What do Leaders need to know about Six Sigma to go from good to great leadership?

Organizational effectiveness trends come and go, but some become embedded in the way extraordinary organizations do things because they actually produce results. One such proven tool is Six Sigma. Over the decades of the nineties GE under the guidance of the legendary Jack Welch was regarded by many experts as one of the most effective organizations in the world. When asked what he attributed much of this success to, he pointed to the Six Sigma organizational effectiveness system as the essential tool that helped him drive quality throughout the organization, saved him millions in increased efficiency, and kept his customers enthusiastic. (Jack Welch and the GE Way by Robert Slater) Six Sigma is derived from a highly technical method originally used by engineers and statisticians to fine-tune processes to near perfection. The name Six Sigma itself refers to a statistically derived performance goal of only 3.4 defects for every million opportunities.

Six Sigma encompasses a comprehensive system of management ‘best practices’ for reaching, sustaining, and maximizing the highest level of effectiveness for any organization. We at the Leadership Mentoring Institute feel it can benefit any organization because it provides a proven framework that creates an intense focus on customer needs, a disciplined strategy for the use of facts and analysis, and a strong attention to identifying, defining, improving or even reinventing processes to improve the quality of the customer’s total experience. Once you have the right people on board your team it gives you a disciplined way to be sure they are doing the right things the right way! Implemented and used correctly it will move your organization from ordinary to extraordinary.

Let us be very clear that Six Sigma is not TQM (Total Quality Management) revisited. It comprises a broad array of best practices that have proven to be key ingredients of organizational effectiveness efforts. It is a disciplined system of thought that encourages to start from the customer’s perspective and then seek ways to streamline our processes for serving the customer better. One of Six Sigma’s big strengths is that it stresses listening to the voice of the customer. Don’t just look at your organization from your perspective like a horse with blinders on! Encourage your entire organization to join you in determining if you really are meeting your customer’s needs in such a way that they are becoming enthusiastic referrers of your organization. Do you and your team really know what your customer’s service requirements are for your product or service? Every customer has these, and unless you really know what they are how can you possibly meet or exceed them?

With your team sit down and describe using customer language what they really want from you. An example might be, quality wise they want your product or service delivered with high quality in a caring way, but they also want an accurate and understandable bill, and very clear payment options. Concerning speed, they want their needs met with a minimum of waiting time. They want to be treated efficiently and then be on their way, but not feel pushed out or discarded. This might seem like a jumble, but the customer sees it as a cohesive process, any one part done wrong can ruin the whole experience. Working with your team and emphasizing the customers voice and perspective you can quickly develop a detailed list of customer expectations. As a team rate yourself on how you are doing on meeting and exceeding these customer expectations and determine areas for improvement. Let’s be honest though. Many times you need an outsider’s perspective and some independent customer data to really shatter people out of their complacency. If it was easy to really get the customer’s voice and perspective everybody would be doing it.

A good exercise is to sit down with your team and write out a process roadmap. Start from the first customer contact and look at the workflow and operations. Keep it simple using little boxes for each process or operation and directional arrows for flow. This is called your value delivery system. Organizations are often surprised that they can’t get agreement on exactly how they deliver value. When you finally get your system written down in a process roadmap ask yourself how well it delivers the service requirements your customers demand?

We have found that training your entire team on some of the simpler Six Sigma processes we will describe below goes a long way in changing their perspective on the customer and indeed your organization. Instead of just taking and filling orders like a pharmacist, they become diagnosing problems like a physician. Instead of reacting to quality or customer problems, they start acting on preventing problems before they occur and proactively improving processes before they are broken! It can really get people to see they are all part of the selling and serving process and start to convert your organization into a selling and serving engine.

From a macro perspective there are some crucial things you can do to get your culture to accept Six Sigma as a new way of doing things around here. At the Leadership Mentoring Institute we like the overall model developed by Carnegie Mellon’s Software Engineering Institute. It is called the CMM or Capability Maturity Model. They use the acronym IDEAL to describe this organizational approach.

• Initiating: This includes developing a sense of urgency, shattering complacency, providing a stimulus for improvement. This can be a consultants report, but usually it is a whack upside the head by a competitor or a key customer. The second phase of initiating is then to develop a sponsor who has organizational visibility and clout, and identify key stakeholders who have a vested interest in the process and will help own the project. As a last step in the initiating phase you want to establish an improvement infrastructure. This does not mean establishing a bureaucracy. It does mean establishing accountability.
• Diagnosing: The current organization and its practices needs to be appraised. Some recommendations need to be developed and documented. The results should be shared openly in the organization. How well are we serving current customers? How do we stack up against the competition? What are our Strengths, weaknesses, opportunities, and threats? Hopefully this can convert any lagging team members who haven’t developed a sense of urgency!
• Establishing: Make sure everyone knows the top leadership is committed to the organizational improvement effort. Get them involved in selling the strategy and setting priorities. Establish cross-functional action teams and plan out your actions. Provide company-wide training on the simple Six Sigma approaches we will outline below.
• Acting: Define key core processes from a customer’s perspective. Develop benchmark measures and key performance indicators. Plan and execute pilots. We will describe this key phase in more detail in a second.
• Leveraging: Document and analyze your lessons and results. Market the impact throughout the organization. Then revise your organizational approach to doing business to reflect the new realities you have discovered. Make this continuous improvement a part of your culture. Your goal should be that every core process at every key step should have a continuous improvement measurement procedure in place.

A key part of the IDEAL process above was the acting phase. In greatly simplified form Six Sigma encourages us to do the following to improve our ability to deliver our product or service more efficiently and effectively so they meet our customer’s service requirements. ( Six Sigma Simplified by Jay Arthur)

• Identify what your key processes areas (KPA’s) are from a customer perspective. Your goal is to make all of your processes better and faster. But first start with a critical core competency that has maximum impact on customers. Your objective is to improve speed of delivery by eliminating delays and increase your quality by preventing defects. You want to increase the good and decrease the bad. It really helps to put the process in a visual ‘process roadmap’ format using either Microsoft Visio or another process charting program. Most people are visual learners and having to put the process into pictorial format really makes you get specific.
• Define customer service requirements. Come up with a clear and complete description of the requirements that that drive customer enthusiasm for this process and its outputs.
• Benchmark current performance. It is not unusual to find that key elements of essential processes have no performance indicators. No one has thought to measure it even though it is having significant impact on customers either good or bad. If you can’t measure it you can’t manage it. Our experience is that with enough thought everything can be measured.
• Discover high potential improvement opportunities. Sometimes there aren’t any, although this is extremely rare. Usually you will find some huge opportunities to improve speed by eliminating delays or increase quality by preventing defects. One valuable tool from Six Sigma is called the impact/effort matrix. On a vertical scale ranked 1-5 you have the estimated degree of impact with 1 being low and 5 being high. On the horizontal axis you have effort rated on a similar 1-5 scale. Have your team suggest possible improvement opportunities and place them on the matrix . Obviously high impact/low effort solutions should be favored.
• Create a gap statement: This would include information on which core process is involved, what is wrong, and what is the opportunity if we close the performance gap? Exactly how big is this to our customers and organization?

Obviously identifying the opportunity gap is critical but how do we go about closing it? The following is the basic Six Sigma five-step model. (See The Six Sigma Way by Pande, Neuman, and Cavanaugh)

• Define the problem with a clear problem statement and goals for improvement. You will usually find improvement in quality, speed, and profitability. An increase in quality comes from a decrease in defective procedures or redoing of procedures. An increase in speed can come from a decrease in time to deliver a product or the reduction of idle time caused by a bottleneck—people, materials, or machines—not being kept active and productive. An increase in profitability is equal to a decrease in the cost of work and rework.
• Measure the problem. Determine what the current problem is causing you in time, money, quality, and speed. This provides a benchmark to measure progress against as you make changes.
• Analyze the problem to identify root causes of the problem. What we often think of as the cause of the problem is often only the symptom of a deeper cause. Brainstorm with your team to come up with all the possible causes of the problem. Most problems do not have just one cause. Also, encourage them to get as far upstream as possible. Use the analogy of a river having a pollution problem. You need to go to the source. Start as far upstream of the process as you can and check the quality of the flow. Catching a problem after it occurs is far more expensive than preventing it before it happens!
• Improve the process to remove the source of defective service or goods. These causes can be such things as lack of capacity in equipment, poorly designed service processes, improper talent selection or placement, lack of training, inadequate software, etc. The key is to identify and define them, then set specific, measurable, attainable, relevant, and timely goals to improve.
• Control the process to make sure the problem doesn’t reoccur. Train everyone to on the alert to prevent problems before they occur.

As you continue to integrate the Six Sigma process or Capability Maturity Model into your way of doing things you will find there are five things your people will begin to automatically look for that can create process problems. (The Six Sigma Way team Field book by Pande, Neuman, and Cavanaugh)

• Disconnects: These are steps in a process where breakdowns in communications occur. These can be between customers and your team, the leader and the team, or within the team as a process moves from person to person or department to department. Any handoff can be a source of error or fumbling the ball! Disconnects can also be caused by supplies not arriving in a timely fashion or in incorrect quantities. Any such handoffs or potential disconnects should be represented by a black arrow on your process roadmap to indicate close observation.
• Bottlenecks: There are points in almost any process where the workflow sometimes overwhelms the capacity of the system. This causes backups that slow the entire process. Sometimes just the addition of some equipment or one extra person can have a dramatic impact on the speed of the process. Anything that can speed up the cycle time of product or service to the customer without having a negative impact on quality will almost always translate into improved profits and customer retention.
• Redundancies: These are steps in the process that are duplicated elsewhere. For example, we often ask the same customer for the same information at two or more different places in the process. By standardizing and streamlining procedures and training all staff we can hopefully eliminate redundancies.
• Rework loops: This is where a process has to halt or be rerouted because of missing parts or information. You reach for a piece of equipment or search for a bit of data and it is not there. Every time you experience a ‘rework loop’ know that it is costing you money and time and possibly even the customer. If nothing else, rework can cause the customer to lose confidence in you as they experience delays.
• Decision/inspection points: Too much rethinking of your actions or waiting too long downstream to make decisions can create lost productivity. Push as many decisions upstream in the process to reduce the chance of rushed efforts or patch jobs. The great management guru Peter Drucker says that the most effective executives only make a few good decisions. If they make too many, they should look at the situation and see if they can’t systematize it or standardize it to minimize decisions to just critical factors. The more decisions you have to make the more chance for error.

Why are these five factors so important? They each cause delays or defects that translates into dollars and dissatisfied customers. Having every employee trained to spot these factors, no matter how small they seem, quickly multiplies into solid profits and improves service. It is not doing one thing 100% better, but doing 100 things 1% better!

As you have probably picked up one of the real keys to organizational effectiveness is the total team’s involvement in creating high performance standardized processes. We define process as a sequence of steps performed for a given purpose. In the extraordinary organizations every key process that can be standardized to a high level of performance is seen as an asset. If 80 % of the effort can be standardized, then our creativity can be focused on the other 20% we have not yet refined to a high level process. Such a high level of standardization also means that new members of the organization can also be trained to a high level of performance in a reduced amount of time and with fewer errors. They are set up for success not failure! The result is less turnover and faster time to productive deployment! Also, customers prefer consistency of offering, especially when it is a consistent level of high performance! A standardized process should produce consistently predictable results. Another way to say this is that effective standardization minimizes variability. It does this through simplifying training and helping people focus on the vital few things that matter. Standardized processes cannot become rituals though! They must always reflect the reality of the customer and the competitive marketplace, and should be subjected to continuous improvement on a regular basis.

Some other keys to implementation?

• Simplification of structure: Six Sigma or CMM can become a bureaucratic nightmare if you let the natural empire building tendencies take over. It should not be a separate department, but a part of everyone’s responsibilities. We call it Six Sigma Simplified or even Six Sigma Lite!
• Simplification of process: Some people have a tendency to overcomplicate. Keep it simple but spectacular. A process that is twenty pages long will never be followed. Avoid importance being equated with paperweight. If it can’t be put on one page it probably hasn’t been thought through well enough. Keep it simple and spectacular.
• Speed: It is not the big that eat the small, but the fast that eat the slow. You can’t let this process that is supposed to reduce cycle time start to add to cycle time by slowing down the process.
• Success: Make sure the success stories get out and the organization heroes who really produce the results get recognized.
• Shared experience: The extraordinary organizations make sure everybody who shares in the success share in the profits.

Our experience has been that this Six Sigma/CMM mindset can be a key component to high productivity and quantum profit growth. Teach your entire organization to learn to really listen to your customer’s voice and to think of what you do as a process that can be continuously improved. Get your team engaged in a disciplined way doing disciplined things and you will see extraordinary results.

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