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So what exactly is Six Sigma, anyway? At its most basic, Six Sigma is a method of applying focused analysis to a business operation in order to streamline it and find economies at every step. In the following excerpt from their book “Six Sigma: The Breakthrough Management Strategy Revolutionizing The World’s Top Corporations” (Random House, 2000, 281 pages), authors Mikel Harry and Richard Schroeder describe the broad principles underlying Six Sigma, as well as how the theory applies to nonindustrial service businesses and departments. Harry and Schroeder found their way to management-guru superstardom by way of Motorola Inc., where executive Art Sundry stood up at a management meeting to proclaim, “The real problem at Motorola is that our quality stinks.” That declaration sparked what the authors call “a quality revolution” at the company. The pair went on to formulate Six Sigma — which has since been adopted by companies such as Maytag Corporation, Raytheon Company, and Texas Instruments Inc. — and to train practitioners in the Six Sigma way at their Scottsdale, Ariz., compound. The theory seems to address a critical need in American business, which had lagged behind Japanese companies in the race to produce quality goods but in the last few years has been roaring ahead. We believe the Six Sigma Breakthrough Strategy should be of paramount interest to any forward-thinking executive, manager, and public administrator who wants to make his or her organization more competitive and profitable and enhance its ability to drive change. Six Sigma principles apply to any business of any size. It applies to engineering, product design, and any commercial process, from processing mortgage applications to credit card transactions to customer service call centers. By attacking “variation” during the design of products and services, it’s possible for any organization to achieve unprecedented profitability. How does Six Sigma work? The first step in the Breakthrough Strategy is to ask a new set of questions, questions that take you out of your comfort zone, that force you to query what you have taken for granted, and that ultimately provide you with new direction. Six Sigma forces businesses to let go of bad habits. Bureaucracy becomes de-layered. Those employees closest to the actual work and to the customer become motivated to meet or exceed consumer requirements. By questioning the speed with which products are produced and services are rendered, people begin to think about new systems that can be put into place to produce a higher-quality product or service in a shorter amount of time. As those closest to the work discover more effective and profitable ways of working, they are able to inform senior management about what changes need to be made, and as a result, push those higher in the organization to reexamine the ways in which they do business. Six Sigma is about asking tougher and tougher questions until we receive quantifiable answers that change behavior. Through Six Sigma, companies relentlessly question every process, every number, every step along the way to creating a final product. Managers, employees, and customers ask different kinds of questions of each other than they’ve asked before. As Six Sigma takes hold across an organization, it creates an internal infrastructure that includes executives, managers, engineers, and operations and service personnel. When 50 percent or more of an organization’s staff embrace Six Sigma, those individuals are able to mobilize massive changes in the way business is done, dramatically increasing profitability. Most commercial processes have developed from a company’s need to facilitate the production of manufactured goods. Industrial companies developed their commercial processes quickly, almost as a kneejerk reaction to customer demands or a growing employee population. They were relegated to the back offices, and rarely the target of quality programs. But as companies grew, more commercial processes and services were needed, and additional checks and balances were put in place. Employees did not understand how their work overlapped or how it affected internal and external customers. Service departments became inefficient, labor-intensive, time-consuming, and costly. Their fundamental purpose — to effectively and efficiently service internal and external customers — was not recognized, and the fact that their processes were subject to variation at enormous costs to the company was not measured and, consequently, not understood. Today, more than 79 percent of the U.S. workforce is employed by commercial businesses, and 90 percent of those employed in manufacturing are actually doing service work, such as finance, marketing, sales, distribution, and purchasing within their industrial divisions. Despite the high number of service employees, some companies still believe that improving commercial processes is less important than improving industrial processes, or that seemingly intangible commercial processes cannot be controlled. Both beliefs are wrong. First, customers are more likely to take their business elsewhere because of poor service than a poor product, and, second, companies like General Electric Company and Allied Signal Corp. have shown that improving internal and external commercial processes adds significantly to the bottom line and customer satisfaction. Service constitutes a large portion of any industrial company’s costs. Industrial organizations will find that by applying the Breakthrough Strategy to all processes — whether they are design, engineering, industrial, or service, they create an opportunity to increase market share. Since commercial processes such as sales, human resources, field service, and so on have relied less on science and technology to improve performance than have design divisions or sectors focused on engineering and manufacturing, the need for the Breakthrough Strategy in these sectors is even stronger. The service industry contains many invisible processes. That is because its “products” are not as tangible as those that come off a factory line. Accounts receivable transactions, for example, can have over 20 process steps. The Six Sigma methodology breaks service transactions into individual process steps in order to create greater efficiency at lower costs. Smooth and efficient transactions translate into faster response time to inquiries, greater speed, and accuracy in the ways inventory and materials are supplied, and foolproof support processes so that errors, inaccuracies, and inefficiencies are eliminated. Cycle time and customer satisfaction are two important components in determining the level of service quality and associated costs. A hospital, for example, can determine commercial quality costs by measuring the cycle time of admitting a patient into the hospital. By measuring the total cycle time for filling out paperwork, taking the patient’s medical history, preliminary testing, and room assignment, a cost can be attached to it. In doing so, the cost of errors associated with the process can be identified, as well. Incorrect or incomplete paperwork, transposition errors, and patient retesting are all examples of commercial quality costs in hospital environments. Finding the right performance metrics and indices of capability and then learning what commercial defects to track is traditionally a tricky area for commercial businesses only because “they don’t know what they don’t know.” However, the application of Six Sigma to transactional processes is even more straightforward than it is for manufacturing and engineering processes. The misunderstanding often results because commercial businesses are not accustomed to thinking of their “work” as being accomplished through a series of “processes” producing a “unit” output. In calculating the number of defect opportunities in customer service, we substitute the word “transaction” for the traditional manufacturing notion of “parts.” In the hotel industry, any contact between a hotel guest and an employee counts as a transaction. A transaction can include the efficiency with which a room reservation was made, the competency of the hotel staff at the time of the guest’s check-in, cleanliness of room at arrival time and for the duration of the guest’s stay, and, in the case of a hotel-based conference, whether meeting rooms are properly equipped and staffed. In thinking of the service world through the concept of transactions, the “unit of product” can be virtually anything — a line of code in software, a guest registration form, a cash register receipt, even the traffic-violation ticket issued by a law-enforcement officer. If a traffic cop puts the wrong license number on a ticket or forgets to take his copy of the citation, he has created a defect that results in lost revenue for local governments. Companies can create categories to be measured, collect data, and analyze the data with statistical tools to establish a baseline capability. As a result, the defects that occur most often can be pinpointed. Knowing this can provide managers with critical leverage points. Black Belts (Six Sigma practitioners who have received at least a month of training in the technique) may conduct a cause-and-effect analysis to establish which processes are flawed and at the root of the problem, and then implement a mistake-proof process that prevents the defect from occurring again.

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