Will Six Sigma Help Operations Management in Your Company?
Six Sigma Quality Improvement
What is Six Sigma?
Six Sigma is, variously, a buzzword, a statistical concept, a measured goal in quality management, and a set of tools and professional certifications in quality management. These days, six sigma is more often linked to operations management than to quality management, simply because quality management has descended into sad oblivion.
Six Sigma, in fact, is an extension of Total Quality Management that arose in the mid-1990s. It focuses more on the technical aspects of quality than the human side of the equation. Six Sigma is a set of tools that, when applied properly, can maintain or increase quality while reducing cost. So the answer to the question in the title of this article, Will Six Sigma Help Operations Management in your company? is a qualified "yes." Six Sigma can help, but it must be implemented appropriately. And it is not a panacea, a cure-all. If your problems arise from the way your company is organized, or from the way the team or workers are managed, then Six Sigma may not be the best solution.
As a business consultant and executive coach, I help corporate and organizational leaders decide how to solve problems and succeed. Six Sigma is an option worth considering. The key factors are: The company must be ready for Six Sigma; And the sources of the operations or quality problems must be more technical than cultural in nature.
Keep reading to learn how to determine if your company or organization is ready for Six Sigma, and if a Six Sigma initiative will solve the problems that you face.
Eleven Million Checks
A few years ago, Bank of America had an ad on TV that illustrated Six Sigma thinking. The slogan was something like, "We don't process eleven million checks a day. We process one check just right, and then do it eleven million times."
This illustrates Six Sigma thinking. The process is mapped out just once, and modeled free of errors. Then the process is reproduced to achieve a very high success rate.
How high? That's the meaning of Six Sigma, which, in quality management terms, means less than 3.4 errors per million opportunities for error.
Strengths of Six Sigma
Key strengths of Six Sigma:
- Six Sigma addresses quality problems (errors and defects) and also cost problems (waste and delay)
- Six Sigma takes a diagnose-and-solve approach to problems, so solutions are likely to work.
- Six Sigma has a process-to-goal focus on developing effective processes. This means that the processes usually work.
- Six Sigma has, literally, dozens of tools to address problems, so, once the diagnosis is complete, the right tool can be chosen for a rapid solution.
- Six Sigma develops key metrics that first define, then measure, desired and actual results.
- Six Sigma can benchmark your methods against industry best practices, so you know how well you are doing compared to your competitors.
- With appropriate investment, a company that adopts Six Sigma can be a center of excellence developing its own best practices through continuous improvement.
- Six Sigma works well with other cutting-edge management tools, such as continuous improvement (kaizen), lean manufacturing, and agile development.
With all these benefits, Six Sigma is great, with one big "if." Six Sigma is great if your problems lie in operations process, quality management, or waste.
But if your problems lie in executive style, management approach, or corporate culture, using the Six Sigma toolkit is like trying to do medical surgery with an auto mechanics toolkit. Before you invest in Six Sigma, look at the people side of the problem. And if you are in upper management or leadership that means, above all, take a look at yourself.
Questions to Ask Before Starting Six Sigma
Total Quality Management, as championed by W. Edwards Deming, was a balanced approach to creating high-quality, low error, low defect results in manufacturing and business. It was balanced in that it included both human factors, such as responsibility for quality work, teamwork, cooperation, and quality assurance, and also technical factors. Technical factors included precise definition of goals and tolerances, measurement, and quality control. By 1980, Deming's methods could reliably produce a reliability rate of 3 Sigma, which is fewer than 3 defects per thousand products.
In the early 1980s, manufacturing processes were rapidly reducing defects and errors, especially in the field of electronics. This accelerated the technical, statistical, and engineering side of quality management. In 1986, Motorola announced a Six Sigma initiative, seeking fewer than 3.4 errors per million events. This was picked up by Jack Welch, CEO of GE, and Six Sigma became a buzzword for the best, toughest, most macho quality improvement anyone can do.
But there is a cost, or at least a danger, to this focus on the technical, statistical, and engineering side of improving quality. People can get lost in the process.
Two Questions to Ask Before Starting a Six Sigma Initiative
Question 1: Do we have a team commitment to quality in this company?
If a company has problems that separate leadership from management, or management from workers, these issues must be addressed first, before Six Sigma can be effective. If any of these problems exist, they must be addressed first, through transformative leadership:
- Leadership is out of touch, not aware of what is really going on.
- There is lack of trust and poor communication.
- There is a pattern of hostility and micromanagement.
- The company is not integrated, perhaps due to a recent merger or acquisition.
In these situations, leadership that transforms the culture must precede the Six Sigma initiative.
Question #2: Have we achieved three sigma?
Quality improvement must be progressive. One cannot go up a staircase to the sixth floor without passing floors two, three, four, and five. And, in quality improvement, there is no elevator. If we can't achieve three sigma, we're not ready to push for four, five, or six sigma.
The good news is that the infrastructure and human organization that has achieved three sigma is ready to push all the way up to six sigma, and beyond.
Problems Six Sigma Can Solve
If you have a well-managed company and a committed team, then Six Sigma may very well be your next step.
Please remember that Six Sigma is a set of tools. It is up to executive leadership to set the goals that those tools will achieve. For example, leadership must decide if the focus is on increasing market share for existing products, developing new products or services, meeting quarterly net revenue goals, or reducing costs over the long term. Six Sigma tools can support any of these objectives. But leadership must set the direction.
Here are some examples of goals Six Sigma can achieve:
- Quality improvement in existing processes. Let's say that the current defect rate is 3 sigma, that is, of every 1,000 products produced, 97% are defect free. Six Sigma diagnostic and process improvement methods, such as statistical quality control, could increase that progressively to fewer and fewer defective products: one in a thousand, one in ten thousand, and on up to six sigma. Early gains will be rapid and low cost, because many tools can be applied at once. The fewer defects remaining, the more expensive the diagnosis and prevention of those defects will become. With fewer defects per million, cost goes down as customer satisfaction increases. This obviously supports an increase in market share, as you can sell the items at lower cost to happier customers. Or, if you don't need to cut costs initially, you can feed the increased net revenue back into either more quality improvement, or more marketing.
- Establishing or upgrading new production lines and processes of the highest quality. Six Sigma excels here. If you want to develop the best methods in manufacturing or operations when you are either starting fresh or doing a thorough re-engineering, Six Sigma is likely to be the best way to go. The result will be high-quality products with few defects at low cost, from day one.
- Reducing waste and cost now. Six Sigma tools support lean manufacturing, which is just-in-time production with minimal inventory and minimal waste. Waste that is reduced includes: raw materials waste; wasted time; wasted product that must be sold at a discount; and wasted space for warehousing and storage. Lean manufacturing is now being adapted to all operations management, so we have lean process control in service and information industries, as well as in traditional manufacturing. Reducing waste in existing processes helps increase quarterly revenue.
- Reducing waste and cost over the long term. Six Sigma initiatives can be very expense at the beginning, especially for an organization that is not already using TQM or some form of Six Sigma. As a result, Six Sigma may not be the best choice if the company has a severe cash flow problem. But if the cost of initiating Six Sigma can be met, then its continuous improvements in efficiency over time create greater and greater cost reduction, while maintaining product quality.
Six Sigma Implementation
What if, by the criteria discussed above, your company is not ready for Six Sigma, but you still want to go in that direction?
You can launch two projects simultaneously. One addresses the corporate management and culture problems. The other begins training and orientation into a Six Sigma culture. This way, you can prepare for Six Sigma, and realize the benefits of an easier management initiative as you do. You get immediate benefits from solving the core cultural and corporate problems, and also turn process improvement over to the Six Sigma team as soon as possible.
Six Sigma Expertise and Implementation
Individual managers and engineers who train in Six Sigma receive two certifications: Green Belt and Black Belt. People with these certifications have studied extensively and passed their tests, and know the tools.
A corporation can implement Six Sigma three ways:
- Hire a consulting firm to get you started, solving problems and training your internal team at the same time.
- Train existing staff in Six Sigma, and have them solve problems.
- Convert the entire operation or company to Six Sigma with universal training in process improvement.
Each of these has different initial costs and ongoing costs, and different levels of benefit are realized, as well.
Maximizing the Value of Six Sigma
In unusual cases, Six Sigma can pay for itself right away, in the first quarter or two quarters of a year. That happens when the Six Sigma engineers find and correct an obvious flaw in process. The cost savings realized there pay for the launch of the initiative.
The Six Sigma Benefit/Cost Curve
More commonly, an initial investment puts cost above benefit, or leaves very little additional net revenue at first. Then there is a crossover point, and benefits greatly exceed costs.
Over time, however, the benefit-to-cost ratio goes down. This does not indicate a problem with Six Sigma opertions at your company. Rather, it is a result of a beneficial aspect of the Six Sigma approach: Solve the biggest problems first. But once the biggest problems have been solved, future benefits over cost will, inevitably, be less.
That is not a reason to stop Six Sigma once you've started. In fact, that's the worst thing you could do. Right at that moment, your competitors have just gotten wind of your Six Sigma initiative, and are imitating you. Or they've already got it, and that competition is one reason you are seeing less competitive benefit from doing it yourself.
Instead, remember that Six Sigma is continuous improvement. It's value is for the long term - decades and lifetimes. Companies that use Six Sigma this way become best practice centers, perpetually improving their own performance ahead of everyone else.
Six Sigma: Your Next Steps
I encourage you to review this article while focusing on the needs of your company or division. Here are some questions to consider:
- What is the problem to be solved?
- What is the opportunity to be realized?
- Are our challenges more technical, or more organizational, or more cultural?
- How will Six Sigma operate if we have global operations or global competitors?
- Will Six Sigma help our manufacturing or production?
- How will Six Sigma replace or integrate with existing methods and approaches?
- Will Six Sigma help our information management and operations management?
- How will we manage the start-up costs of Six Sigma?
- Are we willing to invest in Six Sigma as a way of doing business, rather than pick it up in hopes that it is the next magic pill or quick fix or management fad?
When you have answers to these questions, it makes sense to learn more about Six Sigma, either by reading, or by contacting a consulting or training firm offering certified Six Sigma services.
If your company is not ready for Six Sigma, what can you do to create success and solve problems? You have three options:
- Leadership Initiatives. A good place to start is to read Gordon Bethune's story of how he turned Continental Airlines around through leadership and teamwork, From Worst to First.
- Total Quality Management. TQM is not dead. In fact, all quality and operations management today is based on it. Even Six Sigma is an extension of TQM, adding kaizen continuous improvement, lean manufacturing, and high-end statistical tools to a TQM core. A good start is my book, Quality Management DeMYSTified.
- The Capability Maturity Model, Integrated. CMMI is a method that combines culture, communication, and process control to achieve reliable, repeatable organizational maturity. You can learn more from the Software Engineering Institute.