Six Sigma

Six Sigma is a business management strategy aimed at improving the quality of the products and services offered by a company. The resulting high quality output, in theory, should increase the company's market share. This strategy was developed telecommunications company Motorola's U.S. division in 1986 and has since then been implemented by many companies in different sectors of industry. Among the early adopters of Six Sigma approach were Honeywell International and General Electric.

Six Sigma originated when Motorola realized that it had to initiate change in order to keep up with Japanese rivals. The company decided it would improve its processes by eliminating defects. The name Six Sigma came from the statistical term sigma, which is defined as how far a given process deviates from perfection. There are up to six levels of process sigma, defined by the defects per million opportunities (DPMO). The six sigma level is the level at which the processes are near perfect, with 3.4 DPMO, or only 0.00034 percent in defects.

According to George Eckes in The Six Sigma Revolution: How General Electric and Others Turned Process into Profits (2002), one strategic component of the Six Sigma approach is business process management. The author underlines that in order for the Six Sigma methodology to work, management at all levels of an organization must be actively involved. There are eight key elements of business process management, as defined by Eckes. These are:

1. Creation and agreement of strategic business objectives.

2. Creation of core, key sub- and enabling processes.

3. Identification of process owners.

4. Creation and validation of the key measures of effectiveness and efficiency for each process.

5. Collection of data on agreed dashboards.

6. Creation of project selection criteria.

7. Using the project selection criteria for project selection.

8. Continual management of the processes to achieve strategic objectives of the organization.

According to Eckes, process improvement methodology is the second major component of the Six Sigma approach. There are two basic methods - the first is to improve already existing processes via a simple but detailed plan, and the second one is to create new processes. GE and other followers of the Six Sigma concept improved their processes using a methodology known as DMAIC - Define, Measure, Analyze, Improve, and Control. Following is a description of each of the phases as cited in the article Six Sigma in the 21st Century, published in the 2008 annual conference proceedings of the Institute of Industrial Engineers:

1. Define - The first step in the DMAIC approach is to carefully examine the current situation of the process and to define chronic problems that could be alleviated. Here the company also sets the general frame of the six sigma effort - goals, objectives, required staff and timeline.

2. Measure - During the second step the company measures the current process capabilities and establishes a baseline. This is also the point when performance metrics that may be used in later steps are established.

3. Analyze - Afterward the company must determine the critical process variables by collecting and analyzing data in order to determine the root causes of the existing chronic problems.

4. Improve - This is the point when formal experiments are carried out with the aim to determine optimal process settings. When a solution is found, it should be tested to validate performance metrics developed in the measure phase.

5. Control - Here the solutions are transferred to production. The new process capability is measured and the registered improvements are documented. It is important that the company develop a plan to establish control over and maintain the gains achieved via the six sigma effort.

In his book, Eckes underlines the importance of managing change. He points out that the reason why many quality change efforts fail is that companies put too much effort into the technical change rather than ensuring acceptance of the measures. It is important that there be a vision of what a Six Sigma organization looks like and that commitment to this vision mobilized. It is normal to meet resistance of the six sigma effort so it is of crucial importance to identify the sources of resistance and to have a strategy to overcome it.

Six Sigma: Selected full-text books and articles

Six Sigma for Everyone By George Eckes John Wiley & Sons, 2003
The AMA Handbook of Project Management By Paul C. Dinsmore; Jeannette Cabanis-Brewin AMACOM, 2014 (4th edition)
Yes, Six Sigma Can Work for Financial Institutions ABA Banking Journal, Vol. 95, No. 9, September 2003
Throughput Metrics Meet Six Sigma By Aghili, Shaun Management Accounting Quarterly, Vol. 12, No. 3, Spring 2011
Using the Six Sigma System Approach to Reduce Core Process Times at a Manufacturing Plant By Chung, Yi-Chan; Hsu, Yao-Wen; Yen, Tien-Min International Journal of Management, Vol. 25, No. 3, September 2008
Six Sigma Quality: Experiential Learning By Box, Thomas M SAM Advanced Management Journal, Vol. 71, No. 1, Winter 2006
Improving the Odds: Combining Six Sigma and Online Market Research for Better Customer Service By Rylander, David H.; Provost, Tina SAM Advanced Management Journal, Vol. 71, No. 1, Winter 2006
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