SALES TRAINING INTERNATIONAL LTD FACT SHEET. Six Sigma

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1 Six Sigma This fact sheet introduces the Six Sigma quality technique, and presents action points for its implementation. Companies are increasingly adopting Six Sigma in a bid to improve the quality of their processes and products, and thus achieve competitive advantage. It has been estimated that poor quality, resulting in defects and wastage, can account for 20-40% of sales revenue. Six Sigma offers a structured and disciplined method for reducing that figure significantly: in fact, in a perfect Six Sigma state, a company would reduce it to only 10%. While many companies dismiss a zero defects state as unattainable, Six Sigma offers the potential to get very close. Definition Six Sigma is both a technique and a philosophy based on the desire to eliminate waste and improve performance as far as is technically possible. At its heart is a statistical method that involves drawing up an optimum specification for each of the processes within the organisation, then using statistical analysis to reduce defects in the processes, products and services to almost zero. This is accompanied by an organisation culture that focuses on creating value for the customer and eliminating any processes that do not make a contribution to this final goal. Six Sigma is a registered trademark of Motorola, Inc., which implemented the technique successfully in the 1980s. It is based on the statistical tools and techniques of quality management developed by Joseph Juran. Advantages of implementing Six Sigma it has the potential to increase quality, performance, productivity, and competitive advantage costs can be greatly reduced wastage can be minimised, and environmental impact decreased employees become motivated and have pride in their achievements customer satisfaction and retention is increased improvements are sustained over time it creates visible performance goals it focuses on hard data and thus provides quantifiable evidence of improvements Sales Training International Ltd Page 1

2 Disadvantages of implementing Six Sigma claims of its potential are so great that it may be met with scepticism as unrealistic it may be hard for employees to initially understand the technique an investment in specialist high level training will be required it may require a culture change within the organisation it is a radical long term project requiring deep commitment it requires the collection and interpretation of data that may be difficult and time consuming, especially if in service rather than in manufacturing industries Action checklist 1. Understand Six Sigma Before any organisation can contemplate introducing Six Sigma, its managers need to understand exactly what it is. As with any quality initiative, it is vital to secure the understanding and commitment of top management before proceeding. Advice of consultants or short training sessions may be necessary. Sigma is the Greek letter used in mathematics to denote standard deviation, or the amount a process varies from the mean. As the level of sigmas rises, the level of variation decreases. A Three Sigma organisation achieves 66,807 defects per million, whereas a true Six Sigma organisation achieves just 3.4 defects per million. It is important to realise that perfect Six Sigma may not be achieved, but that even a rise from one sigma level to the next will produce significant benefits. The Six Sigma technique hinges on a continuous reduction of process and product variation that results in defects. This is achieved by first of all defining and measuring variation in each process, and then discovering its causes. This enables the development of operational means to control and reduce the level of variation. Tools used in this stage include statistical process control, computer simulation, short cycle manufacturing, supplier qualification, and others. Six Sigma involves not only reducing existing variation, but also avoiding any future variations that might develop. With this in mind, designers need to "design for producibility", making all new products and processes as little subject to variance as possible. This can be achieved by such methods as "poka-yoke", which aims to design products with minimum opportunity for error. In addition, any potential problems for the Sales Training International Ltd Page 2

3 organisation should be assessed and guarded against. Techniques such as total preventive maintenance and risk assessments are used for this. Before proceeding, the concept of Six Sigma and the goals of the initiative must be defined and communicated, both on a strategic and an operational level. 2. Focus on organisation culture and prepare for change management Six Sigma will be a major change initiative, so it is important that employee resistance is overcome and that the culture of the organisation is supportive of radical change. Six Sigma is implemented through project teams, so teamworking will be a key to its success. A pervasive culture of creative thinking and innovation will also aid the process, as many stumbling blocks may have to be overcome. 3. Decide on the extent of implementation Although full Six Sigma is organisation-wide, there are increasing numbers of companies implementing it in a limited way. Consider whether you might want to focus on manufacturing or engineering processes, or maybe on selected strategic projects that are critical to the organisation. 4. Select and train key personnel Teams need to be formed with the brief of implementing Six Sigma in different areas. Key team members will need to be trained in leadership skills. Training in the Six Sigma technique is almost always carried out by external training providers, but there is no rule to say that smaller companies should not learn from books and manuals. It traditionally involves three stages: Green Belt - participants earn the status of Green Belt by completing a short course that introduces the Six Sigma methodology. Black Belt - some Green Belts, usually of managerial status, proceed to complete a project exercise using the knowledge they have gained. Black Belts will hold responsibility for leading and developing the teams, advising management, and teaching Six Sigma techniques to team members. Master Black Belt - a select few will need further training that will make them the organisation's Six Sigma experts, leading the whole initiative, integrating it into the organisation's strategic plans, and teaching the techniques to others. Sales Training International Ltd Page 3

4 Some companies use different terminology for these levels of training, and it is important to use names that create the right impression in your particular organisation. While certification is usually given for each level of training, there is as yet no international standard behind this. 5. Bring the Six Sigma teams into action Once personnel receive training, the teams need to begin to identify processes within the organisation. Each process is earmarked as a Six Sigma project, and depending on company size, several projects may be carried out each year. Priority might be given to areas that appear to have the highest impact on customer value, or, initially at least, to areas in which improvements can be made quickly and easily, in order to showcase success. The statistical techniques are applied to each project according to a framework. This usually consists of these key phases: definition of the problem; measurement; analysis; improvements; and control. In the first phase the team focuses on identifying processes that customers perceive as value creating. They then need to work out what a "perfect" process would be. For example, a delivery company might aim to deliver all parcels by noon on the day after despatch. The next step is to measure how the process is performing in reality. The common measurement used is "defects per unit", which can be applied to virtually any product or process in any area of the company. For example, a unit might be a line of computer code, a sales invoice, a piece of raw material, a finished product, a delivery, or a record in a database. In the above example, a unit is a parcel delivered on schedule, and a defect occurs when the parcel fails to be delivered on time. In a service environment, as opposed to manufacturing, units and defects may be harder to measure. Tasks should be broken down and ways of quantitatively measuring defects should be created. Use data mining techniques and information technology to make this easier. This is followed by an analysis that identifies the gap between current performance and the desired goal using statistical techniques. Reasons for this gap must be assessed, perhaps using root cause analysis, and some creativity may be involved in this phase. Improvements must then be instigated by finding new and better ways to do things, and implemented using project management techniques. Perhaps the parcel was not delivered on time because of traffic congestion; one way of avoiding this kind of failure might be to investigate alternative routes around the city. Sales Training International Ltd Page 4

5 6. Integrate Six Sigma into the organisation infrastructure If Six Sigma is a company-wide initiative, then it will need to be linked into existing company structures. Consider linking it to pay and rewards, departmental budgets, job descriptions, and documentation such as ISO9001. Modify policies and procedures to reflect the improvements made. 7. Monitor and evaluate success Ensure that projects are monitored, and that failures are investigated while successes are publicised. Six Sigma is an ongoing, long term initiative, so constant assessment is vital to make sure that it is heading in the right direction. Ascertain not only what cost savings have been made but also whether employee job satisfaction and customer satisfaction have improved. Remember that customer demands, marketplaces, and business environments are dynamic and changing. You will need to periodically reassess processes that have already been analysed, to see if defects are creeping in again because of changed circumstances. Dos and don'ts for implementing Six Sigma Do Secure top management commitment Look at other companies that have initiated similar programmes Maintain a customer focus throughout - including internal as well as external customers Keep things as simple as possible to make understanding clear and implementation easier Make Six Sigma implementation the responsibility of everyone in the organisation, not just Black Belts Don't Let the seemingly mathematical nature of Six Sigma deter you, as it can be easily learned, and computer software can perform the calculations Hoard company data among management ranks, as it will need to be freely accessible to everyone Sales Training International Ltd Page 5

6 Forget to teach the soft skills of handling meetings, teamworking, and facilitation that are needed for the statistical analysis to be carried out efficiently Dismiss Six Sigma as unsuitable for smaller companies, since, although it may cost proportionately more to get it going, it can still lead to long term improvements Sales Training International Ltd Page 6

7 Useful reading The Six Sigma Revolution, George Eckes New York: John Wiley, 2001 Managing Six Sigma, Forrest W Breyfogle III, James M Cupello and Becki Meadows New York: John Wiley, 2001 The Six Sigma Way, Peter S Pande, Robert P Neuman and Roland R Cavanagh New York: McGraw Hill, 2000 Related Thinkers Joseph M Juran Thought starters Do you know what proportion of your costs goes on waste that produces no value to your customers? Are you aware of consistent errors with a piece of equipment or standard of customer service? What quality standards do your customers really expect, and can you meet them consistently? What are the quality levels of your competitors, and why they are higher or lower than yours? Sales Training International Ltd Page 7

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