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Six Sigma is a method used for process optimization and quality management in companies. It was developed by Motorola in the 1980s. Six Sigma sets itself apart through its mathematical approach in which it measures the key aspects of a process to assess its performance. It identifies causal relationships in order to improve processes through various methods and to reduce error rates.
In the following article, you’ll learn about the mathematical principles Six Sigma is based on, how Six Sigma is used in business practice, which key performance indicators are involved, and how it compares to other well-known management methods such as lean management.
What is Six Sigma?
Six Sigma’s name illustrates the idea behind the method. In math, the Greek letter sigma denotes the standard deviation of a Gaussian (normal) distribution, and six is a particularly good number in this context.
In business processes, you do not always achieve the exact desired results. Instead, there is a variation as with the Gaussian (normal) distribution. This distribution or the number of errors in a process can be quantified as a sigma level. The less variance there is, the better the performance of the process is and the higher the sigma value will be.
A level of 6 (i.e. a six sigma) represents a value near 0, the best error rate. In this case, the probability that a product is defective is 0.00034%. For comparison, most companies have a sigma level of 3 to 4.
Six Sigma (also written as 6 Sigma) is an approach for process and quality management which combines various methods to help companies improve their products and reduce their error rates so that they can lower their costs and generate higher profits.
How Six Sigma Benefits Companies
Although the main focus of Six Sigma is reducing the error rate, companies that restructure their organization around these principles benefit from additional (and sometimes indirect) advantages as well. There are five key advantages commonly associated with Six Sigma:
- Sustainability: These methods enable companies to achieve success over the long term. This is due to the processes being clearly structured and providing a basis for continuous improvement as well as for keeping up with changes in market conditions.
- Customer satisfaction: Six Sigma places high value on the customer’s perspective. After all, companies need to understand their customers’ needs if they want to be able to obtain economically beneficial results from their processes.
- Increased value: By implementing the Six Sigma method, companies increase their value for customers. Introducing these metrics enables companies to have a clearer idea of their customers’ needs and to target these needs specifically.
- Corporate culture: Successfully integrating Six Sigma into an organization will lead to better communication between managers and employees, since everyone will speak a common language based on the Six Sigma model.
- Being a learning organization: Sharing information within the organization is crucial in Six Sigma. The philosophy of lifelong learning is embedded in this methodology and addresses the challenges facing companies today in terms of global competition and digitalization.
How is This Applied in Business Practice?
The Six Sigma method includes a variety of different management techniques for quality management and process optimization. This set of techniques is often referred to as the Six Sigma toolkit.
The most well-known and important tool is the five-phase model, commonly referred to as the DMAIC cycle:
|Define||In the first phase, you identify the process to be improved and document the problem as well as the process. Then, you identify the target values and the scope of the project (i.e. what should the analysis include and what should it leave out).|
|Measure||In the second phase, you examine each quality-related aspect pertaining to the results of the process using various methods to measure current performance.|
|Analyze||In the third phase, you determine the causes and the causal chain of the problem.|
|Improve||In the fourth phase, you improve the process using a variety of methods, including ones not related to Six Sigma.|
|Control||In the fifth and final phase, you monitor the modified process using statistical analysis to ensure that the improvement made is sustainable.|
This five-phase model of the DMAIC process can be modified for use with new processes as well. Replace the “Improve” phase with an “Engineer” phase in which the results from the analysis are used to establish a new workflow.
In a Six Sigma improvement project, employees take on different roles. Since one of the main ideas behind the method is that each project member must be clear about what their tasks are, a hierarchy is defined to categorize different roles and their responsibilities.
The terminology for the roles is based on the belts used in Asian martial arts: Yellow Belt, Green Belt, Black Belt, Master Black Belt and Champion. Managers and employees can obtain a certification for each Six Sigma belt.
Yellow Belt: The Yellow Belt is the entry-level certification and provides an overview of the basics of Six Sigma. Employees with the Yellow Belt certification may assist in projects. This is usually for specialists or managers who want to acquire additional certifications in the future.
Green Belt: Those who have completed the Green Belt certification have advanced methodological knowledge and are able to manage their own responsibilities in a Six Sigma project.
Black Belt: Those with Black Belt certification can lead complex Six Sigma projects and have the advanced technical expertise and social skills required to implement large-scale changes to processes. They contribute greatly to the success of a project and work to motivate managers at the lower-ranking belt levels.
Master Black Belt: Those with Master Black Belt certification are responsible for the process, as agreed upon with management, and handle the strategic direction of Six Sigma within the organization. They are in charge of managing employee qualifications and define the Six Sigma standards for the company.
Champion: Champions (also referred to as sponsors) come from middle or upper management and are not involved in the day-to-day business activities involved in the project. They select, start, and monitor projects and support those involved through every phase of the project.
Success Factors When Implementing Sigma Six
Whether an implementation of Six Sigma succeeds depends on many factors. Antony and Banuelas have identified the most important key factors for a successful implementation. The following factors are listed in descending order:
- Management involvement
- Understanding the methodology
- Linking Six Sigma to the business strategy
- Linking Six Sigma to customers
- Project selection
- Organizational infrastructure
- Corporate cultural change
- Project management skills on the part of those involved
- Linking Six Sigma to suppliers
- Training project members in the Six Sigma method
- Linking Six Sigma to personnel planning
Six Sigma vs. Lean Management
Sooner or later, newcomers to the subject will begin to wonder how Six Sigma differs from lean management and whether there are any overlaps or possible combinations of the two. As a matter of fact, Six Sigma has been supplemented with ideas from lean management to create Lean Six Sigma.
However, in their original forms the two methods are quite different, despite the fact that they are both used for process optimization. At the same time, they can be combined to suit company requirements, as they do not conflict with one another.
|Six Sigma||Lean management|
|Main focus||Eliminating errors, effectiveness||Avoiding waste, efficiency|
|Standard||Major changes, best solution||Incremental changes, fast solution|
|Guidelines||From management||From the various stakeholders|
|Important metrics for success||Saves money||Saves time|
|Conditions||Various defined conditions||Few conditions|
|Tools||Numerous tools, both simple and complex||Few tools|
Lean Six Sigma combines lean management’s focus on speed with Six Sigma’s standard for attaining the highest quality. This combined method has been taught in management training courses since the turn of the century. Processes are thus divided into five phases following the Six Sigma method, and care is taken in each phase to minimize waste. Additional lean techniques are integrated into the method to tailor it to individual use cases.
The History and Spread of Six Sigma
Six Sigma was created by Motorola in the USA in the 1980s to minimize error rates in the production process. Other major players on the international scene such as Kodak, ABB, and IBM gradually adopted the method and developed it even further. Six Sigma finally got its big break in the 1990s after Jack Welch introduced Six Sigma at General Electric in 1996 and achieved great success with it.
Initially, Six Sigma was only used in the manufacturing industry. However, it has since spread to the service industry.
By 2000, companies were starting to combine Six Sigma with lean management. These days, this strategy is referred to as “Lean Sigma”, “Six Sigma + Lean” or “Lean Six Sigma”.
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