Viewpoint: six sigma implementation

Citation

(2003), "Viewpoint: six sigma implementation", Measuring Business Excellence, Vol. 7 No. 3. https://doi.org/10.1108/mbe.2003.26707cab.006

Viewpoint: six sigma implementation

Six sigma has become a popular approach in many organizations today to drive out variability and reduce waste in processes using powerful statistical tools and techniques. In statistical terms, six sigma means 3.4 defects per million opportunities (DPMO), where sigma is a term used to represent the variation about the average of a process. In business terms, six sigma is defined as:

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  … a business improvement strategy used to improve business profitability, to drive out waste, to reduce costs of poor quality and to improve the effectiveness and efficiency of all operations so as to meet or even exceed customers' needs and expectations (Antony and Banuelas, 2001).

Many organizations have reported significant benefits today as a result of six sigma implementation. General Electric is one of the most successful companies in implementing six sigma projects. GE 1999 annual report stated:

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  … the six sigma initiative is in its fifth year – its fifth trip through the operating system. From a standing start in 1996, with no financial benefit to the company, it has flourished to the point where it produced more than $2 billion in benefits in 1999, with much more to come this decade.

Motorola, where six sigma was developed in the 1980s, claims to have similar savings. In 1988 Motorola was honored with the Malcom Baldrige Award, and prior to this date in three consecutive years, Motorola had spent $170 million on workers' education and training. As a result, Motorola saved $2.2 billions in reducing cost of poor quality (such as reduced scrap, rework, warranty costs, etc.). Other companies such as AlliedSignal, Citibank and Sony, have also succeeded in six sigma implementation (Antony and Banuelas, 2001).

However, not all companies can claim to have had the same benefits. According to David Fitzpatrick, worldwide leader of Deloitte Consultant's Lean Enterprise practice:

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  … fewer than 10 percent of the companies are doing it to the point where it's going to significantly affect the balance sheet and the share price in any meaningful period of time.

These contrast results making six sigma implementation a complex and central process, where the critical success factors (CSFs) in the implementation of six sigma must be recognized.

Management involvement and commitment

Those who have implemented and practiced six sigma agree that the most important factor is continued top management support and enthusiasm (Henderson and Evans, 2000). People in the highest level of the organization must drive six sigma. In six sigma success stories like Motorola, GE, and AlliedSignal, the CEOs are the ones who have made it possible. All of them support, participate and are actively involved and dedicated in company-wide six sigma initiatives.

Cultural change

Six sigma is considered a breakthrough management strategy, because it involves adjustments to the firm's values and culture for its introduction. It also involves substantial change in the organization structure and infrastructure. Usually when important change occurs, the people in the organization are afraid of the unknown and they do not understand the need for change. Phrases such as: "we have tried this before but it does not work" are often heard.

Many authors and theories have been developed to reduce or eliminate this behavior (Eckes, 2000; Rao, 1996; Feigenbaum, 1991; Crosby, 1979; Bounds, 1994). Some companies that have succeeded in managing change have identified that the best way to tackle resistance to change is through increased and sustained communication, motivation and education. It is important as well to get as much practical feedback as possible from employees, plan the change through a detailed six sigma implementation milestone, delegate responsibilities when possible and empower people to make their own decisions.

Communication

A communication plan is important in order to involve the personnel with the six sigma initiative by showing them how it works, how it is related to their jobs and the benefits from it. By doing this, resistance to change can be reduced (Henderson and Evans, 2000). When six sigma was launched in Sony Electronics, as a part of the communication plan, slogans such as "show me the data" were frequently seen on internal magazines and pins worn by employees.

Organization infrastructure

Teamwork is a fundamental element within six sigma. Citibank, one of the top banking organizations that is adopting the principles of six sigma, uses widely cross-functional teams. In a project on manual funds transfers, it forms a cross-functional global team of 80 people, representing each functional department involved in the project. This large number of people was needed since Citibank searches for a process standardization all over the world. The team identified the entire funds transfer process, tabulated defects and analyzed them using six sigma tools. They identified internal call-back procedures as the main defect and then focused on solving it. The results were quite amazing with an elimination of 73 percent in the call-backs (Rucker, 2000).

Training

Training is a crucial factor in the successful implementation of six sigma projects. It is critical to communicate both the "why" and the "how" of six sigma as early as possible, and provide the opportunity to people to improve their comfort level through training classes (Hendricks and Kelbaugh, 1998). The belt system must be applied throughout the company starting with top management (i.e. the champions) and should be cascaded down through the organizational hierarchy.

Linking six sigma to business strategy

Six sigma cannot be treated as yet another stand-alone activity. It requires adherence to a whole philosophy rather than just the usage of a few tools and techniques of quality improvement (Dale, 2000). Six sigma projects must be targeted for process and product improvements that have a direct impact on both financial and operations goals. Even if the first efforts focus on fairly narrow problems, their impact on the whole business should be clear. It needs to be clear how projects and other activities link to customers, core processes and competitiveness (Pande et al., 2000).

Ford motor company has embraced six sigma methodology since 1999. Previous to the six sigma initiative, other total quality management (TQM) initiatives have been successfully launched and implemented in Ford. One of the biggest differences between six sigma and TQM at Ford is that previous philosophies focused on fixing the problem and did not worry about the cost (Gabor, 2001). By following the dictates of six sigma, engineers at Ford conducted a cost-benefit analysis to determine whether the benefit from the project was worth the effort. Ford found that six sigma is a lot more structured and profit-oriented method than total quality management. The expected process performance improvement (i.e. reduction of rework, scrap rate, reduction of warranty costs, reduction of process variability, etc.) is about 70 percent per project and thereby cost savings are in the range of $200,000-250,000. Individual six sigma projects are assigned black belts, who are committed to working on quality-improvement projects (Gabor, 2001).

Linking six sigma to customers

Six sigma should begin and end with the customer. Projects should begin with the determination of customer requirements. It is essential to set project goals based on reducing the gap between the company's expected and actual performance, especially in terms of delivery time, reliability and customer satisfaction. The understanding of markets, operations, measures used and creativity to maximize value and performance are the core elements of six sigma approach (Pande et al., 2000).

Linking six sigma to human resources

Truly changing behavior over the long term requires six sigma goals be internalized on the individual level. To this end, human resources-based actions need to be put into effect to promote desired behavior and results. Some studies show that 61 percent of the top performing companies link their rewards to their business strategies, while lower-performing companies create minimal linkage (Harry and Schroeder, 2000).

Linking six sigma to suppliers

Companies need to expand six sigma beyond the company's walls. One way is to share it with the suppliers, who have a direct participation in company's manufacturing deliveries. The traditional approach is to have different suppliers in order to maintain reduced costs, however under six sigma, one way to reduce variability is to have few suppliers with six sigma performance levels (Pande et al., 2000). In addition win-win behavior should be considered in the buyer-supplier relationship.

Understanding tools and techniques within six sigma

During the belt training, employees learn three main groups of tools and techniques, which are divided into team tools, process tools and leadership tools. With the knowledge obtained, it is important that employees will be capable of adopting and developing the six sigma methodology. Since methodologies vary from organization to organization, there is no standard methodology and organizations must be capable of choosing the most appropriate tools and techniques applicable to them (Pande et al., 2000).

Within the arena of six sigma, there are two different methodologies, which are listed below:

1. 1.

   the problem solving methodology which can be either MAIC or DMAIC (where D stands for define, M stands for measure, A stands for analyze, I stands for improve and C stands for control); and

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   preventative methodology known as design for six sigma, which consists of four stages: identify, design, optimize and validate (IDOV).

Project management skills

Another key ingredient in the implementation of six sigma is that project leaders must have some basic project management skills. Participants must be taught team tools, where project management skills are included. Most of the projects fail due to poor management skills, setting agendas, setting and keeping ground rules, determining the meeting's roles and responsibilities, or undesired facilitative behaviors (Eckes, 2000).

Project prioritization and selection

As six sigma is a project driven methodology, it is essential to prioritize projects which provide maximum financial benefits to the organization. The projects are selected in such a way that they are closely tied to the business goals or business objectives of the organization (Ingle and Roe, 2001). Therefore every project should be selected so that it will help the company improve competitive advantage, business profitability, process cycle-time, throughput yield, etc.