IT Policies

Six Sigma: Changing organizations for the better

The Six Sigma philosophy, which has been implemented by such companies as GE and American Express, starts with a very simple and obvious idea: defects cost money. Learn more about the philosophy 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%, 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% and 40% of its revenues fixing these problems. Six Sigma companies, on the other hand, spend about 5% 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 $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:

  1. The way people in the organization think: focusing on the individual thoughts, expectations, and conclusions, of the members of the organization;
  2. The norms: often referred to as corporate culture, every organization has standards, models, and patterns which guide behavior;
  3. 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% of hospitals that deployed Six Sigma saw improvement in their admissions and discharge processes. 89% in radiology/imaging and 88 percent in pharmaceutical services . 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.

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About

Rick Freedman is the author of three books on IT consulting, including "The IT Consultant." Rick is an independent consultant and trainer, working, through his company Consulting Strategies Inc., to help agile teams and organizations understand agile...

14 comments
gsequeira
gsequeira

This is a great article. The essence of SS is getting members of an organization to think and behave differently. Many believe, incorrectly, that SS is nothing more than training and certifications. This emphasis on training misses the much more valuable benefit that comes from actually changing the culture of an organization to one that addresses problems and challenges systemically rather than symtomatically.

lgtdrivesme
lgtdrivesme

Watching Six Sigma paralyze a company lets me know that it doesn't work. Six Sigma is a production/assembly line process that achieved good results in that use case. People then started applying it to humans and business process. Both items are not mindless widgets. The counter argument could be made that "If someone doesn't want to play with the team, remove them.". That falls short of addressing the shortcomings of the idea. Your defects then become HR hires and in turn 'people'. Essentially, your company is now filled with 'potential' defects that haven't malfunctioned yet. Besides the rehash of an old idea that stifles creativity, rewards opportunism, and punishes hard work and ingenuity; what was this article intended to provide? Six Sigma serves the same purpose as ITIL and COBIT: Package smart peoples hard work and abilities to remove their high cost and replace it with an ever lower cost 'potential defect'/worker. If you truly see all three of these as defect control, your life is tragically misguided. Is this written to help bolster your training curriculum at ESI? I'm sorry, Rick Freedman, that you believe humans are no more valuable or intelligent than a piece of sheet metal on a factory assembly line. May you be LEAN'd out one day as your job will be filled the day people learn how to use MS Project and Excel effectively. That'd be a nice $190k/yr to give back to NEC.

BFilmFan
BFilmFan

Six Sigma is an engineering methodology created by marketing graduates and is nothing less than an elaborate confidence trick. Of 58 large companies that have announced Six Sigma programs, 91 percent have trailed the S&P 500 since that date. General Motors and Ford's Six Sigma process adoption didn't save them from having massive issues with product quality. While 3.4 defects per million opportunities might work well for certain products/processes, it might not be ideal or cost-effective for others.The calculation of defect rates for situations where the normal distribution model does not apply is not properly addressed in the current Six Sigma literature. Sorry, but this article does not elaborate the many well known and documented failures of Six Sigma. Rebuttal witnesses: Tennant, Geoff (2001). SIX SIGMA: SPC and TQM in Manufacturing and Services. Gower Publishing, Ltd.. pp. 25. ISBN 0566083744. http://books.google.com/books?id=O6276jidG3IC&printsec=frontcover#PPA25,M1. Wheeler, Donald J. (2004). The Six Sigma Practitioner's Guide to Data Analysis. SPC Press. p. 307. ISBN 9780945320623. http://online.wsj.com/article/SB116787666577566679.html http://money.cnn.com/2006/07/10/magazines/fortune/rule4.fortune/index.htm http://www.businessweek.com/magazine/content/07_24/b4038406.htm?chan=top+news_top+news+index_best+of+bw http://everything2.com/title/Six+Sigma

spkd
spkd

Do you think that Six Sigma can be applied in a legal firm? Does anyone have any experience or knowledge of actual cases where the Six Sigma philosophy (methodology) has been used to improve efficiency in a law firm?

JamesRL
JamesRL

I was hired into a contract position on Process engineering team at a bank before my current employer. They made good use of the Six Sigma tools, but then they had the authority and the brains to do what they needed to do, and the same can't be said for every organization. Its a tool folks, like a hammer. You can't put a $100 hammer in the hands of an idiot and expect him to make a cabinet or a house. There wasn't much radically new in the toolset of Six Sigma either, I'd already learned how to do fishbone (Ishikawa) diagrams and process charts from previous experience. It just brought things together in a rational framework. The problem isn't in the principles of Six Sigma, or TQM or any of the other methodologies before it. Its in the idiots who latch on to these techniques as the magic wand that can be used to trasnform their company. I'm more from the continuous improvement side of life. Keep making small easily managed improvements, and over time the company will change. James

lodestone
lodestone

Measurement does not quality make. Six Sigma is essentially a complicated measurement process. It does little to address the real problem with quality. The article hit it early on: it's MANAGEMENT. Management is responsible for quality; if managers lack the nads to enforce the quality requirements, they won't be met. That's the primary reason why I skipped Six Sigma when I was a quality manager: too complicated for something that doesn't address the real problem. Crosby had this figured out before Deming even hit the scene so I chose to follow his advice. Ultimately, any quality endeavor will fail if it is relegated to the quality office and not embraced by everyone, managers foremost. --Allen

Dr_Zinj
Dr_Zinj

Six Sigma is primarily focused on reduction of undesired variability in systems. It's implementation is literally a business within a business and we all recognize that a very large percentage of businesses fail. It's not much wonder that a lot of companies have Six Sigma programs, but fail to implement them successfully. Getting people to change their sacred cows is always an uphil battle. And it's even harder considering that the cows will be dumping slippery stinky stuff underfoot the whole way.

mckinnej
mckinnej

The thing that trips up most companies is they don't grasp how hard this change will be and how long it will take. It is unbelievably hard and it could take years. I hate to use the term but it really is a culture change, which is almost impossible to achieve on a broad scale with an existing workforce. Unfortunately the majority of C-leadership seems to get sucked in by the marketing hype and thinks just because they said "do it" it will happen. As the old Aerosmith song goes, dream on. The first red flag should be the numbers themselves, 3.4 in 1,000,000. Unless you are smart enough to adjust the scale, when you apply this to a low-volume process every defect turns into a major tail-chasing event. I've watched managers agonize over a root cause when the reality was very simple, people make mistakes. Unfortunately "Human Error" is a root cause category often frowned on. The fact is, unless you have an automated process (think robots), Six Sigma is going to be a huge exercise in frustration if you try to use it to "fix" a processes driven by humans. I feel the program has merit, but it's application should be targeted to processes that fit its high-volume automation basis.

santeewelding
santeewelding

You did not show in person. Sobers me right up. Thank you. Happens with engineering methodology we market to the organization of our own minds, without ever graduating therefrom.

Dr_Zinj
Dr_Zinj

What you're looking at are the processes used within the firm. How cases are put together, how research is done, how information flows into, out of, and within the firm, how arguments and rebuttals are constructed, how do results compare with preparation. How the complaint process operates. Is your customer service adversarial or cooperative? What's your billing process? Lots of possibilities.

BFilmFan
BFilmFan

It's a confidence trick, just like the Stock Market is a Ponzi scheme.

michael.brodock
michael.brodock

high volume production is where this method works... we were told to get rid of anything that we didn't use weekly, like technical manuals... so we hid them. I mean seriously, I may not need that tech manual every day, but when I need it, I do need it. anyway, that is just one example where different environments and goals require different methodologies and philosophies to operate at peak. Sure if I was stamping out a trillion widgets a week, SS should help but troubleshooting variable issues in a dynamic production environment is a totally different experience.

BFilmFan
BFilmFan

I try, but don't always manage to be my nice online self in person. The real truth is that I am sick and tired of people with no skills or training in an area come and tell others who are trained how to do it better with a process that doesn't work. When I need expertise in marketing, I will get a marketing expert. When marketing needs some engineering expertise, they come and see me. I've mentioned in the past, that before I got into IT work, I was trained as an electrical engineer. I don't actually have an IT degree at all, which makes me one of those weird people in the industry that has an advanced business and engineering degree. I would see more value in an article that discussed methodologies on how to handle change management in an organization based on real-world experiences, so that other people can benefit from someone else's "well that wasn't a very good idea" moments!

shardeth-15902278
shardeth-15902278

Six Sigma get's overused. I know a fellow who has made a killing in his particular industry, because all his competitors enthusiastically embrace JIT manufacturing as a cost saving measure, to the extent that they don't have sufficient inventory to meet urgent needs. The products are small, so keeping an inventory isn't really that expensive. Thus he is still price competitive. JIT is a good idea in many cases, but not all. Same w/ Six Sigma. It isn't a magic bullet.

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