Livro Six Sigma - Beyond The Factory Floor

SIXSIGMA BEYOND THE
SIXSIGMA BEYOND THE FACTORY FLOOR

Deployment Stmtegies for Financia1 Services, Health Care, and the Rest of the Real Economy
Ronald D. Snee Roger W. Hoerl
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Tbis book i s dedicated to our spouses, Maljcirie and Senecca, whose supporr and understanding went well beyond wbat was reusonable to expect.
Ii TABLE OF CONTENTS
I
Pxeface xv
Chapter I
A Holistic View of Six SiFactory Floor
The fmpact of Six Sigma Beyond the

8
12 Lntangible Impact
integration of Process Design, Process Zmprovement, and Process Control The Essence of Six Sigma 15 Deployment Aspects 16 Improvement Projects 18 Six Sigma Methods and Tools 20 Roles of Six Sigma Leaders 24 The Rest of the Story 27 Summary 28 Referentes 29
Table o f Contents
i-ii
Chapter 2
Addresshg the Fundamental Barrier: "We're Different!" 31

Why Six Sigma Hasn't Been Deployed Hoiistically 32 Some Potential Root Causes 33 The Fundamental Barrier 36 What's Different? 38 Conceptual Differences 37 Technical Differences 43 What's Similar? 49
What 1s Process Thinking? 58
Sumrnary 62 References 63
Chapter 3
DepIoyment Case Studies

Deployment Strategy 70 Next Steps 72
67
The Bank ofAmerica Story 68

Comrnonwealth Health Corporation 73
Gening Started 74 Deployment Strategy and InitiaI Resuits 75 Expansion o f the Effort and Current Statu 79
Motorola Finance
83
Deployment Within the Audit Staff 84 Broader Deployment Within Finance 86
GE Research and Development 89

Corporate Research Gets h t o the Acc A StmtegyTakes Form 90 Design for Six Sigma 92 Some Unique Challenges 96 Key Deployment Lessons Learned 97
90
Summary 100 References 101
Chapter 4
A Proven Deployment Road Map
103
105
Keys to Success
104
Cornrnitted md Involved kadership
T q i Talent 107 Suppnrting Infrastructure 109 Iload Map f o r Leading Six Sigrna I 12 hunching the Initiative 115 Managing the Effort 116 Siistaining Momentum and Growing 117 The Way W e Work 1 17 Taiioring the Road Map for Ynur Organization 122 Deployment PIan Elements 124 Smte~y and Goals 125 Process Performance Measures 126
Project SeIection Criteria
128
Project Ideintification md Prioritization System 129 Deployment Processes fur kdders 129 Roles of Leadership and Others 130 Curricula and Tnining System 130 Project and Six Sigma Initiative ReviewSchedule 132
Projcct Reporting and Tracking S?lstem Audit System for Previously Closed Projects 133 Reward and Keognition Plm 134 Ccimmwiication Plan 135 AppIication to Specific Businesses
132
and Functions
136
137
Specific Business Application A r a s Specific Functions 140
Pitfds to Avoid 146 "Begin whh the Etid in Mindn-Take a Sysrems View 149
Summary 151 Referentes 15 1
Tahl o f Contcnts
Chapter 5
Project Case Studies
155
A Six Sigma Approach to Predicting Corporate DefauIts 157

Defme 158 Measure 159 Analyze 161 Design 165 Vem 167 Conclusion 173 An Application to Legal Litigation Background 174 Define 175 Measure 176 Analyze 177 Improve 178 Control 179 Conclusion 180 The Batch Recards Case 181 D e h e 182 Measure 182 Analyze 185 Improve 187 Control 189 Conclusion 189 Summary 190 Referentes 19 1
174
Chapter 6
hprovement Happens Project by Project 193
Keys to Completing Successfd Projects

Seiecting Good S i x Sigma Projects 197 SeIecring rhe Right People 205 Using the Right Methodology 206 Management Project Reviews 207 Guidzince from MBBs 21 1
194
Right Involvemenr by Functional Groups Project Closure-M oving O n to the Next Project 212 How Projects Can Pai1 213 Failures i n Specific Project Phases 215 A Holistic Model for Improvement 2 18 Integrating Process Improvement and Control 22 1
2 11
Creating the Lmprovement System 22 5 Using the DMADV and DMAiC hprovement Models 227 D W C Proess Improvement ModeI 229 Solution-Known Projects 23 1 Trainingfor Project improvement 232 Training Beyond rhe Factory Floor 238 Summary 241 Referentes 242
Chapter 7
Unique Technical Chalenges i n Applying the Methods and Tools 247

How to Think About the Tools 248 Additional Guidance for Real Economy Applications 252 Key TooIs Beyond the Factory Floor 254 To01 integration 254 Individual Tools 256 Some Additional Tools Parcicularly Useful Beyond the Factory Floor 273 Unique Technical Chalienges Beyond the Factory Floor 277 Non-Normal Data Distributions 278 The Truth About the Normal Distribution and the Nomaiity Assumption 280
Strategies For Handling Non-Normal Data What About Discrete Data? 287 Lean Services? 290
283
Sumrnary 292 References 293
Chapter 8
M a k h g Six Sigma Your Strategic Signature 29s
The Strategic Signature 296

New Ways of Thinking 298 Use Six Sigrna as a Leadership Development To01 299 Nrit Only a Methodology, but Also an
Infrastructure 300 Use Six Sigma Across Aii Functions, IncIuding Customers and Suppliers 303 Use Six Sigma to Create a Comrnon Corporate Culture 305 Manage Six Sigma ProjectsAs a PortIolio 305 Think Improvement,Not Training 308 Putting a Starnp on the Organization 3 10
Sumrnary 311 References 3 12
We are pleased to acknowledge the nurnerous individuals who provided exarnples, insights, suggestions, and constructive criticism i n the develapmenc of this book. These include: Bdi Enghsh, Jean Cherry, Lisa Douglas, Chris McKenna, John Hagen, and Bruce Tucker.The cornments and suggestions made by the reviewers-Steve Baile): Jim Buckrnan, Eric Mattenson, Ed Popovich, Rip Stauffer and Doug Zahn-were very heIpful in improving the presentation of this material. Portions o f Chapter 8 appeared i n an article pubiished by Ron Snee n the June 2004 issue of Harvurd Manc~genzent
Update. We also express our sincere gratitude to Jim Boyd, Christine Hackerd, Keich Cline, Nina Scuderi, and other rnembers of the Financia1 Times-Prentice HaU publication team for their guidance and assistance in rnaking this book a reahty. Our sincert: appreciation goes also to our spouses, Marjorie and Senecca, whose support and understanding went well beyond what was reasonable t o expect.
Dr. Rondd D. Snee is principal i n Tunneii ConsuIting's Performance Excellence Practice, which offers Six Sigrna consulting, training,facilitation, and implementation, i n addition to other process improvement approaches. Dr. Snee is a winner of the Arnerican Society f o r Quality's highest honor, the Shewhart Medal, and has served as a member of the Macolm Baldrige National Quality Award Criteria T e m . He designed DuPont's first company-wide continuous improvement curriculum.
Dr. Roger W. Hoerl is a long-time leader i n GE's renowned Six Sigma initiative. As manager of GE's Applied Statistics iab, he partners on R&D with GE businesses ranging from NBC and GE Capital to GE Aircrafi Engines. He has implemented Six Sigma in a wide range of GE processes, ranging from corporate audit to delinquent credit card tracking. He recently won the Arnerican Society of Quaiity's 2002 Brumbaugh Award.
Snee and Hoerl are coauthors of Leading Six Sigma (Financia1 Times-Prentice Haii , 2003), the best-selling executive's guide to Six Sigma. They also cowrote Statistical Thinking: Improving Business Perfomance (Duxbury Thomson Learning, 2002),an innovative guide to the strategic use of data and statistics in solving business problems.
The body of evidence continues to grow. Companies such as GE, MotoroIa, Honeyweli,3M, Home Depot,J.P. Morgan Chase S: Co., Johnson & Johnson, Quest Diagnostics, DuPont, Amercan Express, Ford, and many others have been using Six Sigrna to obtain large irnprovements i n business performance that I-iave produced W o n s of dollars in bottom-line savings. Six Sigma, a processfocused strategy and methodology for business improvement, is a strategic approach that we have seen work across aii processes, a11 products, and ai1 industries.The focus is on irnproving process performance that resuIts in irnproved customer satisfaction and bottom-lhe results. Six Sigma has been used mensively i n improving manufacturing organizations, but only recently has it been used to improve processes outside of rnanufacturing- that is, processes beyond tbe factoy floor. When we talk about using Six Sigma beyond the factory floor,we are referring to improving processes in the rest of the economy beyond manubcturing, such as financial services, e-commerce, hedth care, and so on. For reasons discussed below, we refer to this as the real economy.This real economy includes businesses that do not rnanufacture, such as banks and law offices, non-profits (including non-profit hospitais),
sri
1 as weU as ali the other (non-maniifacturing) parts o f organzations thac manufacture products such as delivery, fmance, and human resources (HR). The real econom): clierefore, consists of aii businesses that do not manuhcturt: physical products,as weii as ail tIic other functions and processes nvolved i n manufactiiring.Al1 processes in an organization are opportunities for improvement. Therefore, by taking a holistic view, yoo u i i l see that Six Sigmn can be used to improve any process. This book is the tliird in a series of books airned at improving the processes and organizations used to serve our customers, a pursuit to which we have colfectiveIy dedicated more than 60 years of our careers. We firsc workd together ac DuPont i n the earIp 1980s.We continued our professional relationship over the years, and i n 1995 we borh independently began our work in Six Sigma. h our frst book Stnhktical Dgi?zki??g~. I~izprouingBusiness P e i - f m a n c e (Duxburyflhompson Learniy ZWZ), we explained the concept of statistical thinking and its key elements: process, variation, and data. Our focus was how to use statistical thinking to improve business processes-those beyond the factory floor-by reducing variation. We believe that Six Sigma is the best way to deploy statistical t hinking broadly. In Lending Sih Sigrna: A Step-by-Step Guide Bmed on Exfierience wirh GE and Otber S i x Sigma Colnpanies (Financia1 Timesflrentice Haii 2003), we showed how to depIoy Six Sigma in an organization and how to integrate it with other irnprovemcnt initiatives.We presented detaiied case studies (both successful m d unsuccessful), identifled the key factars required for success, and presented a detailed deployment strategy. We take the methodoIogy one step further i n this book, focusing on perhaps the most chaiIenging use o f Six Sigma:improving processes beyond the factory floor.This requires special a: t ention because formal improvement methods have been applied less in this m a , resuiting in less being known about how t o improve these processes. For example, there is typicaliy less data avaiIabie on real economy processes than rnanufacturing.We address this and other differences between manufacniring and real economy applications of Six Sgma. Understanding these differences wiU help you
11
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iI
1
I,
1
I
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f
better understand what is required to improve processes beyond the factory floor. Our review ofthe Six Sigma literature shows that there are veqTfew detailed case hitories using the methodology beyond the faccory floor at either the organizational deployrnent leve1 or at the individual projecc 1evcl.We also see iittle or no d i s ussion of the unique technicai chaiienges associated with deploying Six Sigma in these areas. T h i s book addresses each of hese issues.
Features of This Book

This book has many unique features that can help you deploy Six Sigma beyond the factory floor. First, we take a broad liolistic vicw of thc organizational and tcchnical issucs and what can be done about them.We address perhaps the biggest stumbiing block encountered by those workuig beyond the factory floor: the view that "we'redifferent,"and therefore "Six Sigma doesn't apply to us.*Altiioughthere is some tmth to this argument,we show that n these areas has much more i n common with improvement i improvement i n other areas and show how Six Sigma can be applied within an organization with such a viewpoint. We emphasize that rnoving beyond the factory floor means improving both non-rnanufacturing businesses (for exampIe, fmance, heaIth care, non-profic) as well as those non-manufacturing functions that are needed to run manufacturing organizations (billing,human relations, deiivery, and so on).We provide guidance on each of the three key IeveIs of Six Sigrna needed for success: deployment, project-by-project irnprovement, and methods and tools.We know of no other book that gives detailed guidance in aii three areas, especially beyond rnanufacturing.Thisbook provides case studies at both the organizational deployment level and at the individual project level and includes detailed advice for leaders at the business level and functional level. We show how to take a proven road map for Six Sigma deployment and custornize it to organizations and functions beyond the factory floor.This includes a dscussion of how to deaI with the unique technical issues involved as weli as how to take a
siiii
hoiistic view o f the three aspects of process rnanagement (process design/redesign, process improvement, and process ontrol) and how Six Sigma is used in each of theses areas.
How T h i s Book Can Help You

This book wiil prove invaluable to those deploying Six Sigma beyond the factory floor, particularly managers responsible for deploying Six Sigma i n their areas: Champions, Afmfer Bllrck BeEts W B s ) , BZack Belts (BBs) and Green Belts (GBs) .You wiii get a holistic view of what deployment o C Six Sigma entails, including your role and responsibiiities and what to expcct at various points in time. h addition, maaagers and Champions will receive specific advice aholit the following: i i Identifying your compaty's rnost promsing Six Sigma opportunities and leaders
i Providing
leadership, talent,and infrastructlire for a successl launch

systems, processes, and budgets for ongoing
iImplernenting
S i x Sigma projects
i Measuring and
maxirnizing the financia1 vaiue of your Six
Sigma initiative
MBBs wiii receive guidance on how to select projects and how projects can fail. M B s , BBs, and GBs wiii get insight as to how to deal with unique technical problems such as non-normal data. discrete data, and the most usefuI tools.
What's in This Book?

This book is divided into four niain pms: the case for S i . ; Sigrna beyond the factory floor, ensuring successfuI deployment. ensuruXg project success, and proper application of methods and tools. In this overali flow, we address strategic, tactical, and operationai aspects of deploying Six Sigma.
sis
Chapter 1 sets the contexi for the book, highlighting the gowing importante of heaIth care, financia\, service, and nonmanufacturing functions to our economy and the tremendous opportunity and need for improvement i n rhese areas that we refer to as the real economy. Chapter 2 addresses d ~ e fundamental barrier to improvement-the attitude that "we're differentn-and shows that improvement efforts i n diverse processes and environments have much more in cornrnon than not.We find that Six Sigma works very welI beyond the fac tory floor. The focus of Chapter 3 and Chapter 4 is on the management systems that must be put in place to effectively deploy Six Sigma. One of the key things that makes Six Sigma different from earlier improvement methods is the existente ofan infrastructure of management systems to support deployment. One of the kep reasons that previous irnprovement approaches,such as total quali01rnanagement (TQM) and statisticcrl process contt.02 (SPC), did Gt demonstrate long-termsuccess,is that these approaclies lacked an effective deployment method. This is nnt the case with Six
Sipa.
Chapter 3 focuses on deployment and presents four deployment case studies: Bank of America, Commonwealth Healthcare Corporation (which is also a not-for-profit organization), the Motorola Finance function, and R&D at GE Global Research. Key learnings are identified for each case study individuaiiy and summarized to create an ovecaii Iist. Chapter 4 presents a Six Sigma deployment road map that has been effective in a number of companies representing a number o f different environments. We also provide guidance on deploying Six Sigma in different environments (businesses and functions) as weil as deployment success factors and pitfalis. Chapter 5 and Chapter 6 focus on e n s u ~ project g success. The successful completion of projects, one after another in a steady stream, is at the heart: of Six Sigma.The discussion consists of case studies from beyond the factory floor, the Six Sigma method for reaiizing project-by-projectimprovement ,keys to completing successfd projects, and technical considerations that are
essentiai to successful improvernent i n the real economy.To the best of our knowledge, many of these issues are not discussed elsewhere in the literature. Chapter 5 presents three project case studies in finance, legal, and batch records release (a health care, non-manufacturing function). The chapter condudes with a discussion of lessons learned. Chapter 6 discusses project-by-projectimprovement, incIuding the d-important subject of project selection and a list o f ways projects can hil. We present a holistic model for improvementincluding process design/redesign, process imp rovement, and process control-and show how to utilize the Six Sigma approaches of design for Sfx Signzn (DFSS) using the deflne, measure, anaiyze, design, veria (DMADV) and define, mcasure, u~zalyze, i??zprove, controi (DMAlC) frmeworks. Chapter 7 focuses on the technical chalienges unique to deploying Six Sigma beyond the faccory floor.The topics include the tooIs used and unique aspects of the data anaIysis in such applications. For exampIe, we discuss ways to address the common issues of skewed (non-normal) distributions, which ofien occur with qcIe time metrics,and the prevalence of discrete data,which often occur with accuracy metrics. Chapter 8 discusses some next steps you may want to consider to make Six Sigma an integrai part o F the way your organization does business and serves its customers and the community. The goal is to get more out of Six Sigma.You c m accomplish this by making Six Sigma part of, if not your entire strategic signature (somethg for which your organization is known).As a result, a11 work in aii areas o f the organization wdl be utilizing some aspect of Six Sigma to help make them succesfuI.Whttn others look at your organization, they wiiI see Six Sigma as your strategic signature.
How to Use This Book

This book is organized according to the three major levels at which organizations musr adapt Six Sigma ro receive its iidl benefits beyond the factory floor: the deployment (strategic) levelhow to think throug3 o v e d deployment of the initiative across
tht: entire organization;the project (tactical) level-how
to select,
conduct, and close out projects in these environn~ents; and the methods and tools (operational) level-how to properly apply the analytic techniques of Six Sigma when faced wifh difficulties common beyond the factory floor, such as skewed (non-normal) cycle time distributions or the prevalence of discrete data.As a resuIt,this book is intended as a guide for those just starting their Six Sigma deployment; as a referente for those experienced Six Sigma practitioners such as Six Sigma leaders, Champions, MBRs, BBs, and GBs; and for others who are invoIved in the deployment of Six Sigma and want to assess the effectiveness of their S k Sigma deployment. Of course, different parts of this book wiil be of greater value to those fulfilling different roles. Those working in deparcments such as HR, finance, and IT wiii also find this book useful.Companies following the lead of GE, HoneyweH, DuPont, and 3M are using Six Sigma as a leadershipdevelopment tool.Tiiis book wilI help those in HR recognize the various leadership aspects of Six Sigma md how t o integrate Six Sigma into their succession and leadership-development processes.The hoistic view of Six Sigma presented here wiU help those i n finance recognize their roIe i n predicting and documenting project fmancid impact, as weU as how to use financia1 records to identify opporzuriities for irnprovement.Those working i n IT will see not o d y how to improve the processes they use to m n their organization, but also the critica1 role that data play i n irnprovement (and hence the need for effective data coliection systems). W e have seen S i x Sigrna work well in ali types of organizations. As an Allied SignaI manager pointed out, "Six Sigma works if you follow the process. I it is not working, you are not foiiowing the process." We hope that you frnd our book helpful i n your Six Sigma journey and Iook forward t o hearing about your aperiences.
Ronald D. Snee Newark, DE
Roger W Hoerl Schenectady, NY

August 2004
THECASE FOR SIXSIGMA

BEYOND THE FACTORY FLOOR
CHAPTER 1 CHAPTER 2
A HoliSfic View of Six Sigma
Addressing the Fundamental, Barrier: "We're DifTerent!"
"Only the over-d review o f the entire business as an
ecoiioniic system can give real knowledge." -Peter E Drucker
You may have heard o f Six Slgma,a process-focused strategy and methodology for business improvement. Companies such as General Eleccric, Honeywell, Motorola, DuPont, American Express, Ford, and many others, large and small, have been using it to improve business performmce and realize rnillions ofdoliars iri bottom-line savings (Honeyweli 2002, WeIch 2001, Young 2001). Six Sigma is a scmtegic approach that works across aii processes, ali products, and aiI industries. Six Sigma focuses on improving process performance t o enhance customer satishction and bottom-line results. Motorola created the methodology in 1987, and the use of Six Sigma by others increased rapidly during the 1990s.Six Sigma remains in widespread use as of this wciting.
Chapter 3
Deployment Case Studies
CEO Desmarais sumtned up CHC's Six Sigma experiences by stating, "I only wish we had done this five years earlier.. . the competitive edge the organization has gained through this process is incredible."It is interesting to note that CHC's vision statement specifically states that it wishes to have a major influente in reshaping health care. Based on its pioneering work applying Six Sigma holistically, and freely sharing its experiences with others, it appears to be accomplishing this objective. We now present two case studies from organizations within manufacturing companies: finance first, and then research and development.
Motorola Finance
It is well known that Six Sigma originated at Motorola in the 1980s. It is perhaps less well known that Motorola deployed Six Sigma in its corporate finance organization, not just in its manufacturing operations.According to Stoner and Werner (1994), this deployment was not easy. Initially,many in finance thought that Six Sigma was a "production technology" and not relevant to them. Sound familiar? There was widespread skepticism as to whether the decision to deploy in finance made sense. Fortunately, however, senior management provided the leadership required, ensuring deployment continued. Motorola developed a six-step action plan, called the Six Steps to Six Sigma, for non-manufacturing organizations, and this was utilized by finance:
1. Define the major functions or services performed by a
unit of the company.

2. Determine the internal customers and suppliers of these
services.
3. Ident* the customer's requirements, along with quantitative measures to assess customer satisfactions in meeting such requirements. 4. Ident* the requirements and measurement criteria that the supplier to the process must meet.
Six Sigma Bevond the Factory Floor
5. Flowchart or map the process at the macro (interdepartmental) level and at the micro (intradeparunental) level.
6. Continuously improve the process with respect to effectiveness, quality, cycle time, and cost. It is interesting to note the degree to which process thinking underlies the steps in this action plan! Motorola had the advantage of having utilized total quality management (TQM) previously, which makes heavy use of process thinking.
Deployment Within the Audit StafS

To implement this six-step action plan within the audit staff, part of corporate finance, a task force of two audit managers and four new auditors (less than 24 months experience within the audit staff) was formed. Senior management pulled this task force off their schedule for 2 weeks, and sequestered them in a conferente room. These leaders challenged the task force to come up with a plan to implement Six Sigma quality improvement within the audit staff, including a measurement system for implementation.The direction emphasized that the task force could not conclude that Six Sigma couldn't be done, nor could it suggest something bureaucratic that would "drag us to our knees." Further, the task force was to develop a written report of recommendations and be prepared to train other members of the department in whatever new processes and systems they chose to recommend. Interestingly, senior manager of interna1 audit Larry Grow gave them the following advice (Stoner and Werner 1994 p. 162):
M y view of administrative processes is that they are a 1 1 really factories.Whether you are in a banking institution clearing checks or whether you are a secretary worrying about your own in-box and out-box,you can view your operation as a factory.The secretary gets things frorn a suppiier,does sornething with it, and then ships the goods out to a customer.Whatshe is doing is running her own iittle factory. I urged thern to think horizontally not verticaiy.
We fmd it noteworthy that audit staff leadership was crystal clear on their direction concerning Six Sigma and stressed the importance of process thinking.
Chapter 3
In two weeks the task force reported its recommendations. It defined the audit staff's customers and "products," defined the audit process, defined what a defective product was, developed hard metrics on audit quality, and produced a series of recomrnendations to enable the audit staff to implement a Six Sigma quality initiative.Their depiction of the audit process, with its five major steps, and substeps listed for each of these major steps, is shown in Figure 3.3.This type of process map is called a top-down flowchart (Hoerl and Snee 2002, 197). One of the most important learnings from rethinking the audit process was the gradual realization that the audit report generated for each audit was not the most important product of the audit process. In reality, evaluating and promoting an interna1 control environment was their most important product; the audit report was "simply the box they ship it in."
I P e r f o r m Audits I
(&pikqh
Five-year plan Annual Plan Audit Schedule Confirm Date Scope Memo Planning Memo Audit Programs Pre-audit Team Meeting Testing Summarize 8 Conclude Audit Point Control Responses Status Meeting Prepare Repori Exit Meeting Iue Repori Issue Ethics Memo Entrance Meeting System Review & Documentation Edit Repori Determine Grade
( Post-Audit /
Post-audit Evaluation Performance Evaluations Respond to Meeting Concerns
FGURE3.3
Motorola's audit process. Adapted from Stoner and Werner 1994.
The task team mapped the audit process into five macro steps: scheduling, planning, fieldwork, reporting, and post-audit. Further, they brainstormed specific areas where errors were likely to occur, ident*ing 56 such areas. They grouped these 56 areas
Six Sigma Beyorzd the Factory FZoor
into 4 major categories: administrative errors, technical errors, work-paper documentation errors, and personnel-related errors. The team developed two questionnaires to measure audit quality: one to be filled out by an audit department peer as an independent professional evaluation, and one to be filled out by the customer who was being audited. Numerous individual improvement projects emanated from the task force's written report. After a few years of Six Sigma deployment, errors in performing audits dropped from almost 10,000 errors per million opportunities in 1988,to about 20 errors per rnillion opportunities in 1991.The cycle time for completing and issuing tlie final audit report dropped from 51 days after completion of fieldwork to 5 days. Much of this improvement came not from better report writing, but from improvements to earlier steps in the audit reportprocess that greatly simplified final report writing."Defects" ed by customers on the post-audit questionnaires dropped by a factor of 94. Improvements in the internal audit also carried over to the independent external audit performed by the accounting firm KPMG Peat Marwick. In 1983,Motorola's revenues were about $4.8 biion, and the external domestic audit took about 24,000 personhours. In 1991,the company's revenues had grown to $11.3 billion, but the external domestic audit only took 12,000 person-hours. This improvement produced a savings of $1.8 million dollars in avoidance of additional audit fees.
Broader Deploy ment Witbin Finance

Cycle time reduction in closing the books was one of the initial improvement projects in finance. Initially, it took approximately 9 days to close the books, resulting in an updated financia1 forecast coming out 11 or 12 working days into the new month, and an operating cornmittee meeting to review the last month's results and the current month's plan on the 18th or 19th working day.The month was almost over by the time leadership was beginning to plan for it! An ambitious goal was set: closing the books within 4 days by 1990,and 2 days by the end of 1992.
Chapter 3
Stoner and Werner (1994) quote assistant chief financia1 officer David Hickie's explanation for such an ambitious goal:
If you te11 people to close the books in seven days instead of eight, they will figure out how to do it very easily.They will work a little overtime over the weekend. If you say do it in six days, they wiii work on Sunday. But they would not change what they were doing.When we told them to do it in four days and that we would not let them use the weekend as a crutch, they had to look at a fundamental change in the process.
Six Sigma methods led Motorola to a key root cause of cycle time in closing the books: journal-entry errors, resulting in manual account reconciliation-that is, manually tracking down the reasons why the numbers didn't "add up." Previously, Motorola's journal-entry accuracy rate of more than 98.6% was considered enviable. However, upon further examination via Six Sigma, people realized that with 600,000 entries per month, this accuracy rate would produce more than 8,000 errors each month, errors that would later have to be identified and corrected to close the books. A second cause was also identified: the number of signoffs required as data originating overseas was reported up through local organizations into U.S. headquarters. Data went from international factories to local headquarters for approval, then to U.S. international headquarters, then to U.S. sector headquarters, and finaly to corporate offices.At each step, the information was held up for approval prior to being sent on. Interestingly, investigation discovered that it was extremely rare for any changes to be made prior to approval. The net result of Motorola's improvement projects was that monthly closing time went from averaging 9 days to just 2 days, with much less variation, as of July 1992.This was about 6 months ahead of plan for this critica1 goal. Motorola had documented annua1 savings of $20 million from reducing closing time from 9 to 4 days, and when it was reduced to 2 days Motorola anticipated saving an additional $10 million per year.
Six Sigma Beyond tbe Factory Floor
To drive Six Sigma quality improvement throughout fmance, Motorola created three quality councils to provide infrastructure to lead and manage the effort:
iThe
Financia1 Metrics Council-To evaluate new and evolving financial metrics for potential adoption by Motorola Interna1 Controls Council-To evaluate and improve the interna1 financial control systems within the company
i The
iThe
Accounting Policy Council-To ensure worldwide consistency in accounting policy and practices
This type of supporting infrastructure enabled Motorola to extend the Six Sigma benefits from initial application areas, such as the closing process, to many other financial areas. For example, improvements to the expense account processing system, which ailowed rapid checking for errors in expense accounts and automatically converted foreign currency into local currency, cut a reimbursement check in oniy 4 hours, long before the employee's credit card statement arrived. Significant improvements were made in accounts receivable, aiiowing faster coiiection and realization of revenue. David Hickie, assistant chief financial officer, stated of these improvements (Stoner and Werner 1994,171):
Our receivables are interesting. For years we always said as our international business goes up, our total receivables should keep increasing in terms of weeks of receivables.But they have not because the quality improvements in the order entry system and the biliing system make it easier for the customers to pay us-so they pay us. When we quote 30 days and they pay us in 6 weeks it is because of their saying things iike "We don't know who to call" and "I don't agree with the bill."
In sumrnary, beyond a 1 1 the tangible and bottom-line results noted above, which of course are oniy a smail sampling of aii that was accomplished through Six Sigma, Financia1 World named Motorola's accounting department as the U.S. benchmark in 1991,
1
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providing externa1 corroboration of what was being experienced internally. Interestingly, many of Motorola's experiences applying Six Sigma to their corporate audit staff parallel those of GE's corporate audit staff as it implemented Six Sigma in a big way beginning in the late 1990s (Snee and Hoerl2003,25-27). Some key lessons learned from this case study are as foilows:
w As previously noted, strong leadership is critica1 to over-
coming resistance and the "we're different" syndrome.

i Process
thinking is fundamental to holistic deployment of Six Sigma (that is, what Larry Grow called horizontal versus vertical thinking).
i Beyond
manufacturing,"products" exist, but are less obvious. Formaily asking the question "What outputs do we prcduce?"can actuaily help answer this important question.
an integrated set of councils to lead and manage implementation helped drive the initiative broadly.
i Creating
GE Research and Development

Just as many in fmancial organizations think that they are different and that Six Sigma doesn't apply to them, many in technology organizations, especiaily those in research and development (R&D), feel the same way. These detractors point out that R&D organizations don't "produce" things the way manufacturing does, but they certainiy have important outputs and deliverables. Other detractors fear that the rigor and discipline of Six Sigma will stifle the creativity required for innovation. Fortunately, although Six Sigma is certainiy disciplined, there are key phases in the process where creativity is not only permissible, but also absolutely mandatory. GE had to address these and other concerns in the late 1990s as it was deploying Six Sigma across the company.The foilowing case study is based on Roger Hoerl's experiences at GE Corporate Research and Development (now known as the Global Research Center), beginning with GE's decision to pursue Six Sigma in late 1995.
I i
Corporate Researcb Gets Into tbe Act

As discussed in Chapter 2 of Snee and Hoerl (2003), Jack Welch announced GE's decision to dive into Six Sigma in the fourth quarter of 1995. Senior leadership asked aii salaried employees to view a short videotape Jack made to explain this decision internally, and the research center was no exception.Ater we watched the video, there was considerable discussion and debate as to how this would affect us.As might be expected, a number of scientists saw no role for us to play, because the research center wasn't a factory. Others understood that we made significant earnings from services businesses and were concerned that making better products and services might hurt rather than help the company, because there would be fewer defective products on which to sei parts and service.Yes,they actuaiy said this! Global Research joined the Six Sigma initiative by sending three people to the first MBB training session within GE. Much of the initial effort of MBBs focused on serving as technical resources to "mission-critical" projects within the G E businesses. Other efforts included thinking about applying Six Sigma to the design process, so that new products would be Six Sigma from initial product launch and not require a series of improvement projects to get them there.At this time there was still no still clear vision for Six Sigma in R&D or a dedicated organizational structure to develop and implement such a vision.
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A Strategy Takes Form

Toward the end of 1996, this situation changed dramatically when a dedicated Quality Leader was named at the research center. This person was a seasoned and respected engineering department manager, at what most organizations would consider a "director7'-leve1 position. He also created a dedicated quality organization of six people, who came from a variety of disciplines and backgrounds at the research center. It is irnportant to note that each of these members brought a distinguished technical track record and a strong interest in Six Sigma. A budget was also created to support the team's initiatives. Senior leadership was clearly supporting the effort.
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Chapter 3
The initial focus areas for the quality organization were as follows:
i Developing
a unique GE approach to applying Six Sigma to design (that is, DFSS) a Six Sigma training curriculum tailored for the research center and delivering the training
i Developing
i Conducting improvement
projects on internal research center processes, such as the patent application process and recruiting
i Providing
technical support for mission-critica1projects within the GE businesses Six Sigma could be applied in nonmanufacturing processes, such as in fmance or marketing
i Understanding how
The focus on DFSS became the most significam of these focus areas, and is discussed in greater detail below. Development of a training curriculum was a challenge because of the uniqueness of the research center audience. More than 50% of the scientists had Ph.D.s, and many had already studied statistics.The problem was not in conveying statistical concepts and methods, as it often is, but rather how to position Six Sigma in the context of what a scientist actually does. In addition, looking at Six Sigma from a scientific context, people tended to see only the technical aspects, such as the engineering and statistical tools, and overlooked the leadership and customer-centric aspects. In addition, a Six Sigma course was developed for hourly employees at the research center, such as electricians, pipe fitters, and other crafts. Six Sigma training could not be forced on these employees,but many took the course and conducted projects voluntarily. We found many internal processes at the research center in need of improvement,which turned out to be ripe projects for Six Sigma.These included our patent application process-critica1 for any research organization, recruiting processes, and even the process for moving scientists from one office to another. On the patent application project, there was considerable frustration among scientists,administrators,and patent attorneys because the
process seemed to take so long and because we often ended up submitting incomplete patents to meet legal deadlines. These incomplete patents not only caused financial penalties, they also led to a great deal of "rework" (when we had to go back and complete them at some point in the future). One GB project in this area was able to i d e n t e critical bottlenecks in the process, such as a reward system that encouraged incomplete submissions, and reduced the percent of incomplete This percentage could have been higher, but submissions by 60%. the project revealed that there were occasionally legitimate reasons to submit incomplete appiications, such as international patents where laws typically favor "first to file" versus "first to invent." Relative to the focus area on non-manufacturing, it should be kept in mind that in 1996 there were very few published Six Sigma case studies outside manufacturing, and many people viewed Six Sigma as a purely manufacturing initiative. GE, on the other hand, made roughly 40% of its profits from financial services businesses, not to mention NBC and the service activities within the engineering businesses, such as GE Aircraft Engines, GE Power Systems, and so on. Successful application of Six Sigma beyond manufacturing was clearly critica1 to success of the overall initiative. Because of its technical expertise, the research center was a logical organization to focus on this problem, to augment the efforts of the financial and services businesses themselves.
Design for Six Sigma

As noted above, DFSS became the number one priority of the quality organization at the research center. This made perfect sense given that we devoted such a large percentage of our efforts not to production of current products, but rather to design and development of future products. Unfortunately, at that time we were unable to find any commercially available approaches to DFSS that we thought were complete and hoiistic-that is, that offered a step-by-step process to go all the way from customer needs to the start-up of a Six Sigma product and process design. Therefore, we ended up developing our own approach. This approach borrowed considerably from the define, measure, analyze, improue, control (DMAIC) process used to improve existing
Chapter 3
processes; as well as from traditional engineering design processes; and from methodologies we obtained externally. One such externa1 methodology was a well-developed process for a critica1 aspect of DFSS.This involved taking requirements for system-leve1performance and determining what requirements lower-leve1 components in the system would need to satisfy to meet the higher-leve1 requirements, a process known as CTQ flow down. S w a r approaches have been applied with Quality Function Deployment, and other design engineering methods. As an example of this particular approach, you might want to minimize vibration in a motor below a certain threshold to satisfy customer expectations. In CTQ flow down, you would determine the components of the motor that significantly impact vibration, such as a measure of structural integrity of the motor, size and uniformity of the gap between the rotor and stator (the rotor is the part that rotates, and the stator is the stationary part that the rotor rotates within), and so on.You would determine the critica1 specifications that these metrics would need to satisfy in order to meet the vibration specification. Then you would determine the key variables that impact structural integrity, size and uniformity of the rotor-stator gap, and so on. For example, rotor roundness might have a significant impact on uniformity of the rotor-stator gap. The next issue to determine would be what requirements the rotor roundness would need to meet for the gap uniformity requirement in order to satisfy the vibration specification. Depending on the complexity of the design, you might need to continue flowing down requirements to lower and lower levels of detail. Eventually, you wili get down to basic measurements, such as steel hardness. An important point to note is that there is a clear "line of sight" from each lower-leve1 requirement to the ultimate customer specification. In other words, it is clear why you need to satisfy each requirement and how it relates to product performance. Figure 3.4 iliustrates the concept of CTQ flow down using a simpler example:cycle time to complete an audit, using the audit process depicted in Figure 3.3. All numbers shown in this example are hypothetical, but iliustrate the concept.
Step 1-0vera11 CTQ
Overali C cle Time Re uirement: Target-:so davs 1 5 9nlhs1 Upper Spec-160 days
step2-1
st ,riow D~~~
What average (target) and spec limits on lhe individual process steps would ensure that we meel lhe overall cycle time target and spec? (See Figure 3.3)
Scheduling
Target: Upper Spec:
1O 11
Planning
20 22 95 1O0
15 16 1O 11
Note that lhe five process slep averages surn lo lhe overali cyciw time target ol 150. This 1 s because lhe steps are sequential. hence lhe total cycle time is jus1 lhe surn ol the individual step times. All processes are not this sirnple: for example. 11some steps are done in parallel. Note also lha1 even if each process step is at ils upper spec limil. lhe overali upper spec o1 160 will be salisfied. This is called "worst case"flow down. since we are assured ol meeling our overali spec even in lhe worst case (uppe! spec) time ol each step. Various other approaches are also possible, such as llow down based on standard devialions.
Step 3-2nd
Flow Down
For each process step. what average and spec Iimils on the individual sub-process steps would ensure lha1we meet the cycls time target and spec? E.g.. Scheduling.
I
I
Five Year Plan

Target: Upper Spec:
3 3.25
2 2.25
5.5
Step 4-
3rd Flow Down (e.g., Audit Schedule), and so on, as f a r down as is needed
FIGURE 3.4
CTQ flow down for audit process cycle time.
If the mathematical relationship between the higher-leve1 requirements and the lower-leve1requirements (that is, the transfer function) is complex, this task is not necessarily clear and straightforward and requires an understanding of transmission of variation. GE obtained a specific methodology for CTQ flow down from independent consultant Maurice Berryman, who had experience with DFSS at Texas Instruments and several other companies. To ver@ the manufacturing capability to achieve the lower-leve1 requirements, organizations could evaluate historic data from manufacturing and "flow up" actual capability.That is, they need to use the transfer function to predict how well they wili be able to meet higher-leve1 requirements, based on the data for lower-leve1 requirements. This results in a two-step process of flowing down requirements-that is, what is needed; and then flowing up capability, or what is possible. As might be expected, this often results in several iterations going back and forth between flow down and flow up until a desirable compromise is reached that both satisfies customer needs and can be manufactured. By integrating this CTQ flow-down and flow-up methodology, along with accompanying
i
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design scorecards that predicted final system performance, with the tools and methodologies we already had, we developed a framework for DFSS, analogous to the DMAIC framework for improving existing processes. At about the same time, resources from the G E financial services businesses (known as G E Capital at the time) were working on a DFSS approach for financial services processes.This group originally developed the acronym DMADV, which stands for define, rneasure, analyze, design, uerZfy.The two groups worked together to ensure an equivalent approach, although the financial services businesses maintained a separate version of the DMADV training course tailored to financial services.Figure 3.5 depicts the key elements of DMADV,which apply both to the engineering and financial services approaches. GE leadership standardized this approach across GE. More recently, severa1 other companies are now using the DMADV approach or similar processes based on it.
Design For Six Sigma
Scope, in the
Customer Needs And CTQs
Define
Measure
Analyze
Design
Veriy
KEY DELIVERABLES
FIGURE 3.5
The DMADV methodology.
The LightSpeed CT scanner from GE Medica1 Systems was E products developed using DFSS to hit the marone of the first G ket. It has been an unqualified success. By utiiizing a multislice CT approach, it reduced the time required for full-body scans from 3 minutes to less than 30 seconds. Not only was this a major enhancernent for patients, who no longer had to sit perfectly stil for 3 minutes, it also dramatically increased the throughput of
Six S i g m a B e y o n d the F a c t o r y FZoor
people through the scanner for hospitals, which provided a significant reduction in their cost per scan. The image resolution was also unparaeled relative to competitive products. Not surprisingly, GE Medica1 Systems sold orders worth more than $60 million in the first 90 days that this scanner was available.
Some Unique Cballenges

As noted previously, the engineering curricula itself was a chaenge,in that most scientists had already learned basic statistics and the DFSS projects often required more advanced tools than those traditionally taught in Six Sigma.A very unique curriculum was needed, and this is what we developed. It included an introduction to Six Sigma concepts and the DMtUC methodology (Tier l).Then it augmented DMtUC with instruction on our approach to DFSS (Tier 2).The curriculum also included more advanced courses that were not needed by everyone, but which were needed on specific projects (Tier 3).These were taught on an "as-needed"basis and included specialized topics such as mixture experimentation, reliability tools, and three-dimensional tolerancing.This curriculum has been constantly evolving since its inception. Another major chaenge has been the difficulty in documenting hard benefits from DFSS projects. If a manufacturing plant is producing 20% waste, and a DMAIC project reduces this to 2%, it is relatively straightforward to document and j u s t e the fmancial benefits from the project. Suppose, however, that the production process is initiaily designed via DFSS so that it starts up producing .l% waste. What is the savings from this DFSS project? Because there is no history to directly compare the . l % to, it is impossible to come up with an exact savings figure.This issue made it virtually impossible to j u s t e DFSS projects on a purely fmancial basis. After much discussion and debate, it was finay decided to not claim any hard financia1 benefits from such projects.There could be cost avoidance or other "soft" savings, but GE has standardized on hard savings for official reporting.This is one reason why we believe that the official Six Sigma savings numbers published by GE are perhaps understated.
Chapter 3
Some key lessons learned from GE's implementation of Six Sigma in research and development are as follows:
i DFSS
is particularly relevant in R&Dbecause there is such a strong emphasis on new product development.
i An
integrated approach including both DMAIC and DMADV projects wiil help maximize the benefits of Six Sigma deployments. did not occur until management dedicated resources, provided a budget, and so forth (for instante, until they introduced supporting infrastructure). in the Motorola case, initially there was a challenge identeing "products" and processes in R&D.
i Significant progress
iAs
Key Deployment Lessons Learned

Although each of these case studies is in a unique application area, and faced unique challenges, some importam comrnonaiities help explain the success achieved. Interestingly, these commonalities are very similar to the key deployment lessons learned from manufacturing companies (Snee and Hoerl 2003). This reinforces our beiief that although modifications are necessary to tailor Six Sigma deployments in different environments,the fundamentais and critica1 success factors stay the same.We briefly highlight these irnportant lessons learned here, and then in Chapter 4 discuss a deployment strategy based on these success criteria (but also tailored to real economy deployments). The critica1 success factors are as follows:
i Committed i Top
leadership
talent
Supportive infrastructure
Beyond the factory floor,we add widespread process thinking, including the ability to i d e n t e "products" from real economy processes, as a key success factor. Recall that we discussed in
Six Sigmn Beyond tbe Factoqi Floor
Chapter 2 process thinking as a key to overcoming the "we're different" attitude; therefore, we do not repeat that discussion here. By committed leadership, we do not mean leaders who provide passive support, such as encouraging speeches at kick-off meetings. Many improvement efforts that had supportive leaders have faiied. Rather, we mean leaders who devote their personal time to ensure success of the effort. It really must become a personal obsession with them.This is particularly true in non-standard application areas, such as those discussed in this chapter, because there will be additional resistance. Note that in the four case studies in this chapter, there was initially strong resistance to Six Sigma, on the basis of the belief that "we're different; Six Sigma doesn't apply to us." Only personally committed leaders would have been able to overcome such resistance, and drive the organization to successfully deploy Six Sigma in these areas. John Desmarais has certainly supplied such committed leadership at CHC, and Ken Lewis appears to have used a similar leadership style to GE's Jack Welch in deploying Six Sigma at Bank of America. Top talent is important to the success of Six Sigma, as with any human endeavor. However, it is even more critica1 in a major change initiative,for severa1 reasons. In addition to the obvious fact that top talent will be able to deliver the best results, it is also true that many people, especially those "sitting on the fence" relative to Six Sigma,will judge the effort by those with leading roles. If those taking Champion, MBB, and B B roles are viewed by the organization as top talent, others will conclude that the effort is serious and will want to be involved, to be associated with the top talent. On the other hand, if those leading the effort are not viewed as top talent, the effort will be viewed as a losing cause, and others will not want to be involved. Another important reason for involving top talent is that these people will become the future leaders of the organization. If these men and women have experienced Six Sigma first hand and seen the results it can deliver, they will ensure that it becomes a lasting part of the culture. In essence, they will take the Six Sigma mindset into the boardroom. In the case of Motorola Finance, the auditors involved were generally experienced auditors who had come from the "Big Six" accounting firms-respected and talented
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%
9
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Chapter 3
individuals (Stoner and Werner 1994,159).In the case of GE Global Research, it was critically important that the Quality Leader selected was already a respected technical manager and that those selected for his staff had distinguished technical careers.This gave the effort credibility. Milton Jones mentioned the need for top talent indirectly when he noted that Bank ofAmerica made a conscious decision to bring in externa1 technical resources for MBB and B B roles initially, because such top technical resources were not originally available internally (although they are now). Supportive infrastructure is critica1 to maintain momentum over time, by providing the Six Sigma effort with needed resources and attention.The infrastructure elements that we refer to are such things as these:
l
I
iA
formal organizational structure
i Planning
systems to develop budgets, human resources plans, key focus areas, and so on selection and review systems
i Project
systems These are simply the standard infrastructure elements that support business units, but are often overlooked in improvement efforts. Without such supporting infrastructure, however, each dollar spent on the effort must be justified, each personnel decision becomes a battle, and each project must be fought for individually. The time and energy required to obtain this support on a projectby-project basis becomes overwhelming, so that little time and energy is left to actually make improvements.This has been one of the key differentiating factors between successful and unsuccessful deployments of Six Sigma, and real economy deployments are no exception. Recall that GE Global Research set up a dedicated organizational structure. This quality group had a budget and formal HR support, and soon developed planning and training systems to deploy Six Sigma across Global Research.This deployment would have been virtually impossible to accomplish without a formal organizational structure or these managerial systems. Similarly,
iTraining
Six Sigma Beyond the Factory Floor
Motorola Finance freed up four auditors and two managers from their regular work to develop their Six Sigma strategy.They then set up three quaiity councils to provide needed infrastructure to three key areas of deployment: fmanciai metrics, interna1 controls, and accounting policy. CHC modified its organizational structure to better support Six Sigma and named an overall Champion as well as a logistics leader. Milton Jones specifically mentioned the importance of a tailored training system in Bank of Arnerica's success.
Summary
We have seen that Six Sigma can be, and in fact has been, very successful beyond a manufacturing environment. This is true even for non-profit organizations, such as CHC. In each of the cases discussed in this chapter, unique situations and circumstances needed to be addressed in a thoughtful manner. In other words, the unique environments of fmance, research and development, and health care needed to be taken into account in the deployment strategy. Just trying to follow a "cookie cutter" approach that worked in manufacturing is likely to be minimally successful in these environments. Fortunately, we do fmd that the same key factors that lead to success in manufacturing also lead to success in real economy deployments. Regardless of application area, strong leadership cornmitment and involvement, utilization of the top talent in the organization, and implementation of supporting infrastructurefor example, to aid selection of appropriate projects-are critical. The presence or absence of these success factors essentially determines how much impact Six Sigma will have.This is reassuring, in that many organizations have learned, and some have documented, how to do each of these well.Therefore, those implementing Six Sigma in the real economy can take existing best practices and adapt them to their own unique environments.The next chapter provides more specifics on how to do this.
Chapter 3
References
Hoerl, R.W, and R. D. Snee. 2002. Statistical thinking: improving businessperformance. Pacific Grove, CA:Duxbury Press. Jones, M. H. 2004. Six Sigma... ar a bank? Six Sigma Forum Magazine (February) 13- 17. Snee, R. D., and R. W. Hoerl. 2003. Leading Six Sigma: a step-bystep guide based on experience with GE and other Six Sigma companies. Upper Saddle River, NJ:FT Prentice HaU. Stoner, J. E, and E M. Werner. 1994. Managing finance for quality. Milwaukee: Quality Press.
"Six Sigma works if you follow the process. If Six Sigma is not working you're not following the process." -Aiiied-Signal Manager
In the first three chapters of this book you learned about the emergence of the real economy and the need to take an integrated view of improvement to keep an organization viable and growing. We then introduced you to the Six Sigma approach to improvement-what Six Sigma is, the benefits, and some insight as to how to deploy it beyond the factory floor.You also gained some insight as to how Six Sigma was different from previous approaches and how to overcome resistance.The central role of process thinking and the need for cornmitted and involved leadership to initiate and sustain improvement were also discussed. This was followed by some deployment case studies in different areas of the real economy, including finance, health care, and research and deve1opment.A key conclusion was that, with respect to improvement, the real economy businesses are similar to manufacturing in many more ways than they are different.Now
103
Six Signza Beyond the Factory Floor
that you understand the need for improvement, and have some understanding of the Six Sigma approach, you are iikely ready to think about how you would deploy Six Sigma in the real economy and what a deployment road map might look like.This is the subject of this chapter. We begin by elaborating on the keys to successful deployment identified at the end of Chapter 3, based on the presented case studies. Then we provide a proven deployment road map based on these success factors.We identified these keys to success and this road map in Snee and Hoerl (2003), hence here we will only surnmarize key points and highlight unique concerns for real economy deployments. We then provide some insights we have learned about deploying Six Sigma in speci5c environments, such as fmance and e-cornmerce.This chapter concludes by ident*ing some irnportant pitfalls that should be avoided to prevent derailment of the initiative and offering a suggestion to help launch Six Sigma successfully.
Keys to Success
In our studies of Six Sigma deployment beyond the factory floor in Chapter 3 we identified three major keys to successful deployment :
i Committed and iTop
involved leadership
talent
i Supporting infrastructure
Our conclusions are corroborated by many other companies' experiences, not to mention current research in organizationa1 change. See, for example, Harry and Schroeder (2000) and Weisbord (1989).
Chapter 4
Cornrnitted and Inuolued Leadership

B y committed and involved leadership, we mean leaders who are involved in the deployment of Six Sigma and have the conviction to make a difficult decision and then personally lead the organization in the chosen direction without wavering. Such commitment goes well beyond "being supportive" or "in favor" of Six Sigma. History provides many examples of committed leadership. For example, historians teii us that when Hernan Cortez landed in Mexico in 1519 to begin the Spanish conquest of the Aztecs, there was considerable dissention in the Spanish ranks as to whether it was possible for 500 sldiers to defeat the entire Aztec empire. Most soldiers,and even Cortez's senior officers, felt that the more prudent course of action would be to sail back to Cuba to obtain additional troops. Cortez's solution to this dilemma was not to hold a prolonged debate, but rather to burn and sink his own ships! With the Spanish ships destroyed, there was no choice but to go forward toward the Aztec empire; there would be no more debate or indecision. Although we do not find Cortez's mission of conquest and destruction praiseworthy, he did provide a classic example of leadership commitment. In his mind, there was no alternative to conquest and no thought of ever turning back. Senior leaders should realize that this is the leve1 of commitment required to make Six Sigma successful. Table 4.1 provides a checklist for measuring leadership commitment.As discussed, if there is not a clear "burn-the-ships" commitment for Six Sigma, the effort wiii graduaiiy be sabotaged untii it loses all momentum, especially in real economy deployments. If the financia1 and human resources are not provided, it wiii never get off the ground. Similarly, lack of a strategic deployment plan is an indication that senior leadership does not view Six Sigrna as being strategicaiiy important.
Six Sigma Beyo lzd tbe Factory Floor
TABLE 4.1
Key Aspects of Committed Leadership direction on deploying Six Sigma
i Clear, unwavering i Commitment i Development
of required resources, including personnel
lI
of a strategy for deployment (that is, a "game plan," including tangible goals and objectives) and clear communications to the organization involvement
i Frequent i Personal
i Willingness
to revise company policies and procedures to be supportive (for example, management bonus plans) celebration of successes on tangible results
i Reward, recognition, and i Insistence
At a high level, leaders of Six Sigma have to do four things wel:

1. Provide direction by creating strategy and goals for the organization.
2. Communicate clearly, concisely, and consistently why Six
1'
1I
Sigma is needed, what its benefits are, and the progress that has been made.
3. Enable the organization by providing the needed

resources, training, coaching, and counseling.
4. Provide the recognition, reward, and celebration needed to

recognize and reinforce the desired behavior. Further details on these leadership needs are explained later in this chapter inTable 4.6 and its associated discussion. Reviewing these leadership responsibiiities makes it clear that much personal time and involvement is required of the leader. The issue of personal involvement is a critica1 one. Many feel that dolars measure senior leadership's commitment-that is, the more funding they provide, the more committed they are. Although there is some truth to this, we have found that personal time is an even better barometer of leadership cornrnitment. Leaders can always get more money, but their time is the most precious
Chapter 4
cornmodity that they have. Even CEOs only have 24 hours in a day; they can't get any more time than that. Given the many demands on their time, they are forced to prioritize, and only the most critical issues receive their comrnitment. Six Sigma either makes the grade or it doesn't. Most companies have found that some systems and policies need to be revised to be consistent with the direction on Six Sigma. One obvious example is G E revising its reward and recognition system so that management bonuses would be heavily weighted by Six Sigma results. Other examples include allowing additional headcount to backfii for Black Belts (BBs) and Master Black Belts (MBBs), rethinking career progression paths, incorporating Six Sigma as a criterion in performance evaluations at all levels, and adding Six Sigma as a line item in budgets.This last point also relates to the last bullet in Table 4.1. Just as financial resources need to be provided to properly implement Six Sigma, financial benefits also need to be expected as a return. Having financial savings from the Six Sigma effort as a line item in the budget sets clear direction that to whom much is given, much is expected. Conversely,if leadership does not demand financial benefits, the organization wiii quickly see that this is an optional initiative. Why worry about Six Sigma if there are other things that you might actuaiiy get fired for not delivering?
Top Talent
There are three major reasons why top talent is so important to the Six Sigma effort:
1 . The better the talent, the better the results.
2. Top talent become the next organizational leaders.
3. Top talent attract more top talent.

The first on the list is fairly obvious-the better the talent involved, the better results'we wiii achieve with the effort.This is true in any initiative; for exarnple, sports teams with the best records tend to have the most talented players. If this is obviously true, why don't improvement efforts tend to obtain the top talent in general?
One answer is that assigning top talent to Six Sigma causes significam stress to the system, because these folks have to stop what they are currently doing, their work needs to be reprioritized, and replacements have to be found. Naturaiiy, the replacements wili often not perforrii as well as the top talent on these importam projects. Weak leaders generally follow the path of least resistance, even if it is not the path to success. It takes committed leaders to choose the more difficult and stressful path. Our experience has been that only companies that have taken the more difficult path have fuiiy benefited from Six Sigma. Certainly GE and other successful Six Sigma companies foiiowed this path and accepted the additional stress and difficulties it required. Note also that obtaining top talent applies to fding not only the fuii-time roles, such as MBBs and BBs, but also the roles of other members of the BB and GB project teams, and to fmding functional support needed to address root causes identified by the team. The second reason for selecting top talent for Six Sigma roles is to utilize the effort to develop the future leaders of the company.Today's top talent will likely become tomorrow's leaders, and you need to ensure that these leaders fuiiy understand and embrace Six Sigma. Having ex-BBs and ex-MBBs in senior leadership positions wili help ensure that the culture change is permanent and is a major element of making the transition from an initiative to the way we work. Further, the experience of being dedicated to disciplined continuous improvement will make them better leaders. Consider what Jack Welch wrote in his autobiography (Welch 2001,339):
We've always had great functional training programs over the years, particularly in finance. But the diversity of the company has made it difficult to have a universal training program. Six Sigma gives us just the to01 we need for generic management training since it applies as much in a customer service center as it does in a manufacturing environment.
There is a growing body of evidence to suggest that organizations are using Six Sigma to develop 1eaders.We see press releases announcing Person X has received a new position, and in the
Chapter 4
detail we fmd that the Person X was a Six Sigma leader (Champion, MBB, BB) at some point in his or her career. Companies such as GE, Honeywell,DuPont, 3M, and American Standard now require BB or GB experience for managerial advancement.W. R. Grace,whose Six Sigma deployment was discussed in our earlier book (Snee and Hoerl 2003), recently reported on a number of BBs returning to 1 1 with increased responsibilities and most management positions, a with promotions (Rodebaugh 2004). The third reason that selection of top talent is so critica1 is somewhat subtler. If top talent is selected for key roles, this sends a very clear message to the organization that management is serious about Six Sigma,and it creates suction for the initiative.By suction, we mean that people will naturally be drawn to Six Sigma,will want to be involved with it, and may even start to compete with one another for MBB and BB positions. We are not fans of interna1 competition, but we do think it is healthy to have more people vying for Six Sigma roles than there are positions to fdl. It is generally true that the organization knows the talent, so no words leadership may say here make a difference. When the names are announced, the organization will immediately know whether top talent has been selected. The names will speak for themselves.
Supporting Infrastru cture

The presence of a supporting infrastructure was a key reason that Motorola Finance, Community Health Corporation (CHC), and other organizations achieved major success. Based on our experience, lack of a supporting infrastructure is a key reason why some organizations have achieved minimal success. Even committed leaders and top talent will have difficulty succeeding without a proper infrastructure. In practice, of course, these items tend to go together, because committed leaders will ensure that the required supporting infrastructure is developed; uncomrnitted leaders won't.
S Z x Sigma Beyond tbe Factocy FZoor
Table 4 . 2 lists the infrastructure elements that we think are most critical.
TABLE 4.2
i An
Critica1 Infrastructure Elements
organizational structure for Six Sigma deployment that includes overall leadership of the effort, a Six Sigma Council, and dedicated positions for key roles (MBBs, BBs, and so on)
i Six
Sigma planning systems; that is, development and managerial review of implementation plans, budgets, human resources plans, and so on, on at least an annual basis (a process typically done for each business unit in a major corporation, but often overlooked for improvement initiatives) selection and review processes systems for key roles
i Project
i Training
i Modification
of human resources, reward and recognition, business planning, financial, and other business systems to support Six Sigma implementation, as needed
First there need to be formal roles, assigned leadership, and dedicated resources to get the initiative going, overcome inertia, and maintain momentum. No major corporation operates its finance department without a designated leader or a finance cornmittee, with unclear roles, or with resources doing finance in their spare time. If such a disorganized approach fails for finance, why would we expect it to work for Six Sigma? When Six Sigma becomes ingrained into the organization, it will be possible to scale down the leve1 of dedicated resources, similar to the safety department in a well-managed company, which typically has few full-time resources because everyone in the company works on safety every day. The second item inTable 4 . 2 addresses the need to have Six Sigma formally managed like any other activity of the company.The Six Sigma effort needs to plan, to develop a budget, to have clear objectives, to obtain resources, and so on. Similarly, if leadership takes Six Sigma seriously, they wi want to review and potentially revise these plans. Good companies spend a lot of time planning, which in turn means less time has to be spent fighting fires and solving crises. As UCLA basketbal: coaching legend John Wooden
Chapter 4
noted,"Failingto plan is planning to fail." The same principle holds for Six Sigma. A set of formal mechanisms for communication,which colthe lectively form a comrnunication system, are also imp0rtant.A~ old saying goes, "Out of sight, out of mind."The mechanisms can include anything from formal periodic newsletters, to regular e-mails from the CEO, to rotating posters placed in strategic places, interactions.At GE, company leador to informal "meet-the-troops" ers have discussed Six Sigma progress in each annual report since
1995.
As )TOU have seen, project selection is a critica1 component of success. Project selection should align the Six Sigma initiative with the strategic direction of the organization.We consistently see projects that aren't supported by the organization are typicaiy not linked to the strategic direction of the organization. In Snee and Hoerl (2003), we report-on two companies whose Six Sigma deployment was not successful, with poor project selection being a significant contributing factor. Many people believe that Six Sigma should begin with good project selection and put it near the top of their list of key success factors. Often the battle is lost before we have even begun due to selection of poor projects.You also need a formal project review process. The review process ensures that the projects are continuing to move in the right direction at an appropriate pace. Without a regular drumbeat of reviews, projects often get bogged down and move at a glacial pace.The reviews also give leadership an opportunity to make midcourse corrections and to quickly learn of barriers. In addition, the reviews provide a visible symbol that leadership is personally involved. Training systems may at first glance seem obvious. Everyone who gets involved with Six Sigrna receives training to build the needed skills. However, there is a big difference between establishing a formal training system and conducting a wave of mass training.A training system is not a one-time event, but rather an ongoing set of interconnected processes. It wdi evaluate and document the business needs, develop or obtain tailored training courses to meet those needs, and then deliver the appropriate type and depth of training to those who need it (and at the most
Six Sigma Beyotzd the Factory Floor
appropriate time). This may require a more complex curriculum with severa1 courses of varying breadth and depth, rather than a single one-size-fits-a11course. It will also require that new people joining the organization be trained promptly. A common problem in real economy deployments is the use of manufacturing-oriented training materials. Sucli materials are easiest to obtain, so using them is certainly tempting to management. However,putting financia1 analysts or computer scientists into a training course that focuses on improving manufacturing processes typically results in disaster. Not only wili people not understand how it applies to them, they wili likely develop an attitude that Six Sigma is a manufacturing initiative irrelevant to finance or e-commerce. In other words, it reinforces the attitude that "we're different; Six Sigma doesn't apply to us." We have commented previously on the need to mod* systems, policies, and procedures to be consistent with Six Sigma direction. For example, to attract top talent to the effort, career progression paths need to be modified so that MBB and BB roles are clearly seen as accelerators, rather than hindrances, to career advancement. Similarly, managerial bonus programs, annual performance-appraisal systems, communication processes, and the like need to be modified to help drive Six Sigma.These points iliustrate why the three key success factors of leadership, top talent, and supportive infrastructure must be tightly linked.
Road Map for Leading Six Sigma

We now provide the major steps in our road map, including the objectives for each step. Subsequent chapters provide more detailed, step-by-step advice for succeeding in each step.The overa 1 1 deployment process is flexible (as are the individual steps) and can be applied to organizations of different sizes, industries, cultures, and so on. Figure 4.1 shows the recommended deployment process.This road map is not the only road map that can be used, but it has been applied in a number of situations and utilizes the experiences of many types of companies, including lessons learned about the key success factors.
Chapter 4
Major Deployment Phases
Major Transition Point
Keys to Success
FIGURE 4 . 1
High-leve1 deployment process for Six Sigma.
The deployment process shown in Figure 4.1 consists of four major steps or phases:
1. Launching the initiative
2. Managing the effort
3. Sustaining momentum and growing
4. The way we work

Our experience has been that a 1 1 organizations successfully deploying Six Sigma go through each phase, although each progresses through the phases differently. Each phase has unique challenges and issues, and, of course, there may be overlap. Some organizations may have to recycle through previous phases if they have not been properly addressed. We have found these steps to be cornmon to all companies irnplementing Six Sigma,but each organization is likely to experience them in a unique way. These four steps have been carefuily chosen to align with the major transition points in Six Sigma deployment. Unfortunately, no one has gone immediately from being a non-Six Sigma company to being a Six Sigma company in one big step. Everyone has had to go through an evolutionary deployment over
Six Sigma Beyond the Factory Floor
several years, resulting in several transitions. This is true for real economy organizations as well as manufacturing organizations. Organizational transitions often provide major opportunities for breakthroughs as well as for pitfalls. During transitions, direction changes, roles change, often circumstances change, and there is always some leve1 of anxiety in the organization, if not confusion and fear. It is therefore very important that the transitions in Six Sigma deployment be planned properly and take into account the key success factors discussed at the end of Chapter 3:
i Leadership iTop
commitment
talent
i Supportive infrastructure
Without proper planning, these transitions could turn out to be full of landmines and derail deployment. Quarterly reviews of the overall Six Sigma deployment in each organizational unit (facility, business unit, function, etc.) by senior management of the unit are key to the successful deployment of Six Sigma.Transition between phases and changes in direction are much easier to make if these reviews are done properly. Every fourth review is frequently used to focus on deployment strategy for the coming year. It should not go unnoticed that by deploying Six Sigma you are creating a management system that wii enable the organization to make systematic improvement an integral part of how you run your business. You are creating a business process that you plan for, set goals for, assign resources to, and assess the effectiveness of each year just like you do for a 1 1 your other business processes. Although such processes to manage improvement are common in manufacturing,they are much less common in fmance, health care, and other areas beyond the factory floor. The following sections provide an overview of each deployment phase of Six Sigma, with special focus on real economy organizations. Let's take a closer look at each of them.
Chapter 4
Launcbing tbe Initiatiue

The first transition occurs when the organization makes the decision to implement Six Sigma. Implementing Six Sigma will cause significant change to the status quo of the organization. There may be current managers who are philosophically opposed to Six Sigma,or who want to jockey for position based on political motivations. Individual contributors in the organization will no doubt have a lot of serious questions.This is particularly true outside manufacturing, because people may feel that "we're different; Six Sigma doesn't apply to us,"as discussed in Chapter 2. Opinions at this point may be based on hearsay or sound bites from the media that may or may not be accurate.The organization will be looking for clear vision and direction at a 1 1 levels. Some of the key issues that will need to be addressed in the launching the initiative step are as foliows: i Setting the overali vision, strategy, and justification for deployment of Six Sigma
i Selecting an
externa1 Six Sigma provider for training, project mentoring and consulting, project management, and so on, if needed a long-term deployment plan, including
i Developing
objectives
i Developing
a short-term irnplementation plan based on the long-term deployment plan, including selecting the initial set of projects and resources a clear communication plan to explain this direction to the entire organization,including expected benefits
iWriting
Of the key success factors discussed earlier, committed and involved leadership is particularly relevant during this step, especialiy in the real economy. As noted in Chapter 2, strong leadership is needed to overcome the "we're different" rnindset. Committed and involved leaders provide the compelling vision and strong leadership required to ensure that each of the issues is properly addressed, whereas supportive leaders likely hope that someone
Six Sigrna Beyond the Factory FZoor
else takes care of these issues whiie they focus on whatever they consider to be critically irnportant to the organization. It is irnperative that everyone in the organization understands why the organization is deploying Six Sigrna and has a clear understanding of the long-terrn vision. Understanding the rationale for change and seeing where the organization is headed are crucial to any change initiative (Weisbord 1989).
Managing the Effort

After the Six Sigrna initiative has been forrnally irnplernented, the next key transition occurs when the first set of projects are being cornpleted and people start wondering where we go frorn here. If Six Sigrna is properly irnplernented, there will likely be a wave of enthusiasrn that wiil carry the effort through the first set of projects. It is at this crucial transition point that Six Sigrna wiii either fizzle out as just another short-lived fad or it wiii be properly rnanaged as a long-terrn business priority. To successfully move through this transition, you need the second set of projects and the involvernent of the organization's top talent (change is tough!), as well as initial elernents of the supporting infrastructure. Key requirements at this step are as follows:
i Strong leaders iAn
in Six Sigrna roles
effective project selection systern including the airnportant second set of projects rnultiiayered project-review systern approved Six Sigrna budget comrnunication processes
iA
iAn
i Good
i Formal
recruitrnent and career progression processes for MBBs and BBs and recognition systerns
i Reward
The issue of top talent is particularly chaenging outside rnanufacturing and engineering. In those organizations, large pools of engineers are trained in advanced rnathernatics and the scientific

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What are the key steps in launching a Six Sigma initiative?

What are the key steps in launching a Six Sigma initiative?

What are some challenges in managing a Six Sigma effort after initial projects are completed?

What are some challenges in managing a Six Sigma effort after initial projects are completed?

SIXSIGMA BEYOND THE

SIXSIGMA BEYOND THE FACTORY FLOOR

Ronald D. Snee Roger W. Hoerl

Libnry ofCongress hbllcation in Data: 2004109256

Printed in the United States of America First Printing October, 2004'

A Holistic View of Six SiFactory Floor

The fmpact of Six Sigma Beyond the

Addresshg the Fundamental Barrier: "We're Different!" 31

DepIoyment Case Studies

The Bank ofAmerica Story 68

Deployment Within the Audit Staff 84 Broader Deployment Within Finance 86

GE Research and Development 89

Summary 100 References 101

A Proven Deployment Road Map

Cornrnitted md Involved kadership

Specific Business Application A r a s Specific Functions 140

Project Case Studies

A Six Sigma Approach to Predicting Corporate DefauIts 157

hprovement Happens Project by Project 193

Keys to Completing Successfd Projects

Unique Technical Chalenges i n Applying the Methods and Tools 247

Sumrnary 292 References 293

M a k h g Six Sigma Your Strategic Signature 29s

The Strategic Signature 296

Sumrnary 311 References 3 12

Features of This Book

How T h i s Book Can Help You

leadership, talent,and infrastructlire for a successl launch

maxirnizing the financia1 vaiue of your Six

What's in This Book?

How to Use This Book

tht: entire organization;the project (tactical) level-how

Ronald D. Snee Newark, DE

Roger W Hoerl Schenectady, NY

THECASE FOR SIXSIGMA

A HoliSfic View of Six Sigma

Addressing the Fundamental, Barrier: "We're DifTerent!"

"Only the over-d review o f the entire business as an

ecoiioniic system can give real knowledge." -Peter E Drucker

Deployment Case Studies

unit of the company.

Six Sigma Bevond the Factory Floor

Deployment Within the Audit StafS

Deployment Case Studies

Motorola's audit process. Adapted from Stoner and Werner 1994.

Six Sigma Beyorzd the Factory FZoor

Broader Deploy ment Witbin Finance

Deployment Case Studies

Six Sigma Beyond tbe Factory Floor

Deployment Case Studies

coming resistance and the "we're different" syndrome.

GE Research and Development

Six Sigma Beyond tbe Factory Floor

Corporate Researcb Gets Into tbe Act

A Strategy Takes Form