The name of the methodology takes its name from a letter in the Greek alphabet, sigma, which is used by mathematicians to measure variability. In business, the principle of variability is used to measure the number of errors in a process. The goal of a Six Sigma implementation is to produce a product or service with fewer than 3.4 problems per million transactions. A transaction may be defined as a product produced or a service performed.
Six Sigma dispenses with some of the more cumbersome aspects of older business implementation methodologies and, as such, it has risen to become one of the most respected and followed project management systems. Many of the world's most successful companies utilize the principles of Six Sigma because customers in today's business environment have much less tolerance for errors than they did a generation ago. Six Sigma is helping companies deliver excellence to a very discerning consumer base that has very high expectations.
The employees within a company who train on Six Sigma are called "Six Sigma Black Belts." Usually, these Black Belts use advanced computer and business technologies, but the methodology of Six Sigma can easily be broken down to a simple model that comprises five elements: Define, Measure, Analyze, Improve, and Control. Together, they are referred to as the DMAIC model.
Using the DMAIC model, a company's Black Belts must define (D) the goals of a project, measure (M) the existing system in place, analyze (A) the implementation of the project to ensure that there is little difference between actual results and the goals of the project, improve (I) the system wherever possible, and, finally, they must control (C) the new system in place to ensure continued success.
History of Six Sigma
The concepts of Six Sigma were created by the company Motorola in the 1980s under the leadership of Bob Galvin, the company's Chief Executive Officer (CEO). In the early 1970s, a Japanese company took control of a Motorola factory that manufactured televisions. The quality of the televisions was very low and Motorola hired a firm to investigate the problems and to implement a solution.
Within a very short period of time after the Japanese firm took control, the quality of the televisions was dramatically improved. Defects were decreased by 95%, but the company used the same workers and the same technology. In addition to drastically lowering defects, the company was also able to lower manufacturing costs. One thing was very clear: Motorola's management of the factory was the problem and the Japanese firm had managed the process with a remarkable degree of success. The concepts they used to achieve this success were incorporated and expanded by Motorola and would eventually become known as Six Sigma. In 1988, Motorola won the prestigious Malcolm Baldrige National Quality Award, one of the most coveted awards in business. Other businesses started to take notice of Motorola's success and strategy, and the concept of Six Sigma grew rapidly.
One of the most fundamental concepts to understand about Six Sigma is that its methodology is not solely concerned with increasing quality in the traditional sense. While increased quality is a result of its implementation, Six Sigma is primarily concerned with increasing efficiency within a company and delivering higher customer value.
Six Sigma is not solely about cutting costs to improve the bottom line. It is about cutting unnecessary expenses (waste) which do not add to the actual quality, or value, of its products. When companies spend money to fix problems, this expense is often called the cost of poor quality. Typically, companies that utilize Six Sigma spend about 5 percent of the their revenue fixing problems, while the typical cost in most companies that do not use Six Sigma can be as high as 25 percent of revenue.
The Scientific Method
Six Sigma applies the Scientific Method to business. The Scientific Method is a very precise approach used by scientists to invent, discover, and test their theories. Any discovery or theory that does not closely follow the Scientific Method is not regarded as a valid experiment.
The principles of Six Sigma follow these important elements of the Scientific Method:
- Observation: Closely examine the operations of your business.
- Draft an explanation, or theory, that summarizes your observation.
- Develop predictions of future events based on your observations and theory.
- Make experiments to test your predictions. Adjust your theory, if necessary, based on your experiments.
- Repeat the process of developing predictions and conducting experiments until there are no differences between your theory and the results of your experiments.
At the end of this process, a Black Belt in a Six Sigma company will be detailed to certify a theory which explains an important element of the company's business. It eliminates a culture of guessing and employee bickering and moves to a more factual environment.
Six Sigma versus Older Project Management Methodologies
There have been many process and quality improvement initiatives used before Six Sigma, but they differ in several important ways.
Traditional process improvement initiatives focused almost exclusively on the manufacturing process while Six Sigma is concerned with the analysis of data across a broad spectrum of a business. It analyzes all aspects of the business environment, with a special emphasis on efficiency. Thus, Six Sigma considers manufacturing just one part of the business process since customers are concerned about many more things than just the manufacturing quality of a product.
In addition to wanting a high quality manufactured product, customers are concerned with price, service, keeping updated with future releases of the product, and technical support, among many other concerns.
Effective leadership is vital for any Six Sigma implementation. The leaders of the company or the department must communicate the goals of the project clearly, but they must also actively engage all employees in the company. If the project is for a specific department, leadership must ensure that the project's goals are in line with the objective of the entire company. The primary responsibility of leadership is to ensure that the Six Sigma project is in line with the company's mission statement.
Leadership might need to realign the company before pursuing a Six Sigma project. Departments might need to be added, or removed, new positions might need to be hired, and leaders must also take a look at the company's policies on recognition, rewards, and compensation. A new infrastructure might need to be created by senior managers to meet the needs of the project.
The environment of the company must be open to change, and it is leadership's responsibility to help facilitate the creation of this new environment. A DMAIC Project (Define, Measure, Analyze, Improve, Control) is created for the purpose of changing current processes to increase efficiency and value.
Input must be received from all stakeholders: suppliers, senior managers, employees, department managers, and especially customers. A stakeholder is anyone with an interest in the outcome of the project. Systems must be in place to solicit feedback from all stakeholders. At the very beginning of the project, before any change has been implemented, feedback about the current environment should be gathered. This data will serve as a starting point which can be used to make comparisons later in the project.
Before any goals can be established, feedback must be solicited from the entire organization and, from this feedback, Six Sigma projects are chosen. This feedback should come from a variety of sources, including both senior management and lower level employees. The selected projects must have measureable goals, measured in terms of financial performance and added actual value to the customer.
Once the projects are chosen, the teams are assembled. Each team is led by a Black Belt in Six Sigma, or one who is highly trained in its methodology. Green Belts are professionals who have been trained and certified in Six Sigma methodology but they do not receive as much training as Black Belts. Black Belts usually lead teams throughout the project deployment.
The timeframe for the project is determined by two factors: the goals of the project and the current percentage of defects, or errors. A typical goal in a Six Sigma project is to reduce errors ten-fold every two years. So if a company determines that 100,000 errors per million of transactions are currently being found, then a goal at the end of the first two years would be to have 10,000 errors per million. At the end of four years, this amount would be reduced to 1,000 per million. The goal of a Six Sigma project is to eventually reduce errors to just 3.4 instances per one million transactions.
Throughout the final deployment of a Six Sigma project, a company must make changes to its existing operations rather than limit changes to a pilot program or a small subset of its operations. Pilot programs are effective, however, for testing at certain points in the project. Process improvement must be an integral part of the company's philosophy, especially to meet the ever-growing demands of a discerning customer base.
Champions and Sponsors
Unlike other project management methodologies, Six Sigma has a top down philosophy. The goals of the project are supported by the highest levels of management and they set the tone for the entire company's view of the project. The senior managers must act as champions for the project, constantly battling the existing culture and promoting the change that the company needs. In many organizations, a project will be led by a very senior executive, such as an executive vice president. Sponsors help to coordinate the changes that are identified by the Six Sigma project. Champions lead the team to determine the necessary changes while sponsors help initiate the change at lower levels throughout the company.
Visioning is an important part of the leadership process in a Six Sigma project. Leaders must be able to visualize the changes they want to see in the future. Strategy cannot be implemented without this visioning. What will employees' roles be in the future? Do they need additional resources, training, and supplies? Are our customers' expectations going to change over the of the next two years? These are all types of questions that a visionary for the company must answer before change can be implemented.
It is understood in Six Sigma that a visionary does not make change an easy process, but he or she serves as a guide through the process. While the end result may be understood, the process in getting there may still be difficult and require hard work.
How the leader communicates this vision is going to be closely watched by all employees in the organization. The most successful Six Sigma projects are headed by visionaries who communicate their vision in concrete terms, rather than abstract concepts. They live out their vision on a daily basis. Every decision by the leader and every action they take is a method of communicating their vision for the future, a more efficient company.
A Closer Look at Black Belts
How does an executive leader choose the Black Belts that will lead the project to success? What are the qualities necessary for an effective Black Belt and where do they come from? Most importantly, Black Belts should have a natural tendency for questioning the status quo, as they will be instrumental in implementing organizational changes. It is not necessary for Black Belts to be formally trained in statistics or management, but they must be very proficient in math and computers as they will be using sophisticated tools to analyze data and they must clearly understand many complicated technical concepts. While training in statistics is a preference, it is not mandatory.
Black Belts typically receive three to six weeks of training in using the tools of Six Sigma, the technical tools that will be used to analyze data.
Such tools include spreadsheets such as Excel, database programs (Microsoft Access and SQL Server are two common examples), and word processing programs such as Microsoft Word or an equivalent.
Black Belts must be excellent communicators. They will be communicating the change necessary, both verbally and in writing, to all the stakeholders in the company. This communication will be done both in small groups and in front of large audiences.
Master Black Belts
A Master Black Belt has achieved the highest level of training and has proven to be an extremely effective leader in implementing change and overcoming obstacles. In addition to all of the requirements of a Black Belt, a Master Black Belt has the added responsibility of being a trainer for Black Belts. They must be very proficient with mathematical theory, advanced statistics, coaching, and mentoring.
