News focus

Citation

(2003), "News focus", Measuring Business Excellence, Vol. 7 No. 2. https://doi.org/10.1108/mbe.2003.26707bab.007

News focus

Study of Six Sigma reveals gains and missed potential

New research by Juran Institute, Inc., a pioneer in breakthrough performance improvement methods, and Greenwich Associates, a market research firm, reveals both successes and missed opportunities in the deployment of Six Sigma among users. The study shows that Six Sigma continues to provide a high return despite generally being applied in low-yield ways, according to Brian Swayne, a Juran Institute Vice President.

"The good news is that among the companies studied, Six Sigma programs returned more than double the investment", Swayne said. "The average program cost $609,000 in Six Sigma projects and returned $1,300,000." Projects in this average range, he commented, are significant enough to secure the needed resources and at the same time show payback quickly to budget-minded senior management.

Among the factors studied were the cost of Six Sigma projects, their ROI, criteria used for project selection, investment in each aspect of the DMAIC process, number of projects sponsored, and the number of black belts, green belts and master black belts trained. The study examined in depth the use of Six Sigma at 13 companies in a variety of businesses.

Projects with a value of $5 million or more, which in the past were uncommon, now are routine, according to the study. Two thirds of the companies studied were conducting projects valued at this level. All of them had at least one seven-figure project. "Juran has found that many large projects start out small and expand as new opportunities are envisioned and initial successes are recognized", Swayne said.

Gains by companies with three years of Six Sigma experience were 13 percent greater than those of newer users. The more experienced companies have better knowledge of how best to transfer a program's ownership from the black belts back to the business, a major factor for success, according to Swayne.

The measure stage of the DMAIC process was found to be the most difficult and the costliest. The typical ratio of green belts to black belts used was 8:1.

Though the Six Sigma discipline focuses on listening to the voice of the customer, the study showed that most projects were aimed at cost reduction instead. "This means that the companies studied generally are failing to use Six Sigma to maximum advantage for revenue growth", according to Swayne. "A major reason for this is that it's much easier to measure internal cost savings than external revenue increases related to a Six Sigma project. Six Sigma's productivity is highest when the voice of the customer becomes the program's focus", he said.

He offered four suggestions for maximizing Six Sigma's effectiveness:

1. 1.

   Think big, think long term: Do not promise that every Six Sigma project will return immediate results. Reach beyond the ordinary to pursue breakthroughs. Identify clusters of projects whose cumulative effect is truly significant. Some black belt project managers focus on a few sure-fire $100,000 projects whose success will impact on Christmas bonuses rather than on making breakthroughs. Leaders must plan reward structures that encourage thinking big.

2. 2.

   Involve sales and marketing people: These people can provide valuable intelligence for the selection of Six Sigma projects that focus on the voice of the customer. They also can help allay customers' fears that Six Sigma's purpose is only to cut costs, irrespective of what customers want.

3. 3.

   Engage the CEO and CFO: Breakthrough programs need the leaders' buy-in. This buy-in is critical for getting material support throughout the DMAIC process, particularly its difficult define and measure phases, as well as over-all success in the adoption of the Six Sigma discipline. Ongoing leader involvement also helps establish the link between projects and financial results, especially revenue, and helps build a Six Sigma oriented culture.

4. 4.

   Address the "not me" problem: With some projects, perhaps a third of people taking over a project are not aware it's theirs, a third are not convinced Six Sigma is the answer and a third say they have other priorities. Consult with process owners early and often.

Juran Institute has been helping organizations implement organization-wide breakthrough improvement initiatives with training and consulting services since 1979. www.juran.com