Avoiding Six Sigma Sickness

It seems everything within corporate America is getting six sigmitized. Yes, Six Sigma is a well-defined methodology for improving quality, which in turn, leads to control over costs. However, like any major business initiative, Six Sigma can have its drawbacks. This article will outline a few of the pitfalls that sometimes are associated with Six Sigma.

Before we jump in – let's go back to what Six Sigma is. Six Sigma is about how you use resources and the more resources consumed, the higher your costs. Therefore, if we require less time, effort, materials, and other resources to produce something, then we invariably lower our costs. Activity Based Costing also tried to deliver on this cost control approach; but Six Sigma finally broke through on giving management a set of standard tools for controlling costs within a process. One of the big payoffs for Six Sigma over other re-engineering programs is that more effort is not required (at least that's what the experts say). Unlike other process improvement programs where people are forced to work harder, Six Sigma is aimed at getting people to work smarter, not harder.

“It would be a mistake to think that Six Sigma is about quality in the traditional sense. Quality, defined traditionally as conformance to internal requirements, has little to do with Six Sigma. Six Sigma is about helping the organization make more money by improving customer value and efficiency. Six Sigma focuses on customer requirements, defect prevention, cycle time reduction, and cost savings. Thus, the benefits from Six Sigma go straight to the bottom line. Unlike mindless cost-cutting programs which also reduce value and quality, Six Sigma identifies and eliminates costs which provide no value to customers, waste cost.”
The Six Sigma Handbook by Thomas Pyzdek

Where Six Sigma does excel is in the setting of standards for measuring, analyzing, and reducing inefficiency. However, forcing every single business activity into this Six Sigma Model may not work. Such was the case with NBC, a business unit of General Electric. Not every activity or process should be squeezed into a quantifiable model when in fact, the real value proposition gets completely lost. For example, a book publisher followed the Six Sigma Model in the production process of books. The production process became perfect – every letter on every page was produced without defects and no books were rejected from the assembly line. However, no-one was interested in buying the books – the content itself was poorly developed. The real value that the product creates for the customer got lost in the Six Sigma frenzy of perfection within the production process.

Another common problem with Six Sigma is playing games with the numbers. How you categorize and define defects is significant in how well you meet Six Sigma targets. For example, do you look at the number of defects throughout the motherboard of a personal computer or do you look at defects on the PC Battery installed on the motherboard. By simply changing the definition, you can dramatically change your sigma level of perfection.

Like so many major initiatives, Six Sigma can receive less than enthusiastic response from workers. For example, Six Sigma can be somewhat divisive – a few people are chosen as Black Belts, a larger group is selected as Green Belts, and others are not included at all. In order for Six Sigma to be truly accepted, everyone should be given an opportunity to become a Green Belt and people who have demonstrated strong leadership on improvement issues should be considered for Black Belts. Don't exclude people on such a major enterprise-wide initiative as Six Sigma.

Start with selected processes; don't go full scale until you work out the bugs. From initial projects, you can roll-up “lessons learned” into further projects. Up to one-third of your process should be considered for Six Sigma at the outset since many will fail to fit with the Six Sigma methodology. You want to flush out the successful practices that will work since you need to leverage your investment in Six Sigma. And the investment can be high (especially for black belt training). Additionally, it's best to run pilot programs to work through design flows and techniques.

Finally, Six Sigma should not be viewed as TQM (Total Quality Management) or a new approach to re-engineering. People are very skeptical over such initiatives. Instead, you should allow people to use Six Sigma as a set of management tools for changing how they do things. And when balanced against other value-added management processes, Six Sigma should compliment and add value in its own unique way without impeding other critical drivers of success. If you fail to find this right balance, Six Sigma can be a recipe for making you sick.

A good example of how Six Sigma can make you sick was Polaroid. Polaroid, a large manufacturer of cameras found out the hard way. Polaroid put enormous emphasis on quality, but failed to pay attention to a critical product substitute, digital cameras. As a result, Polaroid went bankrupt despite its outstanding quality. So make sure you balance Six Sigma against all those other factors in running your business; otherwise you will destroy value in the name of quality. This is perhaps the biggest risk with Six Sigma – getting blindsided by all those other things that impact your business.

Keep in mind that “quality” is almost a given in the marketplace; i.e. when you and I buy an automobile, we expect high quality. The point is simple – quality may not be as important to your long-term survival as other factors. And if your focus is narrow and driven by Six Sigma alone, then you will invariably get sick, just like Polaroid.

“Implementation of any change effort within an organization is difficult. However, compounding the difficulty with Six Sigma is the level of associated comprehensive tools and techniques. Resistance is a natural, often genetic reaction to any change in our lives. Unmanaged and unaddressed, the resistance to Six Sigma will spell the downfall of the effort.”
- Making Six Sigma Last by George Eckes

Written by: Matt H. Evans, CPA, CMA, CFM | Email: matt@exinfm.com | Phone: 1-877-807-8756

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