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Business Theory

Business theories come and go, but one that has outlasted the rest is Six Sigma. Still going strong after 10 years, major corporations from around the globe have based their entire business structure on this philosophy.

So what exactly is Six Sigma? In layman's terms, Six Sigma is a measure of quality striving for perfection; it is a data-driven approach for the elimination of defects in any process.

The roots of Six Sigma can be traced back to the 1920s, when Walter Shewhart introduced the basic ideology of how processes could be corrected. Many measurement standards branched from this original conception, but Six Sigma — coined by Motorola engineer, Bill Smith, and trademarked by Motorola — has become the accepted "next generation."

In the 1980s, Motorola's chairman, Bob Galvin, decided that traditional quality levels didn't work, so the company developed a new standard. Using this methodology, Motorola has realized more than $16 billion in savings between 1986 and 2006. In 1997, GE became one of the next corporations to initialize the philosophy broad spectrum and realized $300 million savings in the first year of use. Since then, hundreds of companies around the world have adopted Six Sigma as a way of doing business.

Companies use Six Sigma because it helps identify and fix problems, while also exposing areas of opportunity. Six Sigma also helps reduce costs, increase revenues, improve process speeds, raise quality levels and expand customer relationships.

How is Six Sigma implemented? As the methodology is complex, and it is often difficult for a company to implement in an unbiased fashion, usually a consultant familiar with the approach is called in to assist.

According to John Morgan, director of Catalyst Consulting, and the author of the article "Six Sigma - So What?", Six Sigma can be viewed by a company as a number of different things; however, from your customer's perspective, it simply means you are getting it right. "And you are getting it right virtually every time, with less than four defects in every million activities," Morgan added. "Six Sigma equates to 3.4 defects per million opportunities, and the 'defects' are aspects of your process, product or service that the customer has identified as important. So that's why the fuss!"

Morgan states that Six Sigma is a rigorous, quantitative approach to quality improvement. And he should know: his many years of experience include operational and management roles for major insurance companies. He is a regular speaker on the conference circuit and leads the workshop "Six Sigma and Business Excellence."

"The improvement projects undertaken in a Six Sigma initiative will clearly link to the organization's strategic ambitions and business plans," Morgan said. "The efforts are firmly focused on improving customer satisfaction and the bottom line."

Morgan lists these key elements in achieving Six Sigma:

  • Genuinely focus on the customer and identify his or her key to quality requirements
  • Ensure that processes are designed and managed to meet these key to quality customer requirements
  • Ensure that appropriate measurements are in place to understand how well you are meeting the customer requirements and how well the customer feels you are meeting the requirements
  • Involve your people and ensure they are effectively equipped so that they are able, and feel able, to challenge their processes and improve the way they work
  • Undertake this improvement using a systematic problem solving and process improvement approach

Case in Point
An example of a company benefiting from using Six Sigma is JLG Industries Inc., a leading producer of telehandlers and aerial work platforms. In June 2005, JLG announced increased focus to its Six Sigma program, along with an organizational alignment intended to support the company's strategic plan and specific initiatives to grow its service operations and diversify channels to market.

"The first year of our Six Sigma program has been very successful, and now is the opportune time to expand its impact by focusing our commitment to this strategic initiative under John's leadership," said Bill Lasky, JLG chairman of the board, president and CEO.

JLG also announced the promotion of John Louderback as vice president of Six Sigma, Quality Processes and Training.

"[Louderback] has been the Six Sigma champion from day one, and he is to be commended for his passion and desire to institutionalize the principles of Six Sigma at JLG," Lasky said. "We expect that he will lead our efforts to even greater levels of success."

Six Sigma vs. Lean Six Sigma
While Six Sigma methodology aids in increasing the quality of a service or product, Lean Six Sigma methodology aids in increasing the speed and reducing the cost to provide the service or product. While Six Sigma can stand alone as a business strategy, Lean Six Sigma is best incorporated with implemented Six Sigma methodologies. In other words, a mason contractor may want to increase speed and reduce costs, but he or she will need to tackle any issues of quality first.

According to Dennis J. Monroe, a vice president specializing in business performance improvement at the Juran Institute, which provides a wide range of training and consulting services designed to improve overall business performance, Lean Six Sigma differs from the traditional version by bringing additional tools and methods to the mix.

"The two methods are very complimentary," Monroe said. "Imagine trying to make a process Lean with the requisite low in-process inventories when that same process has a high level of defects throughout. The task then goes from difficult to impossible. In order to succeed, both Lean and Six Sigma improvement methods must be applied to the process."

Over the past five years, both methodologies have seen an explosion of books published covering their topics, which will only help to elevate the interest in Six Sigma and Lean as more business leaders become immersed in the published materials now being made available. Each year, however, books published on the topic of Six Sigma consistently outpace Lean by a wide margin.

The difference in prominence between Six Sigma and Lean may be due to the fact that Six Sigma has been able to move beyond its roots in manufacturing into other disciplines, while Lean is still largely perceived as a tool to improve manufacturing processes.

"This perception is changing as more and more businesses across the board are looking to blend the best of each methodology to accelerate their continuous improvement efforts," said Tim Noble, managing principal of The Avery Point Group, an executive recruiting firm and publisher of "Lean Versus Six Sigma ... And the Winner Is?"

"Companies are increasingly realizing that these are truly complementary tool sets and not necessarily competing philosophies," Noble said.

Six Sigma for the Mason Contractor
This sounds all well and good, but Six Sigma theories are typically utilized in manufacturing, medical and financial fields. How can mason contractors use these methodologies in the construction industry? Monroe says any product — goods, services or information — is the output of a process.

"A mason contractor provides a combination of goods and services to customers, plus the labor and skills required to construct a wall, building, structure or whatever is required," Monroe said. "All these processes contain features of ineffectiveness and inefficiency, higher than desired levels of defects and variation, longer than desired process times, wasteful activities, etc. These process deficiencies lead to less than a desirable fulfillment of customer expectations and, often, dissatisfaction.

"Application of the Lean Six Sigma tools and methods can help reduce these deficiencies in any process and, thereby, reduce the levels of dissatisfaction by meeting customer expectations."

Of course there are differences when using Six Sigma in a service industry rather than in a manufacturing industry, but Monroe said the differences are minute at most.

"A service is just another type of process or product," he said. "Since all products are the result of processes, Lean Six Sigma tools and methods are equally applicable. The main difference between a process, where the output is based on services provided compared to goods produced, is that measurements of process effectiveness (defects and variability) may be difficult to analyze statistically and involve more basic (graphical or logical) tools instead. The measures of efficiency (cycle time, value-added ratio, etc.), are identical."

In the end, the real winner is any company that successfully engages in some form of continuous improvement, regardless of whether it is Six Sigma, Lean Six Sigma or some other well-executed approach.

"I can't think of any company that claims to be world-class that is not utilizing some form of continuous improvement approach," Noble said. "World-class status is a constantly moving target defined by both your customers and your competitors. Without a continuous improvement approach, you're not even treading water in today's global economy."

Six Sigma Resources:

GEwww.ge.com/sixsigma

i Six Sigmawww.isixsigma.com

"Lean Six Sigma for Service: How to Use Lean Speed and Six Sigma Quality to Improve Services and Transactions"
by Michael L. George






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