Read an Excerpt
Six Sigma For Dummies
By Craig Gygi John Wiley & Sons
ISBN: 0-7645-6798-5
Chapter One
Defining Six Sigma In This Chapter
* Looking at a problem-solving methodology
* Reviewing the precise statistical term
* Recognizing that Six Sigma isn't just another initiative-du-jour
* Identifying a formidable business force
It's not often that a For Dummies book topic first needs a formal definition. After all, you know in general what gardening, dating, and even marathon training are. But "Six Sigma"? Even if you remember that sigma is the 18th letter of the Greek alphabet, why six of them? What happened to the first five sigma?
It's okay if you don't know what "Six Sigma" is at all, or don't understand every aspect of it. That's because Six Sigma-once a precise, narrowly-defined term-has grown over time to represent a number of concepts:
Six Sigma is a problem-solving methodology. In fact, it's the most effective problem-solving methodology available for improving business and organizational performance.
Six Sigma performance is the statistical term for a process that produces fewer than 3.4 defects (or errors) per million opportunities for defects.
A Six Sigma improvement is when the key outcomes of a business or work process are improved dramatically, often by 70 percent or more.
A Six Sigma deployment is the prescriptive rollout of the Six Sigma methodology across an organization,with assigned practices, roles, and procedures according to generally accepted standards.
A Six Sigma organization uses Six Sigma methods and tools to improve performance: Continuously lower costs, grow revenue, improve customer satisfaction, increase capacity and capability, reduce complexity, lower cycle time, and minimize defects and errors.
Six Sigma is a methodology for minimizing mistakes and maximizing value. Every mistake an organization or person makes ultimately has a cost-a lost customer, the need to do a certain task over again, a part that has to be replaced, time or material wasted, efficiency lost, or productivity squandered. In fact, waste and mistakes cost many organizations as much as 20 to 30 percent of their revenue! That's a shocking number. Imagine throwing 20 to 30 percent of your money away in the garbage every time you cash a check. It may sound ludicrous, but that's what many organizations do.
All businesses, organizations, and individuals have room to improve. No operation is run so tightly that another ounce of inefficiency and waste can't be squeezed out. By their nature, organizations tend to become messy as they grow. Processes, technology, systems, and procedures-the ways of doing business-become cluttered with bottlenecks, meaning work piles up in one part of the organization while other parts sit idle with nothing to do.
Work is often performed incorrectly, or the outcome is flawed in some way. When this happens, you scrap products and services and have to do the work over again: You consume additional resources to correct a problem before it's delivered to the customer, or the customer asks later for a "redo"-a new product or a more satisfactory service.
Sometimes, flaws and defects aren't the problem, but a product or service simply takes too long to produce and deliver. Think about the problems a mortgage company would have if it processed home loans perfectly, but did so 5 times slower than the competition. That's a perfect disaster.
REMEMBER
Six Sigma was once a quality-improvement methodology, but now it's a generalpurpose approach to minimizing mistakes and maximizing value: How many products can you produce, how many services can you deliver, how many transactions can you complete to an expected level of quality in the least possible amount of time at the lowest possible cost?
Six Sigma takes effort and discipline and requires you to go through the pain of change. But soon the pain is transformed into improved performance, happier customers, lower costs, and more success.
The Managerial Perspective
While Six Sigma has its many definitions, Six Sigma action occurs on two different levels: the managerial and the technical. At the managerial level, a Six Sigma initiative includes many units, people, technologies, projects, schedules, and details to be managed and coordinated. There are also many plans to develop, actions to take, and specialized work to complete. For all of this to work in concert, and for the technical elements of Six Sigma to be effective, you have to set the proper management orientation.
Radical corporate success
TRUE STORY
Six Sigma performing companies realize staggering business success:
General Electric profited between $7 to $10 billion from Six Sigma in about five years.
Dupont added $1 billion to its bottom line within two years of initiating its Six Sigma program, and that number increased to about $2.4 billion within four years.
Bank of America saved hundreds of millions of dollars within three years of launching Six Sigma, cut cycle times by more than half, and reduced the number of processing errors by an order of magnitude.
Honeywell achieved record operating margins and savings of more than $2 billion in direct costs.
Motorola, the place where Six Sigma began, saved $2.2 billion in a fouryear time frame. Six Sigma helps organizations achieve breakthrough improvement, not incremental improvement. In short, Six Sigma is a path to dramatic improvement in value for your customers and your company.
Bridge between science and leadership
From a management standpoint, Six Sigma culminates in the predictability and control of performance in a business or a business process, by applying the methods of science to the domain of leadership.
Early in the 20th century, Henry Ford applied the principles of science to the production of cars. By following set processes and by optimizing repeatable processes, Ford and others made goods that displayed little variation in their final states and could be mass-produced without requiring extensive education and years of finely honed skills among the assembly-line staff. We have witnessed how the achievements of machinery, technique, process, and specialization of labor collectively enable the explosion of mass-production and the consumer society. Science dictates how all the parts, materials, machines, and people on the assembly line interact to turn out many "widgets" at the highest possible speed and the lowest possible cost.
REMEMBER
Managerially speaking, the goal of Six Sigma is to inject similar control, predictability, and consistency of results into the production of a successful organization, such that the widget comes off the production line absolutely consistently.
Countless times every day in the United States, people open a water faucet and experience the flow of clean, clear water. The reason is because reliable purification systems treat the water and pressure systems ensure the water is there. This is what Six Sigma does; it treats the processes in a business so that they deliver their intended results reliably and consistently.
REMEMBER
The methodology of Six Sigma was first applied in a manufacturing company, but it also works in service and transactional companies (like banks and hospitals), where it has been implemented many times with great success. Six Sigma dramatically improves the way any process works-whether that process is in the chemical industry, the oil industry, the service industry, the entertainment industry, or anything else.
Management system orientation
Six Sigma is so appealing to managers because it delivers management results.
Clear value proposition and ROI
Six Sigma is characterized by an unwavering focus on business return on investment (ROI). A Six Sigma project can improve a business characteristic by 70 percent or more, stimulating increased operating margins for businesses, while at the same time increasing the value those businesses provide to their customers. Six Sigma initiatives and projects have a direct, measurable financial focus and impact.
Top commitment and accountability
A Six Sigma initiative begins at the top. The leadership and management of an organization must actively commit to the Six Sigma initiative, setting performance goals and developing tactical implementation plans. Management team members must be personally accountable for achieving the performance improvement goals they set for their respective organizations and business units.
Customer focus
Six Sigma, through its voice of the customer (VOC) tools, drives business processes through customer requirements. No operational, process, and business improvements can occur without a definitive understanding of who the customers are and what they need, want, and are willing to buy. Six Sigma managers become savvy about the needs and requirements of customers, in a way that also enables the business to become stronger and more profitable.
Connected business metrics
You know by now that Six Sigma is different from other performance improvement approaches in its focus on business financials and measurable operational improvements. To support this, the Six Sigma management system must include performance measures that are readily accessible and visible to everyone whose actions or decisions determine performance levels and operational quality.
Process orientation
Six Sigma improves the performance of processes-any business or work process-in how those processes effectively and efficiently transform material and other inputs into the desired outputs. This is the focal point of using Six Sigma to improve performance: the design, characterization, optimization, and validation of processes.
Project focus
The Six Sigma project is the tool by which processes and systems are characterized and optimized. Program leadership identifies opportunities for Six Sigma improvement projects and assigns Six Sigma specialists to execute them. We provide details about how to select Six Sigma projects in Chapter 4, how to implement projects in Chapters 5 through 10, and how to manage projects using tools in Chapter 12.
Enabling tools and technology
Properly managing a Six Sigma initiative that spans an entire organization or a significant part of an organization requires the ability to simultaneously manage many projects, processes, analyses, data banks, training activities, and people. Generally speaking, several classes of tools and technology are employed to accomplish this:
Tools for designing, modeling, managing, and optimizing processes
Tools for the broad-scale management of multiple projects across multiple organizational units
Tools for collecting data, conducting analytical calculations, and solving performance problems
Tools and technologies for training, educating, transferring knowledge, and managing knowledge
We provide a comprehensive view of the many Six Sigma tools and technologies in Chapters 11 and 12.
An infrastructure for change
Installing and managing a Six Sigma management system require a certain infrastructure-an underlying set of mechanisms and structures upon which to develop the Six Sigma improvement strategies and enact the tactics of project implementation and process improvement. The key elements of an effective Six Sigma infrastructure include the following:
A fully documented Six Sigma leadership system, strategic focus, business goal configuration, deployment plans, implementation schedules, and activity tracking and reporting techniques
A strategy, methodology, and system for training and preparing executives, managers, Champions, Black Belts, Green Belts, Yellow Belts, financial auditors, process owners, and all others involved in the Six Sigma initiative; we define and describe all the Six Sigma job roles in Chapter 3
Competency models and compensation plans, Six Sigma participant and leader selection guidelines, position and role descriptions, reporting relationships, and career-advancement policies and plans
Guidelines for defining project-savings criteria, aligning accounting categories with Six Sigma goals and metrics, forecasting project savings, auditing and evaluating project ROI, validating project savings, and reporting project ROI
Hard criteria for selecting projects, designating project-type categories, developing project problem-definition statements, targeting intended project savings and ROI, approving selected projects, and managing projects through to completion; we give you more about project management in Chapter 4
Information-technology-related structures, procedures, dashboards, tools and systems for designing and managing processes, tracking project and initiative progress, reporting results, storing information and data, and performing analytical functions; we look at these in more depth in Chapters 11 and 12
A strategy for consistently communicating the Six Sigma initiative across the enterprise, and an Internet or intranet site that provides a common reference and knowledge base that contains important information, motivational content, recognition stories, educational material, contact information, and so on
A management review process for assessing the effectiveness of Six Sigma from the top to the middle to the bottom of the organization: At the top, the focus is on the aggregate process, projects, and results for entire implementation business units.
In the middle, the focus is on the process and results of operational units with multiple Six Sigma projects.
At the lower levels, the focus of management review is on making sure individual projects are on track and yielding their intended process-improvement and financial results.
Complete culture change
A Six Sigma initiative often begins with outside consultants providing methods, tools, and training, but over time, the knowledge is internalized and applied organically within the organization. The ultimate goal is for everyone in the organization to have a working ability to understand customers' requirements, collect data, map processes, measure performance, identify threats and opportunities, analyze inputs and outputs, and make continuous improvements. In Chapter 3, we provide more details about culture change.
The Technical Perspective
Six Sigma performance is the statistical term for a process that produces fewer than 3.4 defects or errors per million opportunities. Behind that single statistic lies a methodology that includes a plethora of data, measurement, analysis, improvement, and control tools and supporting technologies. This section is an overview of the technical side of Six Sigma.
Product, service, and transactional quality
The technical objective of Six Sigma is to ensure the high quality and reliability of products, services, and transactions-the lifeblood of all businesses and organizations. Banks, government agencies, hospitals, car washes, toy makers, semiconductor plants, professional services firms-all organizations of any type-provide products, services, and transactions, or some combination of the three.
For example, most auto manufactures do much more than build cars. They also provides services, such as routine maintenance and warranty repairs, through their dealerships. Through their financing arms, they approve and process car payments, a transactional business activity.
The technical goal of Six Sigma is for products, services, and transactions all to be performed with the highest possible quality as efficiently and effectively as possible. This requires performance targets for all components in a system, and for each important characteristic of every component. For example, a car axle (component) has to have the proper form, fit, and function to perform as intended, and if it is to fit together with other components of the car.
Aiming for the target
In Six Sigma, important characteristics are referred to as CTXs, where the ITLITL stands for "critical," the T stands for "to," and the X represents what the characteristic is linked to: quality, cost, time, satisfaction, and so on. For example, a critical-to-quality characteristic would be called a CTQ. Graphically, you can depict the target values of any CTX in Figure 1-1.
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Excerpted from Six Sigma For Dummies by Craig Gygi Excerpted by permission.
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