Every business and industry relies on strategic management to help fulfill a business’ goals and objectives. Strategic management oversees a company’s activities and develops tactics in order to plan projects, implement company policies, and allocate resources. It is an ongoing process that never stops and is always evolving to better guide a company toward its goals.
Throughout the years, there have been many different strategic management methods but few as widely used as Six Sigma. What is Six Sigma? Six Sigma is a strategic management process that was developed by Motorola. It is a data-driven approach to improve the output process by targeting and removing causes for defects in a business model. It is sort of like quality control but much more detailed. By implementing a set of quality control methods and creating a set of skilled personnel to watch over and troubleshoot the process, Six Sigma seeks to reduce costs while improving production. It is used around the world and is regarded as one of the major systems for TQM (Total Quality Management).
History and Development of the Six Sigma Strategy
The name Six Sigma is derived from the Greek letter sigma which is a standard deviation that measures variations within a statistical population or set of data. The theory of Six Sigma is that if there are six standard deviations between the process mean and the nearest specification limit, then there should be no items that do not meet the specifications or objectives of a process. These standard deviations are measured in sigma units. Six Sigma’s main purpose is to deliver high performance while keeping the number of defects and cost down.
The specific elements of the Six Sigma were first developed by Bill Smith at Motorola in 1986. Six Sigma was originally developed as a set of practices that were used in manufacturing processes to eliminate defects. However, its application was expanded to be used in other types of businesses. One of the things that make Six Sigma so popular is that by using this methodology, processes that operate over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). So the overall goal of Six Sigma is to improve all processes to that level of quality or better.
The Six Sigma process draws its inspiration from earlier quality management systems such as quality control, TQM, and Zero Defects. Like earlier quality management systems, Six Sigma has some of the same standards. Six Sigma uses continuous efforts to achieve stable and predictable process results and reduce unacceptable variation. The methodology states that all manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled.
For any quality management process to work effectively, there must be commitment from the entire business, particularly from all management levels.
While Six Sigma shares all of those traits with other methodology systems, it has other factors which are different. It focuses strongly on achieving measurable and quantifiable financial returns from any project that uses this method. Six Sigma also emphasizes strong and passionate management leadership and support. It sets up an infrasctructure of specialists within the Six Sigma system to lead and oversee the implementation fo the Six Sigma methodology. These specialists are referred to as “Champions”, “Black Belts”, and so on. And finally, Six Sigma emphasizes making decisions based on verifiable data rather than guesses and hunches.
Some of the companies that used the Six Sigma methodology early on and showed some success from it application were Honeywell Industries and General Electric. Their much-publicized success with this system prompted other companies to jump on th ebandwagon. By the late 1990s, about two-thirds of the Fortune 500 companies began using Six Sigma.
Six Sigma Methodology
The Six Sigma system uses two key methodologies: DMAIC and DMADV (I’ll explain what these mean in a moment). DMAIC is used for an existing process. DMADV is used when creating a new product or process. DMADV is the preferred method for new projects because the results are more predictable and produces a higher quality product.
DMAIC follows these five steps:
- Define goals to improve the overall process between your company strategy and your customer’s demands.
- Measure your current processes and collect relevant data. This data is then used as a baseline for future comparisons.
- Analyze the data to inspect cause and effect relationships within the process. It is important to understand this relationship so that you can keep your companies strategy in line with your customer’s demands.
- Improve the process based on the data. It is important to constantly improve and alter the process to fit the current situations by using different techniques. One technique that is often used is Design of Experiments which can help to test a hypothesis.
- Control is important because you must control and correct any variances to avoid defects and prevent the loss of quality. A common thing to do is to set up pilot runs to study process capability and production transition.
DMADV is the second methodology and uses these five basic steps:
- Define goals that are consistent between your business strategy and customer demands.
- Measure and identify characteristics for CTQ’s (which stands for Critical To Quality). These should consist of production processes, the capabilities producing a product, and risks.
- Analyze and evaluate to develop alternative designs, choosing the best design for the overall process.
- Design the details in order to optimize the design features. You should plan for design verifications and alternatives. This may require you to run simulations
- Verify the design. This includes setting up pilot runs and running a short production to verify that the design works. Afterwards, you can handover the design to process owners.
Statistics of the Six Sigma Strategy
At the heart of the Six Sigma methodology is statistics. Statistics of all the data in a particular process are analyzed and reviewed using analysis tools and techniques. Six Sigma focuses on using the results of this collected data to solve problems and design an approach that will lower variations and defects. While Six Sigma uses statistics and data to interpret the best methods to be used, you only need the basic statistical tools and analysis methods to complete it.
Hierarchy Implement Roles
One of the key factors of the Six Sigma methodology is the unique management levels. Other quality management systems before Sigma Six utilized management that was either relegated to the production floor or to management in a separate department. Six Sigma uses a management hierarchy based on ranking levels of the martial arts. These levels cut out a lot of unneccesary functions that slows things down and develops a communication path that leads straight to higher-management levels.
Here are the different management roles for Six Sigma:
- Executive Leadership includes the CEO of a company as well as other members of top management. This level is responsible for setting up the Six Sigma process within the company and for giving power and freedom to the other hierarchy roles to oversee Six Sigma implementation and to explore new ideas and designs.
- Champions are beneath the Executive Leadership and are responsible for implementing Six Sigma across the entire business or organization. Champion positions are filled from upper managemnt leveles and act as mentors to Black Belts.
- Master Black Belts are the coaches and motivators on Six Sigma. They are chosen by and assist Champions as well as guide Black Belts and Green Belts. Their duties involve making sure that Six Sigma is consistent throughout various functions and departments.
- Black Belts are directly under Master Black Belts. Their task is to apply Six Sigma methodology to specific projects within the business or organization. While Champions and Master Black Belts focus on identifying Six Sigma projects and general overseeing them, Black Belts focus on the actual execution of the projects.
- Green Belts are guided by Black Belts. These are employees of the company that are given specific tasks to do along with their regular job responsibilities.
Criticism of Using Six Sigma
While Six Sigma has proved successful in many industries, it has also drawn its share of criticisms. For instance, the use of “Black Belts” and opthe rmanagement levels has created an entirely separate industry of training and certification where there was none before. The accusations are that Six Sigma is being advertised and oversold by consulting firms that do not understand all of its principles. These firms are only interested in their own profit, not what works best for their client.
Another criticism is that Six Sigma is too narrow to be successfully applied to a wide range of products. Six Sigma is not the best tool to use to come up with new products or technologies which is what many companies try to use it for. Instead, it is best when implemented to fix an existing problem. Studies have shown that some Fortune 500 companies that have used the Six Sigma methodology have fallen in ranking due to lower productivity.
Other critics have claimed that Six Sigma is the same as any other basic quality management system. The only difference is that Six Sigma uses creative terms and a different names (such as Champions and Black Belts) for management levels to make it seem more appealing.