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The Six Sigma Management Paradox

Simply stated, the six sigma management paradox is as follows: To attain six sigma performance, we must minimize process variability, slack and redundancy by building variability, slack and redundancy into our organizations.

Six sigma involves an intense effort to reduce process variation to a minimum so that processes consistently meet or exceed customer expectations and requirements. However, revolutionary improvement rates and quality levels can only be achieved by breakthroughs in thinking. These creative breakthroughs can occur only if the organization allows teams and individuals the freedom to try many new things. Whenever something new is tried, there is a risk of failure, which increases waste in the short term. The best minds will be drawn to creative activities (and away from their usual duties) as moths are drawn to light. The organization must possess sufficient slack–i.e., extra resources–to ensure that critical functions continue despite the absence of these key personnel.

Leaders must be vigilant to ensure that the paradox is understood. When one learns a new principle, there is a tendency (especially in the beginning) to go overboard in applying it. A fundamental principle of six sigma is reduction of variability. The tendency is to apply this principle to everything . Advocates examine every process with an eye toward bringing it under control; that is, making the process efficient, capable and predictable. In the early stages, the payoffs from these activities are often huge because the organization is awash in wasted resources and nonproductive or counterproductive activity (i.e., redundancy and slack). However, as progress continues, there is less and less unplanned slack in the organization. If care isn’t taken, six sigma can ultimately result in an organization that is unable to grow and adapt to a changing environment.

The common form of many modern organizations is what I call “hard wired.” The organization chart is the blueprint, and the policy-and-procedure manuals are the operating instructions for this machine. As with a circuit board, the idea is that certain outputs (products, services, profits) will be produced when certain inputs (money, people, ideas) are provided. Such organizations are highly efficient; resources are carefully managed to avoid waste. However, they are also very inflexible and difficult to change. These organizations tend to rely heavily on formal mechanisms, such as chartered teams, to create change. Senior management forces the various functions to provide resources (people, facilities, etc.) to the teams, in effect tapping into the main resource circuits to draw off energy for change. Maintaining the momentum for change in these organizations requires the vigilance of top management because the “true” resource owners–the managers of the functions whose resources are being appropriated–are constantly trying to stop the energy drain from their areas. Such organizations are constantly fighting “resistance to change.” Six sigma tends to work poorly in hardwired organizations because it’s difficult to get the required resources and the necessary permissions to conduct experiments and make process changes.

A second type of organization is the “soft wired” organization. In a soft-wired organization, there are floating resources that are not fully under the control of a particular function. These resources can be easily reconfigured to perform a variety of different activities. 3M’s tradition of allowing certain technical people to claim 15 percent of their time to pursue projects of their own choosing is an example of soft-wiring. The Brazilian company Semco has freelance engineers who report to no one and receive a share of the proceeds from any ideas and innovations they dream up. There are many other examples of soft-wiring, and they produce amazing results. The soft-wired organizational form is well-suited to the rapid but directed change six sigma requires.

An emergent third type of organization, about which I write extensively in my book The End of Management, is the “spontaneous enterprise.” Scientists call these organizations “complex adaptive systems.” Such systems are all around us; examples include the rain forest, the brain and the free market. They are vastly more complex than any business firm, and also very orderly. Until recently, we could only marvel that these amazing systems could exist and function so beautifully without a leader or a plan. However, scientists have finally begun to discover the rules that govern such systems. With our new understanding, we can see how we might design more effective human organizations. They could depend on self-organization, rather than on a costly and ineffective system of rules and hierarchy (i.e., management), for order.

At this time, there are only a few organizations of this type, such as the credit card behemoth VISA. However, as we learn from these pioneers, we should see more spontaneous enterprise organizations.

Because six sigma is a management program, it would need to be radically modified to work in a spontaneous enterprise. One possibility is that six sigma technical leaders would play important supporting roles to leaders, providing them with information to help them maintain a competitive edge. Regardless of how we administer a six sigma program, its paradox will always apply–even to the most complex of organizations.

The Leadership Process

Leading an entire organization is a daunting challenge. One must keep everyone happy. A delicate balancing act, to say the least. We Six Sigma practitioners are often quick to criticize leaders for not properly supporting our efforts. But what if you were asked by a committed leader for advice on how to actually use Six Sigma to help them lead the enterprise? Do we have anything to offer?

The answer, I believe, is yes. When I studied management in college I was struck by the fact that it focused largely on control systems. There were systems to control expenditures, quality, personnel, work flow and everything else in the organization. But are businesses all about control? Six Sigma says no. Businesses are about processes that deliver value to stakeholders. And most leaders, who are trained as managers, are not familiar with this view of their organization and don’t know how to use it to their advantage. We can enlighten them.

What do leaders need to do to create excellent processes?

Phil Crosby once said that quality professionals spend too much time complaining about lack of leadership support. Most CEOs, Crosby said, have no clue what we mean when we say we want their support. Leaders are doers. We must tell them what they need to do. While the leadership process is complex, it can still be described in simple terms, as shown in Figure 1.

Leadership Process

Figure 1–The Leadership Process

Organize for process excellence

The leader can’t achieve process excellence on his own. He needs to create a process excellence leadership team, or PELT. The PELT will be responsible for helping the leader achieve his process goals. They must receive training in their new responsibilities and they must meet on a regular basis to prepare plans and to review progress.

Determine key outcomes and metrics

The process of identifying key outcomes of the organization begins by identifying the goals for each stakeholder and the organization’s strategies for achieving these goals. Strategies are meaningless abstractions until the PELT identifies the metrics that operationalize the strategies. Typically, there are too many metrics for a leader to follow closely. While all metrics are important, the PELT must identify the critical few metrics that will differentiate their organization from its competitors. These “differentiators” will be monitored over time on dashboards that are part of a balanced scorecard.

Identify processes, process owners, drivers

The most important processes in the organization are those that serve customers directly. These are the organization’s core processes. Each core process, and there will be very few, must be defined. An owner must be identified for each core process and given the authority to design and measure the process. Ideally, the process owner will have a voice in assessing the performance of functional leaders who contribute to her process.

In addition to core processes there are enabling functions. These are functions that do not serve customers directly, but they provide resources to the core processes. Examples of enabling functions are IT, quality assurance and human resources.

Core processes must be linked to the balanced scorecard and dashboard. They must each be mapped to an actionable level. This means that the activities of the core process will be defined in sufficient detail to allow the measurement of their impact on the effectiveness of the organization’s strategies. At this level we will be able to determine the critical to quality drivers in the process, also known as CTQs.

Plan for improvement

Once the process owner has identified the CTQs for her process, she can work with the functional managers and her own PELT to generate plans for improving the CTQs. The plans must be validated by mapping them back to dashboard metrics. The process owner must work to get shared vision on her plans among those who will be involved in executing them. Not all improvement will take place as a result of Six Sigma projects or activities. The PELT must identify the best way to achieve the improvement goals.

Improve

If the path to improvement involves projects, the process owner or functional manager’s PELT must identify the projects, prioritize them, and assign sponsors to them. Project identification involves creating problem statements, business cases, and draft charters. In some cases the PELTs will work with the sponsors to identify team leaders. Project kickoff meetings that include a member of the PELT or the process owner will give the team a sense of the importance of their project to the organization, and it will help them determine the line of sight linkage between their project’s goals and the goals of the larger organization.

Since success will depend on the effectiveness of the project teams, the top level leadership will want to monitor the project schedules and the success of the project teams. This will take place during regularly scheduled dashboard reviews. Also, because the business environment is dynamic and constantly changing, leadership must meet frequently to review their strategies to assure that they remain relevant.

Summary

Leadership is simple, but it is anything but easy. Most leaders wake up each day and hope that the people in their organization will do great things to move the organization forward. The Six Sigma leadership process makes this a lot more likely.
Click to find more articles about Six Sigma Leadership.

Taking the Six Sigma Plunge

Recently some prospective clients asked me for a demonstration project to help them determine if six sigma would be a good idea at their company. I advised them against it. Such a demonstration only shows management’s lack of commitment to the success of six sigma. Although philosophical issues are important, there are more concrete problems with such “toe in the water” projects. In particular, major quality improvements can sometimes yield little or no bottom-line cost impact. The result of such projects is to convince management that six sigma adds cost without adding value. This belief is, of course, totally wrong. But it’s also a logical result of the demonstration approach itself.

For example, Sam was a six sigma enthusiast. He’d studied its use at several major companies and was convinced that it would save his company, which we’ll call Acme, millions of dollars. The hype had also caught the attention of the senior leadership at Sam’s company. But before diving headlong into six sigma, they wanted Sam to conduct a demonstration project to see if the savings reported by the press could actually be obtained at Acme.

The company’s main product was a complex assembly, which Acme sold to a large aerospace customer. The assembly- manufacturing process was in statistical control and producing an average of 10 defects per assembly. With management’s support, Sam documented the cost of noncompliance to be about $1,000 per assembly. After months of diligent effort, Sam’s six sigma team was able to redesign the process. To their delight, they were able to reduce the number of defects per assembly by a full 50 percent, from 10 defects per assembly to five.

Management was also interested in the project. But the accounting department had carefully monitored the costs for the assemblies, and to everyone’s surprise, accounting found only a minuscule 0.7-percent cost savings.

Based on these results, leadership’s conclusion was simple: Quality doesn’t pay. The company won’t pursue six sigma any further.

Did accounting make a mistake? In a word, no. The problem arose because Sam measured quality as defects. The truth is that most costs are incurred because of defectives rather than because of defects. (Thanks to Mikel Harry of the Six Sigma Academy for this insight.) A defective is a unit of product or service that contains one or more defects. Whether a unit contains one defect or several is irrelevant. Customers generally react to defective units by returning them for warranty repair, refunds or other options. Internally, defective units must be identified through costly inspection and then routed through equally costly rework processes, or else scrapped entirely. A unit with one defect costs nearly as much as one with several.

Mathematically, the Poisson distribution describes the relationship between defects and defectives. The equation for the Poisson distribution is

In the equation, x represents the number of defects in the sample, and P(x) means the probability of finding x defects. For example, P(1) is the probability of finding one defect. The symbol m is the average number of defects per unit of product or service. For Sam’s project, the average assembly had 10 defects before six sigma was applied, so m = 10. The efforts of the six sigma team reduced the average number of defects per assembly to 5, for a 50 percent improvement in quality.

Let’s plug these numbers into the equation and see what happens. Because we are interested in the probability of an assembly being defect-free, we want to know P(0) for each of the two quality levels. Before six sigma, with m = 10 we get

In other words, there were virtually no defect-free circuit assemblies before applying six sigma methodologies. After applying six sigma, the probability of getting a defect-free assembly at Acme was

Thus, a 50-percent improvement in the quality level as measured in defects produces only a 0.7-percent improvement in the number of defect-free circuit assemblies. A complete graph of this relationship is shown in Figure 1.

Figure 1: Quality Improvement vs. Cost Savings

The real cost-reduction benefits only start to appear when quality reaches very high levels. This relationship explains the commonly observed phenomenon of quality programs not paying off in the short term. Only when companies stick with it long enough to begin to approach six sigma quality levels do they get the desired results. Too often, “toe in the water” projects scare companies out of the pool before they even start to swim.

Six Sigma Shortcuts

I often receive e-mail and phone calls from people whose management has expressed an interest in Six Sigma but doesn’t like the approach (i.e., hard work and dedication from the top down) used by pioneering companies such as Motorola, GE, AlliedSignal, Texas Instruments and others. When I suggest that people not proceed until they can persuade their leadership to do it right, I’m often told that they must forge ahead anyway. This message is conveyed with a great deal of weeping, wailing and gnashing of teeth.

As you might imagine, this can get depressing after a while, so, in an attempt to preserve my sanity, I’m writing a column for those of my readers who want to hear that it’s OK to take shortcuts: If implementation for its own sake is what you’re after–not long-term results–you can devote just as little effort to a Six Sigma program as you want. So please, before contacting me, see if the shortcut you want to take is already on the following list.

  • Ignore the customer. Some companies spend a lot of time and money getting customer input only to find that customer requirements are maddeningly vague and difficult to translate into internal requirements, goals and Six Sigma projects. You can avoid this hassle by simply skipping this step. Besides, what the customer wants is obvious anyway.
  • Start Six Sigma at the bottom or the middle of the organization. CEOs such as Bob Galvin, Larry Bossidy and Jack Welch spent a lot of time on Six Sigma. But unlike these slackers, your executives are too busy to give it more than lip service. That’s OK, as long as you write some really good lines for them to read in their speeches. Start Six Sigma wherever you want; just be sure to give top management credit for any successes.
  • Don’t change the incentives for managers. Managers will always do what’s best for the organization, even if it has an adverse impact on them personally and professionally.
  • Do it on the cheap. Is it really necessary to provide 160-240 hours of Black Belt training? Of course not. Try the “compressed” training programs that offer four weeks of training in only two weeks, or an Internet course that only takes a couple of weekends. Also, be sure to hire the consultant who submits the lowest bid. Better still, just go it alone: Just think of the savings!
  • Don’t integrate Six Sigma with other initiatives. If you’re already working on lean and a half-dozen other programs, just add Six Sigma to the mix. Your people are smart enough to figure out how these programs relate to one another.
  • Try it on a small scale to see if it works. Six Sigma is a proven success in organizations of all sizes in a wide variety of service and manufacturing industries. But your organization is unique, so who knows if it will work for you? To prove it will work for you, try a small-scale pilot. Of course, a pilot will be too small to command attention from top management, none of the major management systems can be changed for the pilot, the supporting infrastructure won’t be there for the team, and so on. But don’t sweat the small stuff; your people can make it succeed.
  • Don’t worry about documenting the bottom-line impact of projects . When you do TQM projects, it’s enough to show that you made quality better by reducing defects. What’s wrong with that? Besides, it takes a lot of time to figure out real savings, and that time isn’t value-added. Don’t worry about skeptics challenging the value of Six Sigma in the future; what are the odds of that happening?
  • Let the quality department lead the effort. Six Sigma uses many quality improvement tools already known to quality specialists. Why waste time and money by teaching these tools to others?
  • Emphasize statistical skills when choosing Black Belt candidates. Those “soft” change-agent skills can be picked up by anyone with half a brain. But statistics are “hard” skills. Drag the analysts from their computers and put them to work on the front line!
  • Let the Black Belts report to local managers . Successful companies believe that Black Belts have a difficult time disengaging from their routine work when they report to their old bosses. But, as your people do what’s best for the company even if it isn’t in their own best interest, that won’t be a problem for you.
  • Use part-time Black Belts. Full-time Black Belts are difficult to extricate from their real jobs. Busy managers don’t need this confusion. Avoid it by letting the Black Belts work on Six Sigma projects in their spare time.
  • Don’t set overly tight deadlines or ambitious goals for Black Belts. Six Sigma might be viewed as ruthless if people are held to high standards. Cut the Black Belts some slack. If they’re trying hard and doing their best, what more can you ask?
  • Select projects based on local criteria . Some companies waste time studying the entire customer value stream and then use Six Sigma to identify projects that will improve the system as a whole. But your manufacturing manager is ready to go now, while the others are still dragging their feet. It would take a lot of time to change that, and who needs that kind of grief? Take the path of least resistance.

Freedom Vs. Permission

Six Sigma betters an organization at all levels. At the highest level, this involves moving the entire organization from three- or four-sigma business processes to six-sigma business processes, which requires reducing defects by a factor of more than 20,000, completely transforming the organization’s culture. But this can’t be accomplished by simply tweaking the process; it requires creativity. And the greatest enemy of creativity is hierarchy.

Because hierarchy in a traditional firm controls all of the resources–material and human–an individual employee must obtain permission from someone to use

any resource. If the resources required to pursue a creative idea are controlled by several positions in the hierarchy, the employee must get permission from each. And when one asks permission, only a “yes” answer moves things ahead.

Getting permission is like passing through a series of filters. Each non-yes blocks further progress. Perhaps the employee’s immediate superior is a kindly person who gives her permission half of the time. In fact, let’s assume that all of the people in the chain give their permission to half of all employee proposals. Consider a project requiring resources from five departments and permission from two people in each department. This is a pretty simple project and pretty flexible management.

Yet 99.9 percent of the creative projects will be rejected by this system. The hierarchy doesn’t seem so much a creativity filter as it does a black hole. Nucor Steel’s Chairman Ken Iverson puts it succinctly in his book Plain Talk (John Wiley & Sons, 1997):

“It is hard to picture any idea–no matter how wonderful–actually making it all the way up from an hourly employee through 10 layers of management without being fatally diluted or commandeered by a higher-up. And executives wonder why employees are sometimes apathetic about suggestion systems. The reason is clear–far too many of the ideas that people offer lose momentum and die, like spawning salmon forced to scale too many waterfalls.”

Permission is less likely to be forthcoming when the creative idea is a threat to someone in the permission chain–and it always is. A creative idea, by its nature, is destructive to the status quo. In a firm, as in the economy as a whole, the creative is usually the destructive as well. Perhaps it will eliminate the need for some process step; then it’s a threat to whomever’s responsible for that process. Maybe it’s a totally new product, which is a threat to everyone making existing products because they may lose resources to the new product. It’s difficult to conceive a creative idea that isn’t perceived as a threat by someone, and if that someone has the authority to stop the creative endeavor, they usually will.

One way of dealing with the filter and lag effects of hierarchy is to form a high-level team with the authority to quickly approve creative ideas. However, it’s been shown that forming such team alliances is made more difficult by having a multi-

layered hierarchy. Basically, the levels and divisions of a hierarchy are analogous to placing distance between people. The more functions or layers between two, the greater the distance between them.

There is another way of dealing with the problem: Eliminate the hierarchy.

When New Englanders beheld the amazing steamboats in the early 19th century, protesters claimed that steamboats would ruin the river sloops, the packet-lines and all New England’s sailing-ship industries. They would destroy the jobs of all the river workers, sailors, ships’ carpenters, rope-makers; they would wreck all of New England. The Connecticut Legislature voted to exclude steamboats from Connecticut’s waters.

But the Supreme Court declared the laws of the state legislature unconstitutional. Within 12 years, Americans covered the western waters with steamboats and launched the first steamer to cross an ocean. And the effects on the old industries were just as devastating as predicted. “The industrial revolution destroys,” author Rose Wilder Lane observed in The Discovery of Freedom (Fox & Wilkes, 1993). “It is a stream of living human energy as ruthless as nature itself, destroying to create and creating to destroy. It makes all forms of wealth as impermanent as life.”

One reason commonly given for forbidding change without permission is that the person with the idea lacks expertise. Although experts can often provide useful guidance, guidance is entirely different than permission. By all means, let the experts have a look at it, but don’t give the expert the power to destroy an idea by withholding approval. Remember, when it comes to someone else’s new idea, the expert is always on safer ground saying no than saying yes. Permission carries with it some risk of failure. Creative genius has always had to contend with the cynicism of experts. The experts either pooh-poohed the idea or predicted dire consequences should it be allowed (usually both). Consider the following statements and predictions made by experts:

“I think there is a world market for maybe five computers.”–Thomas Watson, IBM chairman, 1943

“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”–Western Union internal memo, 1876.

“640K ought to be enough for anybody.”–Bill Gates, 1981.

What is a Black Belt?

Six Sigma Black Belts are full-time change agents who work in Six Sigma or Lean Six Sigma. Black Belts work on entire value streams or cross-functional projects. Candidates for technical leader the Black Belt position are technically oriented individuals held in high regard by their peers. They should be actively involved in the organizational change and development process. Candidates may come from a wide range of disciplines and need not be formally trained statisticians or engineers. However, because they are expected to master a wide variety of technical tools in a relatively short period of time, technical leader candidates will probably possess a background in basic mathematics (e.g., algebra.) the primary tool of quantitative analysis. College-level course work in statistical methods is recommended, but not required. Successful candidates should understand spreadsheets, presentation programs and word processors. As part of their training they will be required to become proficient in the use of one or more statistical analysis software packages.

Six Sigma Roadmap for Small Businesses

Many Six Sigma experts have expressed doubt that Six Sigma can be used effectively in small, or even in some medium-sized, organizations. However, while the approach to deployment must be modified, it is possible for small businesses to successfully implement Six Sigma. Here is how. At the outset, several givens must be in place:

  • The owner of the business supports Six Sigma completely and actively, and is willing to personally spend time on it
  • The company has a routine core of work that will benefit from the process rigor of Six Sigma.
  • The organization’s culture is open to change.

All businesses, but small businesses especially, must understand that Six Sigma is not a panacea. There are many aspects to business, and only some of them should involve Six Sigma. Business owners should not abandon their instincts, intuition, taste, feel for the market, competitive spirit, empathy with customers and employees, common sense or good judgment.

A business that wants to change must also meet three requirements:

  1. Tolerance for variation and the failures that result. Change requires variation; in fact, it is defined by it.
  2. “Slack,” i.e., spare resources that can be diverted to change-related activities.
  3. Redundancy built into its systems, so that the areas being changed can still provide essential stakeholder services.

Big companies meet these requirements easily. But such is not the case with all small businesses. Their approach to Six Sigma must be modified in the following respects.

Increasing Tolerance for Variation

Small businesses cannot afford too many mistakes. Many are flirting with the line between survival and success. Thus, when choosing Six Sigma projects, the leader should err on the conservative side, especially in the beginning. Follow the rule used by successful professional gamblers: “Do not risk more than you can afford to lose.”

Before embarking on the Six Sigma journey, small businesses will want to be sure their customers are shielded from any problems that changes might cause. Prior to deployment, they must be sure that they have installed basic quality systems. ISO 9000 has proven to be useful in this regard. When conducting Six Sigma projects, small businesses must take special care to insulate customers from unintended consequences. Also, they must be prepared to forgive and forget when mistakes are made. The safe path of the status quo may result in fewer mistakes, but it is not viable in the long run.

Slack is the amount of time the change agents (Green Belts and Black Belts) spend on Six Sigma project work. Typically, a company’s most scarce resource is human talent. Six Sigma change agents must be a company’s best employees, so slack is the most important category and the most difficult to come by. Likewise, a company must have the ability to cover the important duties of these key individuals (redundancy.) The company leadership team must prepare a plan for creating this redundancy and slack before it launches its Six Sigma effort.Creating ‘Slack’ and Redundancy

As a rule of thumb, a small business can begin deploying Six Sigma when it reaches a size where one person can devote one day per week to Six Sigma. Assuming an eight-hour day, this threshold is reached when total employment is 20 full-time equivalents (FTEs). This level of commitment is necessary to justify the time and money that must be spent training the change agent, educating the leadership and orienting employees.

This falls in line with what should be a small company’s maximum change agent commitment – 0.5 to 1 percent of its total employee hours (i.e., 20 employees [800 hours a week] means devoting no more than eight hours a week of one employee’s time to Six Sigma projects). The total time spent on change will be much greater than just the change agent’s, and will include time for team meetings and time spent by others implementing the changes. Too much change all at once can be disruptive to normal operations. The 1 percent rule will keep things manageable.

For companies with fewer than 100 employees, Green Belts should be added when total employment reaches 20 and 40 employees, rather than increasing the workload on a single individual. This is recommended for several reasons:

  • It is usually easier to create small amounts of slack in different areas than it is to replace 40 percent of a key person’s time.
  • It will create Six Sigma expertise in more areas of the company, which will help create a culture where Six Sigma can thrive.
  • It will be easier to work on cross-functional projects if there are trained people in more areas of the company.
  • It will more quickly create a change-agent community where people can learn from one another and share a common bond.

The company should consider rotating people through the Green Belt position, which will require additional training expenditures. Of course, a cost/benefit analysis should be conducted before investing in training additional people, but by then the company should have seen the benefits of Six Sigma and be willing to reinvest some of its gains to spread Six Sigma through the organization.

Growing Six Sigma

A company should stay with two or three active Green Belts – rotating Six Sigma projects among them – until the company reaches a size of about 140 employees. At this size it is large enough to have a full-time change agent, i.e., a Black Belt. Assuming that a company has two active Green Belts, its commitment to change will be 1 percent after the company hires its first Black Belt. (That is calculated as 5,600 hours x 1 percent = 56 hours, or one full-time Black Belt and two part-time Green Belts.)

It is not a good idea to replace all of the Green Belts with a Black Belt when the minimum for the 1 percent rule is reached at 100 employees. Black Belts do better when there are Green Belts with whom they can work.

Ideally the Black Belt should be chosen from the ranks of the company’s Green Belts, unless they are uninterested or clearly unqualified for the greater technical skills required of a Black Belt. An individual who not only has successfully completed Green Belt projects, but who exhibits a passion for the role is a good choice. The company will need to invest in Black Belt training, of course. Costs vary widely; a training program should be chosen on the basis of operational requirements as well as cost. If a Black Belt from outside the company must be hired, a knowledgeable consultant can help assess candidates.

As a company grows, its investment in Six Sigma process improvement projects should grow at a rate of one additional Black Belt and two additional Green Belts for every additional 140 employees. While a company has fewer than five or six Black Belts, the Black Belts should report to local supervisors.

However, when the company reaches approximately 700 to 840 employees, it should consider creating a formal Six Sigma organization headed by a full-time Six Sigma Champion. This individual should possess strong leadership skills and should report to the CEO. Black Belts are more effective when they report to a central Six Sigma organization. Typically, Black Belt success rates, measured by the value of completed projects and Black Belts who complete certification requirements, are about twice as high when Black Belts report to a Six Sigma Champion instead of a local or functional leader. There are two reasons for this. First, centrally reporting Black Belts are in a better position to work cross-functional projects. And second, local leaders often cannot resist the urge to have talented Black Belts work on their current local priorities, which, while important, are less urgent than Six Sigma projects.

Other Challenges

In addition to insuring a tolerance for variation and failure, and creating slack and redundancy, small businesses face additional obstacles not encountered by larger organizations. Two of the more daunting challenges are lack of expertise and the especially dynamic nature of small business. Here are some suggestions for dealing with these problem areas.

Inadequate Expertise – Use leverage to create “Super” Green Belts and to provide additional Black Belt support:

  • Invest in software and books on Six Sigma. This “expert in a box” approach is dangerous in the hands of amateurs or Six Sigma newbies, but it is a necessary risk.
  • Get help from large customer companies and suppliers. Caution: Tap into their expertise, but be wary of getting bogged down in their bureaucracy. Some Six Sigma programs have become remarkably hidebound.
  • Local college faculty often can help with statistical expertise. Caveats:
    • Six Sigma is not academic research.
    • Know when to cut the analysis and act.
    • The KISS rule (keep it simple, stupid) applies. Be sure the faculty member uses the simplest approach possible. Choose a person who can explain things in layman’s terms. (A good test might be to ask the candidate to explain binary logistic regression.)
    • The faculty member may not understand what Six Sigma is. The company’s Green Belts and Black Belts might need to guide him or her.
  • Use semi-retired experts. After 20-plus years of Six Sigma, there are plenty of people around who understand it and have used it. Find them.
  • Take advantage of free support: iSixSigma.com’s online discussion forums, articles and information; the International Society of Six Sigma Professionals (ISSSP), etc.
  • Cut travel costs by using online training and consulting.
  • Hire interns from local colleges or universities. Juniors, seniors or graduate students can provide a lot of help with number crunching, data gathering, preparation and cleansing, and many other time-consuming tasks.
  • Commission projects to be done by college students. Students are frequently assigned projects by their professors, and they are looking for partners. Be one.
  • Many individuals are working to be certified as Black Belts and have passed a subject matter exam, but they need successful projects. Small companies can provide project opportunities.

It is important that outsiders sign non-disclosure agreements before being given access to proprietary information. This requirement might need to be bent for professors at research universities.

Dynamic Nature of Small Business – Most Six Sigma projects take four to six months, which is often too long in a small business environment. However, long cycle times often are the result of big company bureaucracy. They are not a built-in limitation of Six Sigma. Choose projects carefully, sponsor them effectively and pursue them aggressively. A small business will find that it can successfully complete most projects in four to six weeks, instead of months.


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Six Sigma FAQs

The questions below are from various conferences where I have presented, from reader emails, and from conversations I’ve had with colleagues and clients. If you have a question that isn’t answered here, click the Contact button to send it to me. I can’t guarantee if or when I will be able to respond to your request. Advanced warning: I don’t have all of the answers! However, I’ll do my best.

 

Index

Q001 Considering Six Sigma as cultural change, what is most needed to achieve full engagement from top management? What would you recommend?

Q002 How can you calculate a number of sigmas for a non-stable process?

Q003 What are some of the results obtained by Six Sigma companies?

Q004 How much time does it take for a medium sized company to change their “bottom line thinking” to “statistical thinking?”

Q005 What are the pre-requisites for Black Belts and Master Black Belts?

Q006 Do you need to apply Six Sigma to the entire organization? That is, does it involve the whole organization without exception or does it have to be applied only in operational areas?

Q007 You spoke about the number of hours needed to train Black Belts, Green Belts, and Master Black Belts. How many hours are needed to train leadership, management, and employees?

Q008 When Motorola made the smallest cell phone in the world, that was what the customers wanted. At the same time Nokia made the cell phone that customers didn’t ask for because they didn’t know. How can you balance in Six Sigma the dimensions standards, expectations and the future? Should Six Sigma focus on the client or on the market?

Q009 I suppose that a return of $1 million/Black Belt/year is possible in a production process area. We are trying to improve business processes in our company, but the results are not having the same impact as in the production areas. Can Six Sigma guarantee results in administrative areas?

Q010 What is the cost to implement a Six Sigma project?

Q011 We know that Six Sigma is a top-down program. If we want to apply Six Sigma to a manufacturing company, which path should we follow?

Q012 In my opinion you cannot separate Six Sigma from TQM. In your opinion are they separate systems?


Question: Considering Six Sigma as cultural change, what is most needed to achieve full engagement from top management? What would you recommend?

Answer: Moving an average organization to Six Sigma does indeed require cultural change. And, yes, accomplishing this does indeed require the full engagement of top management. To accomplish this we must remember that people in top management are no different than other people. Something motivates them to do the things they do, and if we want them to do something different we have two choices:

  1. Change the things that motivate them, or
  2. Show them that Six Sigma can help them better accomplish the things they are already motivated toward.

It is my experience that item 1 is usually not within the realm of people in lower levels of management. Thus, I recommend that item 2 be pursued. It is not difficult to determine what motivates top management. Most senior leaders make it very clear what they hope to accomplish and when. Examine press releases, annual reports, the content of operations reviews, and especially budgets. Once the key drivers of senior leadership’s behavior have been identified look at companies that have pursued similar goals by employing the Six Sigma approach. Motorola, AlliedSignal, and GE are well-known benchmarks, but there are many others. Read the annual reports of these companies as well as the comments of stock market analysts. Next, research technical articles in quality and management journals for information on the results of deploying Six Sigma and TQM. Create a “story” showing how the Six Sigma approach will lead the company to the vision of senior leadership. Finally, seek any and every opportunity to tell this story to those in charge of the company. Better still; find senior leader champions inside and outside of your company to tell the story.

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Question: How can you calculate a number of sigmas for a non-stable process?

Answer: If you mean how can you predict the future performance of a process that is not in statistical control, you can’t. However, it is possible to calculate the historical sigma level for an unstable process by simply using a standard normal table and allowing for the 1.5 sigma shift do it now.

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Question: What are some of the results obtained by Six Sigma companies?

Answer: As mentioned above, GE is one of the benchmark companies for Six Sigma. The chart below shows the results GE has documented from their Six Sigma projects.

image002

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Question: How much time does it take for a medium sized company to change their “bottom line thinking” to “statistical thinking?”

Answer: This question implies that there is an “OR” situation involved in choosing Six Sigma/statistical thinking. Either we pay attention to the bottom line OR we do Six Sigma. Actually, as the GE results shown above indicate, the situation is really an AND. There is a cause-and-effect relationship between the bottom line and Six Sigma. The situation is more accurately described by “We will use Six Sigma to make our bottom line grow.” In contrast to traditional cost cutting, Six Sigma makes the bottom line grow by zeroing on those costs of the organization, which add no value for customers, shareholders, or employees, i.e., waste costs. When waste costs are reduced, the results flow directly to the bottom line. In any event, it seems to take approximately three to five years for medium to large companies to reach maturity in the statistical thinking required by Six Sigma.

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Question: What are the pre-requisites for Black Belts and Master Black Belts?

Answer: See my article What is a Black Belt? You may also wish to view my artcle 101 Things a Black Belt Should Know.

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Question: Do you need to apply Six Sigma to the entire organization? That is, does it involve the whole organization without exception or does it have to be applied only in operational areas?

Answer: Although Six Sigma may start in operational areas, mature Six Sigma organizations tend to deploy the approach throughout the entire organization. The reason is simple: the organization is a system. To reach Six Sigma levels of performance requires that the system itself be optimized. Local improvements will not deliver Six Sigma results where it counts, to the customer or shareholder. The figure below illustrates the principle of total system optimization for a manufacturing company. The idea is that neither local focus nor simple cross-functional focus will get to Six Sigma. Six Sigma requires a total system perspective.

image004

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Question: You spoke about the number of hours needed to train Black Belts, Green Belts, and Master Black Belts. How many hours are needed to train leadership, management, and employees?

Answer: As the numbers in the table below indicate, the training provided to the various employee groups varies widely from one organization to the next. The answers provided here should be taken as rough rules-of-thumb based on my research. Organizations must adjust their training programs to respond to their own unique circumstances. For example, a service organization short of personnel qualified to take 160 hours of Black Belt training may provide 120 hours of training and employ a larger number of Master Black Belts than a typical firm to provide additional coaching.

Group
Approximate hours of training
Low
Typical
High
Master Black Belts
160
200
400
Black Belts
80
160
240
Green Belts
24
40
120
Senior Leadership
8
24
40
Middle Management
8
24
40
Hourly
4
8
24
Team Members
8
24
40

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Question: When Motorola made the smallest cell phone in the world, that was what the customers wanted. At the same time Nokia made the cell phone that customers didn’t ask for because they didn’t know. How can you balance in Six Sigma the dimensions standards, expectations and the future? Should Six Sigma focus on the client or on the market?

Answer: This is an excellent question. Deming made it a point that innovation is the only way to survive and prosper. This requires creativity and constant change. This in turn requires redundancy, slack, variability and a high tolerance for failure. Isn’t it strange that Six Sigma’s success requires that the organization encourage the very things that it is trying to eliminate? I call this the Six Sigma Paradox. For additional information click the Approach button on the left. You may also wish to read the article The Six Sigma Management Paradox.

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Question: I suppose that a return of $1 million/Black Belt/year is possible in a production process area. We are trying to improve business processes in our company, but the results are not having the same impact as in the production areas. Can Six Sigma guarantee results in administrative areas?

Answer: It is my experience and that of my clients that the payoffs in non-production areas is at least as great as in production areas, and often more so. Production areas are generally more advanced in the application of science to their work than administrative areas. Most administrative processes have not even been mapped or measured in the past. When Six Sigma methods are applied it is common to find enormous opportunities for improvement. For example, a purchasing team identified that over 95% of the time it took for processing a typical purchase order was non-value-added. Savings of this magnitude are rare in production areas. By the way, these comments also apply to service businesses.

Having said this, I don’t think Six Sigma can “guarantee” savings. The Six Sigma approach is a proven success in hundreds of organizations in all types of industries, including services, but it is not a panacea. However, any one company’s experience might be less than expected due to a variety of conditions. These conditions include the organization’s culture, its customers, its leadership, unique market conditions, etc.

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Question: What is the cost to implement a Six Sigma project?

Answer: The range of costs is so great that any definitive answer to this question is meaningless. Sometimes the cost approaches zero, as when one stops doing something dumb. (This is more common than you might think!) In other cases the Six Sigma project may require an investment of millions of dollars in order to reap the benefits. Six Sigma project costs are subjected to rigorous scrutiny by the organization’s finance experts during project approval. The costs must be justified by greater benefits, either in the form of a high return on investment for the project, increased customer loyalty, safety benefits, etc.

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Question: We know that Six Sigma is a top-down program. If we want to apply Six Sigma to a manufacturing company, which path should we follow?

Answer: The approach we recommend is described on this web site. Just click the Approach button.

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Question: In my opinion you cannot separate Six Sigma from TQM. In your opinion are they separate systems?

Answer: See my article Why Six Sigma is Not TQM.

Ignore Six Sigma at Your Peril

The Jan. 22, 2001, issue of Fortune contained an article that offered readers risky advice–namely, that Six Sigma could be ignored without adverse consequences.1 Don’t believe it.

To be fair, the article is directed toward investors, not managers. The author’s point is that Six Sigma alone won’t make a company successful. On that, I am in total agreement. In fact, I made the same argument in my November 1999 column, “Why Six Sigma Is Not Enough.” However, the Fortune article presents a frontal assault on Six Sigma per se, and it includes so many errors, omissions and logical fallacies that the unsuspecting leader might be led to believe that his or her company would be better off without Six Sigma. This mistaken conclusion could cause serious harm to such leaders’ companies, as well as their own careers.

In addition to the superficial arguments against Six Sigma (e.g., “Six Sigma can get downright silly”), the article levels some serious criticisms against its deployment:

While impressive at the Black Belt level, the results often don’t have any noticeable impact on company financial statements. Thus, Six Sigma success doesn’t correlate to higher stock value. This applies to 90 percent of the companies that implement Six Sigma.

  • Only early adopters can benefit.
  • Six Sigma focuses on defects, which are hard to objectively determine for service businesses.
  • Six Sigma can’t guarantee that your product will have a market.

Let’s take a closer look at these issues. Evidence for the first point is entirely anecdotal. The article mentions that Whirlpool does Six Sigma and its stock has fallen by 12 percent during the past two years. So what? GE does Six Sigma too, and its stock price is up seven percent. Meanwhile, the Dow Jones Industrial Average is down four percent. What do these comparisons tell us about Six Sigma? Nothing. Scientific studies of the value of quality improvement initiatives show that the stock of companies that implemented TQM significantly outperformed the indexes (See Figure 1).2 Of course, there are differences between TQM and Six Sigma. (Refer to my February column for details.) Having been intimately involved in both approaches, I know Six Sigma is better than TQM.

The latecomer argument is simply ludicrous. The Fortune article states, “If Whirlpool implements it, and then Maytag does too, who wins? The consumers–those savings will mostly get passed on to them.” Even if we allow the author to argue both sides (Excuse me, but didn’t you just say there weren’t any savings?), the argument fails. If Whirlpool succeeds with Six Sigma and Maytag ignores it, as advised by Fortune, Whirlpool has a cost advantage that can be used to improve its return on investment or to capture additional market share. Latecomers have to implement Six Sigma just to keep up.

To say that Six Sigma focuses on defects is to demonstrate that you don’t really understand what Six Sigma is all about. Unlike TQM, Six Sigma goes beyond defect reduction to emphasize business process improvement in general, which includes cost reduction, cycle-time improvement, increased customer satisfaction and any other metric important to the company. The contention that service defects are, as the Fortune article’s author asserts, “mind-numbingly vague,” will likely come as a particular surprise to my service-industry readers and clients. What’s ambiguous about a customer complaint? A customer leaving you for a competitor? Errors in the customer database? A big drop in the customer satisfaction survey results? I’ll bet even Fortune’s leaders keep track of several quality metrics.

Finally, the article plays the Iridium card to prove that even Six Sigma companies like Motorola can make a mistake. Iridium was to be a satellite-based communication system, but advances in technology and changes in the market rendered it obsolete before it could be deployed.

Motorola should wear Iridium as a badge of honor. It was a daring move that failed. But in the volatile high-tech arena, the big risk is not risk of failure. As an investor, I’d be far more worried about a company that was risk-averse. Six Sigma can’t guarantee success in the marketplace. Nothing can do that. But engaging in truly risky behavior, such as ignoring Six Sigma, can greatly increase the chances of failure.

 

References

1. Clifford, Lee. “Why You Can Safely Ignore Six Sigma.” Fortune, Jan. 22, 2001.

2. Hendricks, Kevin B., and Vinod R. Singhal. “Don’t Count TQM Out.” Quality Progress, April 1999.

3. Easton, George S. and Jarrell, Sherry L. “The Effects of Total Quality Management on Corporate Performance.” Journal of Business , Vol. 71, no. 2, 1998.

Cargo Cult Six Sigma

In the South Seas there is a cargo cult of people. During the war they saw airplanes with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head to headphones and bars of bamboo sticking out like antennas he’s the controller and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.
Richard Feynman
Cargo Cult Science,” 1974

When, therefore, a man absorbed in the effect which is seen has not yet learned to discern those which are not seen, he gives way to fatal habits, not only by inclination, but by calculation.
Frederic Bastiat
That Which is Seen, and That Which is Not Seen,” 1850

It seems as if the business improvement world has more than its share of fads. Over my career, I’ve encountered statistical quality control, zero defects, quality circles, Deming/SPC, Motorola Six Sigma, TQM, business process re-engineering, lean, GE Six Sigma (with Belts and other infrastructure), and various combinations and permutations of these. In our field, the MTBF (mean time between fads) is roughly four years, nearly half the seven-year MTBF for the business community as a whole. With this large sample size (n = 9 isn’t that bad), I’ve been able to discern a pattern in the lifecycle of a fad:

  • An isolated group off somewhere in the organization is doing something that’s producing excellent local results. They are discovered by others.
  • A champion helps to spread the group’s message to the larger organization, and results appear there too.
  • Outside organizations discover the secret and are able to replicate the results. A really big company or other prestigious source begins to tout the approach.
  • The bandwagon starts to roll. Others get on board and shout their success stories to the business media.
  • As demand for information on the new approach builds, the supply of talented people who understand the details is exceeded. Suddenly, people who hadn’t heard of the new approach a year ago, or who are familiar with only some of the details, are supposed experts.
  • Everyone is doing it. The new approach is widely discussed in the non-business media.
  • Stories begin to appear about how “Executives report that 80 percent of the attempts to do X result in failure.” First just a trickle of stories, then a flood.
  • Mainstream academic institutions begin to teach the approach.
  • It becomes accepted dogma that “X doesn’t work.”
  • On to the next fad.

As someone who follows Six Sigma news closely, it appears to me that the approach is nearing the end of its lifecycle. As an advocate of Six Sigma for traditionally managed companies, I find this somewhat distressing. After all, there are certainly thousands of firms that could benefit from the additional rigor Six Sigma brings into the business. This is especially true of non-manufacturing firms in general, and those health care in particular. As I get older I grow increasingly concerned that someday I’ll need to go to a hospital with a minor problem, only to be killed by a medical error. So, in my own self-interest, I’ve decided to see if I can offer some suggestions to arrest the decline and fall of Six Sigma by identifying its root cause.

Six Sigma: form vs. substance

The problem begins at step 5. The pseudo-experts look at Six Sigma and they see Champions, Master Black Belts, Black Belts, Green Belts, DPMOs and a plethora of statistical tools. They see projects and all of the affiliated trappings: sponsors, teams, Gantt charts, milestones, financial validation, and software to track the project portfolio and summarize results. They see lots and lots of training and software and meetings. They see “support” from top leaders.

These are the visible forms of Six Sigma. They can be easily copied, but they won’t bring the planes in. They are not the Six Sigma that returned Motorola to competitiveness for a decade and extended the GE miracle. This is Cargo Cult Six Sigma.

What is Six Sigma, really?

Six Sigma is clarifying the desired outcomes for all stakeholders, identifying the drivers and root causes necessary to achieve them, using data wisely to help guide companies as they try to address root causes, and using a systematic approach to continuously improve.

Six Sigma uses a rigorous, focused and highly effective implementation of proven quality principles and techniques. Today, this means that Six Sigma is deployed by training a small cadre of in-house technical leaders, known as Six Sigma Black Belts, to a high level of proficiency in the application of a selected subset of project management and statistical tools. These change agents are supported by an infrastructure of leaders known as Champions and technical specialists known as Master Black Belts. The tools are applied within a simple performance improvement framework known as define, measure, analyze, improve, control, or DMAIC (a related approach, Design for Six Sigma, or DFSS, is also gaining favor). Six Sigma operates in a culture of willingness to change and tolerance for mistakes, which are inevitable when change occurs. The leaders of Six Sigma organizations build and maintain this culture.

Note that what Six Sigma is and how Six Sigma is deployed are two entirely different things. Cargo Cult Six Sigma misses what Six Sigma is and completely focuses on the visible aspects of Six Sigma. The short-term results are abysmal. The long-term result is to find yet another fad and start the whole process over again.

Epilog

This isn’t the first time: Before Cargo Cult Six Sigma, we had Cargo Cult SQC, zero defects (which was almost itself Cargo Cult management,) quality circles, and so on. The problem appears to be inherent in business management culture. I discuss the solution (i.e., getting rid of management) in my book The End of Management (Atlantis Pub, 1999). However, until this can be done, organizations need to operate using the best known management approach. At the moment, that’s still Six Sigma.