Six Sigma for Process Improvement

Rachel Salaman: For the benefit of people who perhaps have heard the term, but aren't sure what it means, what's your definition of Six Sigma?

Tom Pyzdek: Well Six Sigma, the way I present it to my clients, readers and audiences, is a rigorous approach to management. It's very highly focused and it uses proven quality tools that are intermediate in nature; they're not too advanced and they're not too simple, to really understand the root causes of variation in distance processes and to work to eliminate the variation.

Rachel Salaman: What does it involve? What, kind of, business processes are we talking about?

Tom Pyzdek: Literally any, kind of, business process is a target for Six Sigma improvement, anything that delivers value to any stakeholder, and by stakeholder I mean to a customer, to an employee, or to an investor. There are processes in the administrative areas and in the production areas; it applies to services businesses and transaction businesses in healthcare.

Rachel Salaman: So you can use it across the board, it's not just about manufacturing then?

Tom Pyzdek: I have some limitations that I recommend. For example, in peer research I suggested Six Sigma not be applied there because, peer research is not a well understood process and even the theory of creativity is not that well developed. So I think using Six Sigma in artistic in – and in peer research types of areas is a mistake, simply because applying that kind of rigor to the creative process may impede it. But in any other process, including the development side of research and development, I believe Six Sigma has an important place.

Rachel Salaman: So what does it actually involve?

Tom Pyzdek: Well, it involves different things at different levels. At the leadership level, we have to identify the vision and purpose of the leadership of the organization, because what Six Sigma will do, is it will help the organization move toward a goal very quickly, and we want to be sure that the leaders know what the goal is, and have identified it in a way that everyone understands. At the management levels in the organization, it involves creating an infrastructure and devoting resources to the improvement process. At the technical level it involves using technical tools to drill down to root causes of variation in processes and then to make improvements, and at the worker level it involves working with the teams that are doing Six Sigma, to help them make your job easier and better.

Rachel Salaman: So is it something that gets applied every day? Is it that, kind of, set of processes?

Tom Pyzdek: Well there's a phrase that's used in Six Sigma called, 'Getting it into your DNA,' and Six Sigma companies employ technical leaders that are known as Six Sigma black belts, on a full time but temporary basis. So the black belts end up moving through the Six Sigma program, and back into the management of the company and organization. And after a while that mentality that the black belts bring to the job permeates the organization, and the mentality really consists of rigor and insistence that we understand and have data to back up our theories about what makes the business tick. And that, I think, is the most profound difference in Six Sigma organizations.

Rachel Salaman: Well we're going to come back to Six Sigma black belts a little bit later. But first of all, why do you think Six Sigma has gained so much traction, because it is something you hear about quite a lot, isn't it?

Tom Pyzdek: Yes. I think partly because it started in large corporations and it worked so well there, that they moved it down to their first tier suppliers, who in turn moved it down to their suppliers, so it's, kind of, cascaded. Also, business organizations don't really work in a vacuum, so their employees consume healthcare benefits and that's a cost. So the organizations look for ways to reduce that cost and, quite naturally, when they look at healthcare they see that they need Six Sigma as well, that they can use it to improve. And likewise, to the peripheral businesses, so if you study Six Sigma at General Electric, for example, you'll see that they applied it in their legal areas, in accounting and so on, and once you see how broadly it can be applied, it just makes sense to spread it to organizations that you're having trouble with and that are so important to your business.

Rachel Salaman: You talk about it being broadly applied; all organizations don't use Six Sigma in the same way, then?

Tom Pyzdek: I'd say no two organizations use Six Sigma in the same way, because it has to be integrated with the organization's systems and culture. So an organization, say, that has messiah, kind of, leader like Bob Galvin at Motorola, or Jack Welch at GE, will apply Six Sigma from the top down in a somewhat autocratic, but very much consistent with the culture of that organizational approach. Other organizations such as healthcare, are really working with a group – with many groups of autonomous professionals and Six Sigma there has to be handled differently; it can't really be mandated or dictated. Instead it really has to be demonstrated to these groups, that, in fact, this has some benefit to the way they serve their patients.

Rachel Salaman: Can you talk us through perhaps one example of how Six Sigma has helped a company?

Tom Pyzdek: Okay, let me give you an example in healthcare. I was working with the Six Sigma team that was looking at how they were going to reduce unnecessary cesarean sections, and it was in a hospital that had a cesarean section rate that was much higher than the other hospitals in the region. So the administrative leadership wanted to get that level down. So they put together a Six Sigma team that consisted largely of doctors, about half the team membership was doctors, and what the team did was they gathered some data and they identified several possible causes of the high rate of cesarean sections. In a Jack Welch type of organization, they would have been able to pursue this, you know, very aggressively with experiments and so on, but in a healthcare organization you really can't do that, so you can't really experiment with people, and doctors have total control over how their patients are going to be treated.

So what they did was they put doctors in front of doctors, and by that I mean that they found doctors that were using the best practices that Six Sigma had identified, and had them speak to groups of physicians at this hospital, in various venues, they had doctor meetings and staff meetings and so on. The doctors were never forced to adopt the recommendations of the Six Sigma team, but the logic of it was so compelling that over time they were able to integrate these methods into their particular patient practices, and the cesarean section rate dropped in half in a period of about ten months.

Rachel Salaman: You mentioned that Six Sigma identified best practices, how does it actually do that?

Tom Pyzdek: Well, in the Six Sigma framework you go through five phases, they're called define, measure, analyze, improve and control. This – there's an acronym of course, and we have lots of acronyms, and it's called DMAIC. One of the phases in DMAIC is to identify, through benchmarking, what the best practice is in any area where you're trying to improve. So during the define and measure phases of a project, you identify your current baseline, and then you very carefully define your goal, and you go out and do what's called a benchmarking study to see if any other organizations are in fact doing as well or even better than your goal. And if so, you shamelessly copy what they're doing, if it applies, and if not, you try to adapt what they're doing to your improvement program. So in the case of the cesarean sections, the team identified some hospitals in the United States that in fact had very low cesarean section rates and had consistently maintained those low rates, and they also had very high rates of overall health, so it wasn't that they were sacrificing something to provide these low rates, in fact they seem to know something that the hospital did not know. And through this benchmarking study, they identified the key individuals in these areas and were able to bring them in to speak.

Rachel Salaman: Is it usual for organizations to start with a particular problem, like the problem this healthcare organization had surrounding the cesarean sections, or do some organizations just decide that they need to improve overall?

Tom Pyzdek: Well the way I promote Six Sigma is that I have the leadership, first of all, identifying what they're trying to accomplish and what their vision is for the organization, and then look at two measures. One is a group of metrics we call differentiators, and these are things that are going to set their organization apart. The other is what are called key requirement critical gaps, and these are important metrics to the organization that may be dangerously non-competitive. And then I have the leadership team determine how they're going to measure these particular differentiators and key requirements and that flows down to the next level of management, and what they'll do at that level is identify action plans that they've got in place and projects that they can use to really improve those metrics. So it's very much strategically driven on the one side the differentiator side, and it's problem driven on the key requirements side.

Rachel Salaman: Would you recommend it for all organizations or do the organizations have to be searching for improvement?

Tom Pyzdek: Well, I recommend that organizations have some incentive to improve. I find that it's a rare General Electric that is really doing well and looks to make a leap forward from that point. Most organizations that I know start Six Sigma because they feel compelled to improve; there is something wrong with the business in some way. But if you're – if you are a GE and you have a leader who sees the need to improve, even though you're doing well, then certainly, you know, Six Sigma will help you do that.

Rachel Salaman: There was one question I noticed on your website from one of your readers, asked, "Why does Six Sigma work better in the production area, but not in the administrative area?" What's the answer to that?

Tom Pyzdek: Well, I hope I corrected that reader, because in fact the manufacturing business is 75-80% administration. There's very little manufacturing in manufacturing companies, and Six Sigma has been successfully applied in these areas for many, many years. It – if there's an administrative process, then Six Sigma can help improve it, just as if there's a manufacturing process, Six Sigma can help improve it. So if administration is eating up 75-80% of your resources, then these administrative areas are a bigger target for improvement in fact in the manufacturing areas.

Rachel Salaman: And you've seen it work very well in administrative areas, have you?

Tom Pyzdek: Yes, I've worked with – most of my clients, the dominant use of Six Sigma in manufacturing businesses are in the administrative areas, so I've seen it, for example, help with engineering design processes, and with bidding processes, and with customer service, and purchasing processes. So certainly, you know, the administrative areas I could point to example after example of tremendous improvements that came about through the application of Six Sigma.

Rachel Salaman: You touched on this a little bit earlier, but if Six Sigma is about reducing the variability of business processes, isn't it possible that it could stifle innovation and creativity, even in non-creative industries?

Tom Pyzdek: I think it's possible and I think it actually happens, but I don't think it's inevitable. Creativity requires three things from an organization: that is redundancy, variation and slack and you need redundancy because to be creative you have to take resources and divert them to the improvement process, so you have to have extra resources to replace those that have been diverted. It takes variability because creativity and innovation involve change, and change always increases variability, and it takes slack because you have to have more resources than you need to run the routine core business, if you're going to divert some resources for improvement.

Now all three of those areas are not just the target of elimination by Six Sigma, but they're the target of elimination by management, and my view of Six Sigma is that it's just a super effective way to manage. So if you apply this super effective management approach to an organization wall to wall, you'll end up destroying the prerequisites for creativity and innovation. And I think what a firm needs to do is to understand that, and then to create an organization within the organization that pursues innovation and creativity and does it independent of the routine processes of that business. That's what organizations such as IBM and Apple do with their skunk works, that's what organizations such as 3M and Google do by allowing their people time to pursue their own projects, and I think that if you have a group of people that are pursuing a creative or innovative project, I don't believe Six Sigma should be applied to what they're doing.

Rachel Salaman: Is it easy for an organization to isolate certain departments like that and just apply Six Sigma to certain departments?

Tom Pyzdek: I don't think innovation is ever easy, whether you're doing Six Sigma or not. I think that it requires a conscious effort, and it's difficult to create an island of innovation in a sea of routine, and the leadership has to constantly be on guard because the bureaucracy of an organization will always be trying to get those resources back. So it's not easy, whether you're doing Six Sigma or not, to be innovative. On the other hand, I don't think it's any more difficult to isolate part of your organization if you're pursuing Six Sigma, than it is if you are not pursuing Six Sigma, so I don't think it's a factor in making it easier or more difficult.

But, having said that, I think that what does tend to happen is that people see how effective Six Sigma is and they get over enthusiastic and they want to apply it wall to wall, and when you're pursuing Six Sigma you often run into people who say, "Well, my area can't be subjected to Six Sigma because Six Sigma's scientific and my area requires art. So, for example, engineers will tend to say that, and doctors will tend to say that, but the truth of the matter is that, you know, a great deal of engineering and a great deal of medicine is not art, it's a process and to the extent that there's a process involved that can be identified and Improved, Six Sigma is the best known way to improve those processes.

Rachel Salaman: In your experience what proportion of companies or organizations that apply Six Sigma, do apply it to the entire organization?

Tom Pyzdek: Including where they shouldn't apply it?

Rachel Salaman: [Laughs]. Yes.

Tom Pyzdek: [Laughs]. Actually it's a fairly small percent because the Six Sigma it's challenging to apply Six Sigma because it involves so much change, and organizations have systems that allow them to resist change, so standard operating procedures, and policy manuals, and budgets, and financial controls and so on are powerful tools for preventing change, and most organizations have people who are very skilled at applying those tools and using those tools to prevent change. So the biggest challenge, in most organizations that I see, is the opposite, and that is, you know, to get Six Sigma into areas of the organization where it belongs, against the resistance of people who are trying to fight the change. So to that extent I think it's difficult, and that's why I really strongly encourage the organizations to start their Six Sigma programs at the top, because really only the CEO has the full perspective of the organization and its vision in mind, and if that individual's not behind you then you're really going to have a tough time making Six Sigma work.

Rachel Salaman: How long does it take to train all the relevant people in Six Sigma within one organization?

Tom Pyzdek: Well, there is a change infrastructure and it takes about one year to get the basic infrastructure in place and that would be the change agents trained, and the senior leadership of the organization trained, and all of the position descriptions and the pay and incentive programs, and so on, in place. From there you're just growing that infrastructure 'til it reaches the recommended levels. When it's all said and done, the Six Sigma organization is still relatively small; in most organizations it's around 1% of the organizational payroll.

Rachel Salaman: And once they've been trained, how much time does it take for the company to actually see the benefits of adopting this system?

Tom Pyzdek: Well in most companies they will pay for the cost of the Six Sigma program within two years, and from there the benefits exceed the costs and they tend to grow exponentially, and the cost of Six Sigma tends to be linear and it flattens out after about – after about two years it in fact drops off and flattens out, as most organizations bring in their own internal resources to do things, such training and coaching and so on.

Rachel Salaman: Well let's return now to the concept of the Six Sigma black belt, could you explain what this is?

Tom Pyzdek: Well the black belt is the Six Sigma Technical Leader that actually leads project teams, and this is the individual – this is as they say where the rubber meets the road. This person will be given a list of candidate projects and they'll find a project on that list, and they're given this list by the leadership. They'll find a project on that list that they feel they can contribute to and that they have some passion for, and they will then apply the Six Sigma DMAIC process to that particular opportunity. And this means that they'll recruit the team, and they'll identify and they'll find a sponsor, some senior leader to help them with the project at the management level, and then they'll work with the team and the sponsor to identify the business opportunity, and to work through the DMAIC process to finally identify how they can best improve this process or pursue this opportunity. And then the final stage of the project, they will help the process owner, the person who owns the process that they've created, make permanent improvements to the management system so that the changes are locked in.

Rachel Salaman: Do all instances of Six Sigma have to have black belts in them?

Tom Pyzdek: No, there are other ways to apply Six Sigma. One – there's another Six Sigma change agent called the green belt, and a green belt is trained in a subset of the tools that the black belt receives training on, and they work on a part time basis, and they generally don't work on cross functional projects, so they tend to work in local projects.

There is also the fact, as I say, that Six Sigma becomes integrated into the DNA of the organization, so that, in fact, if you're in an organization that's been pursuing Six Sigma for, say, five years or more, you'll find that there are key leaders in almost every meeting that have been black belt or green belt trained, and they're trained to think of things in a – in the Six Sigma way. So they look for data and they look to see that not just some result has been presented, but that people understand the causes of that result and the drivers. They look at processes and they just see the world differently, and I think that after a few years of Six Sigma, that provides a greater benefit to the organization than all of the projects combined.

Rachel Salaman: At what level in an organization should people seek the black belt qualification?

Tom Pyzdek: Well, the individuals that are well suited to the black belt position will have a technical bent. They may not have a technical background, but they'll like numbers and they'll like quantifying and quantitative analysis. They'll be effective change agents, so they'll work in the organization to make things happen and they'll be effective at getting projects completed, and they'll overcome obstacles; that I think is the real hallmark of a black belt. Because as I said earlier, organizations have a lot of ways to stop change, and so a Six Sigma project, which is all about change, is going to run into these obstacles. It's going to be tempting for an individual to encounter one of these organizational barriers and then stop, and black belts simply can't stop, they have to have the ability to see the barriers, the challenge and to find ways to overcome or circumvent that barrier.

Rachel Salaman: Six Sigma is similar to another management strategy, Total Quality Management or TQM. In what ways is it different?

Tom Pyzdek: Well TQM was much more vague. The Six Sigma body of knowledge has been defined to the point where there are now several bodies that give you certification, that say as a black belt or a green belt, and most companies can certify you. So there is a test that body of knowledge has become standardized to the point where there are now exams that test your understanding in that body of knowledge. TQM never had that; there were no certified TQM practitioners. Now TQM proliferated in tools. The Six Sigma toolkit is fairly small; there might be 20 or 25 commonly used techniques in Six Sigma. I saw a paper that once listed the number of tools involved in TQM and that paper listed 432 tools that were called TQM tools.

There was no change infrastructure with TQM. They tried to make the change happen with the same people that were doing the business on a day to day basis, and Six Sigma, of course, has this infrastructure of sponsors, and champions, and change agents, and process owners and so on. So that's another key difference.

Rachel Salaman: So let's say you're a listener and you're sold on the idea of introducing Six Sigma into your organization, but you need to get the buy-in from top management, what are the most persuasive arguments you can use?

Tom Pyzdek: Well what I've found is that most CEOs – and I really think that it is far better if it starts at the CEO level – most CEOs listen to other CEOs, and I would send them to conferences where the Jack Welchs or Larry Bossidys of the world are presenting or keynoting, and have them listen to and speak with other people at their level in the organization. And what those CEOs talk about, when they talk about Six Sigma, is of course the benefit to the investors and the bottom line, but mostly the improvement to the customers and the way that helps them capture new markets and grow their existing markets. So it's very top and bottom line focused, and not at all focused on specific projects and technical types of discussions.

Rachel Salaman: If a company can't adopt Six Sigma wholesale, for whatever reason, are there any Six Sigma techniques or disciplines that they can borrow and benefit from?

Tom Pyzdek: Well they, of course, won't get the full benefit unless they go with the full Six Sigma program, because organizations are integrated and the processes are in fact linked to one another. But if I had to pick one Six Sigma tool that I would say companies could benefit from, it would be the DMAIC framework that I talked about, the define, measure, analyze, improve, control, that kind of an organized approach to improvement. The tools and techniques that we apply within that framework are certainly useful and valuable, but the framework itself is very valuable and that can be adopted with the minimum amount of training and resources.

Rachel Salaman: And finally, where do you think Six Sigma is heading? Is it still evolving?

Tom Pyzdek: I believe Six Sigma is still evolving, although I think the tools and techniques are fairly standardized, but I think, as Six Sigma moves into other parts of the economy and away from the commercial business and into healthcare, into government, into education and so on, I think it's going to have to evolve to be effective in those organizations. So, as I said with the healthcare organization, you have this loose federation of people who have an interest, and I'm thinking specifically of hospitals, who have an interest, but their interests appear to be different. So the doctors appear to have a different interest than, say, the insurance company and the people paying the bills, and I think that Six Sigma has to adapt itself to that type of political structure and really the standard top down approach won't work. So it has to adapt, if it's going to move into those areas, and it is – it has already begun moving into those areas. So I already spoke about how we applied it non-autocratically by having doctors talk to doctors, and we also, of course, had nurses talk to nurses, and we just – we identified that the professional group was the dominant driving force in change in the hospital, and we knew that we'd have to get those people to look at change that was consistent with their commitment to excellence in nursing excellence and physician practices.

So I think it's evolving and I think it's headed toward the broader economic and Government and educational sectors. I hope that it is widely adapted because I see a need for it in my everyday life as I encounter businesses and hospitals and educational and governmental institutions that could certainly stand to look at process improvement.

Rachel Salaman: Tom Pyzdek, thank you very much for joining us today.

Tom Pyzdek: Thank you, Rachel. I appreciate the interview.

Rachel Salaman: And you can find out more about Six Sigma and Thomas Pyzdek's work at his website, www.pyzdekinstitute.com I'll be back next month with another Expert Interview. Until then, goodbye.