Six Stigmas

 

I met someone recently who asked me this question, “Do you think it makes sense to use Six Sigma methodology in the processes in finance sector?” What an interesting question that got me thinking over the factors we should consider while evaluating whether Six Sigma is suitable for an industry or an organization. Perhaps we should first take a look at what Six Sigma is and its pros and cons before discussing further.

Six Sigma is a well-known business management strategy that uses a set of quality management methods to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in the business processes. Companies adopt Six Sigma to help them improve existing processes and reduce wastages. In spite of its widespread popularity and numerous extensively propagandized success stories and reported savings, Six Sigma does have its own issues. Over the years, Six Sigma has been criticized for its over-obsession with process control and statistical figures. Many people also find it too complex and difficult to implement, not to mention the various costs associated with training and retaining the ‘belts’, and this would have probably turned a few of those who are interested away. In fact, a study conducted by QualPro claims that “among 58 companies that have announced broad use of Six Sigma, the stock performance of 91 percent trailed the S&P 500 index since the launch date of their implementations” (note: the validity of this study has been rigorously challenged in this blog post). Now, putting the validity of QualPro’s claim aside, it seems like we have mixed feelings towards whether Six Sigma is the ultimate go-to methodology to help companies achieve operational excellence. It is like durian – you either love it or hate it.

Apparently there are many factors to consider while determining if a particular organization is appropriate to adopt Six Sigma. Factors like organization culture, operation maturity, management style, environment, and nature of business etc. each has an important role to play. Trying to address all these factors in one fell swoop would be crazy, if not impossible, to achieve. However, setting the expectations right up front and avoid falling into any of the Six Sigma false myths could help you see things in proper perspective and make better judgments, potentially saving you from repeating the same mistake made by former Home Depot CEO Robert Nardelli. Below are six stigmas that you should watch out for if you are considering adopting Six Sigma in your organization.

1. The project rush: When the CEO and top management shout “Six Sigma”, everyone down the hierarchical chain gets the pressure immediately. People start to eat, sleep and dream on Six Sigma. All of a sudden, holding on to a couple of Six Sigma projects becomes the new trend. Every topic starts and ends with a project as if you are jobless if you are not on any project. People see this as ‘aligning’ with management strategy. Whether the bunch of Six Sigma projects makes sense or not does not really matter. I have come across a one-year Six Sigma project that claims to save USD 2,000 per annum on toilet paper. Ridiculous, period. We have created a ‘project rush’ phenomenon.
2. Project orphanage: This is actually a by-product from the ‘project rush’ phenomenon above. Just like the post-war baby boom period, we will usually see a sudden surge in the amount of projects driven by the optimism we have in the Six Sigma program. Imagine what will happen if we keep producing babies but no one is going to take care of them after they are born? Yes, most of them will end up in the orphanage. This is exactly what will happen when the entire focus is on projects; people tend to pay less attention to the bigger picture beyond the project lifecycle. The belts hop from one project to another gleefully churning out tons of project deliverables, if not trashes. More than half a dozen of these will end up in the project orphanage. Sounds familiar? Do you have a proper product lifecycle and transition plans to support your project handover?
3. Tunnel vision: Most Six Sigma projects focus on streamlining, cost-cutting and reducing waste. While there is nothing wrong in these approaches, emphasizing too much on them obsessively will result in a tunnel vision effect that restricts the growth of the organization in other dimensions. As QualPro's CEO Charles Holland says, “One of the chief problems of Six Sigma is that it is narrowly designed to fix an existing process, allowing little room for new ideas or an entirely different approach.” Perhaps we should diversify our focus and have more Six Sigma projects in areas like market research and new product development that are usually neglected in organizations that practice Six Sigma.
4. Copy & Paste: I don’t like the phrase ‘free size’ as it means that you are not tailoring the product to your needs. Many people have the assumption that they have to follow everything exactly in the standard Six Sigma methodology out-of-the-box. No, that is not true. Those that have experience in implementing any form of methodology know that the ‘Copy & Paste’ approach will not work as we have to adapt the methodology to suit our needs. We know how rigorous and tedious a standard Six Sigma DMAIC process can be. In some fast-changing industries, the timeframe for a small project could be as short as three to four weeks. If we were to apply the standard Six Sigma process, the project probably would have ended before reaching the ‘Analyze’ step. In an environment where time and resource are scarce, we ought to be realistic.
5. Missing the big Y: In Six Sigma terminology, the big Y refers to the most important business results and measures that are linked to critical customer requirements and expectations. This is what a Six Sigma project seeks to improve. However, it is not uncommon to see the big Y being missed in projects. Sometimes, this is due to the incorrect causal relationships established between the little X’s and the Y’s, but most often than not, it is the big Y itself that is being wrongly identified. In other words, the objective of the project is unclear. This usually happens because the belts do not understand the customer requirements and expectations. Customers just tell us what they want; it is our job to find out what they really need. Setting up a structured and rigorous project review and selection process may help to reduce the number of missing big Y’s.
6. Elixir to all woes: A common mistake that most people make is they bet everything on Six Sigma and expect it to cure all their corporate woes. They have forgotten that Six Sigma is just a tool and as a tool, it depends pretty much on the people using it to make it a success. In other words, it is the execution part that counts. We know that the performance of an organization depends on many factors. The launch of a Six Sigma program alone is insufficient to address all the problems that the corporate is facing. Being carried away by the fads and naïvely believing Six Sigma as an elixir to all corporate woes is probably the catalyst that sparked off the torrent of Six Sigma jokes. To wrap this up, below is an interesting one for your philosophical muse (source: Bright Hub),

A shepherd, herding his flock in a remote pasture stopped as a brand new Mercedes was advancing toward him. The driver, a young man stylishly dressed in an Armani suit got out and asked the shepherd “If I tell you exactly how many goats you have in your flock, will you give me one?” The shepherd looked at the man and said “Sure.” The young man takes out his notebook, connects it to a cell phone, logs into a NASA page on the Internet, calls up a GPS navigation system, scans the area around him, opens up an Excel spreadsheet, spends some time doing complex formulas, and sends an email, to which he receives a fast reply. He next takes out his hi-tech miniature printer to print out a detailed report and says to the shepherd “You have 1,586 sheep." "That’s correct,” the shepherd replied. The young man picked up the biggest animal he could lay his hands on, but before he could drive away, the shepherd said, “If I can tell you exactly what your business is, will you give me back my goat?” “Sure,” replied the young man. “You are a Six Sigma Black Belt,” said the shepherd. “That’s correct,” said the amazed young man. “How did you guess that?” He asked, curiously. The shepherd replied, “You turned up here although nobody called you. You wanted to get paid for an answer I already knew, to a question I never asked, and for all your tech-savvy skills, you don't know crap about my business. Now give me back my sheep!”