The Six Sigma methodology began as a way to measure the quality of products and services. Higher sigma levels mean better quality. Due to the grand success stories of companies that initiated Six Sigma, it’s become a popular strategy for reengineering a corporation to quickly improve processes and increase profitability. The methodology changes the way companies conduct business and affects profitability in both the short and the long term.
The chart below demonstrates the levels of performance associated with various sigma values. For Ideal Aerosmith, the goal was to increase performance from three sigma to six sigma--an improvement factor of 21,000. To realize such a magnitude of improvement requires a leader’s absolute and passionate involvement. Ideal’s president and CEO Lonnie Rogers committed to implementing the methodology with the expectation of creating a corporate culture of dramatic improvement and a Six Sigma mind-set.
Defects/million sigma level in spelling, equals:
66,810 = 3 s = 1 misspelled word per line in an article
6,210 = 4 s = 1 misspelled word per column in an article
233 = 5 s = 1 misspelled word per long article
3.4 = 6 s = 1 misspelled word per large handbook
Someone once said that small businesses do everything large businesses do, only a little faster. Many large corporations have successfully implemented Six Sigma, and some have required the small companies with which they work to establish quality systems or methodologies of their own. Small businesses should recognize that many of the tools large corporations use can help them, too. They shouldn’t let the implementation costs quoted for large corporations intimidate them, but instead negotiate prorated costs that suit their budgets.
Making Six Sigma work for a small business means balancing the benefits of implementation against the investment in training. Because limited budgets allow no margin for failure, small companies (unlike their larger brethren) can’t afford the luxury of repeated Six Sigma implementations. For Ideal Aerosmith, a small manufacturer of test equipment for aviation maintenance, Six Sigma began with an audiobook summary. Once implemented, the methodology improved profits within 18 months.
Ideal was founded in 1938 and has engineering and manufacturing facilities in its East Grand Forks, Minnesota, headquarters as well as in Phoenix, Arizona. The company designs and manufactures motion simulators used to test various navigation systems and motion sensors. It also provides engineering and assembly services for avionics and commercial test equipment.
Ideal employs about 100 employees who are committed to serving customers and helping the company grow. A run of profitable years helped the company improve customer satisfaction and increase business. But when market conditions changed, the focus quickly became profitability and growth, in that order. Ideal was registered to ISO 9001, but the requirements were sporadically maintained, which led to only marginal quality improvement.
Ideal’s management team consists of six managers headed by its president, Lonnie Rogers. The team has excellent personal rapport and camaraderie, which encourages an easygoing management style. In the past, this style discouraged team members from challenging each other to address weaknesses and improve performance. The team focused on accomplishing the day-to-day issues but didn’t push to solve larger problems that would improve overall operations for the long term. The management team needed a sense of accountability, and Six Sigma seemed the logical choice to provide it. Accordingly, when Rogers listened to an audiotape from former GE CEO and President Jack Welch (Jack: Straight from the Gut, Jack Welch and John A. Byrne, Warner Books, 2001; audio version published by Time Warner Audio Books) while on a road trip, he decided to give Six Sigma a try.
The company invited a Six Sigma serv-ice provider to present a quick overview of implementation costs and consequences. Given the company’s modest size, Ideal’s management had reservations about the associated costs and some skepticism about potential benefits. The management team discussed the methodology’s pros and cons, Ideal’s internal resources and capabilities, management’s involvement and the potential distraction from routine business. At the end of a three-hour review, Rogers committed to Six Sigma and asked his team to find ways to overcome employee resistance. His message was that Ideal must do something different to quickly achieve performance improvement, keep current customers and acquire new ones.
Ideal’s Six Sigma journey started with a performance assessment and gap analysis. The assessment consisted of interviewing managers and employees. Management reviewed performance meas-ures, including customer complaints and feedback, for patterns and trends. They also reviewed the organizational structure to assess communication, effectiveness and synergy. Outside consultants conducted the gap analysis to ensure objectivity and thoroughness. The analysis indicated that Six Sigma improvement opportunities could have the equivalent effect of boosting Ideal’s sales by about 10 percent. Three key areas were identified for improvement:
The analysis demonstrated that Ideal’s quality management system, which was based on ISO 9001, was ineffective due to its focus on registration. Ideal’s QMS was typical of many: a nuisance of documentation and paperwork capped by terrifying visits from auditors. Management decided to revamp the company’s QMS, changing its focus to process and business performance improvement instead of documentation. That led to reengineering the auditing, corrective action and management review proc-esses. The modified QMS established a new baseline to sustain improved processes as well as Six Sigma.
After identifying opportunities for improvement, the company developed a Six Sigma implementation plan that included revising the corporate vision, mission and performance meas-urements. All employees received Six Sigma awareness training. A Six Sigma business scorecard was then used to develop a corporate performance scorecard. The scorecard incorporated employee involvement, recognition, process performance and profitability.
Although the vice pres-ident of operations was primarily responsible for implementing the corporate scorecard, other managers took on the challenge of establishing measurements in their own departments along with one element of the corporate scorecard. For example, the manager of manufacturing was responsible for implementing measurements for operational execution companywide. The only hitch was in developing involvement and recognition measurements for the engineering department. This proved a particular challenge, a common problem for many companies. Design engineers didn’t want to be held to measurements, due to their creative natures. They also didn’t want their efforts to be tracked for time, cost and quality.
To establish performance measures for a key process, the following questions were asked:
What’s the purpose of this key process?
What’s the expected deliverable?
How will the process owner know if his or her process has succeeded?
It took Ideal about two months to implement the Six Sigma business scorecard. Ideal organized employee recognition and recommendation processes, and soon managers were able to measure their departments and post results on an intranet bulletin board that was reviewed at company meetings. The measurements were taken as needed to suit Ideal’s short-term goals. After one year the company evaluated each measurement for its value and ability to indicate problems and future trends. The business scorecard was then revised to meet the company’s needs.
As a result, the following benefits were observed:
The scorecard was a quick-and-easy way to start the Six Sigma process and allow employees to track their progress right away.
Accountability, as well as checks and balances, improved.
Pre-established measurements facilitated guidance for improvement.
Scorecards allowed a companywide assessment of progress.
Throughout Ideal’s Six Sigma implementation, guidance from experienced outside help was available for improving the company’s QMS. Procedures changed from empty words to useful procedures that all employees now use daily. Engineers were trained in quality function deployment and theory of inventive problem-solving concepts, and managers were trained at the Green Belt-competency level.
The company added performance goals for growth and profit to its corporate mission statement. It also implemented Web-based software to reduce paperwork and efficiently implement performance measurements. This software allowed document and measurement sharing at multiple locations, which enhanced consistency in implementing the methodology and got everyone involved. ISO 9001 procedures are continually improved and updated through Ideal’s internal audit and corrective action systems. The company now has a very robust and valuable QMS.
The Six Sigma project team met at 7 a.m. every Friday to address short-term conflicts with routine business activities. Team members used the tools they learned during Green Belt training to develop an action plan for improving the on-time delivery of Ideal products. The first on-time delivery improvement project spanned all departments. Ideal’s baseline measurement of on-time delivery was 60 percent in January 2004. Today, it’s 90 percent.
As a result of implementing Six Sigma and the business scorecard, Ideal experienced the following benefits:
Improved teamwork, particularly among managers
Involvement of all employees
Reliable facts for decision making
A road map and tools to determine root causes and solve problems
Increased customer confidence
Improved communication throughout the company
The inclusion of the methodology in the corporate culture
A 30-percent improvement in on-time deliveries
A 25-percent improvement in labor efficiencies for both production and engineering
A 5-percent improvement in profits in one year
Ideal’s current challenges are to sustain the Six Sigma methodology and continually reap benefits from it. Ideal plans to do this by taking the following steps:
Training and involving employees early in the process
Making changes as quick-ly as possible
Overcoming skepticism by providing a consistent push
Concentrating on solving critical problems so that successes will be visible to employees and customers
Using consultants as guides through the process
Encouraging buy-in by training employees to own processes
Changing the QMS as needed
Conducting monthly performance reviews
Changing measurements based on issues that affect Ideal’s success
Keeping everyone aware of Six Sigma through company meetings, postings and everyday activities
Six Sigma has definitely made a difference at Ideal Aerosmith. The methodology has encouraged teamwork and helped the company’s management to focus and refine its methods in achieving efficiency. The company is truly on the right course.
The authors would like to thank Gary Kleven, Jit Lodd, Kevin Otto, Jim Richtsmeier, Lonnie Rogers, Darren Stinson, Jodi Stittsworth, Brian Stonecipher, Ed Urban and Rajiv Varshney for their contributions in making Six Sigma successful at Ideal Aerosmith.
Praveen Gupta is a consultant at Quality Technology Company (www.qtcom.com). He is the author of The Six Sigma Performance Handbook and Six Sigma Business Scorecard, both published by McGraw-Hill Professional Books.
Barb Schultz is vice president of finance, contracts and process improvement at Ideal Aerosmith. She has a bachelor of accountancy degree from the University of North Dakota. Schultz is a CPA, received her CPIM and is certified as a Six Sigma Green Belt.