|Dr. Dipak Bhattacharya|
|E X E C U T I V E S U M M A R Y|
|To leapfrog ahed of competition in this world of uncertainty, corporate world is experimenting with one after another processes. From 'Conformance to Standards' to achieving total quality, the focus has now been shifted to add economic value and pratical utility to both the organisation and the customer. Realising Value entitlement both by the customers and the organistion is now the determinant of business relationship. It is now a win-win situation for the both. For customers it is their rightful expectable to buy quality products at competitive cost while for organistions, it is to produce at highest possible profit. This synergy is what everybody tries to achieve in this corporate world. Rejection Allowance Unavoidable Rejection (UR) are now the forbidden words. |
Sis sigma as a business process is now allowing organisations to improve their bottom line by designing and monitoring business activities in a way that minimises wastes and resources without, however, compromising with customer satisfaction. Six Sigma process is broader than total quality management (TQM) programmes. While TQM focuses on detecting and correcting defects, six sigma re-creates the processes to ensure defects never ariase right from the beginning. From organisations' point of view it provides maximum value in the form of increased profits and from customer's point of view it provides maximum value in terms of high quality products and services at competitive costs.
Sigma is a letter in the Greek alphabet and used to denote the standard deviation of a process. As a concept it was first developed by a consortium including Motorola from the mid 1980s and adopted by many major manufacturing organisations including General Electric. Now, however it is applied in other organisations also. For example, GE Capital the world first service transaction based company introduced this in 1996.
Broadly six sigma is the statistical application of Total Quality Management to achieve a new paradigm in customer quality. Sigma quality level describes the output of a process. Six Sigma goes beyond defect reduction to emphasise business process improvement in general which includes cost reduction, cycle-time improvement, increased customer satisfaction and any other metric important to the company. Six Sigma can now imply a whole culture of strategic, tools and statistcal methodologies to improve the bottom line of companies.
An objective of Six Sigma is to climinate every molecule of waste that can be found in an organisation's processes. Substantial bottom-l;ine benefits can be achieved by organisations practising six sigma break-through strategy through the improvement of cycle time reduction of defects, cost reduction, etc. Quite often organisations are preplexed yet for adopting another strategy and ponder why should it consider six sigma? Simple answer to this today's organisations are customer-centric. Customers from the base of today's world market and sending clear message: produce high quality products at lower costs with greater responsiveness. Six Sigma helps an organisation achieving theses objectives when aligned with other initiatives as part of a business strategy.
Higher Sigma values indicate better quality products and lower sigma values represent less quality products. At six sigma level, products are virutually defect free, i.e. it allows for 3.4 Defects Per Million Opportunities (DPMO) only.
This study is intended to focus on the importance of six sigma practices, duly explaining its processes at the outset and then relating it to HR strategies for better results. As explained at the outset six sigma concept is different than TQM. TQM, per se, focuses on imporvements in individual operations, without relating it to the processess. It emphasises on the use of statistical tools and due to absence of integration of operations and processes (which is a series of activities or steps to create a product or service in its totality), it takes long time for an operation to improve. While six sigma, using rigorous analytical tools with the leadership from the top, develops a methodology for sustainable improvements. Six sigma is a more integrated approach with commitment to achieve success by way of quality improvement that increases profitability and customer satisfaction. Sis Sigma, therefore, is a break through strategy that improves organisational values, infusing changes in the processes, which go into creating defect free product or service at minimum cost. For introducing six sigma, it requires improvement in following areas.
- Improvement in following areas
- Improvement of process
- Improvement of product and services
- Improvement in investor relationship
- Improvement in designing
- Improvement in supplier relationship
- Improvement in training and recruitment
Mickel Harry (1994) in his Six Sigma Academy, emphasises on all these areas which prepare the ground work for acchieving excellence in an organisation. Every member of the organisation needs to be trained, following the system and then the players in the break through strategy ned to be identified to play the role of catalysts in the change process. In the change process customer is the king. Customers define quality and set expectations and hence, they figure out at the top among change agents. Other Change agents being internal to the company, they are graded through training process. A typical inverted relationship in six sigma break through strategy is explained in Figure -I below.
Master Black Belts
|Like customer at the top, at the bottom of the inverted pyramid is the top management, who supports and balances the six sigma change process. Champoins are also executive leaders who identify individuals leaders to ensure that key functions are connected to six sigma. They are the gounding force to make the strategy work Master Black Belts are selected by the Champions to assist in dissemination of break through strategy and for identifying projects for improvement. They train and coach Black Belts and Green Belts, organize people design cross-functional experiments, structure and coordinate projects and meetings, collect and organize information. Black Belts work under the Master Belts and apply six sigma tools and knowledge to specific projects. Green Belts on the other hand are employees of the organization who execute six sigma as part of their overall jobs to six sigma projects. Master Black Belts and Balck Belts dedicate 100% of their time in working on six sigma projects. |
|STEPS FOR SIX SIGMA |
|By now it has been made clear that six sigma is a problem-solving tool. Six Sigma breakthrough strategy aims to achieve excellence by properly identifying issues pertaining to business, technology, manugacturing / services, quality, production and delivery systems. There are eight fundamental steps to achieve six sigma quality in a process division of an organization. These eight stages are; Recognise, Define, Measure, Analyse, Improve, Control, Standardise and integrate. Such eight states can be broadly categorized under four head, as illustrated in Figure-2 |
||Recognise and Define
||To identify Ky Business Issues|
||Measure and Analyse
||To Understand level of Current Performance|
||Improve and Control
||To initiate Break through improvement|
||Standardise and Integrate
||To Transform day to day conduct of business|
|The Six Sigma Map |
|At each stage, organizations are required to perform specific tasks to finally institutionalize the six sigma breakthrough strategy. In identification phase, companies recognize in what way processes affect their profitability and what process are critical to business. Similarly characterisatation phase helps to benchmark and provides the inputs to measure improvement. At this stae action plan is charted to close the gap between the current and the future, matching company's goals for product and services, it si at this stage Black Belts select key characterstics of one or more products / services and develop a detailed description of each and every step in their processes. Using process control cards. Black Belts estimate the short-term and long-term process capability.|
Using specific statistical tools, organization, at this stage, try to analyse reasons for defective products / services, nature of problem-sporadic or persistent, technology or process related, etc.
In the optimisation phase, Design for Six Sigma (DFSS), is used to reconfigure products and services right from the beginning in a way that conforms to six sigma quality. This is done by discovering the key variables that lead to the problem and then designing the products and services eliminating such probelm generating variables. Apart from such improvement initiative at optimisation phase, proper control is ensured by strict monitoring of the processes to avoid recurrence of similar quality problems in products and services. Thus optimisation ensures improvement of a process by reducing the variation using statistically designed experiments. Optimisation also controls the key variables ('vital few') to ultimately improve profitability and customer satisfaction.
In the final stage of institutionalisation, standardisation and integraion of six sigma practices are done to run the day to day business of an organisation . Six sigma is a learning continuum, therefore, it reinforces the intellectual capital to identify the bst practices continually and standardise those within and across the business to create win-win situation in a competitive world. It is I'am O.K. you are O.K.' situation for mutual satisfaction of customers and organisations.
In India six sigma breakthrough strategy is now being practiced by many organisations. Among them noted organisations like TVS Group and Tata Group While six sigma level is yet to be achieved, i.e. 3.4 defects per million opportunities (DPMO), TELCO has reported t achieve 4.5 sigma level by reducing their defects per million opportunities. Incidentally TELCO has retained Japanese Consultants for this Project. Various other organisations are at different phases of implementation of six sigma breakthrough strategy.
|HOW TO CALCULATE SIGMA |
|As has been explained earlier, six sigma break through strategy leads to defect free products and services adding profit to the organisations and satisfaction to the customers (by way of quality products / services at lowest possible cost). However, no organisation can achieve six sigma level right at the beginning. It requires relentless the desired six sigma level and then ultimately the desired six sigma level, at which products / services are virtually defect free. For calculating sigma level, we use the Defects Per Million Opportunities (DPMO) formula duly defining the customers perceived critical to quality (CTQ) factors CTQs are opportunities for error. Since this is a quantitative measurement, We also need to have discrete information about following three items:
- UNIT: The item produced or being serviced
- DEFECT: Event that does not conform to customer's requirements
- OPPORTUNITY: Chance for occurrence of defect.
|To illustrate, let us take the example of examination services of an Educational Institute, Students consider a defect in the system when results declared beyond three weeks. Let us assume students have four perceived CTQs, i.e. speed of delivery, correct transcript of marks adequate information about incomplete or withheld results, proper computation of grades. These, therefore make four opportunities for error in discrete terms. Once quantitative details about number of units and defects are made available, we can use the following formula to calculate the sigma level:|
Number of Defects
Number of Opportunities x no. of Units
|Suppose in our case, we have 2500 results, of which 10 were late due to non-availability of assignment grades and 5 were bad due to improper computation of grades. The calcualtion, therefore, would be as under:|
X 1,000, 000
|3000 DPMO almost corresponds to 4.25 sigma level (See chart), which indicates, the hypothetical institution needs to identif further the process flaws and improve upon the quality of service. At six sigma level DPMO should be 3,4 i.e., 3.4 defects per million (See chart), i.e. we have assumed two CTQs (i.e.)' non-availability of assignment grade' Number of defects is 15 (10+5), which we obtain by adding the defects classified under two CTQs. There are many 'made-to-use' six sigma calculators developed by international consulting organizations. Using such calculators, we can promptly compute the sigma level instantly (without going to the rigours of mathematical computation using the formula. A sigma chart is appended in Figure-3 |
|RELATING SIX SIGMA TO HR STRATEGY |
|Strategy is the dierction and scope of an organization over long term, matching its resources to its changing environment and in particular its markets, customers or clients, so as to met stakeholders' expectations. HR strategy is the pattern of decisions concerning policies and practices associated with the HR system. Strategic Management of Human Resource Management (SHRM) is a competency based approach to develop HR for sustainable competitive advantage. Environmental Organisational, Institutitonal and Technological factors are potential influences in HR strategy, we need to take cognizance of each such factor, right from identification to institutionlization. Integrating six sigma to HR strategy reduces the time lag significantly and thereby helps in achieving excellence in quality of product and services within minimum time frame.|
Let us first try to understand the basic requirements for achieving six sigma.
At the outset, it requires to sell organizational values to its internal customers, i.e. the employees. A clear vision and mission to the job when successfully perfolated to all cross section of employees. Mere documentaion will not help. It requres practices by all through personal selling (behaviour). Vision and mission should reflect commitment to quality - a defect free product / services to the customers. It should further extend to explaining goals, objectives, strategies and action plan. This has been illustrated in Exhibit-1 for a hypothetical organization. Subsequenly in all HR practices such strategic intent should be evident. In recruitment and selection, focus should be to select those who have multiple skill sets and who can be utilized interchangebly by cross lateral movement. Ther requires foreseeing the future skill sets with the changing technology or process. Similarly regular competency mapping and a synergy between individual and organizational compentencies need to be achieved through training and development intervention. Training employees on six sigma requires both technical and behaviouralm reinforcements. Any skill gap requires repeated training till they all fit for the purpose. All can not be black belts. It is also not required. But all should understand how important it is for them to improve their workmanship for defect free products and services. Ranging from product to process familiarization, the training should focus on basic understanding of using statistical and anlytical tools to help them to measure the variability and attribute reasons ro failure.
Similar importance to conpensation planning, motivation and retention should be given to ensure commitment and loyalty to the organization. There are many ways to design compensation innovatively and also for employees' retention. These are beyond the scope of these papers.
To conclude, six sigma, even though a top down approach, it success larely depends on the players who are catalysts for such change. It makes no sense to engage a consultant and expect results, unless the initiatives are properly integrated with HR strategy of the organization.
|Defects per 100
Bhattacharyya, D.K. (2000), Competency Mapping and Manpower Redundancy - A Macro level study of Indian Organisations: Management and Accounting Research, October -December, Volume 4, Issue-2, pp. 97-105
George, Eckes (2001), The Six sigma Revolution, John Wiley and Sons, Inc., New York
Kristine, Ellis (2001), Mastering Six Sigma, Training, December, pp-30-35
Mikel, Harry and Richard, Schroedar (2000), Six Sigma, Currency, New York.
Richard, CH, Chua (2001), Six Sigma, A pursuit of Excellence and Dramatic Results, Today's Manager, August-September pp. 43-45