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How Small Is Small?

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  • #32283

    charit
    Participant

    I have heard that the six sigma initiative can be taken up by small companies. If this is true, then i would appreciate it if someone told me how large an organization should be to take up six sigma.I am an MBA student India and am actually conducting a survey on the level of awareness of six sigma in small companies in India. What I have found so far, is that though the level of awareness (atleast in top and middle management) is quite high, the most common concern for these industries,though, is whether six Sigma is applicable to an organization as small as theirs. Most small companies in India have annual turnovers, ranging from  $50000 (for small companies) to around $5 million (for large ones).Mikel Harry And Richard Schroeder, in their book on six sigma give us a rough idea about the number of black belts required for a company. According to them the number of black belts required is given by Annual turnover/no of millions. This means that a company with an annual turnover of 5 Million would require five black belts. Does this mean, that a company with an annual turnover of less than a million dollars cannot implement six sigma? It is in this context, that I seek an Answer to the question How “small” is small?

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    #86055

    Michael Schlueter
    Participant

    Hi Charit,
    Let’s go to a limit and reduce the companies size down to 1. There is exactly 1 person working in this company (which is probably the owner then).
    Can he/she apply six sigma to improve his/her business?
    I do think so. It may be even wise doing so, regardless of turn-over. A stable, capable business process may be even important for this start-up to survive.
    Which brings us to an interesting topic: do you want to talk about bringing six sigma into an existing, ‘hostile’ company culture of a small company? Or will you talk about six-sigma being a state of mind right from the start?
    E.g. when this 1-person company starts growing from a tailored six-sigma process, what will happen, when it grows to 2, 3, 8, 20, 100 employees?
    It may either transit into a traditional company, paying little attention to quality improvement. Which will bring up the discussion how many % of their employees should be trained on six sigma.
    Or it may preserve its valuable experience, that they do still exist because they did apply six sigma to vital parts of their business process. Perhaps the discussion about how many BB’s there should be becomes obsolete in itself? “That’s how we always did it. How can you run a business without six sigma?”
    Just to illustrate the variety of corporate cultures.
    Michael Schlueter
     

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    #86085

    Sigma Singh
    Member

    Hey Charit
    Six sigma can be apllied to any busines regardless of the size or type of the business. Any seasoned blackbelt will swear by that.
    I think, I understand your concerns, may be depending upon the scale or educational level of the people in the organization you need to demystify the six sigma to a large extent – in the sense that it still retains its teeth (and nails) but may be stripped of all the bells and whisltles. After all at the very grass root level six sigma is one very good problem solving process (present or potential) that has its genesis into the business issues.
    good luck
    Sigma singh

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    #86192

    Mike Nellis
    Participant

    Hello Charit,
    The previous posts are correct, size does not matter.  My comapany has 15 employees, mostly engineers with master’s or PhD’s.  When we develop a new product for a customer, we follow Six Sigma rigors.  Our customers are always thoroughly impressed and give repeat business. 
    I’m against having a large quality program of folks who do nothing but give project or quality advice and do the occasional projects.  If your main workforce, scientists, engineers & project managers do not employ Six Sigma in their daily lives as just another tool in ther toolbox, you’ll have too many employees than you would need otherwise.  I can see why many small companies feel they cannot afford Six Sigma as it exists in companies like GE.  That quality program model requires a lot of training infrastructure i.e. cost.  Hire folks with previous training, make them work hard and succeed, pay them well for their succesful efforts. Let Six Sigma become an “ordinary” business process.
    Hope this helps,
    -Mike 
    Hope this helps,
    -Mike

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    #86227

    Mike Carnell
    Participant

    Charit,
    I just picked this up in the newsletter. Before you start believing everything you read particulrly that book think it through. Why would there be any correlation between your revenue and the number of BB’s. There isn’t correlation between the number of employees and revenue, number of processes and revenue, etc. It is pure and simple BS.
    We did a deployment in the late 90’s where the company had a professional staff of 8 and the total company was under 50.
    How many people you need is probably (particularly in a small company) more of a function of how much change can you handle. Is it an old business where nothing has changed in a long time? Is fast and agile? Geographic spread will affect the number as well.
    Good luck.

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    #86231

    mcleod
    Member

    The whole discussion and prescriptions regarding the number of BBs, GBs, YBs (which is a foolish concept altogether), and Champions is a misconceived idea. It reverses the X and the Y. Most discuss the number of BBs as an X for success (the Y). The number of BBs is merely a historical covariant with success. That is, companies that are more successful tend to have more BBs, but the BBs are not THE  cause.
    Six Sigma, and what makes it work, is not a matter of the number of people in the company who are certified. It is a matter of how the people in the company make decisions that deliver value to their customers and stockholders.
    What makes any company improve is a philosophy that focuses on more money and more happy customers. What makes Six Sigma work better than most philosophies is that it gives a methodology to do just that.
    Six Sigma works for a company of one, or for a company of one million. This is because it uses data, and the tools that turn data into information, to make value-added decisions.

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    #86238

    Bob Peterson
    Participant

    I firmly believe, at the risk of being indelicate, that the required number of black, green, yellow, leather belts, or striped suspenders is zero.  What is mandatory for a company of any size is (a) putting the customer first, (b) accepting that no matter how good the company may think it is, there must a passion for improvement in the eyes of the customer, and (c) seat-of-the-pants approaches will typically yield relatively cost-ineffective results. 
    How the heck can one connect the revenue dollars with a BB bodycount?  How many?  Just do what makes sense.  The effective head of any business knows there are issues to be resolved, has at least a gut feel for the likelihood of solving them, and comes a make-or-buy decision.  If the ongoing need is clear, make; if not, buy as a temporizing move and reconsider later.  If this is new territory – start small.  If this is not new territory, you already know what to do and have probably already lost interest in reading this.
    I am a BB.  I have a passion for customer-firstness, recognize that I am imperfect, and know that honest, focused, measured, high impact work is the very best way both my customers and I win as we improve together.  I have little time for trite formulas, ivory-towerness, or jargon.
    Six Sigma is a wonderful tool, but is a tool that has only one purpose – generating a healthier bottom line through customer satisfaction.  Please never lose sight this.
    One more thing.  There are entirely too many “I”s in this note:  Six Sigma is not about me, us, or them, only them.
     

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    #86326

    charit
    Participant

    Hey guys, while I appreciate your views, it still does not solve my problem. Listen, I do agree with the point that there is no correlation between the number of BBs and the size of the company, but there sure is a correlation between investment and ROI. Now, look at a company that has just started the implementation of six sigma. What is the most crucial aspect for this company?, it is people. Even before a company starts to think about redEsigning (or designing) its processes, it has to think of the people who have to do it. Simply put, the number of BBs or people it trains is its investment on six sigma. Now to train a BB, would set a company back by say, $20000 to $35000, and any subsequent costs in employee compensation. Does the ROI really justify the money spent on training. Sure, we all know Six Sigma translates to good ROI for big companies. Does it do the same for smaller companies.
    There is another aspect to six sigma; the technical aspect.
    Six sigma is basically a statistical technique (which is what makes it so powerful), while I believe that any donkey can do statistics, given the right data, I also believe that it is not possible for a donkey to get the right data in the first place. This is what makes people so important in six sigma. And the type of small organization I am talking about doesn’t have the people to do it, or has people in vital positions, who cannot be taken off, and given a full time BB job.
    Hence, when I ask “How small is small”, I am not seeking a correlation between the size of the company and the number of employees required, rather I am seeking for a correlation between investment and ROI.

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    #86327

    charit
    Participant

    Hey guys, while I appreciate your views, it still does not solve my problem. Listen, I do agree with the point that there is no correlation between the number of BBs and the size of the company, but there sure is a correlation between investment and ROI. Now, look at a company that has just started the implementation of six sigma. What is the most crucial aspect for this company?, it is people. Even before a company starts to think about redEsigning (or designing) its processes, it has to think of the people who have to do it. Simply put, the number of BBs or people it trains is its investment on six sigma. Now to train a BB, would set a company back by say, $20000 to $35000, and any subsequent costs in employee compensation. Does the ROI really justify the money spent on training. Sure, we all know Six Sigma translates to good ROI for big companies. Does it do the same for smaller companies.
    There is another aspect to six sigma; the technical aspect.
    Six sigma is basically a statistical technique (which is what makes it so powerful), while I believe that any donkey can do statistics, given the right data, I also believe that it is not possible for a donkey to get the right data in the first place. This is what makes people so important in six sigma. And the type of small organization I am talking about doesn’t have the people to do it, or has people in vital positions, who cannot be taken off, and given a full time BB job.
    Hence, when I ask “How small is small”, I am not seeking a correlation between the size of the company and the number of employees required, rather I am seeking for a correlation between investment and ROI.

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    #86330

    Bob Peterson
    Participant

    Charit,
    Thank you for clarifying your need.  Something like six sigma is of value to a company of any size or sales dollar volume.  For a small company measured by either means the issue comes down to speed of near-term and long-term problem solving where speed is more important than long-term.  On the ROI point, consider variable vs fixed costs as a key question to address.  The other is an estimate of the magnitude of the problem, how much money is saved if the project is only 50% effective, and how much the BB will cost.
    For companies of modest means, I would suggest you recommend bringing in someone from the outside rather add another body or train an existing one.  In the short-term, either of those two actions will tend to ‘distract’ the small company and impede them from doing other vital things.  The advantages include a reality check for the company on how well this will work for them, fewer preconceived solutions, ability to focus on completion, and essentially pay for performance.  The external resource is a variable expense which I would think in many circumstances is particularly important for smaller companies.
    On balance the people already in place at the company must be open to the consequences of the effort.  I have found this up front acceptance a bit more difficult than you might think since there are many times a couple of influentials that are actually looking for vindication of business-as-usual, which in turn becomes a lose-lose situation.
    The sort of ROI you can expect is a bit trickier since quite a few factors come into play.  My experience has shown a 50+% ROI (1.50 return on each 1.00 invested or spent) is realistically achievable.  If this sort of number is not attractive, I want to know what business they are in so I can be in it, too.  Even if my assertion is incorrect and the return is only equal to the intial cost, any future gains go directly to profit.  If it is less than that some upfront work was lacking.
    I hope this will be of a bit more help.  Best of luck.

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    #86398

    Joe Ficalora
    Participant

    Hi folks,
    Although I entered this thread a little late, I thought I might add another perspective.  Six Sigma is not really about resources, it’s about priorities.  As has been said before, any company small or not can apply Six Sigma methods.  However, if there are unhappy customers, and/or serious complex issues without obvious solutions, then a Six Sigma project would be a priority even in a small company. 
    Having said that, let’s imagine a company of 5 people.  Now imagine 1 person is managing, 2 are selling/delivering existing products and 2 creating new products.  If customers are unhappy with defects in existing product, the priorities will rapidly shift, and performing a Six Sigma project is a possibility.  Likewise if the priority is loss of sales due to a newly featured competitive product, the priorities would shift again and a DFSS(Design for Six Sigma) project would naturally ensue. 
    Having said that, I believe this string of trying to determine investment and ROI would be situational, for a small company especially.  How large are the sales $ at risk – from defects and unhappy customers?, from new products with new features?, from new competitors with lower prices and/or faster delivery times?
    It’s been my experience that Six Sigma works best when there is a real need, and each small company must assess their needs for themselves.
    Some questions I would ask to establish that need are:
    1. Do we have growth?  And is that growth organic (within existing customers) and/or is it expanding beyond the present customer base?  Many people hold hte belief that your market is either growing or shrinking, never static.
    2. Are customers happy with our products and is there objective evidence(data) to substantiate it?  At what lower price would customers switch?  This gets at the need for always lowering your internal costs, the market tends to set the prices !
    Each small business owner decides many times a day where to invest and how much in equipment, people, and in new business deals.  Investing in creating Six Sigma Black Belts is no different, it just has a more public ROI, if you select the right projects and the right people.  If the project opportunities are large enough, then it warrants the investment, same as buying machine tools or any other investment.
    As Dr, Deming once said – “Learning is not compulsory, but neither is survival.”

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    #86404

    Bob Peterson
    Participant

    Thank you, Joe.  Well stated.
    Bob Peterson

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    #86560

    shamsul kamal
    Member

    Hello, I’m interested on what are you doing now. Can you give some info on how I can start to conduct a survey to measure the level of awareness in my co. TQ

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    #86763

    charit
    Participant

    Hey shamsul,Sorry for not responding earlier, The information you have given me is very little. However, the most basic way of conducting a survey is by  questionnairre. There are different types of questionairres for different purposes. The most important aspect in any survey is to have a clearut idea about the objectives. What are you trying to do? Are you trying to find a correlation between two factors etc..

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