Tuesday, March 29, 2011

What Is Six Sigma (and Why Should I Care)?

I'm an indirect casualty of the Borders bankruptcy. I did a proposal for something called The Manager's Answer Book, done at a publisher's request based on their idea, but by the time the publisher was ready to offer a contract, the standard advance had been cut by 60%, so I declined. I did three samples, and here's the first:

“There’s this guy in the office who keeps going on about Six Sigma and claims to be a green belt. What is Six Sigma and why should I care?”
- MD, Bethesda, Maryland

When quality is poor, you can lose money two ways. It costs money to do it wrong, it costs more money to find out that you did it wrong and have to fix it, and it costs still more money to do it over again. And that’s not to mention the risk of losing a customer in the process. The answer, for most companies, was inspection: catch the mistakes before they get out the door. That kept customers from getting bad products, but it didn’t do anything about the cost of making the bad products in the first place.

Enter Walter Shewhart, a quality control engineer who went to work for Western Electric, the manufacturing arm of the telephone monopoly, in 1918. In 1924, he wrote a revolutionary one-page memo outlining a new approach: using statistical tools to observe the process of manufacturing, with the goal of finding and correcting the causes of potential defects before they occurred. This was known as Statistical Process Control (SPC) or Statistical Quality Control (SQC), and it’s at the root of modern thinking about quality.

Shewhart was a major influence on physicist W. Edwards Deming, who adopted and promoted many of his ideas. After World War II, Deming worked for General Douglas MacArthur in Japan, where he famously trained Japanese engineers, managers, and executives (including Sony co-founder Akio Morita) in these techniques.

One of his students, Kaoru Ishikawa, took the teachings of Deming and another quality guru, J. M. Juran, and added customer satisfaction to the mix, calling the new hybrid Total Quality Management, or TQM. (Ishikawa developed one of the basic tools of TQM, the cause-and-effect analysis diagram, also called a fishbone diagram because it looks like the skeleton of a fish, and an Ishikawa diagram for obvious reasons.

In 1980, NBC aired a documentary on Deming and his influence on the Japanese, called “If Japan Can… Why Can’t We?” and TQM fever took off in the United States. But as you can tell, quality philosophies don’t stand still. There’s the zero defects approach, total quality leadership (TQL), kaizen, kansei, business process reengineering (BPR), and more. Because any company could claim they had implemented TQM, along came ISO-9000, a standards-based way to certify internationally that you really had a workable quality program.

Enter Six Sigma, developed by Motorola in 1986. It’s been a highly successful and widely adopted strategy — and, of course, it has its detractors and critics.

The goals of Six Sigma are in line with other quality strategies: it uses statistics, it aims to reduce the causes of defects or errors, and it tries to minimize variability. “Six sigma” itself is a statistical term, representing fewer than 3.4 defects per million opportunities.

Six Sigma advocates claim that their approach does a better job of measuring financial return, promotes more passionate leadership, provides a trained cadre of champions (the “green belt” is an example), and makes decisions based on data instead of guesswork.  Critics claim there’s nothing new to see here, that Six Sigma is just TQM with karate belts.

In terms of results, Motorola claims to have saved over $17 billion from Six Sigma. Jack Welch at General Electric was another successful champion. However, a 2006 Fortune magazine article reported that 91 percent of companies that announced Six Sigma programs ended up trailing the S&P 500.

From your point of view, however, the controversy doesn’t matter. Six Sigma critics argue that it’s derivative, not that it’s wrong. If your company’s made an investment in the program, it’s good sense for you to get on board.

You need Six Sigma certification if you’re going to be doing Six Sigma related projects. If those projects are alongside your regular duties, a green belt is sufficient. If you’re going full-time on Six Sigma projects, shoot for a black belt. If, on the other hand, Six Sigma activities are going on around you, but not in your area of the business, it may be enough for you to pick up the basic vocabulary and concepts — in other words, what you’re doing right now.

Of course, things don’t sit still. Cutting edge companies now practice “lean six sigma,” combining Six Sigma with ideas of lean manufacturing, a technique to eliminate waste. New iterations are surely on management consulting drawing boards. When in doubt, cite tradition. “It’s all just warmed-over Shewhart, you know.”

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