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by Dirk Dusharme

Judging by the amount of press it's garnered, the millions of books sold by dozens of authors and the general buzz it continues to generate, Six Sigma--the process improvement methodology introduced by Motorola in the mid-1980s--is going strong. Whether you believe it's here to stay or simply today's program du jour waiting to be replaced by tomorrow's blue plate special, there's no doubt that Six Sigma has greatly affected the businesses that have embraced it, producing incredible cost savings and waste reduction.

Our second annual Six Sigma Survey takes a snapshot of who's using Six Sigma and, with the help of some notable Six Sigma experts, focuses on the state of Six Sigma and where it could be headed.

This year, Quality Digest invited all of our approximately 75,000 readers plus the 12,500 members of our InsideQuality Web site (www.insidequality.com) to participate in our survey. We received 2,870 responses. Along with the results of our survey, we've included comparative data from a similar survey conducted by DynCorp. For more information on the DynCorp Six Sigma Benchmark Survey, see the sidebar to the right.

The majority of the survey results can be seen in the tables throughout this article. Rather than explain all the results in detail, we'll leave it to you to look at the tables while we focus on what we believe are two of the most interesting findings: the lack of small companies pursuing Six Sigma and why those who are using Six Sigma seem to stop after three or four years.

Getting small companies on board

Despite plenty of press, anecdotes and even surveys showing huge Six Sigma successes, fewer than one-quarter (22%) of all companies we surveyed have a Six Sigma program in place. Ninety percent of the companies that do implement Six Sigma are units, divisions or sites of larger organizations. Of those, three-quarters belong to organizations with more than 2,000 employees.

According to 1997 U.S. Census Bureau statistics, 98 percent of U.S. firms had fewer than 20 employees, and 82 percent grossed less than $1 million in sales in 1992. More than 30 percent of all sales or receipts for U.S. companies come from companies with fewer than 100 employees. If Six Sigma is truly yielding huge savings for the companies that use it, then it stands to reason that small businesses need Six Sigma in order to achieve the kind of cost savings and increased profitability enjoyed by large-company Six Sigma practitioners. By extension, this would aid the U.S. economy as a whole.

Nevertheless, our surveys show that this isn't happening. All of the experts we've spoken to say that the cost of Six Sigma deployment and implementation is the reason. Some consultants and Six Sigma Champions at large corporations say that Six Sigma is achievable in small companies, but they often define small companies as those with 500 or so employees and sales of $50 million to $100 million, not the 98 percent of U.S. operations that are truly "small business."

Money and personnel are serious hurdles for small companies when it comes to Six Sigma, agrees Mikel J. Harry, author of the best-selling book Six Sigma, the Breakthrough Management Strategy Revolutionizing the World's Top Corporations (Doubleday, 1999) and founder of Six Sigma Academy.

"Smaller companies don't have the resources to train the way that large-scale corporations do," says Harry, whose large clients pay millions of dollars for in-house Six Sigma training and consulting. "It's not just the cost but the operational management in terms of human resources. How many engineers can a company free up for four months of learning?"

But with nearly 40 percent of all sales or receipts for U.S. companies coming from companies grossing less than $50 million, one would think that the more altruistic consultants would view getting Six Sigma into the hands of small businesses--those that can't afford it but form a substantial portion of U.S. industry--as a crucial goal. Even from a purely mercenary perspective, formulating a way to scale Six Sigma training down to something affordable for small businesses would open up a huge market for consultants.

Although refraining from going into a lot of detail on the project, Harry reports he's working on a plan to do just that. Within the next six months, he'll unveil details of his Six Sigma Federation, which Harry describes as "a collection of large-scale institutions coming together to ensure the successful installation of second-generation Six Sigma practices and principles into midsized and small-business enterprises." The federation is specifically designed to help small companies reap the Six Sigma benefits currently realized by many of the large-scale corporations.

 

The consultant's role

Consultants can't always offer their services at a price small companies can afford, says Subir Chowdhury, chairman and CEO of American Supplier Institute Consulting Group and best-selling author of The Power of Six Sigma (Dearborn Trade, 2001) and Design for Six Sigma (Dearborn Trade, 2002).

Big corporations can afford a quarter of a million dollars or more to train Black Belts, says Chowdhury. "But for a mom-and-pop shop to afford Black Belt training is almost impossible," he acknowledges. "Consultants have no mechanism to handle small companies." This means that for Six Sigma to reach small businesses, the onus would be on the consultants to find a way to do so.

"The people at the forefront of Six Sigma training, like us, Mikel Harry and others, have to come forward to help these organizations," says Chowdhury. "These organizations have a lot of interest in Six Sigma, and we--consultants in general--are not coming up with solutions for these companies."

Chowdhury says that ASI is adapting its programs to fit the needs of companies that can't afford a full-blown Six Sigma program. Even at that, he admits that it's cost prohibitive for most consultants to help companies that fall below $50 million in sales.

 

Who can do Six Sigma?

Aside from cost and manpower issues, misperceptions about who can "do" Six Sigma can deter small companies from even looking at Six Sigma, says Phong Vu, director for corporate Six Sigma at Ford Motor Co. Small companies see the money and labor that companies like Ford spend and immediately believe that's what a Six Sigma initiative requires, he suggests.

"I think it's the perception of small companies that they can't afford to train thousands of people," says Vu, whose Six Sigma program involved training 1 percent of Ford's employees as Black Belts and 30,000 employees as Green Belts. "As Mikel Harry [Ford's Six Sigma consultant] can tell you, when we started out it cost Ford $6 million. Also, to teach Six Sigma, you have to deploy it to the whole corporation, and that scares small companies."

This view isn't unfounded; the Six Sigma deployment model is difficult for small companies. Having begun in large corporations, the model for Six Sigma is based on deployment in large organizations, notes Don Linsenmann, vice president and Six Sigma corporate Champion at DuPont. "If you look at the genesis of Six Sigma, the whole concept was to find defects in discrete part manufacturing," he explains. "Six Sigma started where there was a big volume of stuff being made [e.g., cell phone parts]. Large companies were able to use the tools that dealt with large populations of articles and design an infrastructure to reduce waste and cycle time. Because of the bureaucracy [in large companies], there was room to organize some of the talent around the idea of Six Sigma." Large companies had the luxury of being able to pull out and train a corporate Champion, small business unit Champions and thousands of Black Belts and Green Belts, he explains. Small companies don't have that luxury.

Add to this the cha-ching factor. As large companies scrambled to follow suit with Motorola, AlliedSignal and the other early adopters of Six Sigma, consultants geared up to provide Six Sigma training services to large companies. "The consultants had an early business model that aimed at big pockets," Linsenmann points out. Small companies were essentially ignored as consultants made millions helping large companies save billions.

 

Six Sigma from the top down

There are some ways that small companies can take advantage of Six Sigma, say our experts.

Stacy Hanley, director of business development at Motorola University, which offers both in-house and open-enrollment courses, is optimistic about reaching companies with fewer than 500 employees or receipts of less than $50 million.

"Six Sigma is, in fact, very scaleable," says Hanley. "We think in terms of critical business objectives and high-impact improvement projects that will reach those objectives instead of the number of people and Black Belts that need to be trained.

By getting clear on organizational goals and creating a short list of high-impact improvement projects, then training a handful of people to drive the completion of those projects through Six Sigma, small and medium-sized companies can experience the dramatic benefits of Six Sigma."

For companies that can't afford in-house training, open-enrollment courses are cost-effective, says Hanley. Both Vu and Chowdhury also acknowledge that taking off-site classes in Six Sigma can be cost-effective; however, both caution that unless the right people are sent and top management is involved, the $10,000 to $15,000 per student cost will be wasted.

"The biggest mistake companies make is to send a couple of guys from the quality department to an open-enrollment course," agrees Vu. "They then go back to the company but can't affect upper management. Somehow we have to get the idea across that it doesn't have to be expensive, but it has to start at the top."

Vu suggests that small companies employ the same mindset as large companies when selling the idea of Six Sigma. Top management has to be convinced that the upfront cost will be more than made up by savings. The trick, says Vu, is to try to sell Six Sigma as a capital investment rather than a training exercise.

Linsenmann suggests that small companies not focus on the Six Sigma support systems that large companies have in place but rather on the attributes of those systems. A 20-person company probably can't free up anyone to undergo the kind of training necessary to get Six Sigma launched. However, small companies can bring in a Master Black Belt, who's not a consultant, to spearhead the deployment. This person would be responsible for teaching employees Six Sigma leadership concepts, tools and technologies. This training could be supplemented by sending some employees to open-enrollment courses.

Chowdhury suggests that if small companies pursue Six Sigma, they should let someone with a long-term interest in the company (e.g., someone from senior management) become the Black Belt. Even among larger companies, a Black Belt certificate makes you more valuable and more likely to be hired away from your current employer. Although larger companies can absorb a certain amount of this, it could be devastating for a small company to invest in Black Belt training for one or two employees only to see them hired by another firm offering more money. This is less likely to happen if someone with a vested interest in the small company becomes the Black Belt, says Chowdhury.

 

Attrition

Our 2001 and 2002 surveys and the DynCorp survey show a drastic drop in the percentage of companies using Six Sigma after the second or third year, as shown above.

There are several possible explanations for the drop. The first is that although Six Sigma has been around for a while, it has only gained mainstream popularity within the last few years. This is due to press coverage of Six Sigma successes at giants like GE and Motorola and the millions of copies of books on the subject sold by Chowdhury, Harry and others. What we could be seeing is the ramp-up of Six Sigma adoption.

Another explanation is that companies are abandoning the program. Not tying Six Sigma projects to corporate goals and/or not leading the Six Sigma initiative by top management almost guarantees the program will fail, say our experts.

"If you're doing Six Sigma and deriving the $350,000 per project savings that we've seen in the deployments I've done, then you're going to stay with it," says Harry. "If you go along with fluffy projects that aren't really Six Sigma projects, and your top management doesn't see a positive change in income or capacity, you're going to scrap it."

The real issue as Harry sees it is that management is seldom properly schooled in what constitutes a Six Sigma project. Projects don't link to corporate goals.

"That tells us that Six Sigma is being led by middle management and below," explains Harry. "This happens because Six Sigma is brought in randomly across different segments of the organization in no focused way. Implementation and deployment was not rolled out from the top down. Six Sigma is starting to suffer from that."

Another issue is that companies often view Six Sigma the same way they view traditional quality control programs: as a set of tools you use to solve a particular problem.

"Some companies define Six Sigma as a quality metric--the goal of 3.4 defects per million," says Linsenmann. "In such a company, Six Sigma is a technology and therefore run by technologists. By contrast, at DuPont it's how we do our work. It's the vision we're working toward. We have to continually refresh and expand the domain to make it relative to everyone."

For companies that see it as only a cost-reduction method for manufacturing, Six Sigma won't survive. Once they wring the maximum amount of improvement out of a set of tools, the company will give up. The key is to look beyond simply solving a particular problem.

"My experience is that a company says it wants to achieve 3.4 defects per million," explains Chowdhury. "After three years or so they hit the five-sigma wall and they say, 'There's no way I can improve more.' After two or three years, they haven't gotten what they wanted, so they stop."

But you can only fix things so much, adds Chowdhury. The next step is to go beyond using Six Sigma to fix what's already there and instead design Six Sigma into the process.

Linsenmann agrees. "Even if you've milked out all the defects, you can start with a clean sheet and use the Six Sigma philosophy to build a process that won't have defects and will run at a more effective rate," he says. "If you don't do design for Six Sigma, you'll hit a brick wall."

It has been Chowdhury's observation that this is where many consultants shortchange their clients. "Ask consultants what's more difficult, Six Sigma training or design for Six Sigma, and they'll tell you design for Six Sigma," says Chowdhury. "But ask them how long their Six Sigma training is and they'll tell you 20 days but only five days for design for Six Sigma. The thing that will help break through the five-sigma wall is design for Six Sigma, but it receives the least amount of training from many consultants."

What's next?

 

Certainly, Six Sigma isn't the only program that companies can use to help cut waste, improve quality and have a positive impact on the bottom line. But, because it's set up to do so, it provides well-documented results. It's those results and the knowledge that one of the past decade's best tools is out of reach for most small businesses that have caught our attention.

Regardless of whether the program is Six Sigma, ISO 9000 or the next big thing, consultants should be looking at how to get those programs into the hands of the companies that make up the backbone of North American industry--the small business.

It doesn't matter if you're a big or small company, complete and total management buy-in is key to your quality program. Without it, you're doomed to failure. Harry, Chowdhury and the others all maintain that the first step to Six Sigma is to sell top management on completely committing the company to the effort.

"Leadership is 99 percent of getting Six Sigma installed," says Harry, summing up the importance of top-management leadership. "It's selling hope and then leading them [the employees] to it. Give them the vision of Oz, show them the direction it's going and then convince them you can create the yellow brick road. The rest is just civil engineering."

We're interested in small company success stories in Six Sigma. If your company has fewer than 100 employees or less than $10 million in sales and has successfully deployed Six Sigma, we want to hear from you. Please send an e-mail to letters@qualitydigest.com with a brief description of your company and how you're using Six Sigma. We may feature you in an upcoming article.

About the author

Dirk Dusharme is Quality Digest's technology editor. Letters to the editor regarding this article can be sent to letters@qualitydigest.com.