Strategic implementation of six sigma and project management
The George Washington University
In formulating and implementing their organizational strategies, organizations need to integrate carefully the following two goals to enhance their effectiveness and competitive position:
- Improvement of current products, services, processes, and the technologies used for delivering these products and services to their customers. This goal can be pursued through Six Sigma, quality, and business systems improvement initiatives.
- Planning and introduction of new products, services, processes, and technologies to enhance organisational effectiveness, efficiency, and customer satisfaction. This goal can be carried out as co-ordinated projects and programs, guided to their completion by program and project management methods and tools.
The Six Sigma management method focuses on better understanding of changing customers' requirements, improving business systems, quality, and delivery, reducing and eliminating defects and waste, reducing cost, and enhancing the organisation's competitive advantage. These objectives are achieved through integrating profound knowledge of underlying processes and systems with knowledge of project management, statistics, and engineering to improve the organisation's overall performance across various disciplines, including product development, engineering, production, marketing, sales, finance, and administration.
Successful implementation and growing organisational interest in the Six Sigma method have been exploding in recent years. Involvement in Six Sigma projects is becoming an important career path requirement in many organisations. Understanding the main concepts of the Six Sigma method provides important opportunities to project professionals to lead Six Sigma projects, and allows them to better support their organisations' strategic direction, and rising needs for coaching, mentoring, and training.
This paper focuses on providing a clear understanding of the Six Sigma management method and the integration of project management and Six Sigma strategies to achieve these critical organisational goals. It provides a brief overview of the Six Sigma management method, and presents the main elements of selection, management, and evaluation of Six Sigma projects. It clarifies the roles of various participants in achieving technical, financial, and customer satisfaction objectives of Six Sigma projects. The paper presents applications of the Six Sigma method and shows implications, benefits, and potential risks of applying it in project management.
Six Sigma Method and Other Quality Initiatives
Total Quality Management (TQM) and Continuous Quality Improvement (CQI) strategies were widely used in the 1980s and early 1990s. As implemented, organisations designed these initiatives for improvement opportunities that were often called the “low hanging fruit.” These initiatives targeted problems that occurred because of historical developments in organisations. Certain activities were performed for specific reasons, and continued to be performed well after their value diminished greatly. To improve these processes and eliminate these non value-added activities, TQM (or CQI) aimed primarily at empowering individuals and teams to discuss these issues within their own area or across organisational boundaries. The tools of TQM (or CQI) were generally oriented towards brainstorming, communications and simple data analysis.
However, by the mid 1990s, most organisations that adopted TQM (or CQI) ran out of “low hanging fruit.” The problems that remained, did not lend themselves easily to simple data analysis, and required more investment in resources and time than what was appropriate in TQM (or CQI) activities. Significant business results were no longer achievable through TQM (or CQI), and organisational strategic commitment to these initiatives faded.
In the meantime, the Six Sigma management method continued to grow and thrive, from its initial development by Motorola in the mid 1980s (Harry,1997; Harry & Schroeder, 2000), to its widely advertised adoption by General Electric in 1992 (Welsh & Byrne, 2001), to its successful adoption by many other organisations including Boeing, Dupont, Kodak, Toshiba, Seagate, and many others. Most of these organisations have achieved very impressive results using the Six Sigma management method, which is rapidly becoming a major force driving the strategy of many leading organisations.
The Six Sigma management method is more comprehensive than prior process improvement initiatives. It appears to be the next logical step, since it cures the deficiencies of initiatives such as TQM and CQI by:
- Applying more advanced data analysis tools, such as quality function deployment, design of experiments, failure mode and effect analysis, and regression analysis, in addition to the basic analysis tools of TQM and CQI.
- Focusing on customers' main concerns, properly analysing them, and solving underling problems that cause them.
- Using a project-driven organisational structure and appropriate, relevant project selection, evaluation and project management tools. This ensures that Six Sigma projects reach their objectives effectively.
- Including clearly measured and reported financial results. This ensures sustained commitment to the initiative by senior executives.
We can summarise the Six Sigma management method as follows (Anbari, 2002):
Six Sigma = TQM (or CQI) + Additional Data Analysis Tools + Stronger Customer Focus
+ Project Management + Financial Results
Theoretical Basis of the Six Sigma Method
Statistical Quality Control Theory
Dr. Walter A. Shewhart developed the quality control chart, which provides a view of the process over time. Observations of the characteristic of interest are plotted on the chart. The Centerline (CL) of the chart is the mean of the data, the Upper Control Limit (UCL) is set three standard deviations above the mean, and the Lower Control Limit (LCL) is set three standard deviations below the mean. These values are calculated from observations on the process itself, and the quality control chart represents the voice of the process (Exhibit 1).
Quality control chart theory assumes that the data follow the normal distribution developed by the German mathematician Carl Friedrich Gauss (1777 – 1855), which specifies that about 99.7% of the observations in a process would be within three standard deviation (three sigma) in each direction from the mean. If the data are not normal, several observations (say 4 or 5) can be made each time and their mean is plotted on the chart. The sample means are normally distributed based on the central limit theorem.
When the process is in statistical control, the process is said to be stable, predictable, consistent, or in control. In this case, approximately 99.7% of the plotted points will be within the control limits. The remaining 0.3% of the plotted points will be outside the control limits: 0.15% above the UCL and 0.15% below the LCL. The quality control chart allows differentiation between common cause variation and special cause variation:
Common Cause variation is indicated when all plotted points fall within the control limits, with no trends, runs, cycles, or special patterns. It is caused by the total system, including planning, design, selection and maintenance of equipment, selection and training of human resources, etc. It is also called system, random, or normal variation.
Special Cause (or assignable) variation is indicated when a plotted point, or points, fall outside the control limits, or when all plotted points fall within the control limits but have trends, runs, cycles, and/or special patterns. It indicates a condition different from the way the system or process operates normally, and is caused by causes outside the system, including human error, accidents, equipment breakdown, etc.
Dr. W. Edwards Deming (1900 – 1993) popularised the use of statistical quality control and greatly influenced Japanese and American quality management and competitive position. Among many important contributions, Dr. Deming highlighted that management is ultimately responsible for quality. He pointed out that management designs the system and has the authority to change it. Therefore, management is responsible for common cause variation. The individual worker is responsible only for special cause variation (Deming, 1986).
The control chart represents the voice of the process. It indicates whether the process is predictable or not. However, it does not indicate whether the process is adequate or capable of meeting customer requirements. It is essential to identify and effectively address factors critical to quality and issues critical to the customer. Genichi Taguchi stressed the importance of reduction in variation and emphasised the importance of having process output as close as possible to the desired target. Certain customer requirements may be stated in terms of a Target Value, an Upper Specifications Limit, and a Lower Specifications Limit, which represent the voice of the customer. Exhibit 1 shows the integration of the voice of the process with voice of the customer.
Six Sigma Practice
If the Upper Specifications Limit and the Lower Specifications Limit were six standard deviations (six sigma) each away from the mean, then pure six sigma would be achieved with a theoretical maximum of 2 defective parts per billion (Exhibit 1). Six Sigma practice convention allows the mean to move ±1.5 standard deviations, leaving 4.5 standard deviations between the process mean and the closest Specifications Limit, and resulting in a maximum of 3.4 defective parts per million. Convention also indicates that the maximum is 3.4 defects per million opportunities (DPMO). This is a more liberal requirement, since the same part could have multiple defects. Thus, when the process generates no more than 3.4 defects per million opportunities, Six Sigma is achieved (Lucas 2002). This is still a very heroic target for many organisations, technologies, processes and projects.
Six Sigma Project Management
Six Sigma Projects
Dr. J. M. Juran suggested that quality could be accomplished project by project and in no other way (Juran 1992). He developed important quality management concepts and tools, and had a great deal of impact on Japanese and American quality and competitive position.
The Six Sigma method adopted the idea of project-driven business systems improvement. A Six Sigma project is targeted to have a duration of three to six months. The expected financial impact per Six Sigma project is $100,000 to $500,000 with a target of $175,000 (Lucas, 2002; Hammer, 2002). Some organisations have approved Six Sigma projects with benefits below $100,000. However, if a Six Sigma project exceeded the duration target, it is broken down to smaller projects. Keeping Six Sigma projects within their duration targets may be an important contributing factor to management support and resounding success compared to larger projects.
Six Sigma Project Management
Six Sigma projects should be selected carefully and evaluated rigorously to ensure that they achieve their business objectives. The selection of a portfolio of projects implies future commitment of organisational resources, profoundly affecting the success and future viability of the organisation.
Project management tools used for Six Sigma projects include project identification and selection methods, such as Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and Scoring Methods (Anbari 2002). Six Sigma projects require a clearly written and approved Project Charter, Scope Statement, and a basic Work Breakdown Structure (WBS). Six Sigma projects are monitored and controlled using basic project planning and control tools, including Gantt charts, milestone charts, project reporting, project closeout, and post project evaluation methods. Other important tools include effective communications and team development methods.
The strategy of managing the portfolio of Six Sigma projects should allow effective, nimble adapting to changes in the environment. J. Welsh observed: “Business success is less a function of grandiose prediction than it is a result of being able to respond rapidly to real changes as they occur. That's why strategy has to be dynamic and anticipatory.” (Welsh & Byrne, 2001, p. 390).
The Black Belt
The organisational structure of Six Sigma is centred on the Black Belt, who works on Six Sigma projects full time, and leads four to six projects per year. Black Belts are selected carefully and receive four to five weeks of training on Six Sigma, emphasising statistical methods, in addition to actual Six Sigma project work (Hoerl, 2001). The Black Belt plays a similar role to that of a project manager in a strong matrix organisation. Assignment as a Black Belt lasts for about two years constitutes an important milestone of the individual's career path.
Green Belts are specialised team members and work on Six Sigma projects on a part time basis. They receive two to three weeks of training on the Six Sigma method. Some organisations refer to all team members on a Six Sigma project as Green Belts and provide them with the relevant training in the Six Sigma method.
Project Team Members
Project Team Members work on Six Sigma projects on a part time basis. They receive two to three days of training on the fundamentals of the Six Sigma method.
Master Black Belts
Master Black Belts are experienced Black Belts and act as technical resources to Black Belts, Green Belts, and other team members. They play a similar role to that of a project management office, and provide mentoring, coaching, and consulting to those involved in Six Sigma projects.
Champions are the organization's strategic and tactical business leaders. They approve Six Sigma project charters, review project progress, and ensure success of Six Sigma projects in their business units. They play a similar role to that of a project sponsor.
Exhibit 2 provides a comparison of the roles of participants in Six Sigma projects to those in traditional projects.
Six Sigma Project Methodology
The generally accepted method for managing Six Sigma projects includes the following phases (Lowenthal, 2002; Pyzdek, 2001; Rath & Strong, 2000):
Define: The objectives and scope of the project are defined. Relevant information about the process and customer are collected.
Measure: Data on the current situation and process metrics are collected.
Analyse: Collected data are analysed to find the root cause(s) of the problem.
Improve: Solution(s) to the problem are developed and implemented.
Control: The implemented solution(s) are evaluated and mechanisms are implemented to sustain the gains.
This methodology has often been referred to by its initials: DMAIC. Some are suggesting an additional initial phase that might be called: Recognise. This would occur before the Define phase, and is intended to ensure that appropriate opportunities and problems are properly recognised.
Capable statisticians have driven the Six Sigma methodology. Professionals in the project management field may find valuable opportunities to contribute to enhancing the Six Sigma project management methodology.
Total Cost of Ownership
From an organisational strategic perspective, total cost of ownership, or total life cycle cost, consists of three major components (Project Management Institute, 2000):
Acquisition: This is the total cost of the entire project undertaken to develop and introduce a new product, service, process, or technology. It includes initiating, planning, design, development, construction, management, control, closeout, and all other costs related to the project.
Operating: This is the cost of operating and managing the facility, service, process, or technology created by the project. It includes the cost of labour, energy, maintenance, support, security, overhead, and all other costs related to operating the new facility.
Disposal: This is the cost of disposing of the facility, service, process, or technology at the end of its useful life. This amount could be positive, such as the salvage value of certain equipment, zero, such as the value of an obsolete software or process, or negative, such as the cost of removal of hazardous material.
By building quality into the project, the cost of acquisition may increase and the schedule may be extended reflecting the additional efforts required to design and build quality into the project. The cost of acquisition may also decrease and the schedule may be shortened reflecting reduction in re-work and waste. In either case, the operating cost decreases because of better designs, more robust components, and better human engineering. The useful life of the facility may be extended because of provisions for expansion and considerations of future requirements. The disposal cost would occur later and may be lower. Thus, by planning, designing, and building quality into the project, higher levels of quality are achieved at a lower total cost. This allows the organisation to enhance its strategic competitive position, capture its market, satisfy its customers, stay in business, provide jobs, and serve the community.
Quadruple Constraints of Project Management
Projects have generally been considered to have two major constraints: time and cost, as evidenced by common statements such as “finish the project on time within budget!” However, project management thinkers suggested expansions of this view. Meredith and Mantel (2002, pp. 3-4) specified that projects have three objectives: performance (or scope), cost, and time. Kerzner (2003, p. 5) indicated that time, cost, and performance/technology are constraints on the project. The PMBOK® Guide 2000 Edition stated, “Many project management practitioners refer to the project triple constraint as a framework for evaluating competing demands. The project triple constraint is often depicted as a triangle where either the sides or corners represent one of the parameters being managed by the project team.” (Project Management Institute, 2000, p. 29). Anbari (2002; 1985) suggested that each project has four general objectives, which are also the four constraints on the project (Exhibit 3):
Scope: Each project is undertaken to complete a certain scope of work.
Time: Each project needs to be completed in a given amount of time, or by a given target date.
Cost: Each project needs to be completed within a given cost or budget, in monetary or effort terms.
Quality: Each project needs to satisfy specified quality levels, or specifications.
A project must meet all four objectives to be successful. The project team needs to address these traditional concerns and other potential considerations (Project Management Institute, 2000, pp. 27, 122, 136). There is a strong relationship between scope and quality. Similarly, there is a strong relationship between time and cost: A project can be completed faster at an additional cost. There is a strong relationship between quality and cost: Poor quality increases total cost due to re-work and failure costs. Constraints on resource availability can affect several project objectives. Indeed, there are relationships among various project parameters. We separate them to study and analyse each of them carefully, while recognising that project parameters are strongly related.
Project Management Applications
Considering the quadruple constraints of project management, the application of the Six Sigma Method in project management may have the appearance of an impossible dream:
Scope: Applying Six Sigma in scope management would enforce clear definition of requirements and rigorous change management. The risk may be that this application could inhibit innovation.
Time: Applying Six Sigma in time management would require better scheduling, immovable deadlines, careful progress monitoring, risk management, and enforces better resource management. The risk may be that this application could encourage additional schedule padding and increase buffers.
Cost: Applying Six Sigma in cost management would imply absolute budgets, and enforce careful cost controls and effective forecasting. The risk may be that this application could encourage additional budget padding and increase reserves.
Quality: Applying Six Sigma in scope management would enforce unyielding quality targets, careful selection of standards, and realistic assessment of capabilities. The risk may be that this application could result in hiding problems and assigning blame for defects to others.
Can Six Sigma be achieved in project management? There is at least one major example that it has already been achieved: Most organisations went through the Year 2000 (Y2K) Project. Millions of projects were successfully accomplished by public and private organisations around the globe with very few failures. Diligent teams cooperated to remediate computer systems, outdated software code, telecommunications networks, imbedded systems, and other infrastructure for the millennium date change. Countries and organisations shared knowledge about Y2K project plans, risks, progress, problems, successes, and strategies (U.S. Department of State, Office of Inspector General 2001). The Chair, U.S. President's Council on Year 2000 Conversion is quoted as saying (U.S. Department of State, Office of Inspector General 2001): “Y2K was fascinating in terms of how to get one's arms around a subtle problem that crossed a wide sweep: 180 countries, 50 states, the entire U.S. economy, and the whole U.S. Government. We will not have to do it again in the near future, however the lessons learned from the exercise will be invaluable in addressing other management issues.”
After the enormous success of the huge number of Y2K projects, some said that the problem was exaggerated. However, that may be the nature of successful projects: if the problem is solved, no one should notice it! Many agree that very important lessons were learned in successful global project management. A telecommunications official, Hong Kong is quoted as saying (U.S. Department of State, Office of Inspector General 2001): “[Y2K] was not easy, but it was a good experience that can be applied to managing other IT projects.” A Consular Affairs official, U.S. Department of State is quoted as saying (U.S. Department of State, Office of Inspector General 2001): “In effect, we should not call what happened a Y2K success, but rather a management success.”
Imagine if we could approach each project as if it were a Y2K project: Clear objectives, thorough planning, immovable deadlines, unwavering support by senior executives, sufficient resources, strong desire to succeed in view of the high amount at stake, and overall organisational alignment to ensure success of each project. A project that has all these critical factors is much more likely to succeed than one that does not!
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