The End is Here!
Repent of your wicked ways O fellow Six Sigma Heretics, or surely you shall be smitten (smoted? smited? smartied?) and turned into a pillar of out-of-spec material! The End (of the Top Ten Stupid Six Sigma Tricks countdown, anyway) is here! What could possibly be the No. 1 reason that Six Sigma fails? Can you guess? Is your business doing it? Is mine? I can hardly wait to find out!
As we have discussed over these few months, there are a lot of ways Six Sigma, whatever that is, can fail (see my first article for that discussion). Some may be obvious in retrospect, others perhaps more subtle, but there are many pitfalls on the way to Six Sigma enlightenment, and I have humbly tried to warn you about a few.
However, there is one way that stands out above the rest. One mistake so fundamental, yet so common, that for me it’s the No. 1 way to spend a lot of time and money and get grey hairs with nothing to show for it but a business that’s worse off than when you started.
So I will tell you…
Once upon a time, in a land not so very far away at all (in fact, just down the road pretty much wherever you are) there was a business. It was a fine business with hard workers and good managers, and a product or service that provided decent value. Yet (as always in these stories) there was a heart of darkness, or at least a heart of slight dimness, for what business in the real world doesn’t have some problems here and there? There were some problems to be solved that the business just couldn’t find the time to solve, or didn’t have the technical tools to solve.
Our hero, a vice president by the name of Galahad Truhart, thought he had an answer. A lot of businesses were finding out that there was money to be made in devoting some small number of people in the business to problem solving using advanced tools. So he proposed the idea to the executive management team and won their approval for his plan.
Galahad asked the other managers for projects to work on and came up with a list that sounded great. He allocated some employees to these projects, who went through some expensive Black Belt training. They came back excited to try out their skills.
The Black Belts worked very hard on these projects. Some projects needed tricky statistical analyses and experimentation, other projects required strong people and team skills, and still others could only be successful after pushing past the conventional wisdom to the truth. And they were all successful! The Black Belts estimated that they captured all of the potential savings in the business case for these projects, and perhaps a bit more.
And yet, from the high tower of the accounting department (known for the mysterious chanting late at night that sounded something like, “R-O-I! R-O-I! R-O-I!”), came the doom-laden voice of the chief financial officer, Merlin Pointyhat.
In a low, gravelly voice that seemed to make the hills themselves vibrate he said, “You claim that you have saved the company millions of dollars and your Black Belts have been paid in stock options and recognition for this achievement. Yet, as I gaze at the mystical bottom line, oracle of success, I note that the bottom line remains unchanged. If you have saved us so much money,” and the last in a shout that could be heard for miles, “WHERE IS IT?”
Galahad couldn’t tell him, because all the Black Belts had done what they had been asked, and part of the business case for each project was the cost savings. The money should be there, right?
The chief executive officer, Arthur King, declared to all and sundry that Six Sigma was a failure—nothing but wasted time and money—downsized the company starting with the Black Belts, and exiled poor Galahad from the land.
Galahad wandered the world for a short time, holding his head and wondering what had happened.
And then he was eaten by a dragon.
People say that sometimes when the wind blows across the hills you can still hear, “It seemed like it should have worked!”
The moral of the story
How is it possible that Black Belts could work long and hard and have no improvement to the bottom line?
We have talked about some of the things it could be. Perhaps they optimized a process that lost money, so it lost money faster. Perhaps the Black Belts hadn’t been taught the depth of statistics they needed to stay out of trouble. Perhaps, while they made improvements, the daily management of the company was neglected, eating into their gains.
All these occurrences point to the lack of one thing,the one thing that is missing in many businesses including those trying to use Six Sigma.
A strategic plan.
It doesn’t matter how smart or well-trained or steeped in people skills your Black Belts are if they’re working on the wrong projects. And if you don’t integrate your Six Sigma efforts with a good strategic plan, well, they might be working on the right projects, they might not. How could you know?
The project might be interesting to a manager, but it might not result in cost savings or benefit the company. It might be a project that would be a good project except that it moves the company in a different direction than they want to go. It might be a project that is beneficial locally that actually hurts the company as a whole. In the absence of a strategic plan, you could have Black Belts running around looking for projects to work on, regardless of what anyone else is doing or what the company needs.
This has been the one sure way not only to destroy your own Six Sigma implementation, but to discourage others from attempting it as well. You have seen them in the literature: big names who “try” Six Sigma, only to abandon it within a short amount of time. Forbes has said that, “91 percent [of companies that have announced Six Sigma programs] have trailed the S&P500.” Now I know the arguments against this statistic (including conflict of interest at the source), but most businesses in my experience don’t do a good job of strategic planning and I wouldn’t be surprised if the percentage in question really was high.
Elements of strategic planning
You might recall from my article on abusing DMAIC that the DMAIC process is useful when you don’t know how to proceed, but not terribly efficient when compared to a tried and true method for accomplishing an objective. Strategic planning in business is one of these areas. This has been beaten around and refined in the crucible of real life for some years now. (Ever since Oog started the first rock-smashing business, anyway. Corporate slogan: “Oog Smash!”) We’ve had a chance to see what works and what doesn’t.
Now the best synthesis of what works in strategic planning that I know of is my mentor Dr. Jeffrey Luftig’s Phase I of business performance excellence (BPE). There are literally tens of thousands of books on the subject (amazon.com lists 34,451 titles) so there are plenty of sources, but his system is clean and clear and has worked well in Fortune 100 companies as well as small companies. Now this is a very brief overview, and even so is probably too long for our little article here. Hopefully I can convey the overall process.
When doing strategic planning, there are certain steps you need to go through:
1. Who are we?
This is a fundamental step to get consensus among the highest levels of the company about just what it is you’re doing there. This is where you identify your:
- Vision: Where do you want the company to be in 15–20 years
- Mission: What you need to do over the next 3–5 years to make progress toward your vision?
- Value proposition: Why do your customers give you money? What do they get out of it? Hopefully, this is aligned with your core competencies—those things that you do better than anyone else.
- Method for strategic differentiation: Michael Treacy and Fred Wiersema propose three models for differentiation that apply to any market. You can either be best at: Operational excellence and provide standard, low-cost, but high quality goods or services; product leadership and provide the newest features for your product or service; or provide the best total solution, where you customize your solution to each customer. The question to ask here is: What one area do you do better than anyone else in your market? Make sure you achieve and maintain supremacy in that while maintaining parity in the other two.
2. How do we measure the success of the company?
In this step you analyze the vision, mission, value proposition and method for strategic differentiation to see what themes are in there. This tells what you need to measure at the highest level of the business in order to measure your success and what the target is for these measures. These are the targets that the CEO would be responsible for achieving.
If you find that there’s no way to measure your progress based on these four elements, you have written a “Mom and apple pie” feel-good-about-the-company-but-useless-for-any-other-purpose set of principles. I can’t tell you how many people I have talked to who tell me that their company mission and vision are a joke. You might even know of someone like that yourself. If you can’t or don’t measure it, you certainly can’t figure out what to work on to further those noble goals and wouldn’t have a way of knowing if you had.
3. Translate corporate measures of success to all levels of the business.
Now that the CEO knows what she needs to do, the rest of the executive leadership can figure out what they need to measure and what the targets are in order to achieve what the CEO needs to do.
A good way to do this is to place the CEO’s measures in the left column of a matrix and list the executive leadership across the top. Each executive then determines what he or she can measure that strongly relates to the measures that the CEO is seeking. At the intersection of each row and column, place a symbol describing the strength of that relationship. If an executive can’t find a measure in his area that relates to any of the CEO’s measures, well, he has an opportunity to save the company as much money as that area uses. (If you missed it, think about that last sentence again.)
The same technique is used to identify measures for the managers reporting to each of the executives and so on down the organization. At each step there is an opportunity for managers and employees to negotiate what measures support the next level up. Eventually, multiple regression or a similar tool will be the source of the strength of relationship, but until you have data, rely on judgment.
By the end of the process, everyone has measures for their area of control that link all the way up to the CEO’s measures. This eliminates unneeded measures and properly prioritizes the remaining ones.
4. Perform a gap analysis and create the strategic plan
Now that you know you’re measuring the right things to track your progress in achieving your vision, you can assess your performance. Likely, you will find some gaps between where you are and where you want to be. Small gaps require tactical improvement efforts (and are most often allocated to your daily management activities).
Large gaps require strategic efforts to close. They may require large, possibly capital-intensive projects (e.g. implementing a new process) or companywide coordinated efforts (e.g. reducing waste across the company). Large projects may also require smaller projects to feed into them and that need to be coordinated across the company. Another matrix can make sure that each area in the company works on projects within its own span of control that support the overall strategic plan. And guess who are likely to be most helpful in these efforts? Six Sigma Black Belts! You thought I was never going to get back to Six Sigma, didn’t you?
I want you to notice two things. First, a strategic plan is the output of your measures, not the input. If you sit down to write up a strategic plan and determine your measurements from that, you’re probably just confirming your own biases by measuring the wrong things, and you’re doomed to ineffectuality. My experience has been that all companies measure things, but that most don’t measure or track the right things to validate their success. I have seen measures that were put in place years ago in response to some event, and that today serve no purpose. I have seen measures in one area that contradict or conflict with measures in another area. I have seen measures that a particular manager loves but that have no relationship to where the company is headed. Remember: What you measure drives what you do.
The second thing is that the point at which you know what your Black Belts should be working on is at the very end. If you start off by giving your Black Belts projects that sound good but that aren’t linked all the way up to the vision and purpose of the company, you might be in the same position as Galahad was: Great projects that everyone supports, that don’t contribute to the success of the business and that lead to the failure of Six Sigma (and maybe the business). Some people advocate working on a few pilot projects right away to prove the concept of Black Belt projects. Even then, if the projects aren’t aligned with the direction of the company, you will do more harm than good and kill off Six Sigma before it even germinates.
Effect of SSST#1
What happens when a company starts a Six Sigma implementation and lacks a good strategic planning process?
You can watch good people look around and find projects that seem to be profitable Black Belt projects. Some or all may claim to save money upon completion. But unless the projects have been linked to the direction that the company wants to go, unless the projects across the company are coordinated so as not to interfere with other efforts, basically, unless these are the most important projects for the company to be working on, the Six Sigma implementation won’t provide the benefit of which it’s capable.
There’s a business that really is down the road from me. They sent their best and brightest to Black Belt training with projects in hand. They worked on the projects through the training and in many cases successfully finished them. And then, the Black Belts wandered around looking for another project on which to work. Some would find a project and work on that, some were left wondering if their training was so valuable, why is there no pool of projects.
Don’t let this happen to you. If your company’s strategic plan is written in a vacuum, it sucks. The strategic plan needs to be based on the correct measures across the company, which in turn need to be aligned with why people in the company have decided to get together and play in the same sandbox. If the age of your strategic plan can be deduced from the depth of dust on the binder, it is not effectual. And if you send your Black Belts out to work on projects from such a strategic plan, they may win the project and lose the business. Build a foundation of good measures that really track the health of the business, or you too could be eaten by the dragon named competitor.
And about this, I am not wrong!