How to Lead With Six Sigma

What are you solving for?

Published: Tuesday, February 15, 2005 - 23:00

The headlines screamed, “Local Hospital Leads the State in C-Sections!” The gist of the story was that this hospital had more cesarean section births than any other hospital in the state. Indeed, it had led the entire Southwestern region for five years running. It’s well-established that C-sections are more expensive and riskier than natural childbirth and, therefore, they should only be conducted when there are good medical reasons for doing so. It seemed unlikely that this hospital’s patients were different from those delivering babies at dozens of other hospitals year after year. In response to this public embarrassment the hospital Administrator formed a team to look into the problem.The team of doctors, nurses and other health care professionals worked for more than a year with little to show for their efforts. I began working as a consultant with the hospital to help the team move forward. After observing a couple of team meetings, I had a pretty good idea of what it would take to nudge this group off of dead-center, but it wasn’t something that I could do as an outsider. I spoke with the hospital administrator and he agreed to lead a meeting with the team if I agreed to provide a bit of coaching.

The meeting room was arranged in a “U” so everyone could see the others in the room. A flipchart was placed at the front of the “U” with the word “mission” in large letters written at the top. The team leader was asked to write the team’s mission on the chart. She wrote “The C-Section team’s mission is to reduce the number of C-sections at the hospital.”

The administrator asked, “Do you agree that this is your mission?” Exactly half of the physician team members nodded, while the other half shook their heads. It took an hour before consensus was reached on the mission: “The C-section team’s mission is to reduce the number of unnecessary C-sections at the hospital.” Ten months later, the rate of C-sections was the lowest in the region, with improved patient and infant care results in every major category. A single word can make a huge difference in the outcome of a team’s mission.

Transfer functions
At its core, Six Sigma is all about Y’s, X’s and transfer functions. It’s science applied to business. The idea is simple: outcomes are driven by root causes. This is very simply to express as Y = f(x), although implementing it can be very tricky. The starting point is what you’re solving for: the Y. If you get that wrong, you’re out of luck.

About half of the C-section team had been solving for “reducing the total of C-sections.” Fearing that needed C-sections would be cancelled, the other half successfully resisted change and maintained the status quo.

Knowing what you’re solving for starts at the top, with the vision of the leader. If organization leaders don’t have a clear idea of what must be achieved, they don’t have a set of Y’s to guide them. You’ve probably been there. When leaders don’t articulate a clear vision of how customers, employees and shareholders will receive more value from their association with the organization, people tend to solve problems for maximizing their own transfer function. This is commonly known as sub-optimizing or local optimization. We’ve all spoken with these people when calling customer service at one time or another. The agent simply doesn’t seem to care about us as a customer; never mind that having customers is vital to an organization’s long-term viability. How can such economically suicidal behavior be so prevalent? Here’s how it happens:

• The CEO lacks a clear vision for all three stakeholders. The board of directors judges the CEO’s performance based on share price growth, which is mainly driven by quarterly earnings. The CEO’s Y is, implicitly, Y₁: ”maximization of short-term bottom-line results.”
• To solve for the Y, the CEO rewards short-term financial performance. It’s always easier to control costs than to control revenues.
• The vice president of operations evaluates the cost structure. The biggest single line item is payroll expenses so Y₂ becomes “Reducing payroll expenses quickly.” (Note that this Y is an X to the CEO’s Y.)
• Cutting production or sales payroll will have an adverse affect on short-term sales, but cutting support for customers who have already purchased won’t. Y₃ is then “Reduction of customer service and support payroll.” Training will also be an early Y to be cut. (Note that Y₃ is an X to Y₂.)
• The CEO was able to solve for another quarter of results while a poorly trained and overworked agent takes your call.

When you’re solving for something, whether you know what it is or not, balance is the key. In any organization with a hierarchy, it’s the leader’s job to set the direction. Only the top-level position has to solve for the welfare of the entire organization. At any lower level, the temptation to solve for a local Y is present.

The reason the best CEOs command such high compensation packages is that they’re able to perform an ultra-tricky balancing act: a vision to achieve short-term and long-term results for all stakeholders simultaneously. Identifying the set of Y’s that operationalize this vision is the first step in setting the organization in motion.

Six Sigma plays a very important role in driving the organization toward this vision, as illustrated in the following figure:

Six Sigma Flowdown from Vision Y’s
Source: The Six Sigma Handbook, Second Edition. © 2004 by Thomas Pyzdek. New York: McGraw-Hill. Used with permission.

A Six Sigma organization is like the engine of a finely-tuned sports car. It will very quickly take people wherever they steer it. If the organization’s leader steers it toward the correct destination, the trip will be rewarding. But like a sports car with a blind driver, an organization that deploys Six Sigma without a clear vision from the top is an accident waiting to happen.

About The Author

Tom Pyzdek

Thomas Pyzdek’s career in business process improvement spans more than 50 years. He is the author more than 50 copyrighted works including The Six Sigma Handbook (McGraw-Hill, 2003). Through the Pyzdek Institute, he provides online certification and training in Six Sigma and Lean.