Lean Six Sigma has proven itself as an effective strategy for business success in both private and public sectors. The methodology has helped enterprise leaders recognize business processes as engines that drive performance excellence and help to deliver value. Lean Six Sigma offers a comprehensible road map, tools, and techniques for achieving superior performance.
Many organizations that were considering lean Six Sigma or actually engaged in pilot initiatives at the outset of the recent economic decline are now embracing the methodology as a way to achieve long-term improvement and sustain customer loyalty as they weather slowdowns and uncertain forecasts.
Companies that successfully plan for and deploy lean Six Sigma will achieve improvements in both their top and bottom lines; however, significant long-term benefits to organizations’ employees, and customers might be unrealized unless these companies recognize and close a critical gap in today’s conventional lean Six Sigma approaches.
The modern era of quality and process improvement movement that started during the 1980s has been continually evolving, enhancing the value of this important business management discipline (figure 1).
Each new methodology has provided not only new tools and techniques, but also new management philosophies. These have helped the concept of process improvement become a major element in strategic and operational management in organizations across the globe.
But even with significant support from executive leaders, a cadre of technically trained internal consultants such as Six Sigma Master Black Belts and Black Belts, and a well-conceived deployment plan, there is a conspicuously absent element in even the most advanced lean Six Sigma programs (figure 2).
All the major process improvement methodologies to date—e.g., total quality management (TQM), business process reengineering (BPR), Six Sigma, lean, theory of constraints (TOC)—have focused only on process to drive business performance and customer satisfaction. But there is strong evidence that process improvement alone will not maximize process or business performance. What is needed to boost lean Six Sigma’s effectiveness is a measurement-based approach to managing and continually improving the contribution of another powerful driver of process performance: people (figure 3).
A research study performed in 2010 by the American Society for Quality (ASQ) and Metrus Group clearly demonstrates the significant impact that workforce management has on the success of quality and process improvement initiatives and resulting business performance. Metrus calls this powerful effect “people equity” (PE). The purpose of the study was to discover:
• Whether some quality tools and techniques are more effective than others
• What role leadership and culture play in the search for quality
• What factors contribute most to the success of quality initiatives and to superior business performance
The survey questionnaire was sent to more than 50,000 ASQ members and customers. The 2,041 who responded represented more than 30 industries, from aerospace to government to utilities. Participating organizations ranged in size from very small to very large, with the average organization having approximately 16,000 employees.
A series of questions were asked in the survey:
• What quality principles and techniques respondents were using
• How effective they considered each principle and technique
• To what extent their leadership and workforce were committed to quality
• How they managed the performance contribution of their employees in their organizations
In addition to asking respondents what they were doing regarding quality improvement, they were also asked how well they were doing: i.e., whether their organizations ranked in the top, middle, or bottom (i.e., one-third) of their industries in applying quality principles. They were also asked about where they ranked in business performance, managing costs, and employee turnover.
Respondents stated that the most commonly used quality principles and techniques included continuous improvement (e.g., TQM, lean, Six Sigma), customer satisfaction and loyalty measurement, and project management. The quality principles and techniques judged most effective included ISO 9000 and ISO 14000 families of management system standards, and voice of the customer (VOC). Nearly all of the most commonly used techniques were also considered highly effective (figure 4).
Participants were asked which organizational performance measures they were using and which they considered most valuable in guiding their business decision making. Financial performance was reported as the most commonly used and most valuable organizational performance area measured. Ninety-eight percent of those that employed financial measures considered them valuable in guiding the organization’s business decision making (figure 5).
The study’s findings clearly minimize the importance of specific tools or techniques in the success of enterprise quality initiatives. Study results indicate that those organizations receiving the highest marks for successful implementation of quality initiatives and resulting business results are those that:
1. Have strong and unwavering support from top leadership
2. Develop a quality-focused culture
3. Effectively manage their people’s contribution to performance
Study respondents spanned the continuum in each of these three areas. While some had the full support of senior leadership, others were continually fighting an uphill battle. Similarly, only 30 percent of respondents said their organizations had created a quality culture in which all or nearly all employees had quality improvement training and responsibilities. Not surprising, when organizations with top leadership support and a quality culture were compared with others, dramatic differences in the likelihood of their success in implementing quality initiatives was found.
Lesson learned: If an organization is serious about quality, its efforts cannot be confined to a few people with formal quality responsibilities. For quality initiatives to succeed, they must become a part an organization’s DNA.
However, as dramatic as the differences were in the success of organizations that had senior leadership support and in which quality had been embedded into the corporate culture, the biggest differences seen were in the those organizations that deliberately focused on and managed employee performance contribution—people equity.
During the past few years there has been considerable research on the relationship between employee engagement and organizational performance. Engaged employees—those highly connected and committed to their organizations’ goals and values—dramatically outperform their peers on numerous measures, including their attention to quality and service.
The findings from this survey confirm employee engagement does indeed contribute to the successful implementation of quality initiatives but is only one part of a bigger picture. Organizations that also focused on developing the capabilities of individual employees and created a higher degree of employee alignment with organizational goals and objectives dramatically outperform their peers.
Three people-equity factors in combination—alignment, capabilities, and engagement—give organizations a distinct advantage. While just slightly more than half the respondents reported their organization does an effective job managing its people equity, those that did so dramatically outperformed others in both the application of quality principles and ability to achieve superior business performance (figure 6).
Organizations scoring in the upper 25 percent on people equity, as measured by combined performance in alignment, capabilities, and engagement, were considerably more effective in implementing quality principles and techniques. Organizations with high people-equity scores were also considerably more likely to be industry leaders in both the application of quality initiatives and financial performance.
These organizations showed a 72-percent probability of being industry leaders in quality and a 68-percent probability of leading their industries in financial performance (figures 2 and 3 show this correlation). Organizations that met all three of the most critical criteria—top leadership support, development of a quality culture, and a high people-equity score—dramatically outperformed others with respect to:
• Successful application of quality initiatives
• Likelihood of employees incorporating quality principles and tools into decision making
• Managing resources and business processes in a cost-effective manner
• Eliminating activities inconsistent with the organization’s strategic direction
• Reducing employee turnover
• Increasing customer satisfaction and the likelihood of customer referrals
• Identifying, analyzing, and closing performance gaps
Four areas were measured using a return-on-people-equity calculation to arrive at a comparative quality index for organizations represented in the survey:
1. The extent to which employees incorporated quality principles and tools into their daily decision making
2. The effectiveness with which employees were trained and provided quality-related skills
3. The effectiveness with which the organization recognized and rewarded people for applying quality principles
4. The extent to which top leadership embraced quality principles
Organizations that scored high on both people equity and the quality index outperformed others on all significant measures: employee retention, quality results, and financial performance (figure 7).
Leaders had turnover rates of only 7.6 percent and had a 73-percent likelihood of being among the top one-third in their industry in applying quality principles, and a 60-percent probability of being in the top one third in their industry in financial performance. By comparison, organizations that were low in both the quality index and people equity averaged a 17.6-percent turnover rate and showed only a 12-percent probability of being in the top one-third in applying quality principles, and 32-percent probability of being in the top one-third with respect to financial performance.
Figure 8 uses a standard quality improvement tool (SIPOC) to help illustrate the new integration of people equity with conventional lean Six Sigma:
Organizations that want to become industry leaders in both quality and business performance must move beyond process improvement and incorporate “people improvement” in their lean Six Sigma initiatives. Gaining top leadership support, developing quality-driven cultures, and more effectively managing the hidden driver of quality—people