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Sunday, May 24, 2009

Introduction to Six Sigma

What Is Six Sigma?

Six Sigma is a methodology that aligns core business processes with customer and business requirements; systematically eliminates defects from existing processes, products, and services; or designs new processes, products, and services that reliably and consistently meet customer and business requirements. It essentially boils down to an approach for quantifying how well a business is meeting stakeholder expectations and then applying tactics for ensuring that those expectations are met virtually every time.

A major difference between Six Sigma and other quality programs, such as Total Quality Management (TQM), is that Six Sigma incorporates a control phase with ongoing checks in order to ensure that once improvements are achieved, they are not a one-time or temporary phenomenon, but maintained over time. Six Sigma methodology gives those who use it a structured yet flexible process to follow, a large and expanding tool set to employ, a configuration to clarify roles and responsibilities, and a governance to ensure compliance. Six Sigma can be used to improve existing processes or create a new product or process.

The “sigma” in Six Sigma is the Greek letter that statisticians use to represent the standard deviation of a population: it tells how much variability there is within a group of items (the “population”). The more variation there is, the bigger the standard deviation is. Thus, the sigma level is tied directly to the number of defects: the fewer the defects, the higher the sigma level, and the better the quality.
Each time that a process or product does not meet stakeholdersÙ expectations, it is counted as a defect. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. To put this in perspective, if you were a publisher and a misspelled word was considered a defect, 99 percent quality would mean that for every 300,000 words that were read by the customers who purchased your books, 3,000 would still be misspelled. Six Sigma strives for near perfection; therefore, reaching Six Sigma quality would mean that for the same 300,000-word opportunity, only 1 word would be misspelled. For training programs, a defect would be anything that did not meet customer requirements. It could be a misspelled word, a simulation that has incorrect information or does not work properly, a hyperlink that is broken, or a course taking too long to complete or costing too much. In short, anything that does not meet a customer requirement is considered a defect.

The Six Sigma philosophy can be captured as a methodology that allows companies to:

1. Consistently meet customer requirements
2. Use data to drive all decision making
3. Do everything with quality

In other words, Six Sigma is a customer-focused, data-driven, measurement-based strategy that allows companies to meet customer requirements virtually every time.

The History of Six Sigma

When many people think of Six Sigma, the first name that comes to mind is Jack Welch. Welch was the CEO of General Electric who championed Six Sigma and in the process made it a household word in corporate America. Welch launched the effort in late 1995 with two hundred projects and intensive training programs, moved to three thousand projects and more training in 1996, and undertook six thousand projects and still more training in 1997. The initiative was a stunning success, delivering far more benefits than Welch had first envisioned. Six Sigma delivered $320 million in productivity gains and profits, more than double WelchÙs original goal of $150 million.

In fact, Six Sigma greatly predates Welch and his experience at GE. A Motorola engineer, Bill Smith, is the individual credited with coining the term Six Sigma. In the mid-1980s, Motorola engineers decided that the traditional quality levels for measuring defects did not provide enough granularity. At that time, it was common practice to measure how many defects occurred for every 1,000 opportunities, but these engineers wanted to measure the defects per 1 million opportunities. Motorola developed this new standard and then created the methodology.

As a measurement standard, however, Six Sigma goes even further back, to Carl Frederick Gauss (1777–1855) the German mathematician who introduced the concept of the normal curve. And as a measurement standard in product variation, it dates to the 1920s when Walter Shewhart (who is credited with combining creative management thinking with statistical analysis) showed that three sigma from the mean (or average) is the point where a process requires correction.
Understanding the history of this methodology and the backgrounds of the individuals who shaped this approach sheds light on the rationale for the methodology
. Shewhart spent most of his career in the Bell Telephone Laboratories, where he worked on statistical tools to examine when a corrective action must be applied to a process. Bill Smith was a Motorola engineer who introduced the statistical approach to increasing profitability by decreasing defects. The work of Jack Welch and how he turned GE around, largely as a result of adopting Six Sigma, is well documented. None of these men were just dealing purely in theory; they worked in businesses and were responsible for quantifying their contributions to the organization in a way that the business respected. As a result they understood the need to show business results.

Three concepts are at the core of Six Sigma: the concept of the customer, a defect, and tollgate reviews. These concepts apply to Six Sigma regardless of the model and will be discussed throughout this book.

The Customer

With Six Sigma, everything begins and ends with the customer. According to iSixSigma, a customer is “one who buys or rates our process/product (in terms of requirements), and gives the final verdict on the same” ( Motorola University teaches that there are two types of customer classifications: internal and external.
Internal customers are stakeholders, departments, and employees within the company. They are frequently referred to as process partners. They may use their companyÙs products or services or may be part of the value chain that helps to produce the product. In developing a training program, a process partner might be a subject matter expert or the manager of an employee who will take the training. The requirements of internal customers are frequently referred to as the voice of the business.

External customers are individuals or organizations outside the company. They use or purchase a product or service in its final form and are referred to as end users. They are the reason an organization is in business. If the training group is designing a training program for the accounting department, then the accountants who are taking the training are considered the customers. Whoever is paying for the course development is also considered an external customer. The same is true if the training is being developed for individuals who do not work for the company. The requirements of external customers are referred to as the voice of the customer.

The same rigor that is applied to external customers needs to be applied in understanding internal customer needs. Improvements made for an internal customer ultimately lead to a quantitative improvement for the external customers.

The Six Sigma philosophy holds that these two entities, the internal and the external customers, dictate the requirements for specific products or services and thus quality
. The highest level of quality means meeting the expectations of both internal and external customers.

The Defect.

Internal and external customers dictate the requirements for a product or service. Not meeting a requirement is considered a defect. To use a sample example from the training world, letÙs assume that as a training manager, you are commissioned by the accounting department to develop a program that teaches employees how to use a new accounting system. One of the requirements is that the class is no longer than one hour. You build the course, but it is one hour and ten minutes long. The course length then becomes defective. LetÙs assume that another requirement is that a specific logo must appear on every page of a PowerPoint presentation. Each time the logo does not appear is considered a defect. If the PowerPoint presentation is 100 pages and the logo is absent from fifteen slides, the defects per million opportunities (DPMO) would be equal to the total defects divided by the total opportunities then multiplied by 1 million:

DPMO = Total defects/total opportunities x ,000,000.
Applying this formula to the training example would be as follows:
(15/100) x 1,000,000 = 150,000 DPMO.
One hundred and fifty thousand defects per million opportunities would translate into a sigma level of less than 2.5.

The number of DPMOs translates into your sigma level: the fewer defects, the higher the sigma level. The performance in the example would yield a sigma level of between 2.0 and 2.5, meaning that it would be meeting critical customer requirements (CCRs) less than 84 percent of the time.

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