David Henkin, a principal at The Vanguard Group, offers his views on Six Sigma metrics. He discusses ideas on metrics used by successful companies, Six Sigma metrics versus business metrics and the best ways to present metrics to upper management.
Q: What are some of the metrics used by companies that are successful with Six Sigma?
- Innovative, as well as classical/typical metrics make up successful measurement frameworks.
- Vanguard translates performance “voices” into drivers and ultimately CTQs, for a unique focus on clients, business and crew.
A: The easy answer would be to review a list of classical and/or typical Six Sigma metrics. Classical measures of quality such as timeliness, accuracy, ease of doing business and cost are important and often abundant on most companies’ Six Sigma measurement framework. Other typical Six Sigma measures such as rolled-throughput yield, sigma and DPMO tell a good story, when applied properly.
Still, simply collecting and calculating these measures are not enough to be successful. Successful businesses apply these metrics in the right context and in innovative ways to solve client opportunities. Companies that are successful with Six Sigma tailor metrics to align with core processes and its critical-to-quality (CTQ) characteristics. Understanding clients’ CTQs and ensuring they are measured and addressed are paramount.
Another element of success is ensuring measures are “leading” rather than “lagging.” Leading measures focus on the process, its inputs and suppliers, whereas lagging metrics focus on results or outcomes. Ultimately, the truly successful companies understand the cause-and-effect relationship between the leading and lagging measures.
At The Vanguard Group, feedback from clients, business leaders and the crew is collected, utilizing both proactive and reactive means. By translating these “voices” into drivers and ultimately CTQs, a measurement framework is constructed that has a unique focus on the client, business and crew.
Q: How can companies ensure they are measuring the “right” things?
A: Arguably the most critical step in ensuring a company measures the “right” things is to understand its clients’ needs. Fundamental understanding of a client’s processes or value chain allows a company to gain critical knowledge of a client’s needs and therefore CTQs, enabling definition of business processes from the client’s point of view.
- Fundamentally understanding clients’ processes is a cornerstone.
- Prioritizing strong CTQs and metrics (though correlation or causation) focuses on adding value.
A common challenge in identifying client-focused CTQs and metrics is the sheer number identified. Complex business processes often deliver a lengthy list of CTQs, and therefore metrics. While all CTQs are important, the right things to measure are those that are most critical. It is usually impractical to measure every CTQ or metric identified due to limited time and resources.
At this point, a company must develop and utilize an effective means of separating strong from weak CTQs and metrics. The means of prioritizing CTQs depends on the business, its clients and the nature of its processes. In most cases, a correlation or (hopefully) causation link can be established between an input and an outcome through quantitative and/or statistical means. In other cases, it may be as easy as asking the client and utilizing a prioritization tool such as pairwise comparison or a prioritization matrix.
However the CTQs are prioritized, ensuring that metrics are focused on successfully adding value to the client is the way of ensuring you are measuring the right things now and in the future.
Q: Should Six Sigma metrics be distinct from the rest of the business metrics? If so, for how long?
A: Ideally, Six Sigma metrics should not be distinct from the rest of the business metrics, but rather one and the same. Practically speaking, however, this is often a work-in-progress, especially in the early stages of a Six Sigma implementation.
- As organizations strive to manage with data, Six Sigma metrics should be fully integrated.
- Improvement projects, business operations and leadership forums all leverage a common measurement framework.
Consolidating Six Sigma metrics with business metrics is an exercise in change management. The saying “never solve a problem before its time” applies. Forcing a business (and its culture) to change to a new set of metrics can lead to resistance.
So what to do? Effectively managing a continuous improvement initiative, such as Six Sigma, will produce a waterfall effect on metrics by not only identifying new ways to consider and measure what’s important to the business, but also creating better data the current business metrics are based on.
As continuous improvement initiatives are executed, more actionable and relevant business data is produced. Business operations are motivated by results to incorporate Six Sigma metrics. With leadership leveraging better business data, a more informed strategy can be put in place that better addresses client needs and how the company can more effectively address them.
Q: What are some of the ways that these metrics can be effectively displayed to upper management?
A: How the metric is derived and used is important. First, regardless of the tool, the metric must be based on data that is sufficient, relevant, representative, contextual and timely. Without the data possessing these attributes, the metric based on this data can lead upper management to bad assumptions and wrong conclusions.
- Examples of effectively displayed metrics include dashboards and balanced scorecards, digital or low-tech.
- The metrics displayed should represent the most critical drivers and outcomes identified for a business.
Second, the metric must be actionable. An actionable metric is one that is accompanied by specification limits of some sort. “Actionability” allows upper management to assess current levels and determine whether or not those levels are acceptable.
Third, metrics should be presented in a format that establishes a clear “line of sight,” cutting through the business’ core processes and, therefore, process owners. Establishing clear accountability not only for the quality of the metric, but also the action taken to improve the metric is critical to the success of the dashboard, and the business. Upper management should be able to consider a high-level metric and drill down into the business to gain a better understanding of where the problem originates (drive to root cause).
Last, metrics should be presented in a simple manner. Do not crowd as many metrics onto the dashboard as possible, but rather present the most critical seven-to-twelve metrics required to run the business successfully.