Idea 39 - Six Sigma (50 Management ideas you really need to know)

Idea 39 - Six Sigma

Martial arts mixes with the Greek alphabet and a US electronics maker in a defects control discipline that has won many thousands of corporate converts - Six Sigma. It was designed to reduce. Defects and shorten cycle times, something it does very effectively, but today its sponsors are promoting it as a fully integrated management system.

Six Sigma was developed in the 1980s by electronics and communications firm Motorola. It was part of that company's response to devastating competition from foreign - read 'Japanese' - manufacturers. Sales were taking a hammering and there was a rising tide of complaints from the field sales force about warranty claims. As Motorola tells the story, the senior sales vice president looked the chief executive in the eye and said: 'Our quality stinks.' The two of them agreed on a goal of tenfold quality improvement over the next ten years.

The job of making that happen fell to Bill Smith, an engineer and scientist in Motorola's communications division. He drew together a variety of existing methodologies, largely from Japanese practices, and in 1986 introduced the concept of Six Sigma. It was, the company said, 'a new method for standardizing the way defects are counted, with Six Sigma being near perfection'. As it has evolved, its aim is to achieve total customer satisfaction by delivering products on time, without defects or excessive failures in service.

Sigma is the Greek letter's', its lower-case form written, ironically enough, as if it were the number 6 bowing to the east. In statistical shorthand, sigma is used to represent standard deviation, a measure of how wildly a set of numbers deviate from their 'mean' or average. If the mean is an index of quality, reducing the standard deviation will reduce the
Number of products that fall wildly below it.
To qualify for Six Sigma status, a process must produce no more than 3.4 defective parts per million (which supposedly represents a sigma of 6). The methodology for changing processes that need incremental improvement is summed up by the acronym DMAIC, which represents the important steps in the process:
Define the problem, to determine what has to improve.
Measure the current state against the desired state.
Analyze the root cause of the gap between them.
Improve the process, by brainstorming, selecting and implementing the best solution.
Control the long-term sustainability of the improvements by establishing monitoring mechanisms, accountabilities and work tools.
To design new processes or products that will conform to Six Sigma quality, there is the DMADV methodology - define, measure, analyze, design, verify. This can also be used if an existing process is performing so poorly that it needs more than incremental change.
Belted up Employees have to be trained and certified to implement Six Sigma, which has spawned a sub-industry of trainers and certifiers. Competing with them is the company's own Motorola University, which offers at-source Six Sigma training and consulting services. Maintaining the Japanese flavor, certification means becoming a green belt or black belt, something that requires on-the-job experience as well as time in the classroom. Green belts are the foot soldiers of the process improvement teams, and black belts - whose Motorola University course currently costs over $13,000 - are the NCOs. Black belts who demonstrate 'impact and experience' over some time may be elevated to master black belt status. They tackle the most complex improvement projects, and they coach black and green belters.

Six Sigma has had its share of bad press, and some technical purists say that its results can be distorted. Its supporters retort that it may embody some imprecision, but that this is to miss the point. It works, they say, with benefits that include greatly reduced costs and waste, faster cycle times and improved customer satisfaction. Because the way to do it is specified in such detail, it is easy, though not quick, to implement. Yet, with its culture of customer- centeredness and fact-based analytics, it is clearly more than just a toolbox for manufacturing. Motorola thinks so too. By the early 1990s Six Sigma was already being used in non-manufacturing industries such as financial services, high-tech and transport. In 2002, Motorola wheeled out a new version of Six Sigma that went way beyond the factory floor, calling it 'an overarching high performance system that executes business strategy'. This new Six Sigma –Six Sigma 2.0, if you like - stipulates the following four steps:
Ø  Align executives to the right objectives and targets, by creating a balanced scorecard of strategic goals, metrics and initiative. These will identify improvements that will have most effect on the bottom line.
Ø  Mobilize improvement teams, using the DMAIC method.
Ø  Accelerate results - change is best accomplished in sprints rather than marathons.
Ø  Govern sustained improvement, and share best practices with those parts of the organization that can benefit.

In this way, Motorola claims, companies can grow market share, improve customer retention, develop new products and services, accelerate innovation and manage changing customer requirements.

Overstretching a good idea some have expressed scepticism about this latest development along the Six Sigma time line. They fear that a good idea might damage its reputation - and so prevent its adoption - by making exaggerated claims about what it can realistically achieve. Much the same happened to business process reengineering towards the end of the 1990s.

One of those who worries that this may be happening to Six Sigma is Dr Michael Hammer who, as one of the founders of business process reengineering, should know what he is talking about. 'A Six Sigma train wreck ... would be a tragedy for all the companies who could in fact benefit from a rational and measured application of this valuable technique,' he has said.

To avoid disaster, Hammer advised that practitioners should develop a balanced perspective on Six Sigma, recognizing that it is not the universal answer to all business problems. It is, he said, just one tool among many, very useful for a particular set of problems.

Reference: 50 Management Ideas You Really Need to Know

Book by Edward Russell-Walling

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