Analysis of Six Sigma

Abstract As we enter into the business world, in some way shape or form, we are going to encounter a quality control problem. Six Sigma is currently one of the most popular quality control metrics out there. This work will present a brief history of Six Sigma, as well as define precisely what its strengths and weaknesses are. We analyzed two companies that implemented Six Sigma: one that saw long term success and another where Six Sigma made the company worse off.

We collected from multiple proponents and opponents of Six Sigma and concluded from the data that for it to be truly beneficial there has to be strong leadership that can guide the process. Also, there needs to be a well-educated and trained team that understands that Six Sigma gains are maximized when it is not the only metric used. I. What is Six Sigma? Six Sigma is a customer-driven quality control system. It is composed of a set of tools and strategies used to improve a company’s overall performance by identifying and eliminating defects in their business processes.

The main purpose of Six Sigma is to minimize variability by creating processes with near perfect outputs. Six Sigma is statistically defined as having no more than 3. 4 defects per million opportunities. In order to successfully implement Six Sigma, a company must fully adopt the rigid structure and culture that accompanies this quality control program. (Russell & Taylor) It is especially important for top-level management to accept and master the concepts of Six Sigma. There are various training programs and certifications for managers to achieve in order for an organization to be truly Six Sigma.

The required involvement of employees at all levels of the organization increases the success rate of Six Sigma implementation. When employees are certified they feel empowered and often more motivated to drive bottom line results. Motorola created Six Sigma in the early 1980’s as a means to improve their manufacturing processes. The company used the statistical calculation of 6s as a goal for all of their operations and thus the program and techniques used became known as Six Sigma. The program gained popularity when Jack Welch famously instituted it as a central component of General Electric’s successful business strategy in 1995.

Following G. E. ’s success with Six Sigma, many Fortune 500 companies began implementing Six Sigma initiatives to improve operations and reduce their costs. II. Benefits & Drawbacks of Six Sigma There are several benefits offered by successful implementation of Six Sigma. By definition, the program is driven by bottom-line results. The goal is to detect and remove defects and wastes in all business operations. By eliminating wasteful elements of the manufacturing process, organizations are able to focus their efforts on value-added activities.

The aggressive goal of striving for perfection allows companies to develop a huge competitive advantage. Companies with successful experiences using Six Sigma have attributed billions of dollars in savings to the programs initiatives. Although there are many advantages to the program, we must not ignore the drawbacks and potential disadvantages for some companies using Six Sigma. The rigidity and strict structure required by the program may create a bureaucratic environment and ultimately suppress creativity.

There is an immense amount of training necessary for employees to understand the program and how to properly apply it to business operations. Six Sigma is costly to implement and therefore becomes difficult or intimidating for some organizations to undertake. An area of concern for companies and individuals looking to implement Six Sigma is the lack of standardization among trainers and certifications (Keller 2010). The rise in popularity of Six Sigma has led to an entire industry of consultants and trainers that may claim expertise in Six Sigma but may simply be charismatic individuals with only a basic understanding of Six Sigma principals.

When choosing a consultant or certification program it is important to find a reputable organization or individual, one that can meet the demands of an organization to successfully implement Six Sigma methodologies within the company and successfully train management and employees. Without Proper implementation and execution of Six Sigma through qualified training, individuals and companies will not see optimal results from Six Sigma, and may see a negative return on their investment. The decision whether Six Sigma is the right approach ultimately

depends on the goals of the organization. Several companies have experienced great success using this system while others have seen less desirable results. III. Successful Implementation: Honeywell International Incorporation. Honeywell International Incorporation is a product based fortune 100 company with over 1,320,000 employees in more than 100 countries (Honeywell 2013). Honeywell products touch the lives of most of us every day, whether we are flying on a plane, driving a car, heating or cooling a home, furnishing an apartment, taking medication or playing sports.

The company deals in serving customers worldwide with aerospace products and services, control technologies for buildings, homes and industry. They also produce automotive products, turbochargers and specialty materials. In 1999 AlliedSignal acquired Honeywell Inc. and as a result Honeywell International Incorporation evolved. The name Honeywell was retained because of its higher brand recognition. The two companies had existing quality management systems and the merger meant a conflict in their Quality Control systems was inevitable. AlliedSignal had used Six Sigma while Honeywell had createdthe Honeywell Quality Value Program.

AlliedSignal was five years into its Six Sigma program, which directed the company’s effort to capture growth and productivity opportunities more rapidly and efficiently by reducing defects and waste in all of its business processes resulting in $600 million in annual savings. AlliedSignal’s Six Sigma efforts had developed a strong reputation, both internally and externally, for accelerating improvements in all of the company’s processes, products and services. At the same time Six Sigma had reduced the cost of poor quality through waste elimination, defect and variation reduction.

Meanwhile, Honeywell had developed its own quality management system – the Honeywell Quality Value (HQV) program – an assessment process based on the Malcolm Baldrige National Quality Award criteria. The merger of the two was a challenging task and resulted in the creation of Six Sigma Plus, which is used by Honeywell today (Green 2000). Six Sigma Plus is a way of life at Honeywell International which drives the growth and productivity by energizing all of Honeywell International’s employees worldwide. It provides the skills and tools to create more value for its customers, improves its processes and capitalizes on the power of the Internet through e-business.

Key to making Six Sigma Plus universal in each of Honeywell International’s divisions was committing to a strategy of approaching every improvement project with the same logical method, the Define, Measure, Analyze, Improve and Control or DMAIC. With DMAIC the company aims to define the customer and the critical parameters, measure how the process performs, analyze the cause of the problems, improve the process to reduce defects and variation and control the process to ensure continuedimprovement in performance. Being able to effectively use DMAIC meant training.

Also key to training employees in Six Sigma Plus is Honeywell International’s Growth Green Belt program, which aims to bring Six Sigma quality to every aspect and department of the company from: marketing, human resources, sales, etc. As the company expands the reach of Six Sigma Plus methodology well beyond traditional manufacturing-based projects, several hundred teams led by its Growth Green Belts have engaged marketing and sales professionals, design engineers, and others in a quest to deliver customer value by developing new products and services.

Honeywell’s managers and supervisors are expected to earn Six Sigma Green Belt certification within 12 months of their hire date. This ensures that the company’s top-level management is properly trained and embraces the Six Sigma culture in their daily activities. The company has realized billions in cumulative savings from Six Sigma-related activities. As a result of using Six Sigma, Honeywell has many success stories. An Industrial Control team developed a reliable, cost-effective family of chips and assembled components for the burgeoning data communications market.

As a result, Industrial Control achieved a 500-percent increase in revenue growth, resulting in a year-over-year increase in operating profits of several million dollars. Cycle time was reduced 35 percent, and yields increased from 75 percent to 93 percent. Also, More than 300 staff members, both in quality control and research and development laboratories across several Honeywell International businesses, participated in a customized Green Belt learning program to improve measurement systems.

This sharing of best practices, resources and expertise has benefited the development of new products and the quality control of existing products. At the same time, it has helped save nearly $8 million (Antony 2007). The company has built its operations to drive continuous improvements and produce exceptionalperformance in all areas. Everyday approaches in the company have absorbed the Six Sigma methodologies. The employees are expected to do it right the first time and eliminate the non-value steps.

The employees follow procedures to reduce the process variations and are expected to be lean for their need of resources and support. The focus of the company is customer satisfaction,first to understand customer needs and then delightthem by exceeding their expectations. IV. Unsuccessful Outcome: 3M 3M is a multinational conglomerate corporation producing tens of thousands of products worldwide in various market segments with current global sales of $30 billion and 88,000 employees globally. 3M operates in more than 70 countries (3M Company Information, 2013).

The company maintains separate research labs to create innovative ideas for products used every day for people all around the world. James McNerney became the CEO of 3M in December of 2000 after losing a close race to succeed Jack Welch at GE. McNerney aggressively made changes to the company’s culture, primarily the implementation of Six Sigma as the company’s new quality control system. Before McNerney took the position as CEO at 3M, the company was known for risk taking and abundant spending on innovation through research and experiments.

They believed that creativity and innovation was as essential a piece of success as production and management efficiency. McNerney saw these efforts and time spent on creativity as reckless and believed that Six Sigma would force the organization to pull back the reins on its spending. Initially, the program was effective at reducing costs and successfully increasing the company’s profitability as the company had become sluggish. McNerney whipped it back into shape by streamlining operations andlaying off about 11% of the workforce (8,000 employees).

He also intensified the performance-review process, and imported Six Sigma management techniques to analyze processes, curb waste, and reduce defects. The discipline and focus on execution resulted in improved margins and growth in earnings – the company’s stock leaped approximately 20% after McNerney was selected CEO in 2000 (Gunther, 2010). The rigid nature of the Six Sigma system came at a price. It eventually took its toll on the organization for squashing the creative environment that once thrived at 3M.

The strict structure required for Six Sigma implementation did not allow room for risk-taking and innovation. Workers at 3M took pride in their business model, which was “new-product innovation”. There was absolutely no flexibility for researchers to utilize their creativity. For instance, for every new idea that was thought of, the 3M ambassador asked for a 5-year plan, insisted people go through all levels with a new idea, was suspicious of every idea that originated below them, and was very control-conscious (Huang, 2013). This strict regime left workers close to no room to experiment and fail.

To them, failure and variation was a form of creating innovation. Did the implementation of Six Sigma “kill” innovation at 3M? The answer could go both ways. The success of a company entails various elements, not just innovation. McNerney was able to create a path of efficiency for 3M by bringing in the discipline and the focus on execution that the company needed. The problem really relies on what business model 3M believed in and stood for. 3M had always been a company of creativity, variation, and innovation.

Post-Its, for example, is now a world-wide product, but was created after experimenting and researching an intangible idea. For 3M, the employees had prided themselveson the process of creating a new idea, experimenting with it while tolerating failure. Eventually many of these experiments were put into production to create tangible products that generated profitability (Hindo, 2007). After McNerney left 3M for a position at Boeing, a previous employee of 3M, George Buckley took control of the company as the new CEO. His main struggle was to manage the tension between innovation and efficiency.

With a new boss onboard, company policy created the 15% program, wherein workers can use 15% of their time to pursue their own research outside of their usual coursework. Buckley has allowed more spending on Research and Development, acquisitions, and capital expenditures. The overall budget grew 20% in 2007 to $1. 5 billion. But more importantly, Buckley reallocated these funds into the core areas of 3M technology (Huang, 2013). With this said, for the seven years that 3M has been under the control of Buckley, net income increased from $3.

104 billion in 2005 to $4. 444 billion in 2012 (3M Annual Report, 2012). There is no doubt that Six Sigma has brought some positive changes to the company, but as a company who values innovation, the replacement of previous CEO, McNerney, gave more room to breathe for researchers. The elements of Six Sigma did not die out of the company’s quality and management structure. As mentioned before, the elements of Six Sigma did not completely die out of the company’s quality and management structure.

The problem that lied under McNerney’s control was that he focused too heavily on the number of products produced, how fast it can be produced, and mandatory updates on timelines for these products – in essence, it emphasized the quantitative aspect more than the qualitative. On the other hand, Buckley was successful in implementing these two aspects of innovation and efficiency into one quality control system, wherein the company can still keep the integrity of their business model of innovation, but also sustain the essential principles of discipline and management in production.

The point here is, although many other companies have had success with Six Sigma, such as Honeywell, other companies like 3M are not best suited to use Six Sigma as the sole metric system. Where Six Sigma was successful in 3M’s financials, it was also a failure in what the company stood for, which was as important to 3M. The integration of both techniques had created a more profitable and efficient company without losing its integrity and belief in innovation. “At 3M, one idea always leads to the next, igniting momentum to make progress possible around the world” (3M, 2013). V. Conclusion

As we have seen in the previous examples Six Sigma can be viewed as a business tool that tackles specific business processes. While Six Sigma was created by Motorola and refined by GE the actual makeup of Six Sigma is an amalgamation of other operations management metrics. Things we have learned this class, such as: house of quality, histograms and regression are all measurements of quality utilized by Six Sigma. The real “breakthrough” that Six Sigma created was implementation of the colored belt system. This hierarchy of belts, from black down to green, is a representation of the individual’s command of Six Sigma methods.

These methods place a clear focus on achieving measurable and quantifiable financial returns to the bottom line of an organization by eliminating defects in business practices. Although the benefits of Six Sigma are widely promoted there are cases where it has cost the company greatly. Our example from 3M started out with the typical gains from a Six Sigma initiative but the long-term effects were not taken into account. The sole focus on eliminating waste led to a drop in the innovation of the company, which it prided itself on.

The new CEO George Buckley trying to right the course started funneling money back into the Technology and R&D departments, the staples of the 3M business model (Huang 2013). Looking at the examples we chose we can see the pros and cons of Six Sigma. One of the main things the detractors bring up is that Six Sigma is being sold as a “Cure all. ” Mark Twain once said “If all you have is a hammer, every problem looks like a nail. ” If left unchecked or poorly managed, Six Sigma can lead to a bureaucratic nightmare. Companies become more focused on the number of trained green and black belts they have then the actual bottom line savings.

Some processes that don’t have data readily available are seen as part of the waste and eliminated from the company. Take our example of 3M, how exactly would you measure the creation of new ideas? This lack of quality data will eventually lead to drop in innovation. Something the proponents and opponents of Six Sigma strongly agree on is that successful execution of Six Sigma needs decisive and encouraging leaders. People in who make the decisions in the organization need to have knowledge of the current processes, which help them oversee their organization’s efforts to improve them.

Complete transparency is essential when trying to reshape your organization by using Six Sigma. The management staff needs to be willing to collaborate with their team to identify flaws in their current system processes. Instead of eliminating processes, which can lead to some costly outcomes, figure out ways to fine-tune or upgrade them. In the example of the Honeywell and AlliedSignal merger, the two companies had two very different quality protocols. The company adopted Six Sigma and used them in concert with quality programs that were already in place and created Six Sigma Plus.

Using Six Sigma to complement to other business problem solving approaches can help keep the companies competitive and innovative while preserving existing corporate culture and values. Works Cited 3M. 3M Annual Report (2012). Retrieved January 1, 2013, from http://media. corporate-ir. net/media_files/irol/80/80574/Annual_Report_2012. pdf 3M. 3M Company Information. (2013). Retrieved December 6, 2013, from http://solutions. 3m. com/wps/portal/3M/en_US/3M-Company/Information/AboutUs/WhoWeAre/ Antony J. (2007), Is Six Sigma a Management Fad or Fact? , Assembly Automation, 27(1), 17 – 19.

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