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A R T I C L E R E P R I N T

Management

Update

Six Sigma:What It Is and How to Use Itby Hal Plotkin

No. U9906C

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Copyright 1999 by the President and Fellows of Harvard College. All rights reserved. 3

TS HARD not to bump into thequality movement known as SixSigma these days. Dozens of leadingcompaniesamong them General

Electric, Seagate Technology, Bom-bardier, and AlliedSignalhaveadopted the techniques pioneered byMotorola in the 1980s, and their man-agers burn with the fervor of converts.Its been remarked that we are just abit unbalanced on the subject of SixSigma, writes GE chief executive Jack Welch in a report to shareholders.Thats a fair comment. We are. To besure, Welchs evangelism may bejustified: GE estimates that Six Sigmaefforts added more than $600 million to the companys bottom line in fiscal1998.

Six Sigma goes well beyond earlierapproaches to quality, such as qualitycircles or TQM. For one thing, it has setthe bar higher by an order of magni-tude. Older approaches to quality worried about defects per hundred or defects per thousand. Six Sigmafocuses on defects per million. Then

too, it generally involves more far-reaching change in a company, andhence requires the active participationof top management. To reach SixSigma, companies cant simply fine-tune existing systems or teach peoplehow to do their jobs better. Rather, theymust be willing to toss out old proce-dures and methods completely andreplace them with new ones.

So what is Six Sigma exactly? In statis-tics, sigma is a measure of variation.When applied to a business process, its a measure of how many defects or failures are likely to occur per millionopportunities; the greater the sigmanumber, the fewer the defects. Theaverage product or process defect rateat most major companies hoversaround four sigma, or more than 6,000defects per million, according to MarioPerez-Wilson, former manager of a statistical methods department atMotorola. At the Six Sigma level, bycontrast, the expectation is just 3.4defects per million. Establishing theSix Sigma goal was a huge leap for-ward, recalls Perez-Wilson, now a SixSigma consultant.

Although Six Sigma was rooted in an effort to improve manufacturingprocesses, the techniques are increas-ingly being applied in other businessareas, including sales, human resources,and customer service. Defect, ofcourse, is defined differently depend-ing on the process involved. An HRdivision might set a goal of filling everyvacancy within a given time frame. If it fails to do so just once, that failurecounts as a defect.

But Six Sigma is more than a goal; it isalso a four-step process for achievingthe goal. (When you set that high astandard, says Perez-Wilson, youneed a mechanism for getting there.)The four steps are measure, analyze,improve, and control.

1 MeasureMeasurement can be as simple ascounting the number of defective prod-ucts that come off an assembly line. Butnonmanufacturing variables can alsobe measured. At GEs 7,000-employeeplastics division, for example, HR

manager Nancy Sykes measured all the variables that influenced how longit took her division to fill each vacantposition. Other activities commonlymeasured in Six Sigma programsinclude the time required to repairreturned products, the number of salescalls made per employee per day, andhow quickly customer orders areprocessed. There is nothing we do that cant be measured, says BruceMiyashita, former director of strategicinitiatives at Montreal-based Bom-bardier, a $5.5 billion maker of aero-space and rail transportation equip-ment, and recreational products.

2 AnalyzeAnalysis determines the performanceobjectives for an operation. Managersexamine optimal outcomes and attemptto understand how they came about,then establish procedures that makesuch outcomes routine. We take our best cases in each area, saysMiyashita, and then figure out whythat doesnt happen each and everytime. At Seagate Technology, a $6 billion disk-drive manufacturer head-quartered in Scotts Valley, Calif., engi-neers determined that yields and turn-around times on disk-drive repairswere sometimes adversely affected bythe way adhesive labels were removedfrom returned drives. At GEs plasticsdivision, Sykes learned that it tookmuch less time to fill open positions if new recruits already lived near theplant that hired them. After measuringall the factors that contribute to an idealhiring cycle, Sykes calculated it shouldtake no more than 50 days to fill vacant positions.

In Six Sigma terminology, factors suchas distance of potential new hires froma plant or the way adhesive labels areremoved from a returned product arecalled CTQs, for critical-to-quality, orCTXs, for critical-to-cost. Each vari-able is weighted using statistical mea-surement tools to determine its impacton the processes under study. Indeed,one key to the growing popularity ofSix Sigma is new off-the-shelf softwareallowing managers to use sophisticated

t r e n d w a t c h

Six Sigma:What It Is and How to Use It

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HR might set a goal of filling every vacancy

within a given time frame.If it fails just once,that

failure counts as a defect.

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statistical techniques to assess theimpact of different variables.

3 ImproveFor Six Sigma to work, managers mustbe willing to throw out old methods,procedures, and tools. Eighty-fivepercent of all the tolerances or specifi-cations found in the blueprints of toolsused by manufacturers have nothing atall to do with what they actually need,says Richard P. Schroeder, president ofthe Six Sigma Academy, a consultinggroup in Scottsdale, Ariz. At Seagate,engineers began using a different envi-ronmentthe technical term is sput-tering atmospherein one manufac-turing process after determining thatthe old one contributed to an unaccept-ably high defect ratio. We had thatproblem for years, says Don Redinius,VP of corporate quality/ Six Sigma.But we had to be willing to makewholesale changes to achieve theresults we desired. Thats what reach-ing for the Six Sigma level of qualitytaught us.

At Motorola, managers set a goal ofgetting more customers to check theVery Satisfied box in customer-ser-vice surveys. We call it our Top Boxprogram, explains Motorola seniorcorporate vice president and qualitydirector Dennis Sester. One step towardthe goal: managers revised proceduresso that 80% of returned products couldbe fixed and reshipped to customers the same day they arrived at the plant.Theres been a substantial improve-ment in our customer satisfaction num-bers since then, Sester reports.

4 ControlOnce new processes are in place, thegoal shifts to monitoring the processesto make sure high quality levels aremaintained. At GEs plastics division,HR takes action if there are insufficient

numbers of qualified applicants 20days after a job vacancy has beenposted. We know that if we dont havea good talent pool to choose from within20 days, we might have a problem,says Nancy Sykes. The hiring processis kept within optimum parameters byincreasing the number and size of clas-sified ads or by the rapid deployment of other recruitment practices. Wedont let things slip away from us,says Sykes. We know what is happen-ing each step along the way. If some-thing falls out of line, we take immedi-ate action.

Six Sigma programs often result in thecreation of such new metrics, which aredesigned to measure the performanceof specific operations in real time. Youhave to foolproof the process so it cantbe altered, says consultant Schroeder.Adds Seagates Redinius: Imagine ifyou tried to drive a car by looking outthe window one second out of everyminute. Thats how most businessesoperate. With Six Sigma, if you havethe right feedback mechanisms inplace, you know what is happeningwhile it is happening.

Effective implementation of a SixSigma program requires a major com-mitment on the part of top manage-ment. This is really not something youcan do part-time, says Dennis Sester.Under one program, key senior man-agers go through a several-weeks train-ing process to earn the title of SixSigma Black Belt. They then lead pro-jects designed to improve carefully targeted areas of business operations.You have to be very selective, andpick the right projects for Six Sigma,says Perez-Wilson. Reducing the timeit takes to respond to customerinquiries is an ideal project. Improvingthe design of a car might not be appro-priate, unless it could be broken down

into discrete, manageable activities,such as reducing the cost of design orimproving the cars aerodynamic pro-file. According to the Six Sigma Acad-emy, a typical Six Sigma Black Beltcan undertake five to six projects peryear, with average savings in the rangeof $175,000 per project.

Six Sigma is not a product you canbuy, adds Sester. Its a commitment.Sester calculates that Motorola hassaved more than $15 billion in the 10years its Six Sigma practices have been in place. Even so, he admits thatMotorola has not yet achieved the over-all goal of 3.4 defects per millionopportunities in many of the com-panys operations. Its a very, verytough goal to achieve, Sester says.The important thing is to keep work-ing at it. Its a continual process ofimprovement. v

HAL PLOTKIN

If you want to learn moreSix Sigma: Understanding the Concept,Implications, and Challenges by MarioPerez- Wilson (1999, Advanced SystemsConsultants Press, 308 pp., $98.00. Tel. 602-423-0081)Six Sigma: A Breakthrough Strategy forProfitability by Mikel J. Harry, QualityProgress, May 1998, pp. 6065.

General Electrics online Quality Coach(www.gelearningsolutions.com/QualityCoach) offers a Web-based Six Sigma software package. Price: $2,000 for up to 50 users.

For a listing of several dozen articles on SixSigma and related topics, visit the Web site of the American Society for Quality(www.asq.org), click Quality Infosearch,and type in six sigma. The ASQ offers SixSigma Black Belt Training in partnershipwith the Six Sigma Academy. For informa-tion, call 800-248-1946 or 414-272-8575.

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