Siddhartha Roy and Anil Gubrele analyse investment methods and regions to judge the returns associated with Six Sigma Six Sigma measures deviations from an ideal. The item to be measured may be the process used to make a bolt, whose material specifications and costs are measured and compared to ideal material specifications and ideal cost. Or it may be the process in an airline, where quality of service and cost of service are measured against ideals of quality and service. There is a well known saying: it takes money to make money. This saying also holds true in the world of Six Sigma quality. It takes money to save money using the Six Sigma quality methodology. No business can expect to significantly reduce costs and increase sales using Six Sigma without investing in training, organisational infrastructure and culture evolution. But if the organisation wants to produce a culture shift, a shift that causes every employee to think about how their actions impact the customer and to communicate within the business using a consistent language, it's going to require a resource commitment; that is, it takes money to save money. But is the investment in terms of money, effort and time justified for that elusive 'Six Sigma' quality level? This article will examine arguments from both schools of thought on the ongoing debate: Is Six Sigma more trouble than it is worth? Or is the payoff worth the effort? The Six Sigma Way Six Sigma is a methodology to manage process variations that cause defects—defined as unacceptable deviations from the mean or target—and to systematically work towards managing variation to eliminate those defects. The objective of Six Sigma is to deliver high performance, reliability and value to the end customer. It was pioneered by Bill Smith at Motorola in 1986 and was originally defined as a metric for measuring defects and improving quality—a methodology to reduce defect levels below 3.4 Defects Per Million Opportunities (DPMO). Six Sigma has now grown beyond defect control.
It provides companies with a series of interventions and statistical tools that can lead to breakthrough profitability and quantum gains in quality, whether the products of a company are durable goods or services. One study, Minitab (2000), claims that today, most organisations operate between two and three sigma. Another study (Blakeslee, 1999) claims that US manufacturing firms frequently attain four sigma quality levels, whereas service firms often operate at quality levels of one or two sigma.  Implementing Six Sigma There are two basic models for implementing Six Sigma. One model is based on teaching the tools of Six Sigma. In this model, little attention, if any, is given to building an organisational infrastructure that supports Six Sigma. Instead, emphasis is typically given to the mechanics of tool execution, as opposed to when and how a tool should be implemented and integrated with the other tools.
The other model is project-based: the tools are taught and then applied to projects that are defined before sessions begin. In this model, Six Sigma infrastructure issues need to be addressed. However, this effort is sometimes not given the emphasis it deserves. Organisations can achieve more significant bottom-line benefits from this approach. Benefits of Six Sigma The customers that form the base of today's world market are sending a clear and undeniable message: produce high-quality products at lower costs with greater responsiveness. To compete in the world market, a company needs to move toward a Six Sigma level of performance. Many of the most profitable and admired companies in the world have set goals within the Six Sigma context, and many moving toward Six Sigma levels of performance have saved billions of dollars. The changes that occur within corporations striving for Six Sigma quality translate into bottomline benefits.
Any Six Sigma implementation is expected to improve the organisation's bottom-line. This benefit is realised in terms of large savings that were previously unrealisable. An average project would result in savings that can vary between $50,000 and $200,000. For example, for a $30 million a year company, the savings would fall between $360,000 and $1,350,000 in bottom-line per year. Six Sigma systematically reduces variability in any process and its key advantage is that it forces companies to take a methodical approach to problem solving. The ultimate goal is to achieve customer satisfaction, which would be reflected in sales. Significance of Six Sigma Six Sigma quality results in the following benefits:
Delivers business excellence Improves profits Delights customers Increases entry barrier for competition. All businesses acknowledge the fact that the customer places a certain value on quality. If quality is too low, customers won't buy. When the quality is improved, costs increase-but then the customer won't pay the higher prices charged. Most companies work at around the three sigma level. Trying to get better quality out of the existing systems would increase the costs. Therefore, in order to simultaneously improve quality and reduce costs, they need to go for a Six Sigma quality implementation. But we can’t just leapfrog from the three sigma level to Six Sigma. The implementation has to be carried out in a phased manner. The overall performance moves from three sigma to four sigma, then to five sigma and so on, as people are trained and systems redesigned andimproved. Six Sigma is not about quality for the sake of quality. It is about providing better value to customers, investors and employees. The Debate The last few years have seen wonders in demonstrating the power and potential offered by Six Sigma Quality, Motorola’s now famous revolutionary business design strategy.
This tool has proved itself in both large and small businesses. It has become quite popular among the many businesses who have undertaken the massive re-training and re-thinking of their policies and procedures in order to implement the whole new Six Sigma Quality way of functioning. Despite this level of understanding and awareness, there still exist a number of Six Sigma doubters. They often ask whether or not this sacrifice is worth it for a business. After all, it does take a great deal of time, effort, and money in order to properly take on this new way of doing business. The main issue isn’t whether or not it will work for them, but rather, whether it is a true long-term strategy or simply a fad that will soon be forgotten by those who did not use it, and loathed by those who made the change. To assuage those fears, it is important to recognise that Six Sigma Quality is not like other business processes and strategies. In fact, when we really get down to it, it isn’t truly anything new. What it is is a capable, practical and logical combination of many existing business and quality techniques that have withstood the test of time and shown themselves to be the leading methods for success.When properly combined, they become a new way of thinking, using existing individual elements whose structure and discipline have proved to obtain extremely desirable results. Naturally, this is not to say that employing Six Sigma Quality will guarantee success for any business. However, when properly implemented with black belt training, Six Sigma Quality has an exemplary track record for effective project resolutions in large and small companies alike.  Critical success factors (CSFs) for Six Sigma implementation The typical requirements for successfully implementing Six Sigma quality in any organisation are as follows: Management team buy-in and support Education and training Resource commitment Link to compensation. Most failed implementations can be attributed to the lack of senior management commitment. When this is lacking, the initiative invariably, becomes a training exercise characterised by poorly conceived or poorly supported projects rather than a plan to drive business results with projects based on relevant business cases. Training is expensive. A big expense with no focus on results yields little or no returns. But, the most important CSF for any Six Sigma implementation is the ‘project selection’. Unless the right areas to improve upon are identified, the ROIs will be pretty low. Any Six Sigma Quality implementation is not an easy or overnight implementation. It can be quite lengthy, but is considered by most to be well worth the effort once everything is in place and its potential starts to emerge. The implementation would definitely add value to the existing initiatives, with the knowledge that all of the necessary steps are in place for the business to reach its financial targets. In the end, it is for the management to decide. Six Sigma Quality is,after all, an extremely large step for a company to take and, only the management knows how, when, if, and in what way the business may adopt it. The authors are from the Indian Institute of Management, Kozhikode |
