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Six Sigma, lean, and similar disciplines of analysis and control have been used for decades. Ever since GE’s former chairman and CEO Jack Welch sang its praises in his book, Jack: Straight from the Gut (Warner Business Books, 2001), the Six Sigma process in particular has been widely used by companies looking to streamline their operations and capitalize on opportunities. The methodology has undoubtedly helped improve the financial health of organizations such as Toyota, ING Group, and Volkswagen. Six Sigma is often cast as either an organization’s hero or, as was the case for 3M and The Home Depot, scapegoat.
Given the intense scrutiny of Six Sigma, we offer the following perspective on its effectiveness, scale, and alternative approaches.
Six Sigma is a cyclical process used to identify issues and opportunities within an organization. Each step in the process is necessary to ensure the best possible results.
The methodology was first used on a companywide scale by Motorola Inc. during the 1980s to improve quality through a focus on statistical measurements, customer requirements, and process alignment. The process gained public recognition during the 1990s when Welch embraced it at GE. Since then, Six Sigma has experienced its share of success stories as well as failures. Along the way, it’s become a fixture in many corporate cultures.
Six Sigma as a methodology doesn’t need to be regarded as a cumbersome undertaking. It comprises five steps, each of which involves a series of actions that must be completed before moving on to the next. Six Sigma team members know this process as “DMAIC,” which stands for define, measure, analyze, improve, and control. These steps can be thought of in the following way:
• Define the customer, the critical opportunities, the core processes, and the project boundaries, including the beginning, flow, and ending of these processes.
• Measure the performance of the core business process involved. This step involves collecting data to determine defects and metrics of the process. These measurements are then compared to results from customer surveys to determine shortfalls.
• Analyze the collected data and process maps to identify gaps between current performance and ideal performance. This step also involves prioritizing issues and opportunities for improvement and determining reasons for observed variations.
• Improve the target process by developing innovative solutions using technology and discipline to correct identified issues as well as prevent problems.
• Control performance by developing, documenting, and implementing an ongoing plan to monitor changes and ensure that they become part of the company culture.
Is there a Six Sigma “lite” for midsized companies? Unfortunately, in our experience, there really is no plausible way to break off pieces of the Six Sigma process and successfully implement just that segment. Six Sigma is an integrated process from beginning to end. It would be virtually impossible to implement only aspects of this process and expect meaningful results. To achieve maximum results, the five-step process must be carried out from beginning to end.
However, specific projects can be selected and worked on, using the entire methodology. Although this reduces the time and effort required to successfully complete a project, the downside is that capturing benefits becomes a lengthy process.
Implementing Six Sigma can be a successful way to improve processes. Many companies that have implemented it have seen their product quality improve, costs decrease, and efficiency increase, all of which positively affect profitability. However, many times this success proves a short-term phenomenon because companies fail to adequately consider all the factors that affect those improvements’ long-term sustainability. Also, the process doesn’t take into account the most important aspect of corporate change: the human element.
Nearly 60 percent of all Six Sigma initiatives fail to yield the desired results. “We’ve noted rising concern across multiple industry sectors regarding the failure of many internally led Six Sigma projects,” says Praveen Gupta, a noted author on the methodology and a Master Black Belt who’s been involved with Six Sigma since its origin.
Echoing Gupta’s finding is QualPro Inc., a Knoxville, Tennessee-based consulting firm that identified 58 publicly traded companies with broad Six Sigma programs. QualPro compared these companies’ stock performances since their announced Six Sigma launch dates to Standard & Poor’s 500 Index (S&P 500).
What QualPro found was surprising: 91 percent of the Six Sigma companies exhibited stock performances below the S&P 500. What can be deduced from this information is that the majority of Six Sigma programs don’t benefit a company’s stock performance.
High-profile Six Sigma failures like those that occurred at The Home Depot and 3M indicate that companies can’t focus on implementing Six Sigma as a single solution to all of their problems. These examples prove the need for human involvement in corporate change. Six Sigma is only a set of process tools that should be part of a more holistic process improvement strategy. Attention must also be paid to people, innovation, and customer relationships.
Many times the very aspects that make Six Sigma useful can reduce its overall effectiveness. Six Sigma as a metric uses rigorous statistical analysis to identify defect areas, the correction of which produces better quality, lower costs, and increased efficiency. A dollar value is usually assigned to the correction to illustrate to management how much money a particular change will save the company. Although this technique is effective for controlling processes, hard-to-control elements such as employee behavior and innovation can hinder the long-term success of a Six Sigma initiative.
Midsized and larger companies looking for an alternative to Six Sigma may be best served by a concentrated focus on the human element. By using a behavioral approach to change, companies will gain many of the same benefits without the outlay in capital often associated with Six Sigma projects. The behavioral approach focuses on optimizing existing human assets rather than investing capital in new hardware, software, or other equipment sometimes necessary to implement Six Sigma.
When one company applied this behavioral approach to its processes, 85 percent of the issues and opportunities that surfaced were either similar to or exactly the same as the findings of its Six Sigma team independently working on the same issues.
The behavioral approach involves three core disciplines:
• Process improvements. Review and redesign existing business processes for production, supply chain, sales, cost control, and capital expenditures to deliver measurable improvements in effectiveness and efficiency.
• Training and coaching . Educate, train, and communicate with employees at all levels to provide solutions that align thinking and behavior in support of the redesigned or new processes. This is critical to facilitate sustainable change.
• Management operating systems . Develop specific, easily understood, high-impact benchmarks to monitor performance and identify areas that require managerial attention.
Yes. In fact, this complementary coexistence may be an executive’s best option. Few doubt the effectiveness of incorporating both Six Sigma and behavioral approaches simultaneously to gain the most improvement to the bottom line. However, a company is more likely to enjoy significant benefits without large capital investments when it effects change by focusing on the employees in a given process. The only way to enjoy a sustained change in business practices is to modify employees’ behavior and implement a system to ensure that no one reverts to old habits.
When an organization decides to make any significant change to its internal processes, even the initial announcement of the intended change can be unsettling to a workforce comfortable in its current routine. The situation is exacerbated if management fails to communicate its reasons for wanting to implement the change, and fails to demonstrate strong, visible support for it. The behavioral approach not only provides effective communication channels but also promotes employee input into the changes.
Change agents must be mindful of a key issue when managing people: Changes in processes or procedures are sustained only when changes in behavior occur. As a rule, people are going to resist change because they’re currently operating within a comfort zone. They’re going to wonder why there’s something wrong with the way that they perform, especially if they’re working within parameters set forth during their initial training.
People who are asked to implement change must first understand why a specific change is needed. They must understand that they can make a difference within their areas of influence. Experiences in the field indicate that most managers come up short in their approach to the behavioral elements of change. For example, although it might be clear what type of process change in a mining operation, manufacturing line, or warehouse is needed, the results of that change depend more on whether behavior is modified permanently than on correctly incorporating the technical requirements. A change in policy might directly affect the bottom line, increase the life of an expensive piece of equipment, or possibly be the difference between life and death. When properly informed of the rationale behind a policy change, the employees directly affected will be more likely to adopt and implement the change for the long term.
For effective, sustained change to occur, employees’ buy-in must happen at the onset of the project. Their input from being on the job for years is just as important, if not more so, than what statistics indicate. There’s an old African saying, “When you hire a pair of hands, you get a brain for free.” Sanctioning employees’ input gives them a feeling of involvement and a sense of ownership of these eventful changes.
Although Six Sigma focuses on the technical identification and solving of issues, it often fails to sufficiently take into account the human factor. Focusing on behavioral change requires fewer capital expenditures, although management must invest in time, empathy, training, coaching, and follow-up.
There’s no shortcut around the Six Sigma process if a company chooses that route. However, by using the behavioral approach to implement change in a corporate culture, management can indeed enjoy many of the same benefits that Six Sigma provides with a lower capital outlay. These changes also have a better chance of long-term sustainability.