Six Sigma: Changing organizations for the better
Wednesday, September 09, 2009 11:10 AM
The Six Sigma philosophy, implemented by companies such as GE and American Express, starts with a very simple and obvious idea: defects cost money. Find out more in this high-level overview.
The TV connection
In 1967, Motorola released its Quasar model, which was the first all-transistor TV sold in America. The innovative design featured modular, solid-state components in a drawer that could be pulled out and serviced, enabling technicians to access and replace parts quickly and more efficiently.
It was plagued with so many quality issues that any productivity gains enabled by the new design were eroded by the need for constant warranty repairs just to keep customers' TVs working.
Motorola management proved unable to resolve the quality problems with the Quasar TV, so the company decided its best option was to sell the brand, thus beginning the migration of consumer electronics from the United States to Japan. In 1974, Motorola sold its TV division to Matsushita, the Japanese company now known as Panasonic.
Using quality concepts that were gaining wide acceptance in Japan--including Total Quality Management (TQM) ideas that originally imported into Japan by American advisors such as W. Edwards Deming and Joseph M. Juran--Matsushita management was able to reduce defects by 95 percent, using existing Motorola designs, work-teams, and technology.
Matsushita management demonstrated that the problem was management's fundamental approach to manufacturing; this inspired a member of that Motorola management team to later admit, "Our quality stinks!"
The beginning
Out of adversity, Motorola sensed opportunity. Bob Galvin, Motorola's CEO at the time, began the development of a quality program that evolved into Six Sigma; it turned Galvin into a business celebrity, and it eventually led Motorola to win the first Balridge National Quality Award in 1988.
Galvin used Motorola's recognition to publicize his firm's Six Sigma programs, which have since been adopted by such organizations as GE and American Express, as well as hundreds of smaller firms worldwide. While Motorola has struggled of late in its core businesses, its business line of training Six Sigma practitioners from other firms has been a constant growth area.
The evolution
Statisticians will recognize the concept of sigma, or the Greek letter σ, which signifies the variability in a process or a statistical sampling. In its most mathematical application, sigma is used by efficiency experts to measure companies' performance by analyzing the number of defects in its manufacturing procedures.
The Six Sigma standard of 3.4 problems per million opportunities represents about as error free a process as humans can deliver, and it's a far cry from the 67,000 defects that typical companies previously accepted as the norm.
This use of statistical language often leads to the unfortunate conclusion that Six Sigma is a dry and mechanical method, solely focused on driving errors and defects out of manufacturing processes. While defect reduction is an element of the Six Sigma approach, Six Sigma has evolved from a statistical quality-control method to a customer-focused philosophy that challenges organizations to change strategies, focus, internal procedures and business models.
As Rey Moré, Motorola's chief quality officer, told the 2009 iSixSigma Conference, Six Sigma has evolved from metric, to methodology, to a catalyst to drive change in the organization.
The philosophy
Six Sigma (as currently practiced) is focused on improving quality in all business endeavors, from manufacturing and assembly of products to customer sales and service. The Six Sigma philosophy starts with a very simple and obvious idea: defects cost money.
Studies show that organizations operating at lower levels of defect prevention, categorized as three or four sigma in statistical terms, tolerate errors of between about 6,000 to 65,000 defects per million, and, more importantly, spend between 25 percent and 40 percent of its revenues fixing these problems. Six Sigma companies, on the other hand, spend about 5 percent in defect remediation. This "cost of quality" has been one of the key drivers of Six Sigma adoption; Jack Welch of GE fame estimated that GE's adoption of Six Sigma methods saved the company almost US$12 billion annually.
Another core element of the Six Sigma philosophy is the application of science and data, rather than politics and hierarchy, as the driver of change. Just as the requirement for observable, measurable data drives scientific debate about, for example, the efficacy of a new drug, Six Sigma practitioners (often known in the Six Sigma lexicon as "black belts") insist that decisions that affect the business' performance, processes, or strategies be based on empirical data, analyzed in a scrupulous manner and tested for veracity in the real world.
By applying a simple performance improvement model called Define-Measure-Analyze-Improve-Control (DMAIC), Six Sigma practitioners assist organizations in achieving the highest level of perfection possible in the business environments in which they operate. DMAIC is simply a refinement of the well-known scientific method of inquiry optimized for the business environment.
Practitioners are not naïve enough to believe that simply by applying scientific methods we can squeeze all of the politics, culture, history, and resistance out of an organization. In fact, the modern application of Six Sigma has benefited tremendously from some of the errors of earlier process improvement methods such as Business Process Re-engineering (BPR). Most business analysts now agree that BPR foundered on the idea that processes can be redesigned and optimized without much attention paid to the emotions of, and the impact on, the people involved. Six Sigma practitioners now emphasize this "Change Agent" view of their work as much as, or even more than, the statistical and scientific elements.
Six Sigma Handbook
Tom Pyzdek, author of the comprehensive Six Sigma Handbook, notes that organizations undertaking a Six Sigma program need to change in three domains:
- The way people in the organization think: focusing on the individual thoughts, expectations and conclusions, of the members of the organization;
- The norms: often referred to as corporate culture, every organization has standards, models, and patterns which guide behavior;
- Systems and processes: this is the core work of the Six Sigma practitioner, but can't be sustained without the success of the prior two organizational changes.
While the benefits of Six Sigma are compelling, the difficulty and complexity of a far-reaching change program are daunting. Pyzdek suggests that the average time to achieve benefits from a Six Sigma program can be more than three years--a period that many enterprises simply don't have the organizational patience to endure.
Still, companies that do take the plunge are rewarded. For example, in a recent study by the American Society for Quality (ASQ), 90 percent of hospitals that deployed Six Sigma saw improvement in their admissions and discharge processes. Similarly, 89 percent in radiology/imaging and 88 percent in pharmaceutical services, indicated so. With the current focus on the cost and efficiency of health care in the United States, these results are compelling.
Conclusion
Considering the fact that the Six Sigma Handbook runs to over 800 pages, it should be clear that this introductory article is a condensed fly-by of this complex topic. For those who wish to delve more deeply into this topic, the literature is rich, and organizations such as Motorola University and ASQ offer courses and certifications to aspiring black belts.
Six Sigma has been applied to almost every conceivable business endeavor, from software development to project management, and prepares consultants and managers for one of the most important and difficult tasks any leader can undertake: changing the organization for the better.
Rick Freedman is the author of three books on IT consulting, including "The IT Consultant". He is a director in the global services division of NEC America, and a trainer and course developer in the Agile Project Management practice of ESI, the international PM training company.
There are currently no comments for this post.