If you are encountering this term for the first time, you may be thinking why a number and a Greek alphabet is a business solution. For a bit of trivia, this term came from the manufacturing processes’ statistical modelling, the Sigma rating, which indicates the percentage of error-free products that a company can produce. Six Sigma and Kaizen are quality improvement approaches.
The entire definition of the Six Sigma methodology has evolved over the years to incorporate these concepts:
- It is the most effective problem-solving method that an organization can use to improve performance.
- Any organization aims to achieve the Six Sigma performance. The Six Sigma performance is a statistical term coined to refer to a process that creates less than 3.4 errors or defects per million opportunities that may cause errors in a production.
- A Six Sigma improvement is achieved when a work process or business has key outcomes that are dramatically improved, ideally by 70% or more.
- Any Six Sigma organization makes use of Six Sigma techniques, methods, and tools to improve its performance. By improving performance, an organization should be able to improve customer satisfaction, reduce process complexities, the lower cycle time in producing features, lower costs while improving revenue, and minimize process errors.
Is It Hard to Use Six Sigma?
When you look at what Six Sigma aims to achieve, you may realize that these concepts you are trying to achieve may seem like you are trying to hit the moon. Using the Six Sigma approach is not for an organization that is unprepared to make substantial changes – it would entail rigorous and intense inspection of all methods that involve doing things within any group.
It is ambitious in a way and it would enforce accountability, from the stakeholders down to the most common worker. You cannot expect that management would be complacent about running things – it will expose all the wastage that was invisible in the past.
The methods of Six Sigma would take any organization out of its comfort zone for a definite amount of time. When projects are creating profit and the organization feels the benefit of change, everyone would embrace the cultural change that this methodology provides. The initial difficulty of laying out Six Sigma would soon be replaced by recognition of opportunities out of problems discovered, and all errors unearthed from old processes would provide leverage when it comes to adhering to better practices.
Why Many Fail at Six Sigma?
If you think that many companies that have been introduced to Six Sigma are doing so well in minimizing errors (and enjoy impressive ROI because of this), then you think wrong. The reality is that only a few lucky companies are able to achieve fewer than 3.4 defects per million opportunities. Many companies do not even reach five sigma, or fewer than 233 errors per million opportunities in their final products, since there are too many processes, tools, people, materials, and machines that they have to check.
When you look at all possible inputs that organizations do in order to achieve a product, you will observe that all of them should operate in sync within a particular level of variation that the system will tolerate in order to produce a desirable or satisfactory outcome. However, you also need to remember that even before any step in the production process is done, the product and the system itself are designed by a team of engineers and architects that are capable of making mistakes.
Now, if any step involved in conceptualizing, managing, and producing is compromised or is not performed as expected, you can already infer that the risk of error spreads throughout the system. Since there are many steps and areas to check in a vast system, you can think that the entire process of product creation serves like a huge hide-and-seek playground for errors.
A problem that happens to a specific area may actually be caused by an action that happened to another time or place. The gap between these occurrences makes it harder to find where the error originated.
Six Sigma practitioners often refer to the reality of having to fix these errors as the hidden operation or the hidden factory. You can almost see all the rework and cover-ups that need to be done, as well as the cost of days that are wasted when you need to constantly make corrections in your company.
However, you cannot accept mistakes or treat them lightly – once you begin thinking that “this is the way it is,” you will mentally hide all the things that are actually hampering your organization’s growth. It does not mean, however, that you need to accept that you have the need to re-do and revise work again. You simply need to eliminate the error.
Six Sigma seeks to eliminate hidden factories that run in secret in all organizations. Because you do not need to have to allot another set of resources to correct mistakes, you can be confident that all the time and resources that you usually waste will return to the business.
Why Use Six Sigma?
Any kind of organization on this planet makes mistakes or need a great room for improvement. You may realize that every mistake that someone creates in a day comes with a certain cost – your business loses a customer, someone needs to redo an entire process all over again, and productivity is squandered.
When you think about all these mistakes a business makes in a day, the business may throw away up to 30% of its profit simply because someone did not do what he is supposed to do. Now, you can only imagine how much resources are going to waste in a year!
While it is impossible for any business or individual to be perfect, there are ways to improve processes in order to minimize these mistakes. However, you need a way to figure out where you should start troubleshooting the organization. There are occasions wherein the flaws and defects that turn up each day is not really the problem, but a service that takes too long to be delivered.
There are times wherein the problem does not lie within the process, but how the customer feels about the process that he has to go through to receive the product that he is willing to pay for.
With Six Sigma being a general-purpose method to maximize value and minimize errors, you begin to answer the most important questions that would lead you to find out what your organization should be achieved in the first place. With this method, you should be able to answer these questions:
- How many products and services can the business really produce or deliver?
- How many transactions can truly be completed with the expected quality?
- How many transactions can be done in the least possible time and with the lowest possible cost?
The Managerial Perspective
When you take Six Sigma from the managerial perspective, the initiative will include all people, projects, details, units, and technologies that should be accounted for. In order for all these components to work harmoniously with each other and make sure that Six Sigma would work well with the technical elements, you need to set up the right orientation for the management.
Six Sigma makes it possible for the management to predict behaviours and gain control of performance by using scientific methods to leadership. It works similarly to the methods used in producing cars – set processes are followed and by allowing repeated processes to be optimized, products like cars can be created with little variation from each other.
It is even possible to mass-produce these products without requiring advanced education to the workers – as long as their skills are honed to perfection when it comes to mass production, the personnel can still create near-perfect products.
Six Sigma’s goal is to achieve control, consistency, and predictability of results right into the production process of any organization. By treating every step of the process, you can count that delivered products and services will always be reliable to your customers.
To achieve management results using Six Sigma, the following traits are built right into the management system orientation:
1. Clear Value Proposition
Six Sigma is defined by its focus on the return of investment (ROI) for every business. Any Six Sigma project is designed to achieve an improvement of 70% or more for every business trait, and when this development takes place, operating margins experience stimulated increase. This improvement goes hand-in-hand with the increase of value that customers experience. Measurable and direct financial impact and focus become an important contribution of Six Sigma projects.
2. Accountability and Commitment
Six Sigma initiatives begin right from management and organization leadership. By making sure that every authority within the business is committed to setting performance goals and creating strategic implementation tactics, and sticking to the Six Sigma initiative, the management becomes accountable for making the organization realize improvement goals that they set for teams or business units.
3. Customer Focus
Six Sigma has a set of the voice of customer (VOC) tools which makes business processes become driven by the needs of its customers. That means that there is no process, operational, or business change that should happen without truly seeing who the customers really are, along what they want to buy or need to have in their lives. Because Six Sigma sticks to the requirements of customers, this focus allows the business to grow and enjoy the better profit.
4. Process Orientation
Six Sigma is designed to improve how each business process performs by looking at how these processes can efficiently and effectively turn any material into a desirable output. This focus allows Six Sigma to be very reliable in improving the characterization, optimization, validation, and the overall design of a process.
5. Harmonious Metrics
Six Sigma is different from other approaches that adhere to performance improvement – instead of simply making arbitrary changes, the Six Sigma management system includes measures that are visible and accessible to everyone that needs to decide or take action in determining performance quality.
6. Tools and Technology Enabling
When you need to use Six Sigma in an entire organization or when you need to manage data banks, training activities, personnel, processes, and projects all at the same time, you should have the ability to use technology and tools. To make this happen, you need to have tools that do these jobs:
- Managing, modeling, designing, and optimizing processes
- Conducting calculations for analytics, collecting data and research materials, and assisting in process problem solving
- Training, managing and transferring knowledge
- Managing multiple projects over multiple units or teams
7. Change Infrastructure
Having a Six Sigma management system requires that you have an infrastructure or a system that would enact tactics of process improvement and project implementation. An effective Six Sigma infrastructure should have these key elements:
- A documented Six Sigma leadership system, the configuration of business goals, plans for deployment, trackers for activities, schedules for implementation, and provisions for reporting
- A strategy and system for preparing stakeholders, process owners, auditors, and managers to fulfil Six Sigma job roles.
- Guidelines for leader and participant selection for Six Sigma
- Guidelines for aligning accounting categories with Six Sigma metrics and goals, reporting project ROI, looking at project savings, and defining cost-effective measures for each project.
- Criteria for approving and selecting projects, along with their problem-definition and statements and provisions for savings, ROI, and management towards completion
- Strategy for communicating Six Sigma initiatives across the organization, along with a database that will serve as a common knowledge base and reference for everyone
- Review process for the management to check the effectiveness of Six Sigma across the organization
- Culture Change
Six Sigma initiatives often begin with consultants from the outside. These consultants will provide tools, methods and training until the knowledge is applied and internalized within the organization. Over time, Six Sigma methods will grow organically within the organization.
Why is it Called Six Sigma?
Not what you are aware of what you need to do to achieve quality and how it is likely to have errors, you would realize that you need to be concerned with the roll-up of behaviours and the natural variation increase of each characteristic in an expanded amount of time. Six Sigma addresses these concerns by letting you know what your targets should be.
The sigma scale is a measure of how well critical characteristics perform based on its requirements. This universal measure tells that the higher the sigma score is, the more reliable a characteristic is. Since you want to achieve a sigma score that would make the opportunity of defect small enough for a characteristic to be possible, you would want to achieve as sigma score of 6.
The Best Practices of Six Sigma
To achieve better results using Six Sigma, it is very important that you adhere to several practices that you need to stick to. Here we will discuss some of them, which aims to help you set landmarks to your project’s journey using this methodology. Even if you have been doing Six Sigma for a while, it is important that you compare and contrast what you do with the best practices in the methodology that has found to be most effective.
Set Stretch Goals
A stretch goal is defined as a goal that aims for 70% improvement over a given current performance. For example, if your business now has a profit margin of a measly 7%, then you would want to aim for a profit margin of 11.9% which is a 70% increase of what you used to make.
Six Sigma, in itself, is not designed for the less ambitious manager – it is made for those who want to make breakthroughs in their processes. By combining Six Sigma tools and techniques with stretch goals, you would be able to reach goals that may even sound to be too optimistic or aggressive.
Strive To Achieve Tangible Results
Six Sigma is known to be a methodology that makes organizations cut costs by 20 to 30%. At the same time, it is designed to create 10% or more revenue. However, to make all these promises of profit come true, the methodology should be tied up to a tangible measure of financial return. These returns must be rolled up, tracked, and measured if you want to achieve the financial hallmark of Six Sigma.
Every output or result that you produce in an organization is set by the inputs that you have, which tells you that every product that you produce and the success that you can gain can be very deterministic. By being able to have the necessary adjustments and control with your inputs, you would be able to create consistent outputs with consistency.
Use Critical Thinking Before Taking Action
There are too many occasions wherein people jump into action against a problem to solve it. However, you should not confuse action with effectiveness – they are never one and the same, and unwarranted action may even cause a problem to continue. You would never want a subpar, band-aid solution that may cause defects in the long run.
Have Faith in Data
Six Sigma practitioners have a rather apt saying: In God we trust, all others bring data. This is a belief that is worth putting faith in when you are in business – the absence of data is a cause of doing everything based on guesswork and wishful thinking. Data, on the other hand, will help you become objective, have reasonable goals, and work out the best solutions with empirical evidence that they are bound to work.