THURSDAY, JULY 24, 2014
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Implementation Success Factors Ask the Expert: The Topic – Six Sigma and Business Strategy

Ask the Expert: The Topic – Six Sigma and Business Strategy

Joe Valasquez, senior vice president/quality and productivity executive for Bank of America, offers his views on Six Sigma and business strategy. He discusses aspects of successful programs plus the value of partial deployments and pilot programs.

Joe Valasquez

Senior Vice President, Quality and Productivity Executive

Bank of America

Charlotte, North Carolina, USA

Q: Six Sigma is often considered the “make or break” strategy for a business, but we see companies using Six Sigma both excel and flounder. Why?

A: Six Sigma has proved it can deliver stellar results in all types of industries – service, distribution and manufacturing. Additionally, Six Sigma has proved itself in companies that ranged from thriving at the top of their peer group, to struggling to survive, to bankruptcy. But that’s not the whole story. Efforts that are isolated in the organization, lack systematic implementation and lack key executive support are more likely to flounder. Six Sigma, without the proper infrastructure, will at best provide incremental gains and at worst will misdirect valuable resources.

Q: How have you seen Six Sigma best deployed into an organization’s business strategy?

A: Six Sigma is best deployed into an organization’s strategy when it is the “how to deploy” of the strategy. Starting with the organizational strategy sets the tone for the entire organization. We use the Hoshin planning process for our strategic plan development and the Kanri process as our periodic management methodology. Put together, this is the Hoshin Kanri process which roughly translated means “compass” and “directed.”

Hoshin plans help key leaders focus on the vision for the company, ways to drive the breakthrough strategies to achieve the vision and crisply defined tactics for each strategy. Metrics are assigned to define success and measure progress. Planning at every subordinate level is required to demonstrate how it is aligned to the plan above it, creating a cascade in which every strategy, tactic and metric can ultimately be connected to the company’s master plan.

An effective organizational strategy is surprisingly simple in structure. The beauty of a great plan is its simplicity. Transforming a complex annual plan into a concise document requires focusing on the critical few.

In order to achieve the plan, the Six Sigma skill set and methodology are required to achieve the breakthrough goals. Some plans identify training and yield targets (yield is a measure of number trained versus number certified) for Six Sigma. The real linkage of strategic plan to Six Sigma is that it is difficult to achieve breakthrough goals in defects, speed and customer delight without using Six Sigma tools.

Q: To be successful, does Six Sigma need to be deployed throughout a business, or can it be deployed in selected parts of a business?

A: Six Sigma can be successful at either end of the spectrum – projectized or functional implementation versus an enterprise-wide holistic approach. The difference between the approaches is the magnitude of benefits and the probability of program longevity.

Deploying Six Sigma in selected parts of the business will most likely realize positive gains. The issue is that there are diminishing returns. After the low hanging fruit is gathered, it becomes increasingly challenging to identify viable opportunities. All organizations are composed of intertwining and dependent processes. In our modern organization, few processes are completely stand-alone. There are linkages to reporting systems, suppliers, customers, business partners, regulators and multiple internal functions. For Six Sigma to truly become part of the organizational culture and therefore self-sustaining, a holistic approach is required.

A holistic approach requires the mapping of organization processes with functional interconnects identified. Six Sigma projects are executed with the good of the whole as a key underlying principle. Cross-linking the projects with a management tool similar to a management by fact (MBF) aligns projects and provides Belts with the big picture. Metrics are identified in a way that complements and accelerates progress.

Q: If Six Sigma is not “driven by the top” (by the CEO), is it doomed to failure?

A: Yes. It is always best when initiatives are sponsored and driven by the top of an organization. No level of effort can substitute the impact of top-driven initiatives. When the CEO is the driving force, results can be spectacular.

Bank of America is an example. The bank’s CEO, Ken Lewis, reports: “Using Six Sigma, our payment error rate has gone down 22 percent and we have increase payment speed tenfold in the same time frame. We have reduced the deposit error rate by 83 percent and increased customer delight…from a baseline of 41 percent to almost 52 percent. All of those have contributed to the addition of more than 2.5 million customers during this period.”

Driving Six Sigma from the top is only part of the story. Driving Six Sigma at the top is like driving a “how to” without the “what.” The “how to” is Six Sigma, the “what” is a strategic plan – the two must be connected. Just driving Six Sigma creates a number of projects that may be isolated and difficult to connect to the needs of the overall business. Eventually, if the projects are not linked to achievement of overall business goals, there will be a hunt for hard savings. Six Sigma can provide so much more benefit to all the facets of the business. So for the most successful program, it should be driven from the top – both by the CEO and by the corporate strategy.

Q: Is a Six Sigma pilot program beneficial or detrimental to a company contemplating deploying Six Sigma?

A: A Six Sigma pilot program is not the ideal approach to a program startup. Nevertheless, with no other options, if properly managed within a tight schedule, significant value may come from a pilot. Pilot programs have typically been individual, disconnected projects focused on reducing expenses. This may set the perception of Six Sigma within the organization. It may be difficult to transition from a project-focused expense approach to a holistic improvement program addressing all facets of the business. Even though excellent projects may have been executed in the pilot, the perception of the program may already have been set. Six Sigma works best when it is integral to an overall quality program that addresses the entire business.

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