The figures are daunting: Motorola credits it for $17 billion in savings since 1986. General Electric estimates it saved $10 billion in the first five years, and it cut invoice defects and disputes by 98 percent. Ford cut waste by more than $350 million in 2002 alone.
It started with manufacturers, but now Six Sigma is everywhere: Bank of America, Chevron, Dow Chemical, Fidelity, Lockheed Martin, Microsoft, Sony, UPS. It’s caught on with the U.S. Air Force, the Army and the Pentagon, NASA, the Florida Department of Corrections.
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Should your business be next?
Paul Dacey, manager of a new Six Sigma program at Bryant University’s Executive Development Center, says the system can work for almost any kind of company, big or small, as a comprehensive effort or to fine-tune a specific process, such as customer-service calls.
“A lot of folks are saying: The GEs, the Motorolas are doing it – how can we do it?” Dacey said. “It really is a feasible thing (even) for a small local organization.”
This Thursday, Bryant is hosting a breakfast seminar to explain how small- to mid-sized businesses can use Six Sigma. Year-round, it’s also offering a full range of Six Sigma courses: from an entry-level “yellow belt” program, three days for $2,195; to a six-day “green belt” program – for managers preparing to run their first Six Sigma project – for $4,195; to the expert “black belt” program, for “green belts” who want to upgrade, 10 days for $8,195.
Never heard of Six Sigma?
It started at Motorola in 1986, as the goal of a major global competitiveness initiative: Within five years, Motorola executives decided, they would improve quality tenfold, aiming to have no more than 3.4 defects per million opportunities.
Quality engineer Bill Smith called the plan “Six Sigma,” from the standard-deviation concept it’s based on. It became the centerpiece of a whole new business strategy, applied to all manufacturing processes. Managers focused on it; employees were trained to work toward it.
By 1994, Motorola had reduced manufacturing costs by $1.5 billion, and other companies began adopting Six Sigma – most notably General Electric, which extended the concept to all business areas. Then-CEO Jack Welch called it “the greatest fulfillment engine ever devised.”
Over time, Six Sigma has evolved from a standard to a broader management philosophy and methodology focused on quality control and efficiency. It’s now taught by executive training programs around the world; Motorola and GE especially promote it avidly.
What distinguishes Six Sigma from other quality-improvement systems, Dacey said, is that it’s very customer-focused, and it’s expressly meant to improve the bottom line.
Six Sigma is built on the notion that customers want consistent, reliable quality, so business processes must be designed to minimize variations and defects in the areas that customers care about the most.
A company adopting Six Sigma might start with a “readiness assessment” by a consultant to evaluate how it operates, help set improvement goals, and look at specific processes that can be targeted, Dacey said.
Say a bank wants to improve the way its call center takes mortgage applications – specifically, reduce the number of errors. The first step would be to quantify the problem, and then set a goal: say, to cut the error rate from 1 in 100 to 1 in 500.
Then the bank would look in detail at where the mistakes are being made, and how the process might be improved to minimize them. Maybe the room is too noisy at peak hours, so people mishear things. Maybe the keyboards are old and skip characters. Or maybe the questions the staffers are asking are poorly worded.
The analysis would produce a plan to correct the problems, and the bank would then implement the changes. But Six Sigma doesn’t end there: After a few months, the bank would then go and compare the data to see whether the plan worked – maybe even come up with new ways to measure performance. And it would keep refining the process more and more.
The work itself wouldn’t be done by consultants, but rather by in-house staff trained in Six Sigma. Depending on the complexity of the project, Dacey said, a company might get one or two people trained as “green belts” and a couple of others as “yellow belts.” Over time, as Six Sigma expanded through the company, other executives could become green belts, and one or two might upgrade to black belts.
Given the expense of training, not to mention the work involved, Six Sigma is acknowledged even by its proponents to be an expensive endeavor. But Dacey said it’s worth it, especially for companies that are competing with others who are already using the system.
“It’s really kind of trickling down to the smaller organizations,” he said. “For example, Bank of America is a large Six Sigma house. So smaller banks are saying: ‘They’re our competitors locally. We need to keep up with them.’”
