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Setting Quality Expectations
Setting Quality Expectations
In statistics, the Greek letter sigma stands for standard deviation (i.e., a measure of dispersion of a set of
observations around the mean value of these observations). We can use a standard normal curve (i.e., one for
a distribution with a mean of zero and a standard deviation of 1) to represent probabilities. For example, the
area to the right of + 3 standard deviations (i.e., 3 sigma) is very small: approximately 1.4%. In turn, these
probabilities can be converted to number of defectives per million. A 3-sigma performance level, then, would
be approximately 1,400 defects per million. A 4-sigma performance level would translate to approximately 32
defects per million, while a 6-sigma performance level would translate to only 0.001 defect per million. (In
practice, be aware that adjustments to these figures are made to capture process drift or shift.) In short, sigma
can be used to set (or express) quality expectations: the higher the sigma level, the higher the quality
expectation. As noted next, however, the term Six Sigma can also be used to refer to a process-improvement
philosophy.
Six Sigma2, as a management philosophy or goal, has been embraced by many organizations as the guiding
principle that drives improvements in products, services, and processes (e.g., product development, logistics,
sales, marketing, and distribution). Six Sigma can be defined as a business process improvement approach that
seeks to find and eliminate causes of defects and errors, reduce manufacturing cycle times and costs, improve
productivity, better meet customer expectations, and achieve higher asset utilization and return on investment
in both manufacturing and service operations.3
Rudisill and Clary4 offer the following actual examples of improvements realized by adopting a Six Sigma
philosophy:
Reduction of scrap in a ball-bearing manufacturing plant and capacity assembly plant.
Identification and reduction of unnecessary spare parts inventory for a paper cup plant.
Reduction of defects and product variation in a textile finishing plant.
Reduction of lead times for product development and scale-up in a pharmaceutical company.
Reduction of wait time for loan approval notification (from the bank).
Six Sigma is based on a simple problem-solving methodology, DMAIC—Define, Measure, Analyze, Improve,
and Control. Typically, the application of Six Sigma is done using cross-functional teams, more or less on a
consulting project basis. In the design stage of the project, the Six Sigma team defines the problem and
specifies the deliverables of the project.
In the measure stage, the team collects relevant process-performance data. In the analyze stage, the team
tries to uncover root causes of an underlying quality problem. This is followed by the improve stage, in which
proposed solutions to the underlying problem(s) are generated and then implemented. Finally, in the control
stage of the project, appropriate controls are put in place to ensure that the identified problem does not recur.
Motorola Inc. pioneered the concept of Six Sigma as a structured approach for assessing and improving both
product and service quality. Today, this approach has gained notoriety and credibility because of its adoption
by firms such as Allied Signal and General Electric. As noted previously, the term Six Sigma actually comes from
statistics: in a normal distribution, the area outside of +/− six standard deviations from the mean is
very, very small. From a control standpoint, we can express this area in terms of relative
number of defects. One interpretation of a Six Sigma quality expectation (and that differs
slightly from the number referred to earlier) is approximately 3.4 defects per million items produced. 5
The move from, say, a 3-sigma to a 6-sigma quality level (where “sigma” refers to process standard deviations,
and therefore the area under a normal curve) is dramatic. As Evans and Lindsay point out, 6 a change from 3 to
4 sigma represents a 10-fold improvement in quality; a change from 4 to 5 sigma, a 30-fold improvement; and
a change from 5 to 6 sigma, a 70-fold improvement. For this reason, Six Sigma is not likely the goal for all
processes and operations. The appropriate quality expectation is a function of the strategic importance of the
process and the anticipated costs of taking the process to an increasingly higher level of quality.
Implementation Tips: Six Sigma7
Following are steps management can take to ensure the success of Six Sigma projects:
First and foremost, provide necessary leadership and resources. As with many other strategic
initiatives, the CEO and top-management team must exhibit strong support for the Six Sigma
program. Such support can come in the form of employee training and making sure that there is
appropriate buy-in for the concept on the part of key managers in the organization.
Implement a reward system. Bonus and incentive schemes for the organization might have to be
amended to accommodate rewards associated with reaching Six Sigma goals.
Provide ongoing training. Because Six Sigma is a process (think of the DMAIC approach as iterative in
nature), employee training should be ongoing, reinforcing the strategic importance of the process and
the need for continual improvement.
Judiciously select early projects. As noted above, Six Sigma principles can be applied to processes
throughout the entire value chain of the organization. It is recommended, however, that top
management start with easy, nonpolitical, and noncontroversial projects that support the strategic
goals of the organization. Given success with these projects, Six Sigma can then be rolled out to other
more complicated and difficult projects.
Break up difficult projects. Top management should try to parse complicated projects into smaller,
short-term segments, each of which has its own milestone. This allows individuals to experience
success along the way and to be recognized for their efforts to help the organization succeed.
Avoid employee layoffs. From a motivational standpoint, it is crucial that improvements based on Six
Sigma should not jeopardize the jobs of those who helped accomplish the goal. Judicious job
reassignment is one strategy for dealing with this situation; layoffs should be viewed as a last resort.