Critics Say It's Time To Rethink Quality-Improvement Programs

By Erin White
From CareerJournal.com

The love affair between American managers and a wonkish mistress is showing signs of strain.

Managers have been falling head over heels for quality-improvement programs for years. The systems -- which go by unblinkingly nerdish names such as TQM, ISO 9000 and Six Sigma -- differ in details, but they all aim to reduce error and improve quality by standardizing processes.

These so-called process-management techniques took off in the U.S. in the 1980s at manufacturing companies desperate to compete with higher-quality Japanese products. But they have been widely applied across industries from retailing to financial services. Six Sigma, for example, was invented at Motorola Inc. in 1986 and popularized in the 1990s by former General Electric Co. Chief Executive Jack Welch, who preached its gospel across GE's businesses.

The systems can help boost quality and efficiency and help companies cut costs. A diaspora of former GE executives -- including W. James McNerney Jr., the former 3M Co. CEO who is now at Boeing Co., and Bob Nardelli at Home Depot Inc. -- helped spread the word. "Process management was sort of a universally held truth -- it was perceived to be universally good," says Mary J. Benner, a management professor at the University of Pennsylvania's Wharton School.

Now, some academics and consultants are raising questions about the limits of these systems. In essence, they say managers have stretched the techniques, by applying them too broadly to more creative areas such as research and new-product development. And some companies are rethinking the way they use the systems.

The critics say process management helps improve existing products and routines, but can hinder a company's ability to innovate. "For stuff you're already good at, you get better and better," says Michael Tushman, a management professor at Harvard Business School. "But it can actually get in the way of things that are more exploratory."

Ms. Benner and Mr. Tushman teamed up to study the subject. They found that quality-improvement or process-management programs can hamper a company's ability to respond to technological change, by effectively forcing employees to focus on honing routine tasks associated with the older technology.

In their study, the professors looked at the number and types of patents granted to photography companies from 1980 to 1999, a time of sweeping technological change as the industry began shifting to digital images from film. As companies used process-management techniques more, they generated more patents based on traditional technology, but fewer patents "based entirely on knowledge new to the firm," the study says.

Some executives agree that the techniques have limits in the business world. Christine Landon, director of executive and next-generation leadership development at Agilent Technologies Inc., says quality-improvement skills are important, but managers shouldn't rely too heavily on Six Sigma for tasks that aren't easily measured.

As a maker of scientific instruments and testing devices, Agilent, of Palo Alto, Calif., is all about measuring the tiniest changes in the real world. But, says Ms. Landon, "when you try to apply Six Sigma too broadly to processes that don't have data, that aren't data-driven, that don't lend themselves to very specific metrics, that's really a stretch."

So Ms. Landon doesn't use Six Sigma to analyze her leadership-development programs, partly because the skills involved are "hard to measure," she notes. Plus, with Six Sigma, "you can go overboard. It's not an inexpensive thing."

GE, for example, estimates that it has spent hundreds of millions of dollars on Six Sigma since 1995, and says the program has helped it eliminate billions in costs. Nonetheless, GE has trimmed its use of Six Sigma in the past two years, concentrating it on functions that "touch customers," such as sales and marketing, but eliminating it for back-office operations such as payroll, says Gary Reiner, senior vice president and chief information officer.

GE executives don't believe Six Sigma hinders innovation, Mr. Reiner says. Instead, Mr. Reiner says, "we have a finite amount of resources and we want to focus in on those processes that touch customers." He notes, "there are times when Six Sigma is overkill."

As it turns out, Six Sigma may not even really be Six Sigma. The term is derived from a statistical formula for determining how "abnormal" a result is. Motorola translated this into a defect rate, as a way to measure quality. As published, Motorola equated Six Sigma-quality to no more than 3.4 defects in a million products, or a million times of repeating a process.

But in response to concerns raised by an independent business consultant, Motorola says this defect rate is actually closer to "four and a half sigma." True Six Sigma quality would be 1,000 times as tough -- no more than 1.2 defects in a billion products or repetitions. A Motorola official says it adopted the somewhat easier target because machines wear down over time, introducing more defects. So a process that starts out at Six Sigma quality will eventually drift away from that level, he says.

Almost Perfect

David Rae, Financial Director 05 Sep 2005

The six sigma concept can be used to cut defect rates to near-zero in businesses as diverse as Scottish Power and Nasa. But getting the right mindset is more important than a slavish adherence to the laws of statistics. Words David Rae

“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature,” writes Peter L Bernstein in Against the Gods: The remarkable story of risk.

The moment that new world was born arrived when seventeenth century French mathematicians Blaise Pascal and Pierre de Fermat formulated Pascal’s Triangle. This solution to an age-old mathematical problem of how to divide the stakes of an unfinished game of chance set out the laws of probability.

A century later, Abraham de Moivre discovered normal distribution and standard deviation, and hence the law of averages, and, for the first time, the world had a tangible way to quantify risk.

A single standard deviation from the mean – shown on de Moivre’s famous bell-curve diagram – is called a sigma. Six sigma amounts to six standard deviations from the mean, which equates to 99.99966% accuracy. The difficulty for business lies in establishing what constitutes a reasonable level of accuracy, and the appetite for risk varies enormously between industries.

Bernstein quotes Arthur Rudolph, the scientist who developed the Saturn V rocket: “You want a valve that doesn’t leak. But the real world provides you with a leaky valve. You have to determine how much leaking you can tolerate.”

Historically, controlling a manufacturing process to a nominal +/– three sigma was deemed acceptable for most businesses. It would, after all, result in 99.73% of a company’s production being fit for purpose. But this figure is far from good enough in today’s high-technology world.

In February 2003, Time magazine ran an article investigating what went wrong with the space shuttle Columbia, which had disintegrated on re-entering the Earth’s atmosphere a week earlier. “In a flying machine with more than 2.5 million parts, even a 99.9% reliability level would still leave 2,500 things to go wrong,” it pointed out.

This observation exposes the fact that what may appear an acceptable level of accuracy is not necessarily anything of the sort.

On 22 April 2005, the New York Times ran a front-page article about quality standards at Nasa. It reported that the space agency had “loosened the standards” for the acceptable risk of damage to its space shuttles from airborne debris. Barely three months later, a half-kilo chunk of foam peeled away from the space shuttle Discovery during its climb into orbit, in what could easily have been a rerun of the February 2003 disaster.

The episode highlights the importance that risk analysis plays in our world, and goes some way to explain why the six sigma approach is experiencing something of a renaissance since its invention in the 1980s by Bob Galvin and Bill Smith of Motorola. Famously, Jack Welch, the former CEO and chairman of GE, currently the fifth biggest corporation in the US, built his entire company around it.

In its 1999 annual report GE claimed a net benefit from six sigma of $2bn. Six sigma leaders ABB and Allied Signal have also reported that it has saved them hundreds of millions of dollars each.

Six sigma reliability equates to 3.4 defects per million opportunities, or about one in every 294,000. But achieving such an incredible level of accuracy is difficult.

Nothing in life is perfect – all we can do is strive for perfection. But in manufacturing terms it is clearly more important to have less deviation in an aerospace company such as BAE Systems than in a biscuit manufacturer.

Trying to ensure that 99.99966% of biscuits are perfect is prohibitively expensive and ultimately pointless. But how do we put a price on failure? In the case of the space shuttle or in aviation terms, a failure is likely to lead to a catastrophic loss of human life.

It is why Nasa explored using six sigma to improve its internal processes. But what Nasa forgot was that six sigma on its own is insufficient unless implemented as part of a much wider change management programme. As Bernstein says: “Our lives teem with numbers, but we sometimes forget that numbers are only tools. They have no soul; they may indeed become fetishes.”

Scottish Power is an example of one of the UK’s most innovative companies in its use of six sigma. It was awarded a best in class medal at the European Six Sigma IQ Awards in recognition of a project to improve customer account setup time.

“The six sigma business transformation programme originally adopted in our supply activities was extended to our generation activities in the year and, in total, delivered revenue and cost savings of £15m this year,” reads the company’s full-year results statement.

Willie MacDiarmid, who established the six sigma programme at Scottish Power, spoke to Financial Director. “We were keen not only to bring our costs in check,” he says, “but also to improve our processes.” And that’s a key factor in any six sigma process.

In the utility company’s case, the initial six sigma project was to improve the customer billing process. Since the project’s success, six sigma has been extended all around the organisation, from its power stations to IT.

MacDiarmid says a successful six sigma programme demands complete commitment from everyone in the company if it is not to be doomed to failure. He says he was forced to “shake hands” with some former employees of Scottish Power and allow them to move on when they refused to buy in to the six sigma vision.

“There were the early adopters, who see the opportunity early and grab it; there were the people who were sceptics to begin with but then came on board when they saw the power of it; and then there were the people who just wouldn’t buy into it at all,” he says.

But thanks to MacDiarmid and Scottish Power’s commitment to the philosophy, some of the biggest names in the world of business – including Shell and Credit Suisse – have since benchmarked the utility’s six sigma progress as they consider launching their own programmes.

“If I left Scottish Power tomorrow and joined another company, it would be one of the first things that I would adopt,” says MacDiarmid. “It takes away what we lovingly call the ‘urban myths’ around the business, which is when you get guys who think that because they have been at the company for nine years they know how it works.”

Finance plays a key role in maintaining and scrutinising the company’s six sigma programme. “The way Scottish Power is structured, the finance function has been implementing and using six sigma for the past two or three years,” says MacDiarmid. “When they realise that you can track project savings right the way through to the ledgers, so there is an audit trail – this is when these guys get turned on.”

A successful six sigma implementation is easier to imagine in a manufacturing process than in a more service-oriented organisation such as Scottish Power. But the same parameters can be applied to any company.

GE describes it this way: “Six sigma is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services.”

But the company goes on to describe it as a “philosophy” and a “vision”, which lends weight to the belief that the actual statistics behind six sigma are of little import.

If you are going to do this properly you have to have a fundamental change in terms of outlook,” says MacDiarmid. Often this can become the biggest barrier to its adoption.

But six sigma lets MacDiarmid track the success of change. “What we actually have is a situation where the line people working on it are actively involved in each stage of the improvement process.”

This lets MacDiarmid make changes, such as reduce budgets or headcount, on the back of a scientific process in which everyone affected was involved from the very beginning.

IT investments are an excellent opportunity for six sigma. MacDiarmid says that if his company can shave a few days off each implementation stage of an IT project – of which there may be 100 a year – significant cost savings will suddenly appear.

Speaking to the Institute of Quality Assurance, which itself has just established a European six sigma programme in partnership with the American Society for Quality, Philip Catherwood, business development manager at Source Wales and a previous “black belt” in six sigma at Sony UK, was adamant that UK plcs had much to gain.

“Within UK industry there are still massive savings to be had in reducing the cost of poor quality, and the potential for return to be gained from six sigma is huge for any business,” he says. “While I am not saying that UK companies will generate anywhere near the billions achieved by GE, proportionally, there is no reason why some degree of savings cannot be achieved.”

To do so demands a combination of change management and risk analysis. The level of risk an organisation is likely to accept will differ immensely from industry to industry. Adopting best business practice in order to work towards a failure rate of just 3.4 defects per million opportunities is more important than the realisation itself. A successful six sigma programme will embrace risk and work towards minimising it.

As Bernstein explains: “The story that I have to tell is marked all the way through by a persistent tension between those who assert that the best decisions are based on quantification and numbers, determined by the patterns of the past, and those who base their decisions on more subjective degrees of belief about the uncertain future. This is a controversy that has never been resolved.”

The odds are six sigma might just help.

Business improvement with Six Sigma

Express Computer Online

Application of Six Sigma methodology improves efficiency and effectiveness of processes resulting in customer satisfaction, writes Dr Anirban Basu.

A software development organisation in Banga-lore found that schedule slippages in the 12 large projects executed in 2004 varied from 5 to 60 percent. Any schedule slippage beyond 20 percent was unacceptable as the management kept a provision for 20 percent time and cost overrun. There was pressure on project teams to keep the difference between actual and estimated time and cost as low as possible and within budget.

Another IT company was involved in providing tier two support for an ERP package developed and marketed by their US client. The organisation, a CMMI-level 5 company found that although the SLA (Service Level Agreement) with its US client specified that the support time for most critical (level one) complaints should not exceed 6 hours, on the average, it was taking 8 hours with variation from 2 to 14 hours. Further, its US client told them that the support time needed to be reduced to 4 hours because of strong demand from end-users for better service. The organisation was at a loss to find out how to improve the quality of their services and achieve the target specified by their client. Retaining this contract was extremely important for them as 30 engineers were involved in providing tier two support for this product.

Yet another software development company in Bangalore developing accou-nting software was receiving complaints from their customers that the number of bugs being detected in the field during usage of their product was much higher than expected. The management decided to analyse the reasons for defects after verification and validation phases. The company would lose their market share if the situation was allowed to continue.

These are the typical problems reported by companies, who in spite of having received certifications like ISO 9001:2000 and SEI CMMI for adhering to process standards, are finding it difficult to meet the increasing demands of business. They realise that they need to do lot more than implementing process standards. Most software companies even after implementing all the practices prescribed in SEI CMMI V1.1 levels are not able to meet the increasing demands of the business. Problems arise :

in requirements development process needing rework to incorporate customer expectations
in project planning phase due to time and cost overruns because of fallacy in the estimation process
in the field (after release) when defects which escaped the testing process are detected by the end-user and so on.
Software Six Sigma comes to the rescue in all these cases where improvement by qualitative means do not suffice. In an organisation, pursuing implementation of CMMI Staged Representation, Six Sigma methodology supplements the specific goals and practices prescribed in levels 4 and 5 of SEI CMMI (Staged Representation), namely application of statistical techniques to reduce variation, organisational innovation and deployment, causal analysis and resolution.

This is exactly what the three IT companies did. They engaged a consultant who trained them on statistical techniques and Six Sigma methodology. After diligent implementation of Six Sigma methodology, the software companies could improve the performance of the relevant processes and meet client expectations. They could not only retain their clients but also go in for expansions!

Six Sigma methodology results in reduction of rework, avoidance of schedule slippages and cost overruns. Proper application can prevent losses and generate substantial revenue. It is therefore more a business initiative than a quality one.

Application of Six Sigma methodology generally follows the DMAIC (Define, Measure, Analyse, Improve and Control) approach. It is based on a closed loop control system, where data is analysed and processes are refined depending upon the output of the process so as to reduce the variation to a negligible level.

In DMAIC approach, the first phase is define which defines the problem, identifies the customer, the parameters of interest i.e., the Critical to Quality (CTQ) factors. The word, process, means a series of steps involved in transforming inputs to outputs and all other factors affecting the transformation namely people, tools, etc. The process to be improved is defined by developing a SIPOC which is an acronym for Supplier-Input-Process-Output-Customer.

The next phase measure involves specifying the measure of the process in terms of defects per million opportunities (which gives the sigma rating of the present process). In this phase FMEA (Failure Mode and Effect Analysis) is done and high RPN causes are identified. Histogram is made for variable data and DPMO (defects per million opportunities), long-term and short-term sigma ratings are calculated using descriptive statistical measures.

In the analyse phase, the data collected and the process map developed in the previous phases are analysed to determine the root causes of defects, identify opportunities for improvement, find gaps between current and target performance, identify root causes of defects and sources for variation. The process is analysed to remove non-value added activities, if any.

In the improve phase, the target process (i.e. the process under consideration) is improved by designing creative solutions to problems taking into account the result of the analysis performed in the previous phase. Inno-vative solutions are found to improve performance and implementation of pilot solutions are planned.

The last phase is called the control phase, and involves controlling improvements on the new process suggested in the improve phase. It requires documenting and monitoring the improvements planned so that the process does not revert to the “old process”, and institutionalise the suggested improvements.

Application of Six Sigma methodology improves the efficiency and effectiveness of the processes resulting in customer satisfaction. Satis-fying customers by delivering a better product and services without time and cost overrun contributes to increase in volume of business. Although software organisations emp-hasise on data collection, more importance needs to be put on data analysis using quantitative techniques in order to implement Six Sigma methodology. This requires guidance from consultants who have expertise in statistical techniques and have an excellent understanding of software engineering and knowledge of software metrics.

Tracking Quality Improvement in Health Care

Quality Digest Magazine

Sutter Health uses Six Sigma to improve the quality of care

by Bill Farrell, Ph.D., and Tom Simas

To understand Six Sigma, you must first realize that every process has variation--including the process your body uses to control internal temperature, the process a medical facility uses to admit patients or the process health care providers use to administer angiotensin-converting enzyme (ACE) inhibitors to congestive heart failure (CHF) patients as they are discharged from the hospital. All of these processes have a goal or desired output, and they all vary in how well they meet that goal. The statistical term "sigma" represents how consistently a process is meeting its goal, which is expressed as a specific requirement. The formal statistical definitions of sigma describe in technical terms how well a process produces results that fall within the range of these specified requirements.

One of the most important aspects of Six Sigma is its absolute demand for measurable results. Organizations have a limited amount of time, money and resources. When a project team gets started, its members will use a very specific process to guide them. This sequence of steps is called DMAIC, which stands for each of the major steps in a Six Sigma project: define, measure, analyze, improve and control. This article will use these steps to frame a case study in which Sutter Health, one of the nation's leading nonprofit health care providers, sought to improve the quality of care for people with CHF.

Serving more than 100 communities in Northern California, Sutter Health is a family of nonprofit hospitals and physician organizations that share resources and expertise to advance health care quality. For the past six to eight years, Sutter Health has worked on roughly one new clinical initiative per year. Currently, Sutter Health tracks progress on the following initiatives:

• Breast cancer

• First pregnancy and delivery

• Childhood asthma

• Acute myocardial infarction

• Pressure ulcers

• Community-acquired pneumonia

• CHF



This work had its inception in 1998, when Gordon Hunt Jr., M.D., senior vice president and chief medical officer of Sutter Health, brought in one of the present authors (Bill Farrell) to provide statistical rigor to the quality improvement process. Dr. Hunt had just completed the Advanced Training Program at Intermountain Health Care and was anxious to apply techniques such as statistical process control to quantify the improvements he was seeing in the treatment of breast cancer.

Sutter Health's commitment to this paradigm can be seen in the Management and Clinical Excellence Program, an internal mini-version of Intermountain Health Care's Advanced Training Program. To date, more than 450 Sutter Health employees have been trained in Six Sigma and rapid cycle-improvement techniques
by a faculty comprising both internal and nationally renowned external
experts (including Brent James, M.D., M.Stat., the originator of the Intermountain Health Care Advanced Training Program).

Using the Six Sigma DMAIC process, let's look at how Sutter Health approached CHF.

Define
CHF was chosen early on as one of Sutter Health's clinical initiatives, both because of the increasing burden the disease places on health care organizations and because of wide variations seen in the treatment of the disease. It's primarily a disease of the elderly, and as life spans increase, more people are being diagnosed with CHF. At the onset of the initiative, Sutter decided to focus on ACE inhibitors as the treatment of choice for CHF. Several random clinical trials had demonstrated the efficacy of this class of drugs in treating the disease, and other studies had shown wide variability in the extent to which CHF patients received these drugs. (Sutter is currently tracking nine measures for the inpatient CHF initiative but is focusing on ACE at discharge for this case study.)

Measure
Sutter collects data quarterly for the initiative. Data collection initially was cumbersome, relying on manual chart review at each of the 20 Sutter Health hospitals that treat CHF patients. The process has been streamlined over time, with the data now available in a data warehouse.

Sutter uses bar charts and spider (or radar) charts to compare hospitals for the current quarter's results. Statistical process control methodology (at the heart of Six Sigma) is used to track performance for individual affiliates over time, and confidence interval (CI) methodology is used to compare performance to a target.



Analyze
The figure above shows a standard three-sigma SPC chart for the fictitious Sutter St. Elsewhere Hospital, revealing the performance over time in getting ACE inhibitors to CHF patients as they are discharged from the hospital. Although the data are fictitious, they reflect real progress at Sutter Health in getting this important medication to people who have been hospitalized with CHF.

Because numerator and denominator data are available for this measure, a p-chart is used. Statistical process control software plots the individual data points, draws the center line as the average of the data points and draws the three-sigma control lines. The width of the control lines varies from quarter to quarter because the sigma measure depends (in part) on sample size, which in this case varies over time. Most important, the SPC software looks for and labels "rule violations," that is, cases where a particular data point shows unusual variability given the history of the process. In the figure, the last four data points are labeled "A," meaning that they are beyond three sigma on the high side. Several earlier data points are labeled "B," meaning that they are beyond three sigma on the low side.

Improve
This figure shows significant improvement. Seeing this, one might ask, "How much improvement is enough?" All of Sutter Health's clinical initiative measures have targets attached to them, so one answer to this question could be, "When everyone is at target." Statistical process control by itself cannot provide the answer, so Sutter turned to another technique, developed by Dr. James, which involves "tricking" SPC software into drawing a pseudo-confidence interval chart.



To implement this technique, Sutter fixes the center line at the target (i.e., 90 percent in the case of ACE inhibitors at discharge), rather than letting the software calculate the center line. In addition, the software draws two-sigma limits, rather than the standard three-sigma limits. Finally, the rule violation labels are turned off because they have no meaning in this context. The result, as shown in the figure above, is an unusual-looking but useful 95-percent confidence interval chart (three-sigma limits would produce a 99-percent CI chart).

Interpreting the data is simple: If a data point lies outside the 95-percent "envelope," it is significantly different from (i.e., higher or lower than) the target. Points inside the envelope do not differ, in a statistical sense, from the target.

In the present (fictitious) case, we see that although Sutter St. Elsewhere made significant positive progress from an SPC perspective, it took the hospital more than three years to move its ACE performance into (and beyond) the target zone.

Using these two methodologies in tandem provides a more complete picture of Sutter Health's improvement in getting ACE inhibitors to CHF patients. An affiliate may show no significant triggers on its SPC chart but have 18 consecutive quarters where its performance is significantly favorable to the target. Similarly, another affiliate may not reach the target zone but demonstrates several instances of significant upticks on the SPC chart; these are recognized and rewarded.

Control
In an industrial Six Sigma effort, control could mean keeping a process within a tight set of specification limits. This is less relevant in a health care setting--at least in the early stages of clinical improvement--where, in most instances, we want to see a process demonstrate significant upward movement. In other words, we want our processes to be out of control. However, as time goes on and clinical improvement processes start to mature, we hope to be in a position to utilize another tool in the SPC arsenal: the phase chart. This chart splits a process into "before" and "after" phases. It's commonly used in industry when a major change occurs--when a robot car painter replaces a human one, for example. Changes in health care delivery are not usually that abrupt, but the goal is to have most processes working at a relatively high level with relatively low variability.

For illustrative purposes, we will suggest that the ACE inhibitor process at Sutter St. Elsewhere moved to a steady-state phase 2 between the first and second quarters of 2004. The figure below presents the appropriate SPC chart for this process.



The phase chart shows a process with significant improvement over 12 quarters, followed by four quarters where the process is in control at a new, higher level.

At the moment, it is rare that a health- care delivery process shows this kind of abrupt shift and steady-state maturity. Sutter Health is committed to using Six Sigma tools for the long term, however, and looks forward to getting all of its quality processes in good control.

Conclusion
In summary, think of Six Sigma as a structured way for your organization to solve important problems. Six Sigma teams use the DMAIC method to diagnose and resolve these problems. Software tools are critically important to the success of your Six Sigma efforts. In the analyze phase, Sutter Health emphasized the understanding of the baseline. Before we move forward, we must know where we have been. To analyze is to quantify. With this tool, we can measure our interventions or new results against the baseline. If an intervention is needed, we do so in the hope that our processes will be improved. But what constitutes "improvement?" Trend charts can help us understand the level of improvement from one cycle to the next.

In this article, we proposed a unique and interesting way of measuring improvement through the use of a confidence interval chart. With our emphasis on continued process improvement, we need to ensure the control component. A phase chart will not only display pre- and post-intervention analyses, including a computed center line, control limits, etc. for each phase, but also can continue to provide feedback relative to the new process to ensure that it is working at a relatively high level with relatively low variability over time.

About the authors
Bill Farrell, Ph.D., is senior analyst for Sutter Health. Farrell applies statistical rigor to a wide variety of clinical data to more reliably underpin quality improvement efforts. He utilizes Six Sigma techniques such as statistical process control to ensure that an observed change in an outcome is real and not random. He has taught research methodology and statistical analysis at the University of California at Berkeley and the University of San Francisco. He received his doctorate in psychology from Stanford University.

Tom Simas has a master's degree in education from Oregon State University. He has been president and CEO of Statit Software Inc. ( www.statit.com) and its predecessor, Statware, for more than 10 years. During this time, Simas' focus has been to help manufacturers and health care providers realize the benefits of statistical process control techniques to improve processes and their outcomes. Simas is a regular speaker and contributor at various quality improvement conferences. QD

Shackled by Bad Six Sigma?

Quality Digest Magazine

Here are the top ten reasons why Six Sigma implementations fail

by Fred Mullavey

Whether you're new to Six Sigma or have been involved in the methodology since its inception, sooner or later you will run into obstacles during its implementation. Most of these aren't due to a lack of data needed to improve a process or reduce defects, but are more human in nature. This article will look at some of the most common reasons Six Sigma projects fail, and what you can to do prevent that failure.

1. Isn't this stuff just for manufacturing?
Experienced practitioners understand that Six Sigma isn't just for manufacturing; it's applicable to all organizations interested in efficiency and improvement. But newcomers often struggle with the discipline in nonmanufacturing environments such as administration and finance, where performance metrics are harder to establish and sometimes not understood at all. Six Sigma practitioners who attempt to introduce administrative projects using manufacturing examples are positioning themselves for failure. Performance measurements must be done in terms and processes the organization is familiar with and understands.

Lacking traditional manufacturing data, performance may be tracked best by measuring mistakes. Take the case of a data-entry specialist who must repeatedly open and close computer programs, gathering information from one and inputting it to another. The likelihood of error is great. Measuring the number of mistakes made in a given period can help determine the viability of a Six Sigma project to improve data-entry efficiency. In this example, studying the mistakes and the processes that lead to them could result in the development of applications that share information automatically, reducing error rates and dramatically improving data efficiency.

2. Where did everyone go?
Everyone wants to implement Six Sigma, but not everyone supplies the resources. Many Six Sigma projects fail because of insufficient people and expertise, poor participation among team members or both.

Take the case of a company in New England. The company wanted a Six Sigma program to improve and control processes for a new contract received from a missile manufacturer. Senior and midlevel managers and first-line supervisors knew nothing about Six Sigma. Employees signed up for Six Sigma training, and all had projects to work on during the training.

Although the participation of top managers was requested in a training session to learn the basics of Six Sigma and become champions for the projects, all but one declined. Employees were required to take the training on their own time. Mid- and lower-level management never bought into the process and declined employee requests for time during their shifts to work on projects.

Unfortunately, this company was never able to establish a Six Sigma program. The culture remains the same today as it was 50 years ago.

Commitment and communication go a long way toward preventing such occurrences. Six Sigma projects are most successful when the methodology involves team members from the top down, from the boardroom to the boiler room. Management must be willing to allocate resources and participate in the staffing of diverse teams from all areas affected by the project. This includes internal suppliers and customers, and others with beneficial experience and skills.

Employee involvement is best accomplished through open communication, including an honest evaluation of the project's benefits to the organization and employees. Employees must know that employers want their input and are present in team meetings to encourage and accept feedback. A sense of ownership among team members will result in positive participation by everyone.

3. We've never done it that way
Changing an ingrained culture isn't easy. Organizations that are mired in flowcharts and the maintenance of bureaucratic boundaries are slow to change in response to multidisciplinary philosophies like Six Sigma. Organizations are prone to failure when managers dictate how workers must perform their jobs. Workers often know best how to perform tasks
and processes because they're the ones doing them.

Employees who are empowered to identify problems and institute changes become invested, with an eye on the future of their organization and themselves. Empowerment is an extraordinarily powerful tool in an organization, and one of the most effective ways of transforming a culture.

4. It's not my job
Lack of organizational maturity can doom projects and the Six Sigma discipline to failure. Maturity goes along with cultural change. Organizations are mature when members have evolved in empowerment to identify problems, recognize the need for change and offer to find solutions. With an immature organization, the response to a problem is often, "It's not my job." Mature organizations are composed of members who realize that it's everyone's job to seek solutions.

Maturity can take from two to five years. How quickly an organization matures depends in part on how well Six Sigma is supported by senior management. If they're not "walking the talk" on a daily basis, maturation will go slowly. By setting good examples, senior managers can speed the maturing process, improving Six Sigma efficiency.

5. If it walks like a duck…
If your Six Sigma project isn't really a Six Sigma project, it's doomed to failure. For example, the corporate headquarters for a well-known national company in the southeast United States decided that Six Sigma was the key to helping it improve its processes. The organization had a Master Black Belt who provided basic Six Sigma training to all employees of each corporate division. Forty hours of training was provided for employees to become Green Belts.

Division managers were instructed to complete several Six Sigma projects over the course of one year. The problem was, none of them knew how to determine what was or wasn't a Six Sigma project. Still, they wanted to comply with the directive.

One division hired its own Six Sigma Black Belt to review all ongoing projects. The results weren't good. None of the projects met Six Sigma criteria. The projects were either lean or projects in which the answers were already known by Green Belts, fixable without using tools.

To put the program back on track, the Black Belt had to identify true Six Sigma projects within the division and retrain the Green Belts, requiring them to use
Six Sigma tools in the performance of their projects.

Employees are now well-trained and eager to continue working on projects. The culture is evolving and the division is celebrating its successes.

There are two simple rules for recognizing potential Six Sigma projects: First, it's not Six Sigma if you already know
the answer, and, second, it's not Six Sigma if it doesn't provide value to the bottom line.

Because you're asking team members for an investment of time and effort, there must be a return on that investment. Team members need to know and understand that the dollar savings they create through Six Sigma can be passed along to customers, increasing the company's efficiency and market competitiveness, thus translating directly to the success of the company and its employees.

Another key to successfully understanding Six Sigma is identifying the boundaries within which team members will work. Without clear boundaries, Six Sigma projects can cut across an entire organization, often needlessly. If your initial objective was to drain the swamp, keep your project limited in scope to
the area immediately surrounding the swamp, or you could end up trying to solve world hunger.

6. That's nice, but…
Your Six Sigma effort will fail if you don't set aside the necessary time and resources. Because they're charged with meeting deadlines, midlevel managers understandably may have their eyes on a ball other than the current Six Sigma project. This is another instance where it's critical that the Six Sigma discipline is understood from the top levels of management down to the very bottom of the organizational structure. Six Sigma projects exist to increase efficiencies and drive out cost. They frequently help processes achieve deadlines. Midlevel managers who understand the benefits of Six Sigma are inherently more willing to invest the time and resources to fix mistakes, even if it temporarily reduces production or risks missing a deadline. By planning ahead, it may be possible to modify productivity and deadlines without jeopardizing client satisfaction. Remember, once a solution is found, the benefits are ongoing.

7. Whose project is this, anyway?
Diversity in Six Sigma is a necessity. Technical experts, customers and suppliers--both internal and external--all need to be involved, regardless of their department or discipline. When boundaries aren't crossed in this manner, problems remain entrenched, and the Six Sigma effort fails.

Difficulty in achieving these "meetings of the minds" is often a symptom of Six Sigma immaturity within an organization. That is, the mindset of Six Sigma as a means to efficiency has not yet been completely embraced by everyone or every department. Changing a culture never occurs quickly but will happen faster with the visible support of Six Sigma from the highest levels of management.

8. Don't force it; get a bigger hammer!
It's been said that a little knowledge can be a dangerous thing; this holds true for Six Sigma. Six Sigma team leaders should not only be trained; they should be certified. Team leaders can receive 40 hours of classroom instruction, but failure is certain unless they fully understand how to use the tools. The best Six Sigma courses include classroom instruction and hands-on projects that ensure the student not only knows what a hammer is for but also how, when and when not to use it.

There are many Six Sigma courses to choose from. Some offer certification and some don't. Investigate the classes you invest in, check references and ensure that your Six Sigma students are certified Green Belts, a signal that they truly understand the methods and tools of the discipline. It will help them select the proper projects and increase the efficiency with which they undertake them.

9. I didn't know that
Six Sigma fails in many organizations due to a simple lack of recognition for its successes and the team members who achieve them. Failing to communicate Six Sigma's successes can lengthen the organization's maturing process, frustrating Six Sigma projects and participants.

Success comes with organizationwide celebration. Six Sigma successes can be visually displayed in a conference room or cafeteria, much like a school science fair. Details of the project, the problem and the solution should be posted for everyone to see. Every team member should receive credit. Successes should also be published in employee newsletters, intranet Web sites--anywhere employees may congregate and view information.

How you celebrate success is up to you. What's important is that word of your success is heard by all. Success stories serve a dual purpose by instilling confidence in employees and validating Six Sigma as an effective tool worthy of everyone's support.

10. What we've got here is a failure to communicate
Six Sigma fails when its proponents don't communicate the reasons for Six Sigma in the first place. Six Sigma's benefits and the fact that there is support for the methodology at all levels must be communicated throughout the organization. Executives, managers, supervisors, team leaders, technicians and others must be aware and involved. Information about Six Sigma and Six Sigma projects should be transmitted in e-mails, posters, newsletters and by any other effective means.

Solicit feedback. Communication is a two-way street. Feedback means the difference between telling someone something and discussing it with him or her. Six Sigma is about sharing ideas. By communicating the Six Sigma message, then asking for people's opinions, you are more likely to receive good ideas that benefit your efforts, bolster credibility and provide employee ownership of the process.

Plan for the future
Jack Welch, the celebrated chief executive of General Electric, said several times that you have to look at the future to be successful. Examine what the future holds and how you want your process or business to look in 12 to 18 months, then find the methods to get there. This is what Six Sigma is all about. By working throughout your organization to instill a forward-looking, solution-seeking attitude from everyone, your Six Sigma projects will be on track to success.

About the author
Fred Mullavey is national quality manager for Sypris Test & Measurement, a subsidiary of Sypris Solutions Inc. Mullavey is a Six Sigma Black Belt and a lean manufacturing expert who is also trained as an ISO 9001 lead auditor. Mullavey has more than 15 years of quality management experience, including management-level positions at Silverado Cable Co., Rexnord Corp. and AlliedSignal Aerospace. QD

Delivering a Customer Experience that Matters: GE Insurance Solutions Expert to Share Insights at Conference

BOSTON--(BUSINESS WIRE)--Sept. 20, 2005--Imagine for a moment you're a customer. Not hard to do, since we all find ourselves purchasing at least a few items or services every day.

What was your experience? Was it good or bad?

Alex Gonzalez, Customer Experience Leader at GE Insurance Solutions, believes no matter the business or brand, every customer will have an experience. The key is how that experience is managed.

This week Gonzalez will share his insights with insurance professionals at an Insurance Performance Association conference in Boston. His presentation is titled "Delivering a Customer Experience that Matters."

"People always ask, 'What is customer service?'" says Gonzalez. "The best answer is that it's whatever our customer says it is. That's why an organization needs to begin with a strong sense of listening to its customers and understanding their goals, their desires, and their frustrations."

Gonzalez continues: "It's not just listening; in the case of GE Insurance Solutions, we have to build strong, lasting, mutually profitable relationships with our strategic customers. And we need our best people to build and maintain these relationships."

In his presentation, Gonzalez reveals the ingredients to building a culture within a company that's focused around the customer. Gonzalez says culture extends from sales to service, and is built on an understanding that each person in the organization affects the customer's experience.

"Every time one of our customers or distributors comes into contact with us they have an experience," says Gonzalez. "It will be good or bad but they will have one. Our goal at GE Insurance Solutions is that they have a great experience when they do business with us."

Gonzalez will also discuss some of the processes and metrics GE Insurance Solutions uses to ensure and measure and sustain customer satisfaction. They include Six Sigma -- a methodology applied to eliminate defects in operations -- and Net Promoter Score -- measuring how likely a customer would be to recommend a company to someone else.

Gonzalez is Customer Experience Leader for GE Insurance Solutions and leads a global team that enables the company to deliver "unsurpassed customer service." He has served in several sales, marketing and Quality roles with the company. Before joining GE, Gonzalez held various underwriting, sales and leadership roles at Chubb Insurance. He has a degree in Finance from the University of South Florida and is Six Sigma Certified.

"Building the High Performance Insurance Organization" is one of two conferences this week sponsored by the Insurance Performance Association (IPA). The conference takes place at the Ritz-Carlton Boston Common September 20 and 21. On September 22 and 23, IPA will hold "Six Sigma Enabled Insurance Processes, Practices & Systems: How to Achieve and Sustain Breakthrough Improvements in Productivity, Costs, Quality, and Service."

GE Insurance Solutions (NYSE: GE) protects people, property and reputations. With more than $48 billion in combined assets, the GE Insurance Solutions group of companies is one of the world's leading providers of commercial insurance, reinsurance and risk management services. Combining deep practical risk expertise with GE's business acumen, our dedicated professionals in offices around the globe help customers understand and manage risk more effectively. More information is available at www.geinsurancesolutions.com.

Singapore plant ships high-end electronics assembly placement machines

Sep 16, 2005



Global Siplace quality standards make it possible

On September 6, 2005, the first Siplace HS-60 Surface Mount Technology (SMT) placement machine - with globally standardized Siplace quality - was shipped out of the Singapore manufacturing plant. Dr. Peter Drexel, member of the Management Board of Siemens Logistics and Assembly Systems (L&A), commented on the event: "We produce where our customers are. With our global Siplace quality system and our consistent Siplace supply chain, we can guarantee the same standards anywhere in the world. That is what has made us successful and ensures our global leadership in innovation and technology."

With its constant focus on what is best for the customer, the Electronics Assembly Systems Division (EA) of Siemens Logistics and Assembly Systems (L&A) pays close attention to providing the same level of quality everywhere in the world. The delivery of the first Siplace HS-60 to rapidly rising electronics manufacturer, Jurong Technologies Industrial Corporation (JHT), in Singapore underscores the Siplace team's successful global realignment.

The more globally a company operates, the more attention it must pay to ensure a globally standardized level of quality and innovation. Both must be created cost-effectively. The objective is clear: maximum customer satisfaction. For Siemens, the most important element in achieving maximum quality standards is close customer integration. And to always keep a finger on the pulse of its customers, Siplace has introduced a global feedback management system. Each customer response is recorded and systematically processed to make sure that each customer receives a solution for his problem or an answer to his question within the shortest possible amount of time. The information collected with the help of this system flows via the continuous improvement process (CIP) into the various main processes and ultimately reaches the appropriate departments all over the world which are responsible to the continued development of Siplace technology and Siplace services. With annual customer satisfaction surveys, Siplace finally closes the loop and finds out the impact of its actions and improvements on the customer.

Continuous improvement
If you stagnate, you lose. With that in mind, the Siplace team in the Siemens EA Division is always moving forward and has given its continuous improvement process a new dimension with the Siplace Excellence program. The division constantly initiates new projects to further improve its global customer satisfaction ratings. Top management in all four regional Siplace headquarters - in Munich, Germany; Norcross, U.S.A.; Shanghai, China and Singapore - constantly review projects that can improve the customers' satisfaction. All the targets are quantified and monitored to ensure the objective is met within the specified time frame.

Management-driven quality culture
Siplace managers worldwide brainstorm strategies for the Siplace Excellence program and incorporate processes to incorporate it into the division's culture. They are committed to developing a two-way communication for all levels and regularly participate in quality gates (Q-gates), quality reviews, scheduled quality meetings and similar events.

Globally successful with Six Sigma
To improve its profitability in addition to customer satisfaction and quality, Siemens uses the Six Sigma methodology as a primary management tool. Six Sigma largely avoids cultural barriers or communication problems caused by differences in mentality to develop globally standardized processes. Problems are analyzed methodically and solved with the help of people who are best qualified to do the job. Six Sigma creates a certain discipline within the enterprises that practise it and makes this analytical approach a mandatory part of all thinking.

The program is based on a hierarchical structure of Six Sigma proficiency levels such as Black Belts, Green Belts and "Six Sigma Management Sponsors". They are specially trained to adapt the methodology for all Siplace departments and to pass on their knowledge in various training programs. Global Siplace Quality Management Director, Herbert Hofmann, adds: "It is important that all our employees understand why we want to practice Six Sigma. Once we have achieved this, it becomes part of everyday life. Otherwise, it won't be successful."

Meanwhile, the Siplace team has also included its suppliers in its Six Sigma training program at the international level by holding joint seminars and implementing the methodology together. In addition, the cooperation is supported through supplier audits, quality agreements and similar measures that have been part of Siplace's supplier management system for many years. System partnerships with key suppliers and early integration of suppliers into new product development activities further improve the EA division's results.

Quality standards for processes and projects
The Siplace team is set up in a worldwide process organization. All main processes like customer relationship management (CRM), product life cycle management (PLM), supply chain management (SCM) and quality management (QM) are globally standardized and documented on the company's corporate intranet to which each employee has access. The result: No matter where materials are procured or manufactured - the processes are always the same. That way, customers are guaranteed to receive consistently high quality, no matter which product they buy or where they buy it.

Quality managers help with problem solutions
At Siemens, a designated project quality manager (PQM) accompanies each project that is part of the PLM process. He determines the schedule for the new product, creates a uniform PLM milestone plan, and makes sure that it is complied with. Critical milestones have Q-gates, where the entire management discusses the project's status and determines further measures. Herbert Hofmann declares: "In all these meetings, customer satisfaction and the resulting business success are always at the top of everyone's list of priorities."

The quality management team then tests each product in the Siplace Test Center before it is released for worldwide sales.

Measurement tools: Balanced scorecards, assessments and satisfaction surveys
The Electronics Assembly Systems Division at Siemens measures its success with the help of the Balanced Scorecards (BSC) methodology. Each Balanced Scorecard consists of many key performance indicators (KPIs), with quality factors playing a predominant role in addition to cost and schedule factors. In addition to providing standard information about suppliers, audits, etc., Siemens' QM reporting system focuses primarily on the Siplace customers, using a visual red-yellow-green system to indicate the severity of each situation. That way, management receives the information it needs quickly and can respond accordingly. All KPIs are linked and indicate their respective effect on sales and profitability. To know where Siemens' QM system truly stands, the managers in charge supplement the BSC methodology with regular assessments. These assessments help reflect its level of maturity and point out any weaknesses. Herbert Hofmann adds on, "we put great value on the feedback we get from our customers. Thanks to our annual customer satisfaction surveys, we know where we stand and what progress our worldwide activities have generated."


All these measures create a worldwide culture of quality that crosses all borders and is expressed at Siplace in nine globally mandatory elements:
1.) Customer integration
2.) Continuous improvement
3.) A culture of quality through management involvement
4.) Quality standards in processes and projects
5.) Broad qualification on quality issues
6.) Control and support role of the global quality management
7.) Consistent supplier management
8.) Business-driven quality planning
9.) Focused quality reporting

News source: EMSNow Media

How High is Up? Setting Appropriate Targets for Customer Satisfaction Scores

by Rick Garlick Maritz Research

An executive once made a comment that it was her primary goal to raise guest satisfaction scores in her company's hotels to the greatest extent possible. If that indeed is an executive's most important objective, then the solution is a simple one. All one needs to do in order to guarantee dramatically improved guest satisfaction is to (1) cut room rates, (2) reduce the staff-guest ratio, and (3) give free amenities and upgrades as much as possible. Of course, the hotel executive who aggressively pursues higher customer satisfaction using these strategies will probably be looking for another job quite soon.

Every organization that relies heavily on customer feedback grapples with the same general issue. Executives recognize that customers are more likely to be loyal when they receive a high quality product accompanied by excellent service. Yet, everyone also acknowledges that there is a significant investment in improving product and service. At what point does the investment in improving customer satisfaction cost more than it brings in return? What level of customer satisfaction represents an appropriate target? In other words, what is a reasonable expectation for improving customer satisfaction scores?

In any given situation, there are several possible relationships between customer satisfaction scores and profitability. The first possibility is that no relationship exists at all. This may be the case in certain 'hostage' situations where a consumer has no choice but to buy a particular product or service, even though he or she holds no emotional loyalty. An example might be choosing a particular airline that represents the only alternative for direct flights to a certain destination. Another example might be choosing a rental car company with which your employer has formed a contractual relationship. In this circumstance, customer satisfaction is a less relevant predictor of profitability in the short term, although there may an impact in the long term if circumstances were to change and a competitive option were introduced.

In most situations, however, it is far more likely that one of the following depicted relationships exists between the customer experience and profitability:

In Scenario 1, there is a linear relationship between profit and satisfaction scores, suggesting that hotels and restaurants with higher guest satisfaction scores are those that consistently show higher profits. In reality, however, this relationship usually is not as clear cut. Scenario 2 is a more likely situation where guest satisfaction is associated with higher profitability up to a certain point. Beyond this point, there is a leveling off effect, where driving a better guest experience is no longer associated with higher profitability. Scenario 3 is the situation that creates the greatest concern for users of customer experience research. At some point, there is an inverse relationship between guest satisfaction and profitability. In this case, investment into improving the guest experience beyond a certain point costs more than it brings in return.

So, what are some practical steps to determine "How High is Up?" Here are some suggestions:

Conduct a competitive satisfaction study. Customer satisfaction research is often conducted in a vacuum in which there is no competitive context for determining a 'good,' 'bad' or 'average' satisfaction score for a particular category. For example, an appropriate guest satisfaction score for Ritz-Carlton will be different than for Motel 6. Syndicated satisfaction studies are sometimes conducted for this very purpose. The only difficulty with these syndicated studies is that the sample size for any given competitor may be quite small and not necessarily representative of that brand's entire customer base. In any case, however, sponsoring a competitive study to examine either guest satisfaction within the competitive universe or within a specific competitor is a good way to get some kind of reading on how your brand is comparing to the competition, as well as the amount of investment you need to make into the guest experience.

Study the specific units within your organization that are the most profitable. Another strategy is to identify the specific hotels, restaurants, branches, etc. within your entire organization that are the most successful financially. How are they performing on guest satisfaction relative to those that are the least successful? Identify the top and bottom 10%-25% and compare and contrast them on customer experience scores. Make sure, however, that you identify enough units in each category that the results are not inappropriately influenced by factors such as location, local competitive set, proximity to a highway or major attraction, or anything else that is completely independent of the guest experience.

Use non-linear statistical techniques to determine the linkage between satisfaction and profitability. For companies that employ statisticians and modelers, or who work with outside partners that provide this expertise, consider alternative ways of modeling the data. Typically, bi-variate correlation, multiple regression, or some other type of linear modeling technique will be employed when attempting to link one variable to another. Since the relationship between satisfaction scores and profitability is likely to be non-linear, traditional statistical analysis is likely to underestimate the relationship between the two. Maritz employs a statistical technique called MARS (Multiple Adaptive Regression Splines) analysis that identifies points at which the functional relationship between satisfaction and profitability changes. MARS is somewhat constrained in that it usually requires at least several hundred data points (units) that are fairly uniform in nature in order to produce a generalizable result. A company such as McDonalds would be an ideal type of company on which to conduct MARS analysis, whereas a small hotel company with widely varying property types would not be a candidate for this type of analysis. There are other quadratic models, however, that still might be able to identify these non-linearities in the data and help establish an appropriate target for guest experience scores.

Once an appropriate target is agreed upon, the next goal is to reduce the amount of variability around this target number. Many companies are adopting Six Sigma strategies for this very purpose. If a particular hotel or restaurant is greatly exceeding the brand target, it should be affirmed for its efforts to please customers, while at the same time encouraged to re-evaluate the money it is spending toward achieving this goal. Units scoring close to the target should be recognized for appropriately delivering product and service to its customers. Those scoring slightly or far below the target should receive the proper amount of remediative attention.

The purpose of this article is not to discourage hotels and restaurants from delivering great service to their customers, but rather to navigate their way through the difficult balance of delivering their company's brand promise while controlling costs. The ultimate goal is not to drive up customer satisfaction while going broke, but rather to manage the customer experience as an important aspect of creating a profitable venture.

Rick Garlick Dr. Rick Garlick is Director of Consulting and Strategic Implementation for the Maritz Hospitality Research Group. He has worked with many of North America’s leading hotel chains including Hyatt, Marriott, and Starwood to translate research findings into actionable solutions with the goal of driving organizational growth and profitability. He is also an integral part of Maritz’ international leadership team guiding its employee engagement measurement and training program.

Published by Maritz Research
Date: Volume 18 - July 2005

Ibru charges manufacturing, service industries on Six Sigma

By Franklin Alli
Posted to the Web: Thursday, September 08, 2005

Chairman of Ikeja Hotels PLC, owners of Sheraton Lagos Hotel and Tower, Mr. Goodie Minabo Ibru, has charged the manufacturing and service industries to exploit Six Sigma in their operations.

Six Sigma is a management tool developed by Motorola in the 1980s that helped it realise superior performance results in its organisation.

Ibru, who chaired Trithel International Consulting’s special conference, tagged Six Sigma, held Tuesday in Lagos, said although, the model is relatively new in Nigeria but it has proved to be the key for survival in today’s corporate world where only the best survives.

According to him, Six Sigma had saved Motorola who developed the concept, more than $16 Billion in savings as a result of Six Sigma efforts.

Also, he said "I am delighted to tell you that Sheraton Lagos Hotel & Towers adopted Six Sigma as the driving force for its business about 2 years ago. Within this short period, it has witnessed improvements in every facet of the business from product delivery through service delivery to guest and employee satisfaction which have all positively impacted on the bottom line. It is also encouraging to note that City Bank and Cadbury Nigeria PLC now practise Six Sigma. With mergers and acquisitions becoming commonplace in the Nigerian corporate world today, Six Sigma should become very useful in helping to model, measure, modify and improve companies’ business strategies for increased profitability."

However, in an address of keynote, Faculty Member, Lagos Business School, Pan-African University, Dr. Obinna Muogboh, noted that in today’s fiercely competitive business environment, successful organisations and business leaders are actively seeking ways of improving performance through delivery of higher values to the customers and better returns to the shareholders, which he said Six Sigma delivers. " In many world-class organisations, Six Sigma has overshadowed techniques previously viewed as the continuous improvement tools of choice. This is as a result of the bottom-line effect — Six Sigma directly impacts financial results and customer satisfaction. However, even with the threat of globalisation, many Nigerian companies are still not aware of the tremendous power of Six Sigma as a competitive weapon and yet some are complacent and seem to be taking a "wait and see" attitude."

It is hard to argue with the logic of Six Sigma principles, and even harder to ignore its potential when looking back on its contribution to industry and society. Jack Welch, former CEO of General Electric, in the GE 1998 annual report, provided insight into the impressive result of Six Sigma initiative. He stated that GE Six Sigma improvement effort returned more than threequarters of a billion dollars ($750,000,000) in savings beyond their investment in 1998, with a billion and a half ($1,500,000,000) in sight for 1999.

Since that time, GE has been able to make additional Six Sigma savings of several billions of dollars." Also, he said , Six Sigma has improved the bottom line at several high profile corporations. At least 25% of Fortune 200 claim to have a serious Six Sigma programme. Companies such as -Lockheed Martin, Toyota, Motorola, J.P. Morgan Chase & Co., Texas Instruments, IBM, General Electric, Ford Motor Co., Sony, DuPont, Dow Chemicals, Microsoft, and American Express have successfully implemented Six Sigma and reduced costs literally by billions of dollars.

Many organisations in the Nigeria are operating below three-sigma quality levels. That means they could be losing up to 25-40 per cent of their total revenue due to processes that deliver too many defects — defects -that take up time and effort to repair as well as creating unhappy customers.

Executive Chairman of Trithel International whose company is the promoter of Six Sigma, Engr. Joseph .J. Akpieyi, said his company is committed to selling Six Sigma to both public and private organisations in the country.

His words " In this era of globalisation which is accelerating exponentially, we, in Trithel, ardently believe that Nigerian organizations cannot shy away from mastering the application of Six Sigma, which carries the tremendous allure of proven business successes, in the management of their businesses."

News source: Vanguard

Six Sigma Stigma

Ask Japanese carmaker about Six Sigma, and you'll be speaking Greek to them.

From: Issue 98 | September 2005 | Page 40 By: Martin Kihn

Not long ago, in its global pursuit of the Truth, the Consultant Debunking Unit (CDU) journeyed to Japan for a tour of the car-making facility in Toyota City. Guided by engineers, we heard a lot about the legendary quality of Toyota's vehicles. Eager to show we knew a thing or two about quality ourselves, we soft-balled our hosts with the obvious question: "When did Toyota start using Six Sigma, anyway?"

Long silence. After some awkward consultation in Japanese, the engineers asked us, "What is Six Sigma?"

Good question. Sigma is the Greek symbol used to denote deviations from the mean. And so Six Sigma is essentially a set of procedures and tools designed to measure and analyze "defects" in a process and help determine what's causing them. The goal -- the "six sigma" part -- is 3.4 defects per million, or 99.997% perfection.

As with many management trends of recent vintage, blame Jack Welch for this one. The former General Electric CEO so believes in Six Sigma he devoted a chapter to it in Winning (HarperBusiness, 2005), writing, "You can't afford not to understand it."

Now, like a virtually flawless brushfire, it has spread well beyond its 1980s roots as a statistical tool for reducing manufacturing defects. Thousands of companies, from Sony to DuPont to Merrill Lynch, have flown in experts from the Six Sigma Academy and other consultancies to train cadres of so-called black- and green-belts in the ways of process control and deviation.

No one disputes the worthiness of Six Sigma's intentions, much less the statistics. But a quick survey of a handful of industries, using product-quality ratings from J.D. Power and Associates, led CDU to believe that while Welch may be right that you can't afford not to understand Six Sigma, you can't necessarily afford to use it, either.

In copiers and printers, Xerox ranks lower in quality than competitors Canon, Toshiba, and Hewlett-Packard, yet it proudly trumpets its Six Sigma legacy back to the 1980s. In wireless phones, quality varies by region, but Sprint PCS ranked highest only in the West; it tied in the Northeast with Verizon, which had "fewer problems experienced with static/interference." Nonetheless, quality consultancy Six Sigma Systems cites Sprint as a major client.

In boats (!), Larson Boats ranks last in a field of 11 companies that make express cruisers. It has two Six Sigma black belts on staff and boasts, "Quality isn't something we add at the end of the line!" And in cars, Ford stayed below average in the recent Initial Quality Study, despite its companywide policy in 1999 to adopt . . . well, you-know-what. Once again, the highest quality ranking went to Toyota -- a company that had to learn about Six Sigma from the CDU.

News source: Fast Company

Six-Sigma Pitfalls

Are Six-Sigma programs delivering on their promises?

By Marc S. Morrison

Sept. 7, 2005 -- Marc S. Morrison is a manager in the Houston office of Alvarez & Marsal. Alvarez & Marsal Business Consulting helps companies grow stronger bypartnering with management to identify opportunity, enhance efficiency andmaintain competitive advantage.

Developing Six-Sigma programs for business process improvement has become the latest craze for many companies, having evolved into full-fledged programs with unique training regimens and belt-based hierarchies. But are these programs delivering on their promise? Are differences in implementation creating different results? If so, how can managers ensure that optimal results are achieved and how can an executive ensure long-term longevity to this program? What are the pitfalls to a successful Six-Sigma program?


Are Differences In Implementation Creating Different Results?

In a word, yes.

Some organizations have made Six-Sigma a strategic initiative with a permanent head, where others have provided training to employees and rolled it out in a less structured manner. For example, training regimens for green belt training have ranged from lecture-based sessions as short as three days without any project-related work to two one-week sessions requiring completion of a project that achieves a specific cost savings. More disciplined investment in training, with a hands-on component and corporate-aligned measurements provide greater return to companies.

The different outcomes are tellingly illustrated from a division of a Fortune 500 company. It initially rolled out its Six-Sigma program using a consultant that conducted abbreviated lecture-based green-and black-belt training. Employee participants were not assigned any Six-Sigma projects during the course and only a few were assigned projects after participating in the class. The division did not provide formal measurement tools or significantly change its plants' current improvement program initiatives to be consistent with Six-Sigma. The effort resulted in limited savings.

After one year, the company rolled out the program a second time with much more rigor. The company required each participant to have an approved improvement project before being allowed to attend the class. This project allowed participants to use the tools of the training. In addition the company added dedicated staffing to support the initiative and tied the Six-Sigma improvement initiatives into the plants' performance measurements. This training method reduced operating costs as well as inventory levels.

The more intensive, practical training immediately spawned more projects and had the impact of speeding up the return in the investment as well as accelerating the development of additional cost savings projects. Managers were much more attuned and supportive of the Six-Sigma initiative, leveraging it to achieve their immediate objectives. The plants also benefited from the additional division-level support and periodic status meetings to facilitate each project's completion.


Six-Sigma Savings, Real Or Manufactured?

Though the application of Six-Sigma initiatives differs greatly, these programs are delivering some amount of value. Leading organizations claim that they have achieved billions of dollars in productivity gains through the late 1990's through their Six-Sigma initiatives, while other lesser-known organizations have credited Six-Sigma with millions of dollars in annual savings in the first year.

However, one must wonder how much of the savings would have been achieved without a Six-Sigma program. Have these programs really improved the significant savings that the companies are touting? Some organizations do not have a formal process for capturing savings or any means for validation. For example, one company conducted an operational assessment as it was preparing for a new ERP rollout. The assessment documented observations, implications, and recommendations at the plant site. One of those recommendations was added to a Six-Sigma program, which was credited in reducing the receiving lead- time from four days to less than a day. This project had not been 'defined' by the Six-Sigma process, but rather had been identified during a separate assessment and then labeled a Six-Sigma project.

Other examples include a company at which Six-Sigma program directors met with team leaders of an inventory reduction initiative that had achieved significant results prior to the rollout of the Six-Sigma program, and consequently took credit for the costs savings.

In another situation, a Six-Sigma program lead was documenting savings before the discrete initiatives were even implemented.

To prevent these situations from occurring, organizations need to define the policies and procedures to calculate Six-Sigma savings and identify a review and validation mechanism using finance and accounting. Initiatives should be monitored in the same ways capital projects and other major efforts are monitored. The appropriate financial adjustments should be made to reflect the savings in future budgets to support the program's institutionalization.

News source: Industry Week

Use Six Sigma to manage staff performance

News source: People Management

Using a Six Sigma approach makes performance management less onerous
Michael M Grant Issue date: 01 September 2005Source: People Management magazine
Page: 56

Isn't it odd that organisations successfully using the Six Sigma approach to manage the quality of outputs find performance management such a challenging and painful process? Often perceived as a dreaded once-a-year process, most managers rush through it as quickly as possible. If we tried to apply Six Sigma in this way, it would be chaos.



Six Sigma follows five well-known steps: define the process to be improved or controlled; measure the performance of the process; analyse the data collected; improve the process on the analysis; and control the process at near-zero error/defect rates.

The steps in managing performance are no different. The organisation's strategic goals are cascaded down and "smart" objectives – specific, measurable, attainable, relevant and time-bound – are defined with the employee (step one). This includes agreeing on how the objectives align with the organisation's strategic goals.

When measuring performance (step two), it helps to break down competencies into their components. Teamwork could be measured if "smart" objectives were related to areas such as timekeeping and generating ideas. The measures might not be as tight as a Six Sigma control chart, but it is better than leaving important competencies unmeasured.

Analysis of the data (step three) can occur even in informal conversations. Simply asking: "How are you doing now with your objective – what do the measures indicate?" is a good check. Coaching and developmental opportunities can be provided to help the employee improve (step four). Engaging in these efforts can become part of the objective and assessed to provide data for the next performance discussion.

Once performance improvements are made, they need to be maintained (step five). Reward is a powerful way to reinforce good performance.

Using a Six Sigma approach makes performance management less onerous and helps to achieve its real purpose: realisation of the organisation's strategic goals.

Seagate Technology Honors Supply Chain Excellence for 2005

News source: PR Newswire

SCOTTS VALLEY, Calif., Aug. 31 /PRNewswire-FirstCall/ -- SeagateTechnology (NYSE: STX), the world's leading hard drive company, todayannounced the winners of its Outstanding Supplier Awards for 2005. BeltonGroup, Hoya Corporation and Xyratex, Ltd. all brought home this year's tophonors. Seagate unveiled the winners at its 5th Annual Suppliers Dayconference in Singapore.

The awards are presented to those suppliers delivering consistently highperformance in the areas of Quality, Technology Availability, Delivery,Flexibility and Cost Management.

The Belton Group, a leading manufacturer of Arm Coil Assembly and Hook-Up,was this year's Outstanding Supplier in the Mechanical Components category. Inaddition to delivering on aggressive volume requirements, Belton consistentlyoutperformed its peers to meet Seagate's quality, Six Sigma, LeanManufacturing and technology metrics.

Hoya Corporation, a leading provider of glass substrates and media,supplies glass substrates for multiple Seagate products. Hoya was awarded theOutstanding Supplier Award in the Media/Suspension category. During Seagate'sfiscal year 2005, Hoya was instrumental in providing products for Seagate'srapid growth in the Mobile and Consumer Electronics markets. Hoya's execution,technology and flexibility were key elements of Seagate's success throughoutthe year.

Xyratex, Ltd., a leading provider of capital equipment to Seagate'smanufacturing sites, was honored as Outstanding Supplier in the ManufacturingCapital Equipment category. Xyratex responded pro-actively to Seagate'saccelerated demand schedule, and its 24-7 response accompanied by a highlyefficient supply chain helped dramatically reduce total lead-time for newequipment.

"Our mantra for our suppliers is 'Drive Quality,'" said Karl Chicca,Seagate senior vice president of Global Materials. "The importance of reliablestorage continues to grow within traditional and new markets, like consumerelectronics, and our suppliers must not only provide components that meet ourstringent requirements, but must continue to raise the bar on quality.

"Much of Seagate's success in fiscal year 2005 can be credited to thequality, technology, delivery and flexibility of our supply base. We continuedto improve our industry-leading supply chain over the last year and receivedtremendous support from our suppliers to meet our customer demand. It was nosmall feat and I thank them for their hard work and contribution."

About Seagate

Seagate is the worldwide leader in the design, manufacturing and marketingof hard disc drives, providing products for a wide-range of Enterprise,Desktop, Mobile Computing, and Consumer Electronics applications. Seagate'sbusiness model leverages technology leadership and world-class manufacturingto deliver industry-leading innovation and quality to its global customers,and to be the low cost producer in all markets in which it participates. The company is committed to providing award-winning products, customer support andreliability to meet the world's growing demand for information storage.Seagate can be found around the globe and at http://www.seagate.com.

NOTE: Seagate, Seagate Technology and the Wave logo are U.S. registered trademarks of Seagate Technology LLC.