Six Sigma and Beyond:
A message from the boss

Previous columns have dealt with starting a Six Sigma effort from the middle management perspective (July 2000) and from a generic organizational change perspective (March 2001). This month, I would like to address the chief executive or operating officer who is interested in beginning a Six Sigma initiative. These suggestions are offered as elements of a plan-do-study-act cycle, which should be ongoing, deepened and expanded with each iteration of the circle. Do not think of this as a linear model, merely a process that is likely to evolve in approximately this order. Here goes:

PLAN
Add Six Sigma to your reading list. Or learn more about Six Sigma by whatever method works best for you. Six Sigma is a mature enough technology that resources abound. As you probably know, Six Sigma works because it is based on two interrelated and essential assumptions:

1. It is important to focus on the bottom line
   
   
2. The scientific method, combined with a reduction in variation, works well for making things better.

You don't need to know much more than that, but the more you know the better the results will be.

Announce your intention. This does not have to be a commitment to the entire organization. It could be no more than announcing to your management team that you are interested in Six Sigma and want their help.

Examine your income statement. Six Sigma works because reducing costs is generally the easiest way to improve profits. Find the costs. Engage people who do not usually see your income statement in the examination. They will ask the questions that people who look at it on a regular basis are too familiar with or embarrassed to ask. I had a recent client whose biggest operating cost by far was material. This is not an uncommon pattern. I asked what the cost would be if they bought only that amount of material they actually shipped in their final product. The difference turned out to be staggering and they had no idea what to do about it. That phenomenon has not changed much since my days with General Motors 30 years ago. Accounting systems are wonderfully ingenious at hiding rework, scrap, and opportunity costs. These are the treasures that Six Sigma seeks. Focus your attention on big bucks. Focus on material and other purchased parts and services. Studies show that reducing head count almost never yields the projected savings. The overhead you assign to labor frequently overstates the real cost of labor. Continue your examination until you can find someone on the management team who is ready to take a major cost item on or, better, yet until you have defined a cost item enough that you are ready to take it on yourself. You now have a pilot project and a champion. The champion is responsible for making the success of the project possible.

Find an internal Six Sigma consultant. This is the person who will lead the pilot project(s) and other following projects. Look first for someone who has the desire and people and technical skills to lead a Six Sigma project. You may be surprised to find someone who is already equipped and willing to take on the task. More likely, one of the folks may be willing, but not quite confident in necessary skills. Provide the support necessary to help that person become more comfortable. You may have to hire someone, but my guess is you already have a great candidate working for you. You will notice that I have avoided the term Black Belt here. That is because I think much can be accomplished without many of the statistical skills connected with Black Belt status. Someone who is enthusiastic and confident, likes people, understands a bit of psychology, and knows how to apply the plan-do-study-act cycle and use the seven basic quality tools can save you a lot of money.

DO
Begin the first project(s). It is important to have a personal success story before taking the leap headlong into Six Sigma. Look for past or present success stories. You may find, as we did at Ford, that you already have personal evidence that a Six Sigma approach can work in your organization. If not, now is the time to develop that evidence. You can make it as complex as you like, but a pretty simple approach will probably work to start. Try this:

1. Operationally define they system you want to improve. Make sure that you've made a strong link to the cost you are trying to reduce and a clear definition of what is inside and what is outside of the system you are trying to improve.
   
   
2. Quantitatively determine where you are. This data may already exist. If it does, track it as far back historically as you can. Put it on a run chart or, better yet, a control chart. If the data do not exist, figure out a way to start gathering them on an ongoing basis. Tracking over time is the best way to know how effective your Six Sigma efforts are.
   
   
3. Plan a change. Make a statement something like, 'We will (change something) and expect to see a (specific numerical effect) improvement in (project measure), with a resulting (specific numerical effect) reduction in (cost category) cost. For example, by repacking the bearings on the #3 screw machine, we can expect to see an 80 percent improvement in machine capability, with a resulting $30,000 reduction in annual machine shop scrap and rework cost. Recognize that this statement is always a guess. The more analysis you do at this step, the better the guess. Talk with the folks who are familiar with the machine shop operations and decide to pack the bearings. Or, you can use any or all of the appropriate tools, such as Pareto analysis, cause and effect diagrams, design of experiments, and nominal group technique, to improve the likelihood that your change will be effective.
   
   
4. Make the change.
   
   
5. Study the results. Determine how effective the change has been.
   
   
6. Act to standardize the improvement or begin another improvement cycle based on what you have learned.

STUDY
Examine the results. Did things occur as anticipated? What were the positive and negative unintended consequences? What systems supported the effort? What systems did not? Where do you find resistance? What caused it?

ACT
Stay the course and learn. Six Sigma is not natural for most organizations. Status quo is. When your attention to the initiative wanes, it may well die. Use the plan-do-study-act cycle to continually deepen, learn from, and improve your Six Sigma initiative.

Grow the initiative. Continue to support the initial project(s). Create more projects. Track, report on, and celebrate the reduction of overall costs and the improvement of profit. Look for systemic ways to support the initiative such as improved profit- or gain-sharing, clearer, more transparent information systems, and improved training for everyone.

I am almost embarrassed by the simplicity of what I have written here, but Six Sigma is not, as they say, rocket science. It does not take a Ph.D. It takes an appreciation for people and systems, an understanding of the plan-do-study-act cycle and a few improvement tools, and a dedication to use Six Sigma to better serve all stakeholders as well as the bottom line. As always, stay in touch. I'm at support@pqsystems.com.