Working capital is influenced by a complex system consisting of external and internal factors as well as strategic decisions. External drivers are composed of economy, cost of capital, regulations and market position. Strategic decisions include geographies of customers and suppliers, customer mix and vertical integration. Tactical factors are policies, processes and metrics, systems and tools and also the degree of execution of the former. Whilst external drivers and strategic considerations cannot be subject of short-term changes to gain cash advantage, tactical factors definitely are. Lean Six Sigma helps to analyse the drivers and their impact on the working capital situation. Working Capital meets Lean Six Sigma.…
The art and science of project selection for improvement projects is one that most organisations take rather seriously. Some companies in a variety of industries have developed highly sophisticated methods for project screening and selection to ensure that the projects they choose offer the best promise of success.
Even without having such kind of method at hand, it is necessary and possible to screen projects before embarking on them. Some common sense questions may help:
Every project must have a crystal clear business case. The first reason for this is that the project needs support by not only the sponsor but also other stakeholders in order to be successful. This support can be ‘organised’ by deriving the compelling need for this project from Customer Satisfaction, Financial Benefits or Employee Engagement reinforced by rock solid data. The positive side effect of having this kind of business case is that the team will likely be more motivated to spend their extra time on this kind of effort.
Pareto charts are powerful management tools to explain business case and therefore support project selection. Do not forget to have financial calculations be signed off by the experts.
A business case that shows a growing backlog, a decrease in customer satisfaction or employee engagement over time is a compelling reason for doing this project now. If, in contrast, the situation has been getting better over time, i.e. the backlog is melting away as a result of other initiatives, it is much harder to justify this project. Then the question really is: Can we not sit by and wait for the problem to resolve itself?
A simple time series plot may help to understand the history and even to forecast the future.
Sitting by and waiting will not be a good idea if the problem might grow in future. Knowing the current state well is a prerequisite. And, having a more than rough appraisal of the future demand as well as the expected changes in the industry will enable some good assumptions that help to heighten the need for the said project. These assumptions may be used to create a basic simulation to generate credible data before project selection.
The resulting scenario, well presented to the management, will certainly generate support for your project idea.
No organisation has only one initiative or project running at any given point in time. Usually, there are plenty of overlapping activities changing the business environment on a larger or smaller scale every day. Such activities may have affected historical data why it is not always wise to use a long data window for deriving the business case without ensuring that the tackled process was more or less undisturbed. Such activities may as well confound with your project work in future. If you already know that there will be unrelated changes that will affect your process, make sure you have a chance to see which process change triggers what change in the result. Without that, you may get improvements but you do not know why.
Ensuring a very close-loop, data-driven cause-effect-chain for all activities will help untangling the coils. Based on that, the project selection has more foundation.
If the business case is important enough, related KPI’s will be on some managers’ scorecards. These managers will be supporting this project naturally since it drives their targets and hence the business objectives. In case the suggested project is targeting on improving something that is not someone’s KPI or is not even measured yet, two situations can occur:
Firstly, the project idea may not be a good idea after all.
Or secondly, it is certainly a good idea and it needs to be made a KPI as soon as possible. Then, it should appear on the management dashboard frequently.
All project proposals should be linkable to the organisation’s or departmental dashboards, hence must have someone with ‘skin in the game’ who is likely the project sponsor.
Starting projects ill-prepared is much worse than not starting at all. Failures in project selection usually lead to frustration amongst team members and confusion within the organisation. It will make your initiative a nonstarter if this happens at the beginning. Time well spent in selecting projects saves a multitude of that time later.
Choose the right projects to maximise your organisation’s performance to the benefit of customers and employees.
Over the last decade, companies and organisations in nearly every industry all over the world have introduced Lean Six Sigma to increase customer satisfaction and to deliver impressive results. An outstanding example is General Electric, the company who has made Six Sigma as popular as it is today.
Another term that has drawn tremendous attention in the business world is Innovation. On the one hand, Lean Six Sigma works towards very low variation in processes with high efficiency. Innovation, on the other hand, seeks to find undiscovered, uncertain territory. Such efforts are rather inefficient. Innovation requires risk-taking, making mistakes and learning from failures.
Can a corporate culture be developed on both key thinking patterns in order to get the best out of Lean Six Sigma Efficiency and Innovative Solutions? Does it make sense to think Innovation Six Sigma?…
Working with management teams of our clients often takes them away from their business for a few days. They frequently get in touch with their teams at home. Sometimes I involuntarily eavesdrop their part of the conversation. “How is it going? Is everything ok?” is a very common question they ask their teams. When they get some kind of “yes” they feel much better.
My old professor at the university, we called him Ho, had the habit of having tea with the whole team of his assistants in the morning whenever he was around. I cannot say that these sessions were my favourite pastime. Yet, I have to say that these sessions had been a great learning experience. Ho would never ask a question like “Is everything ok?” Instead, his preferred question was “What are your issues? What is new?”
Not knowing the context of his enquiry, I once replied somehow like “No issues. Everything is ok.” For him this was a very cheap answer and Ho countered immediately “So, you don’t have issues. It either means you don’t work or you don’t change anything; you did not try anything new since we met last time. The day you stop improving what you do and how you do it is the day you start falling behind.”
The day you stop improving what you do and how you do it is the day you start falling behind.
Besides the request for continuous improvement and change his question implied that he did expect problems. Ho encouraged us and indirectly sanctioned issues and mistakes. He made the continuous search for better ways part of our business life. Ho never blamed someone if something went wrong. Instead, he expected us to name the issue, own it and suggest a solution. The worst crime one could commit in business life was the crime of not trying to get better every day.
Continuous improvement does not start with massive Lean Six Sigma or Innovation initiatives. To the contrary, continuous improvement needs to be part of the DNA of an organisation if you want to ensure that your aforementioned initiative is successful and lasting. Here are some simple tips that will help incorporating the habit of continuous improvement into the normal business life:
One day I was asked why I left the stable, “money-printing” ISO 9000 business to join the riskier Six Sigma environment. My explanation went something like this: “Well, I think it makes more sense to implement a real business improvement and management system than to hang a nice certificate in the CEO’s office.”
But is this statement really true? Does starting a Six Sigma initiative automatically mean you’ll have an effective Quality management system? Definitely not. The downside of this methodology is that there are currently no “standards”, nor an “official” certifying institution. There is no external body that checks whether everyone walks the talk.
Six Sigma is more than starting a few projects, training some Belts and educating some business leaders about what it all means. The Six Sigma criteria depend on the business implementing this approach.
Generally, Six Sigma criteria are not comparable to the ISO 9000 but to the Malcolm Baldrige National Quality Award criteria or the European Quality Award criteria. These Quality management system descriptions exceed the historical thinking of “Quality Management Systems” enormously. Companies that have won either the European or the Malcolm Baldrige National Quality Award have learned that successful Quality management encompasses business management tools including leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management and results orientation.
Six Sigma aims to pursue the same target: “Completely Satisfying Customer Needs Profitably!” (Jack Welch). Therefore the criteria of a successful Six Sigma system are similar to the Baldrige criteria. One major difference seems to be that Baldridge shows just the shell of targets within those criteria whereas Six Sigma also describes a proven box of powerful tools and a rigid way to apply them.
The trick is how to plant this concept into an organisation. Here are some steps that most companies pursuing Six Sigma must go through:
Firstly, the Leadership team of the organisation decides to go for Six Sigma. They dream of increasing its net income with huge savings, continuing to portray the image of an outstanding company and increasing customer satisfaction and loyalty, with doubts of whether these concepts will actually work. Normally the implementation of Six Sigma starts with Leadership awareness training and a couple of improvement projects. When they choose their first projects, the company either shows its Six Sigma competence by selecting business related projects within the leadership team or demonstrates the old-fashioned Quality way by delegating the task to their Black Belts or a “Quality team”.
This phase also includes the first Black Belt/Green Belt trainings. If the projects only focus on manufacturing areas, the company will limit themselves to the playground of traditional Quality improvement initiatives. Instead, it makes sense to think cross functionally and recognize improvement opportunities in all key business processes.
Secondly, it is critical for the Leadership team to pass the first tollgate: Are they tracking results from their first projects or are they losing interest? Successful organisations install a steering committee – often called a “Quality Council” – to make decisions about projects, especially about tying their selection to business strategy and customer needs, implementing improvements, and reward and recognition.
If the leadership team shows that they don’t care, then Black Belts will not be able to produce results. And if the Black Belts do not produce results, then the leadership team will lose interest. It becomes a vicious cycle. The trigger must come from top management.
Results also need to be communicated to the entire company. It is critical to sell Six Sigma internally and convince the sceptics. Otherwise, the company will not be ready for the next phase.
Thirdly, results from the first projects usually include a few measures that track the results and ensure that the improvement lasts. Successful companies do add these measures to their internal dashboard and customer loyalty tracking system. Some even share those results with their customers, which builds trust.
Customer satisfaction measures are key for project selection. Unfortunately, they are not always available or used. Scorecards (comparable with Balanced Scorecards) should be implemented to tie Six Sigma implementation to the reward & recognition system and the bonus system to drive business results in terms of process improvement, customer satisfaction, employee satisfaction and net income. This kind of scorecard contains deployment and result measures.
Finally, to build Six Sigma into the “business as usual”, all departments should be involved. Six Sigma includes a powerful tool set. This can help to improve all key business processes – including administrative processes – throughout the organisation. Additionally, there are a few key departments who need to support the Six Sigma initiative. Finance should track the costs and the benefits. Marketing/sales should gather the voice of the customer and track customer satisfaction levels. IT should support certain projects with their technical competence. And, HR must support Black Belt and Green Belt selection and development. They should include it into reward and recognition, and track and analyse employee satisfaction.
By this phase, project selection is no longer driven by the Quality leader or business leader. Individual process owners use Six Sigma to achieve their own business goals. Therefore, they dedicate resources to the effort and gain the results.
Consequentially, you will know when Six Sigma is in the bloodstream of your organisation, when it will no longer be necessary to talk incessantly about it. Then, it will be part of the culture. This is probably one of the major differences between earlier improvement efforts such as TQ and Six Sigma. There will be no need to get startled by the call of the ISO 9000 auditor asking for the date of the re-certification. Six Sigma is a different mindset. There will rather be a kind of a regular internal evaluation by the leadership team assessing the status of their own management system – comparable with EFQ assessment.
Six Sigma means
Leadership’s role is critical, especially at the outset, because leaders communicate and reinforce the power Six Sigma has to achieve business objectives. Without buy-in from leadership, it simply will not work. It must be reinforced from high and adopted from each internal level and process area. When done well, Six Sigma has the ability to create a truly customer focused workforce – and organisation.
Two weeks after joining Central Bank in Germany, I spend a full week in the so-called Black Belt Training by TE Capital Europe. Black Belts are the project managers for process improvement approaches at TE. This approach comes from Motorola and is called Six Sigma. The first two weeks in the new company, I have tried to understand Six Sigma and to learn about the methodology and steps, after I got somehow familiar with TE Capital and its terminology, our banking products and our bank itself. While my new colleagues could help me with the latter, the learning of Six Sigma seemed to be an unsuccessful venture, as nobody in my bank had more than a hunch about it.…
Becoming a Lean Six Sigma Black Belt – and to a certain degree a Green Belt – is a major career move and should be considered carefully. There are not only the Pros; there are plenty of Cons. For you, it will definitely mean putting in more time. On top of someone’s normal job, the Black Belt is required to spend a considerable amount of time on the new commitment. Your additional time will not be rewarded financially at the outset. Your organisation will not be willing to put much money in something that is new and has not paid back yet.
You will work with teams whom you – most likely – have no power over. If you cannot convince them with your knowledge, skills and especially your attitude, you will be running your Lean Six Sigma projects on your own. The same applies for the stakeholders, i.e. the process owners you want to help to improve their processes. If you think they need you, think again. When you appear in their office, you, basically, convey the message that there is something wrong with their processes. They will not be overly enthusiastic to see you … until you show that you are worth spending precious time with and lending scarce resources to. Interacting with, influencing and communicating with all levels in your organisation will be one of your key responsibilities. If your best friend is your computer whom you prefer to interact with, this job is not for you.
Although there is no need to be or become a statistician in order to do the Black Belt job, it is still about dealing with data, about data analytics. Collecting, plotting and analysing them – sometimes with advanced statistical tools – in order to draw conclusions for improvements is one of your foremost tasks. If you already get scared when your boss asks you to produce a histogram, you should consider giving this Black Belt adventure a miss.
As a Lean Six Sigma Black Belt, you will not be able to show results short-term. Be prepared that you – and your stakeholders – need to have some patience until you, with your team, get to the real root cause of problems, develop effective solutions and enough data to back them up. If it would be easy to do this, it would essentially mean that the process owner does not know what he is doing. Fortunately, we do not have many of those. Unfortunately for you, you need to learn about the process, catch up with the process owner’s and stakeholder’s knowledge before you can be of any help. You will need time to study what you want to improve.
If you are frustrated now, do not give up yet. There are some benefits, too.
Being a Black Belt is one of the most interesting tasks you can think of. You learn more about a virtually unlimited variety of processes and issues in your organisation than anyone else. This demanding job rotation, i.e. rotation from one project to the next, has numerous rewards. One of them is the growing familiarity with your organisation, with your colleagues at all levels, with customers and their needs and with your suppliers and partners.
Contrary to an induction programme, you will learn “at the heart” of the processes. You will learn what makes your organisation tick – or struggle.
By doing so, you will be able to contribute to the organisation’s strategy – if they take it seriously. You will do what matters and you will help moving your organisation to the next level, to prepare them for tomorrow. This makes your new job highly visible. More people in the organisation will know about you and what you do. Especially your management will recognise and challenge you. From time to time, you will get the limelight you can use for your personal development. Before these occasions, you will be honing your proficiency in presenting to the management. You will learn how to understand and speak their language and you will grow to be convincing in your pitch.
Even though learning will become your daily bread, it is just a means to an end. The ultimate goal is improving your organisation’s performance to satisfy customer needs profitably. The skills you learn in theory and especially by practising are not only applicable to your Lean Six Sigma projects. Over time, you will make use of them in all facets of your professional and even your private life. Who says that powerful influencing skills cannot be useful when dealing with your teen kids? It works for me.
We need a robust and systematic tool to select and train future leaders for our company. Personally, I do not know that much about Six Sigma, but what I have read so far was about focusing on customer requirements, managing and improving processes, changing the company’s culture, encouraging people and, last but not least, making money. This is exactly the job of our leaders.
Michael Malaghan. President, Learning Technologies
Although, there is usually no pay rise or other monetary award at the beginning, you certainly increase your own value over time. Your organisation will definitely recognise and reward you for this – or another organisation will. Your Black Belt certificate adds more value to your CV than many other papers you used to attach. This certificate is not only about theoretically mastering new skills. More importantly, this certificate testifies the application of these skills to generate value to the business and your customers. You will not only be seen as someone who has studied a new theory. You will be seen as someone “who has done it”.
In many organisations who practise Lean Six Sigma, previous Black Belts and especially Master Black Belts have taken over key positions. If you were able to deliver results as a Black Belt, you should not be surprised to find your name well positioned in the succession plan of your organisation.
Becoming a Black Belt is not for everyone. More important than statistical knowledge are personal traits such as openness and conscientiousness combined with some degree of extroversion. If you decide that you fit the bill and you go for it you should do it wholeheartedly and you will certainly benefit a great deal from it.
If someone asked you to join the Black Belt training and take over a project, it is usually a good thing. It usually means someone cares about you, wants to develop you and trusts that you are worth it. Do not forgo this opportunity; it may not come again so soon.
Your decision to become a Black Belt has the potential to change your life … as it did for me.
“We need to increase productivity!” What sounds very reasonable on a country scale could be damaging on a company level.
Now, after nearly two years of recession the economy is back on track, i.e. companies of all sectors sell more. This is good news, isn’t it? It brings our productivity to new heights, meeting and even surpassing the levels we had seen before the recession. Stop! This is not really good news. This is expected news. Every company – well managed or not – will be able to show these figures. The question is: have companies used the time of low productivity to expand the productivity potential in preparation for the future?
Productivity measures the ratio of output quantity over input quantity. Increase of productivity means growing the output quantity faster than the input quantity. Output quantity can stand for anything from number of products made over number of customers served to number of donors treated or number of work passes produced. Input is usually summarising all resources needed to do this from raw material over equipment to man hours.
How is productivity increase possible?
Some time ago, I was facilitating a Six Sigma project group involved in solving a process challenge. This group had been working on defining the parameters regarding recruitment policies. This included the allocation of cubicle, phone number, password, printing of name cards, email, pass card, etc for the new hires. The process involved seven people, taking about five months to complete. The team had dutifully performed all the analysis required, used the necessary tools and come up with detailed process delays corresponding to different positions to be delivered to the new hires. It all pointed out to be a ‘people problem’. “If Mr X and Mrs Y did their job properly we would not have any delays” was the assumed concluded answer to all the problems.
“Don’t use Six Sigma to tackle special cause variation!”
is one of the common phrases being repeated by Lean Six Sigma coaches and a very important recommendation for the management, too.
The Six Sigma methodology is indeed targeting variation that is an inherent part of the process – common cause variation that has been expected and tolerated due to its unknown and supposedly complex root causes. Understanding this variation and analysing the real root causes before implementing improvements is a fundamental pillar of the methodology and driver for its success. …
Globalisation and instant access to information, products and services continue to change the way our customers conduct business.
Today’s competitive environment leaves no room for error. We must delight our customers and relentlessly look for new ways to exceed their expectations. This is why Six Sigma Quality has become a part of our culture. Jack Welch, GE
First, what it is not. It is not a secret society, a slogan or a cliche. Six Sigma is a highly disciplined process that helps all kinds of companies focus on developing and delivering near-perfect products and services.
OurBank is an American international bank with 50 branches in Germany and approximately 300 employees working either in the headquarter office or in one of the branches.
In 2003, the senior management of OurBank decided to adopt and implement Six Sigma as their business management tool across all business units in the Europe region.
According to the OurBank business strategy, the car loan business was identified as one of the business priorities in the next 12 months. The strategy was to significantly grow the car loan business market share within the region in two years time, by 100% in the first year, and by another 70% in the second year.