster. Use project management and other planning and management tools to implement the new approach. Use statistical methods to validate the improvement.|
|C||Control the new system. Institutionalize the improved system by modifying compensation and incentive systems, policies, procedures, MRP, budgets, operating instructions and other management systems. You may wish to utilize systems such as ISO 9000 to assure that documentation is correct.|
A very powerfulfeature of Six Sigma is the creation of an infrastructure to ensure thatperformance improvement activities have the necessary resources. From researchit is known that failure to provide this infrastructure is the #1 reason why80% of all TQM implementations failed in the past. Six Sigma makes improvementand change the full-time job of a small but critical percentage of theorganization’s personnel. These full time change agents are the catalyst thatinstitutionalizes change. Figure 2 illustrates the required human resourcecommitment required by Six Sigma.
Six Sigmainvolves changing major business value streams that cut across organizationalbarriers. It is the means by which the organization’s strategic goals are to beachieved. This effort cannot be led by anyone other than the CEO, who isresponsible for the performance of the organization as a whole. Six Sigma mustbe implemented from the top-down.
Six Sigmachampions are high-level individuals who understand Six Sigma and are committedto its success. In larger organizations Six Sigma will be led by a full time,high level champion, such as an Executive Vice-President. In all organizations,champions also include informal leaders who use Six Sigma in their day-to-daywork and communicate the Six Sigma message at every opportunity. Sponsors areowners of processes and systems who help initiate and coordinate Six Sigmaimprovement activities in their areas of responsibilities.
This is thehighest level of technical and organizational proficiency. Master Black Belts provide technicalleadership of the Six Sigma program. Thus, they must know everything the Black Belts know, as well asunderstand the mathematical theory on which the statistical methods arebased. Master Black Belts must be ableto assist Black Belts in applying the methods correctly in unusual situations. Whenever possible, statistical training shouldbe conducted only by Master Black Belts. Otherwise the familiar “propagation of error” phenomenon willoccur, i.e., Black Belts pass on errors to green belts, who pass on greatererrors to team members. If it becomesnecessary for Black Belts and Green Belts to provide training, they should doonly so under the guidance of Master Black Belts. For example, Black Belts may be asked toprovide assistance to the Master during class discussions and exercises. Because of the nature of the Master’s duties,communications and teaching skills are as important as technical competence.
Candidates forBlack Belt status are technically oriented individuals held in high regard bytheir peers. They should be activelyinvolved in the process of organizational change and development. Candidatesmay come from a wide range of disciplines and need not be formally trainedstatisticians or engineers. However,because they are expected to master a wide variety of technical tools in arelatively short period of time, Black Belt candidates will probably possess abackground including college-level mathematics and the basic tool ofquantitative analysis. Coursework instatistical methods may be considered a strong plus or even a prerequisite. Aspart of their training, Black Belts receive 160 hours of classroominstruction, plus one-on-one project coaching from Master Black Belts orconsultants.
Successfulcandidates will be comfortable with computers. At a minimum, they should understand one or more operating systems,spreadsheets, database managers, presentation programs, and wordprocessors. As part of their trainingthey will be required to become proficient in the use of one or more advancedstatistical analysis software packages. Six Sigma Black Belts work to extractactionable knowledge from an organization’s information warehouse. To ensure access to the needed information,Six Sigma activities should be closely integrated with the information systems(IS) of the organization. Obviously, theskills and training of Six Sigma Black Belts must be enabled by an investmentin software and hardware. It makes nosense to hamstring these experts by saving a few dollars on computers orsoftware.
Green Belts areSix Sigma project leaders capable of forming and facilitating Six Sigma teamsand managing Six Sigma projects from concept to completion. Green Belt training consists of five daysof classroom training and is conducted in conjunction with Six Sigmaprojects. Training covers projectmanagement, quality management tools, quality control tools, problem solving,and descriptive data analysis. Six Sigmachampions should attend Green Belt training. Usually, Six Sigma Black Beltshelp Green Belts define their projects prior to the training, attend trainingwith their Green Belts, and assist them with their projects after the training.
StaffingLevels and Expected Returns
As stated earlierin this article, the number of full time personnel devoted to Six Sigma is notlarge. Mature Six Sigma programs, such as those of Motorola, GeneralElectric, Johnson & Johnson, AlliedSignal, and others average aboutone-percent of their workforce as Black Belts. There is usually about oneMaster Black Belts for every ten Black Belts, or about 1 Master Black Belt per1,000 employees. A Black Belt will typically complete 5 to 7 projects per year.Project teams are led by Green Belts, who, unlike Black Belts and MasterBlack Belts, are not employed full time in the Six Sigma program.Black Belts are highly prized employees and are often recruited for keymanagement positions elsewhere in the company. After Six Sigma has been inplace for three or more years, the number of former Black Belts tends tobe about the same as the number of active Black Belts.
Estimated savingsper project varies from organization to organization. Reported results average about US$150,000 toUS$243,000. Note that these are not the huge mega-projects pursued byRe-engineering. Yet, by completing 5 to 7 projects per year per Black Belt, thecompany will add in excess of US$1 million per year per Black Belt to itsbottom line .
Implementationof Six Sigma
After over twodecades of experience with quality improvement, there is now a solid body of scientific research regarding the experience of thousandsof companies implementing major programs such as Six Sigma. Researchers havefound that successful deployment of Six Sigma involves focusing on a smallnumber of high-leverage items. The steps required to successfully implementSix Sigma are well-documented.
1. Successfulperformance improvement must begin with senior leadership. Start by providingsenior leadership with training in the principles and tools they need toprepare their organization for success. Using their newly acquired knowledge,senior leaders direct the development of a management infrastructure to supportSix Sigma. Simultaneously, steps are taken to “soft-wire” theorganization and to cultivate an environment for innovation and creativity.This involves reducing levels of organizational hierarchy, removing proceduralbarriers to experimentation and change, and a variety of other changes designedto make it easier to try new things without fear of reprisal.
2. Systemsare developed for establishing close communication with customers, employees,and suppliers. This includes developing rigorous methods of obtainingand evaluating customer, employee and supplier input. Base line studies areconducted to determine the starting point and to identify cultural, policy, andprocedural obstacles to success.
3. Trainingneeds are rigorously assessed. Remedial skills education is provided to assurethat adequate levels of literacy and numeracy are possessed by all employees.Top-to-bottom training is conducted in systems improvement tools, techniques,and philosophies.
4. Aframework for continuous process improvement is developed, along with a systemof indicators for monitoring progress and success. Six Sigma metrics focus onthe organization’s strategic goals, drivers, and key business processes.
5. Businessprocesses to be improved are chosen by management, and by people with intimateprocess knowledge at all levels of the organization. Six Sigma projects areconducted to improve business performance linked to measurable financialresults. This requires knowledge of the organization’s constraints.
6. Six Sigma projects are conducted by individual employees and teamsled by Green Belts and assisted by Black Belts.
Although the approach is simple,it is by no means easy. But the results justify the effort expended. Researchhas shown that firms that successfully implement Six Sigma perform better invirtually every business category, including return on sales, return oninvestment, employment growth, and share price increase.
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- KEN LEWIS ARTICLE
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