Building frameworks for Six Sigma success – Case Studies – quality management philosophy
Sarah Fister Gale
Trendy quality initiatives that promise revolutionary results from using more rigorous standards often fade before they can turn a profit because they require too much time, money, or effort to maintain. These days, Six Sigma is the quality-management philosophy du jour. Like its most memorable predecessor, Total Quality Management, Six Sigma focuses on identifying, quantifying, and driving out errors in business processes. It’s the way it goes about achieving results that is very different, says Richard Schleusener, master consultant for Six Sigma Academy, a Six Sigma consulting firm in Scottsdale, Arizona. The process doesn’t just add a layer of scrutiny to the production or transaction cycle, but changes the way business is conducted, he says. Projects are chosen and measured by using statistical tools rather than gut instinct.
Six Sigma projects identify a repetitive process that can be improved upon and then establish metrics against which change can be measured. It’s the measurement, Schleusener says, and the direct connection between projects and financial results that make Six Sigma so appealing and successful. “When you understand how to identify and measure Six Sigma projects, you can resolve real business problems and see the impact of your efforts.”
From the beginning, Six Sigma differs from other quality programs because it creates specialized positions in the company instead of putting additional tasks on already overburdened executives. Those chosen to be “black belts,” or Six Sigma specialists, are removed from their jobs and assigned solely to the role of Six Sigma project leader. Through an intensive, typically four-week training program, these experts learn the statistical, fact-based approach to identifying Six Sigma projects, eliminating the waste, and, most important, measuring their impact.
But a Six Sigma initiative is about more than training a small group of experts and expecting them to make changes on their own, says Luca Bencini, assistant vice president at AON Management Consulting/Rath & Strong, a human resources consulting firm in Lexington, Massachusetts. “To be successful with Six Sigma, everyone in the company needs to be involved at some level.” Six Sigma is a culture-change effort that requires business leaders to alter the way they operate, he says. “They need to stop relying on experience and tenure to guide them instead of requiring hard data to support their decision-making processes.”
Employees at all levels have to embrace the philosophy and acknowledge that it is how the company does business, Bencini says. To spread the culture change, executive-level leaders must champion the cause and through their own training learn how to communicate about Six Sigma and answer questions raised by the rest of the organization. Then the rest of the population should go through basic training and have access to information about the Six Sigma process and why it’s important.
Most critically, the human resources team should be on board from the beginning to build an infrastructure that will support a Six Sigma rollout, says David Silverstein, CEO and president of Breakthrough Management Group, a Six Sigma consulting firm based in Longmont, Colorado. “The human resources department shouldn’t run the Six Sigma program, because they don’t have the clout to make it work, but they have to have strong influence in shaping it,” he says. “They supply the infrastructure that causes the Six Sigma culture change.”
There are hundreds of human resources issues that should be addressed when you begin Six Sigma, Silverstein adds. For example, you need to write job descriptions for black belts, define their compensation packages, and create selection criteria and career-planning tracks. You also should create and implement a communication strategy that will keep the entire company informed about Six Sigma achievements. The training department has to plan its delivery of Six Sigma training. While most companies outsource black-belt development in the beginning, within two years they typically bring it in-house, which means the training department has to be ready to develop and support instructors in a short amount of time.
To date there is no book or class that is specifically designed to prepare human resources teams for their role in Six Sigma, but it’s important that they get some support and guidance, Silverstein adds. They need coaching from the vendor on what questions to ask and how to answer them, and would benefit from mentoring by an industry peer or someone else with Six Sigma experience. “The human resources team controls the history and the culture of the company,” he says. ‘They are a vital part of the system that supports Six Sigma.”
Fast-Tracking Culture Change
Name: The Vanguard Group
Location: Valley Forge, Pennsylvania
Type of organization: Investment management company
Number of employees: 10,000
The Vanguard Group implemented Six Sigma two years ago to add rigor and discipline to its management style. Several years earlier, the company had seen rapid expansion, which resulted in some loss of accountability in the management team, says Rich Luzzi, principal of the Center for Excellence, Vanguard’s internal Six Sigma organization. “There was too much management by the seat of the pants,” he says. “We needed to add metrics and measurement to the process.”
They decided to implement Six Sigma and created a custom approach, which they named “Vanguard Unmatchable Excellence.” At the heart of VUE are dashboards, computer-based tools that are used to collect and report data about vital customer requirements and business performance. All executives define dashboards for their core strategies and then broadcast them to the workstations of any workers whose performance affects that measurement, Luzzi says. The dashboards are constantly updated to show the results of the teams’ efforts. For example, the people who answer the phones can see the impact that their interactions with customers have on specific business drivers by monitoring their dashboards.
In the beginning, Vanguard executives used dashboard metrics only at the management level, but by year two, they had disseminated them to the entire employee population in order to accelerate the culture-change process. “When people see the impact they have on the Six Sigma metrics, they know it’s not just management speak,” Luzzi says. “They understand the value of their performance, and that’s where it all comes together.”
To help people understand the Six Sigma philosophy and how their efforts affect the dashboard measurements, Vanguard offers several levels of training, which is all conducted in-house by VUE masters (also known as master black belts). Employees– who are referred to as “crew members”–receive overview training that introduces them to VUE concepts and terminology. Once they have been chosen to participate on a VUE project, they receive team-member training. Training for VUE specialists (green belts) is given to anyone considered a leader, change agent, or influencer in the company. They learn how to identify and implement projects, build dashboards, and make use of VUE philosophies, Luzzi says. The training also teaches them how to communicate the message to their team members. This is critical to drive the VUE mentality into the leadership organization. Finally, those chosen to be VUE experts (black belts) receive the full four-week training program.
At most other Six Sigma companies, black belts maintain their role for two or more years. VUE experts stay in the position for only 12 months. During that time they are expected to finish training, complete two projects, pass a certification exam, and then return to a leadership role in the company.
By putting its brightest people through a rigorous fast track of Six Sigma training and experience, Vanguard is quickly filling its ranks with individuals who use Six Sigma’s measurement-based approach, and they are infusing the culture with the new management philosophy. “Our goal with Six Sigma is to change the way we manage,” Luzzi says. “We are creating better leaders through the use of Six Sigma.”
Six Sigma Is a Way of Life
Name: McKesson Corporation
Location: San Francisco
Type of organization: Provider of healthcare supplies and software
Number of employees: 22,000
McKesson executives see Six Sigma as fundamental change in the way they do business. “It’s not an additional step or certification system,” says Jeff Reinke, McKesson’s vice president of Six Sigma. “It’s how we operate.”
Before 1999, McKesson Corporation had never thought to implement a quality initiative. “Until the late ’90s, quality was an issue for manufacturing companies, not transactional ones,” Reinke says. But as health-care costs skyrocketed, McKesson executives realized that the only way they could stay competitive was to drive costs out of the supply chain.
At the time, companies using Six Sigma were getting a lot of press about their results, so McKesson’s leadership team met with Six Sigma Academy to see if the process could transfer to the health-care-supply arena.
In 1999 they launched Six Sigma, using what Reinke calls “a traditional approach.” They identified exceptional employees for a four-week black-belt training course, pulling them out of the business for two years to work solely on Six Sigma projects. Beginning with the health-supplies and pharmaceutical division, they trained 15 to 20 black belts and then reassigned them to their original business units as their teams’ Six Sigma representatives.
Each wave of training since then has targeted a different business group, and slowly the Six Sigma philosophy has infiltrated McKesson’s business philosophy, Reinke says The company has since trained more than 12C black belts, 80 of whom are still active.
When the two-year commitment ends, black belts return to the business at higher positions, helping to spread the approach throughout the organization and ensuring that key leaders are committed to the philosophy. “The black-belt assignment is like a succession-planning effort at McKesson,” Reinke says. The strongest performers are chosen for the training, and they are promoted accordingly when it’s over. “Associates know that if they want to grow in the company, they need to be selected for black-belt training.”
But Six Sigma training doesn’t end with black belts. In most divisions of the company it is mandated that all senior vice presidents go through “basic training,” which introduces the Six Sigma concept and details how to identify and scope a Six Sigma project. Across the company every manager and director is expected to attend basic training and green-belt training, which gives them a high-level working knowledge of Six Sigma methodologies and why it’s important to follow them. “They understand Six Sigma well enough to identify potential projects, discuss them using unique Six Sigma vocabulary, and participate on Six Sigma projects led by black belts,” Reinke says.
The mandatory training also raises awareness of the company’s commitment to the new fact-based approach to business. “In the past, requests were granted on the basis of seniority or past experience,” Reinke says. “Now, decision-makers know that every project must be supported by hard data before it can be implemented.”
Six Sigma training also has no end-date at McKesson. The company now has four master black belts who conduct all of the Six Sigma training in-house, and Reinke expects the training to remain an integral part of the employee-development process. Eventually, all teams will have a dedicated black belt, just as they have vice presidents and associates, he says, and everyone in the company will embrace Six Sigma as a way of conducting business.
And while the Six Sigma effort showed profits in the first year and each subsequent year, Reinke sees it as more than just a cost-cutting initiative. “It has helped us get better at our core competencies,” he says. “Six Sigma is our culture now.”
Huge Profits by Year Three
Name: Mount Carmel Health System
Location: Columbus, Ohio
Type of organization: Health-care provider
Number of employees: 7,000
June 2000 was a pivotal time for Mount Carmel Health System. Escalating healthcare costs forced the company to lay off 200 people, which affected employees’ ability to deliver good customer care. Expenses were rising 4 to 6 percent annually, and reimbursement payments weren’t going up, says Tammy Weidner, Mount Carmel’s vice president of Six Sigma. “We knew that we needed to do something differently.”
At the time, the chief quality officer and the CEO were both reading books about Six Sigma. It hadn’t been done yet in health care, but the results in other industries were so impressive that the executive team decided to pursue it, Weidner says. “Someone in health care needed the courage to take the initiative, and they said, ‘If not us, then who?'”
With the commitment to find a solution in place, the leadership team, which included the CEO, CQO, COO, and CFO, attended a Six Sigma seminar in June. By July 27, 2000, they had signed a contract with BMG, and they started executive training on July 31.
BMG consultants began by working one-on-one with executives to teach them the Six Sigma concept of fact-based problem solving, to answer their questions, and to understand their fears. “It was critical to deliver the executive training first, because they would be the voice of the initiative,” says Weidner. “They needed to know how to respond to employees’ concerns and what to do if there was resistance.”
After the two-day executive training, the company’s vice presidents, who would become “champions” of the program, were trained in Six Sigma processes and methodologies. They were then asked to identify 44 potential black belts from their existing teams. “The black-belt candidates were pulled from their positions and they weren’t replaced,” Weidner says. It was a sacrifice for the business units that lost them, especially so soon after a layoff, and therefore it was critical that the VPs understood and embraced the Six Sigma concept or there could have been a lot of resentment. By October 30 the first wave of black belts began training.
“It was unprecedented for a health-care company to move so quickly,” Weidner says. “It showed the staff that there was significant commitment to this change effort.”
Because Six Sigma was so new to the company and to the health-care industry, the black belts became a community among themselves, supporting and encouraging each other through the early projects, she says. They were also supported by the “core team,” a Six Sigma task force made up of the vice presidents of HR, finance, communications, and PR; Weidner; a senior executive; a representative from the IT department; key operations people from the three hospitals; and the director of education. It was their job to create the infrastructure for Six Sigma, which included making technological improvements to support projects and training, building job descriptions, defining roles and compensation for Six Sigma personnel, and creating an organic FAQ to answer any employee questions about the company’s Six Sigma methodology and how to be a part of it.
At that time, having a core team was unusual, Weidner says, hut she attributes much of the success of Mount Carmel’s Six Sigma program to the core team and the infrastructure they built. There were no companies to use as guides in the industry, so the core team was largely responsible for customizing Six Sigma for health care and spreading the message across the organization through newsletters, meeting agendas, and an informational Web site. “Every day I receive calls from people asking what’s going on with Six Sigma,” Weidner says. “It’s a great litmus test of the excitement people have about Six Sigma and their acceptance of it.”
Another convincing measure of employees’ acceptance of Six Sigma is the return on investment the program has shown. The first year, $650,000 was spent on the rollout, and even though training was not completed until March of 2001, by June 2001 (the end of the fiscal year) Six Sigma efforts had saved the company $946,000 from three projects conducted over two months. The second year saw a savings of $6.5 million, and this year Weidner projects a return of $9 million. “It just shows if you have courage, commitment, and the willpower to stick with it, the payoff can be exponential.”
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