Qualityworld

Six sigma excellence

In the last couple of years there has been an explosion of interest in six sigma. Professor Les Porter, MD of Oakland Consulting, explains the fundamentals of the approach and demonstrates how a six sigma breakthrough strategy fits into an overall excellence initiative.

Over the last two decades various proponents have argued that approaches like TQM, SPC, business process reengineering (BPR), benchmarking and business excellence are the key to unlocking the potential in organisations. With the current interest in six sigma, the battle-weary could be excused for thinking that this is just one more buzz-word in the long line of quality offers. However, while six sigma's pedigree can indeed be traced to TQM and SPC, it is differentiated from these earlier approaches by the bottom-line focus and intensity of its application.

Six what?

Six sigma is a disciplined methodology for improving organisations' processes, based on rigorous data gathering and analysis. The approach focuses on helping organisations produce products and services better, faster and cheaper by improving the capability of processes to meet customer requirements. Six sigma identifies and eliminates costs, which add no value to customers. Unlike simple cost-cutting programmes, however, six sigma delivers cost cuts whilst retaining or improving value to the customer.

The term six sigma is based on a statistical rationale (see box). Six-sigma performance is the goal and equates to 3.4 defects per million process, product or service opportunities. The focus is on reducing variability to achieve the goal.

The six sigma breakthrough strategy involves a 'define-measure-analyse-improve-control' (DMAIC) methodology broadly based on the Shewhart plan-do-check-act cycle (frequently attributed to Deming). The strategy takes an organisation's key business processes through five phases to deliver breakthroughs in performance:

phase 1: define - involves defining the scope and goals of the improvement project in terms of customer requirements and the process that delivers these requirements
phase 2: measure - involves measuring the current process performance -input, output and process - and calculating the sigma capability for short and longer-term process capability
phase 3: analyse - involves identifying the gap between the current and desired performance, prioritising problems and identifying root causes of problems. Benchmarking the process outputs, products or services, against recognised benchmark standards of performance may also be carried out
phase 4: improve - involves generating the improvement solutions and fixing problems to prevent them from reoccurring so that the required financial and other performance goals are met
phase 5: control - involves implementing the improved process in a way that 'holds the gains'. Standards of operation will be documented in systems such as ISO 9000 and standards of performance will be established using techniques like SPC. After a 'running-in' period, the process capability is calculated again to establish whether the performance gains are being sustained. The cycle is repeated, if further performance shortfalls are identified.

Figure 1. Six sigma performance

The six sigma concept

Figure 1 illustrates the six sigma scenario. The output from most processes follows a normal distribution as shown by curve A. In the short term, a process naturally centred at T will have a natural spread of plus or minus three-sigma sst, where sst represents the short-term standard deviation. In the six sigma case, this process variation is only half the width of the design tolerances for the process, ie the difference between the upper specification limit (USL) and lower specification limit (LSL). 99.9973 per cent of the process output is contained by this natural spread. Clearly a process running at T is highly capable of meeting the design specifications - only 0.002 parts per million will be outside these specifications.

Controlling processes in the longer term so that they remain on target can prove difficult in many practical situations. A typical process is likely to deviate from its natural centring position by up to one and half standard deviations. This is illustrated by a process shift to position B in Figure 1. Applying this principle, you can calculate the longer-term capability of the process based on the initial short-term capability of the process based on the initial specifications. The statistical basis of six sigma, in particular the 1.5 sigma shift, is not without its critics but this is outside our scope. Suffice to say the issue of process shifts and process capability is a practical problem in many industries. Six sigma offers one solution.

Critical success factors

A key feature of a successful six sigma culture is the creation of an infrastructure that supports and invests in performance improvement. Six sigma programmes involve major investment and must deliver bottom-line results. Successful six sigma programmes require a combination of the following characteristics.

Committed leadership

The six sigma approach is essentially about achieving business transformation and not surprisingly, it requires specific leadership qualities to make it happen. Committed leaders who have the clarity of purpose and drive to achieve breakthroughs in performance are a vital element in all six sigma programmes.

The transformational leader in the six sigma approach is often described as having an edge. Frequently cited examples include Jack Welch (GE), Larry Bossidy (Allied Signal) and Bob Galvin (Motorola). The commitment to six sigma is evident through their behaviour, drive, energy and commitment to provide the necessary resources. It would be unwise to assume that this rather 'hard' model of leadership represents some unified theory

Leadership research is littered with theories - trait theories, behavioural theories, situational/contingency theories etc. Transformational leaders must certainly have that edge to make tough strategic decisions but other qualities, including a genuine concern for the people being 'transformed', must play a key role in delivering sustained success.

Strategic alignment

Six sigma aims to achieve strategic breakthroughs in performance. Organisations that have successfully embraced it ensure that it supports their strategic objectives and key performance measures, and that it is well integrated throughout the organisation. In organisations such as GE and Allied Signal, six sigma is being used in all areas of the business to align resources to solve critical business problems and deliver strategic objectives. It is used in product development, research and development, order fulfilment and back-office operations, among others, to deliver end-to-end process improvement.

A cadre of change leaders

Six sigma is an intense approach to improvement and requires the full mobilisation of a trained and dedicated cadre of practitioners. In six sigma, improvement projects are led by a dedicated full-time resource - master belts and black belts. Black belt training provides the necessary knowledge and technical capability to lead the attack on delivering breakthroughs in performance. The typical curriculum for black belts includes four weeks of training in quality tools, delivered just in time for a team to begin its improvement project. Black belts help to identify opportunities, transfer knowledge on improvement methodologies, act as mentors and coaches and champion the use of six sigma tools and strategies.

Project team members are called green belts and work on improvement projects on a part-time basis. Master black belts act as experts across all project teams. Master black belts are generally experienced black belts with improvement project, teaching and mentoring experience and a good knowledge of the more advanced improvement tools.

Massive investment in black belt training is a key feature in all six sigma programmes. Figures typically quoted are one black belt per 100 employees and one master black belt per 100 black belts. Clearly this can scale up into galactic levels of black belts! It is claimed that the average black belt project will save a company £100,000.

Bottom-line focus

Six sigma focuses on delivering real savings and/or additional revenue. This focus ensures that projects are selected on the basis of maximising their monetary return and customer satisfaction. It is improvement based on removing cost whilst retaining or improving capability. The portfolio of improvement projects should include a mix of projects capable of delivering quick wins as well as larger longer-term projects.

Companies such as ABB, Allied Signal and GE claimed massive savings from their six sigma programmes. ABB saved $898 million each year for two years, Allied Signal has saved $1.2 billion in direct costs since 1994 and GE published a net benefit of $2 billion in its 1999 annual report. There is some debate about these claims and the assumptions behind them: why isn't this performance always realised in share performance etc. However, the focus on bottom-line results does indeed bring a hard strategic focus.

Process approach

Processes are the engines that deliver every organisation's value proposition. The focus of six sigma is on understanding processes and reducing variability Process understanding requires processes to be mapped, their operation fully understood and their capability to deliver customer requirements fully quantified - ie the concept of process capability. Process sigma is based on the ability of the organisation's processes to deliver customer requirements. Therefore closing the capability gap between what the customer requires and what the organisation's processes produce is at the heart of six sigma.

Obsessed with measurement

Management and measurement are inseparable in six sigma programmes - 'you cannot manage what you cannot measure' is the accepted philosophy Six sigma organisations collect data from all their processes and use the data to drive improvement throughout the organisation. They distinguish themselves from 'normal' organisations in the range of data collected and the rigour in which it is analysed and used. There is great emphasis placed on understanding cause and effect. Fact-based decision-making is the norm.

Organisational learning

Giving employees access to knowledge and information systems encourages organisational learning. Personal development and learning is also a key feature. In organisations such as GE, managers and aspiring managers are required to complete the equivalent of black belt training as part of the qualification process for promotion. GE has produced more than 70,000 part-time improvement team leaders. This sends out a powerful message about GE's long-term commitment.

Continuous reinforcement

Recognising and rewarding leaders and improvement teams contribution to improvement continually reinforces six sigma programmes. Incentive programmes must be designed to support six sigma and drive the desired behaviours. Organisations such as GE include competency and experience in six sigma as part of the appraisal process for all staff, including executives. A large part of a project champion's bonus is typically tied to his or her success in achieving six sigma improvement goals.

Quality overload

Organisations in the thick of other quality initiatives such as business excellence, benchmarking etc may see six sigma as just one initiative too many. However, it is not in competition with these activities, rather it is the driver for achieving business excellence.

In any major change programme there are three fundamental questions to answer:
Where are we now and how did we get here? Where are we heading? What future route must we take? These questions help us understand the complementary role of quality approaches such as self-assessment to the excellence model, benchmarking and six sigma. Their relationship is illustrated in figure 2, which illustrates the excellence implementation framework.

In the excellence implementation framework, the emphasis is on clearly defining the strategic goals of the organisation, critical success factors and key processes to deliver the strategy. Baseline assessment involves excellence assessments and product/service assessments to assess the current position. A gap analysis identifies the strategic improvement opportunities, which in turn lead into the process analysis phase. This is where the six sigma breakthrough strategy comes into play with its emphasis on improving process capability to deliver bottom-line benefits.

Six sigma is not a new technique, its roots can be found in TQM and SPC, but it is more than TQM re-badged. With the TQM philosophy, most practitioners promised long-term benefits, five to ten years, as the programmes began to change hearts and minds. Six sigma is about delivering benefits now and is distinguished from TQM by the intensity of the intervention and the pace of change. Like all successful major change programmes, six sigma requires very strong leadership from the top. Excellence approaches such as the excellence model and six sigma are complementary vehicles for achieving better organisational performance.

Interested in implementing Six Sigma in your company? The CQI has launched the CQI/Six Sigma, covering everything from planning for six sigma to full black belt training. Find out more.

Professor Les Porter is the managing director of Oakland Consulting plc, a member of the European Centre for Business Excellence and visiting professor at the Leeds University Business School. After a senior management career in the automotive industry, he entered academia where he developed a reputation in business excellence, process improvement and SPC. During this period, he directed several large research projects in Europe. His research was recognised by the EFQM in 1994 when he won a European Quality Award for research. He served as a senior EFQM assessor from 1992 to 1998. Over the past ten years, he has provided consultancy support to many organisations in the public and private sector and has led many large process improvement and change consultancy projects in Europe and the US. He can be contacted at lesporter@oaklandconsulting.com