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SS Implementation Steps in a Small Business

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This topic contains 18 replies, has 10 voices, and was last updated by  John J. McDonough 15 years, 2 months ago.

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  • #36654

    Business Investor
    Participant

    I was directed to this site for some advice concerning the
    appropriate steps for implementing Six Sigma in a small
    business. By small business, we mean an organization
    with about 100 employees doing about $30M in annual
    revenue. We are primarily a commercial enterprise that
    processes about 1000 contract transactions on a monthly
    basis. We don’t have much to spend on a six sigma
    program since the business is only about 3 years old (we
    need all the cash to generate more sales to meet growth
    expectations of the other business investors). Can
    someone provide a simple cookbook of the steps we must
    go through to effectively install and benefit from six
    sigma? Is there an exemplar for small business six sigma
    (like GE is the exemplar for big business)? Who has such
    direct experience with six sigma in small business? We
    need to internalize in our own minds what it will take to do
    six sigma before we committ resources. Help in this
    regard would be greatly appreciated. Thank You.

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    #106353

    mjones
    Participant

    For your size of business you could use a Black Belt, a few Green Belts and a part-time Master Black Belt/external adviser to help get you going. While there are a bunch of consultants that will be happy to come in and take your money, I would recommend great caution selecting consultants; avoid them if you can.
    Instead, try and grow your own expertise. I suggest you get one of your strong people enrolled in a Black Belt program and you go to a Champion session to get a feel for what this is all about. (I’m presuming you are the GM/CEO; if not, then take him/her with you to school — and sounds like you need to go since you seem to be the one interested in driving this effort.) You and your newly minted BB can train the GBs and/or you can send them to school as well.
    There are some nice combinations of training and consulting support from some of the various state Manufacturing Extension Programs. They have reputable contractors who hold open enrollment classes and they have Black Belts/consultants on staff that can assist in the implementation process. Unlike a typical consultant, they are supported (to various degrees) by state and Federal funds so their fees are reasonable; but they are professionals and know what they are doing.
    Also, their mission is to get an organization up and running on their own. Therefore, unlike some consultants, they do not hang on and on and on, because they are expected to help a variety of companies. On the other hand, they are there if you need them, and can be available almost “on call” to drop by and help you through a rough spot.
    Depending on where you live, there could be good help just down the road from you.
    Good luck!

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    #106382

    John J. McDonough
    Participant

    Hello BI … I guess I would take a slightly different spin than mjones, but maybe not so different.
    With 100 employees, presumably most of them are clerical or nonprofessional.  With a likely tiny number of technical folks, you probably will be hard pressed to afford even a single Black Belt.  A in-house MBB is probably out of the question financially.  You need at least one Black Belt to be reasonably effective, and a Black Belt, by definition, is a full time position.  Worse yet, it really needs to be someone with strong leadership skills, so the first step is to swallow hard and ask if you are ready to face that.  The benefits can be substantial, but are you willing to pull your best and brightest out of his/her current duties to give a couple of years full time to improving the organization?  You will certainly want a number of Green Belts, but they can be part time, and don’t need quite the strong skills the Black Belt needs.
    The Black Belt will need a fraction of an MBB for support, but MBB’s are pretty high-priced talent, and I don’t believe that growing an effective, fractional MBB in-house is realistic, so I think you are pretty much forced to rely on a consultant to fill that role.
    The bad news is that getting that role filled is fraught with hazard, as mjones implies.  To get good information on who knows what they are doing you need to look at the large houses. The problem is that the larger consulting houses are breathtakingly expensive, and most will be more interested in generating billable hours than in making your program successful.  Before you begin looking, I would encourage you to read “Consulting Demons” by Lewis Pinault.  While I don’t believe all the consultants are quite as dark as he portrays, at least it will give you a taste of what you are up against.
    In a perfect world, you might find a consultant well recommended by someone you trust.  This may be difficult, depending on how well connected you are.  An alternative is to find someone who seems to be pretty good, and be prepared to pull the plug quickly if it’s not working out.
    –McD

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    #106387

    Brent
    Participant

    Maybe a good way to get started is to use a consultant BB to get an initial project going.  Then use those results to determine more fully how deep your organization wants to go.
    An experienced BB can help your organization center the project to address an issue that is critically important to the organization.  All the better to insure that the activity gets status amoung the competing priorities in a growing business.
    After clarifying the objectives instruct the BB to direct the six sigma process through to a sustained solution, but any decent project will require participation and input from many people in your organization.  In this way many people get exposure to the method.  As the project closes up have debrief with all involved to determine what should be the same/different next time.  You will know at that point if you need your own BB or can work some other plan.
    Look around your community.  You may find some experienced six sigma people who could moonlite to help you through a modest project.

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    #106414

    arvind pathak
    Participant

    I think your business should have one full time BB with demonstrated accomplishment in similar kind of business.(1:100 ratio works out well)A BB with domain knowledge is always beneficial and can save a lot of substantial time in achieving your objective. You should have atleast one champion and must ensure that your CEO also supports the initiative. You should not go in full swing in the beginning itself. The most important thing is to have a self assessment of the business for measurement. Let an internal team brainstorm whether all your products (outputs) are measurable or not.if not what initial ground work you can do to establish a measurement culture in the business. Let’s not worry about how good our measurement is rather focus on how to ensure measurability of every output being used by customer.Parallelly try to capture customer expectations in the product (not in the process) through different sources (e.g. meetings,surveys,phone,feedback etc).Do not worry if you are doing these activities six sigma way.Just do it on your own way.When some ground work is there, then go for hiring a full time six sigma black belt.
    -Arvind

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    #106448

    Barbara Holtzman
    Participant

    I’m a social worker, my degrees are in advanced administrative social work, and I’ve also been a research scientist of some sort or another. However, my lack of an MBA or a degree in computer science is actually a good thing. Not having a BS degree, I tend to see through most of it.
    Did NO ONE read what this person wrote? NO MONEY I believe this message says, for ANY kind of implementation of any sort, so what’s wanted is a reference to a COOKBOOK. This person is looking for what musicians call a “fake book.” Can’t pay for training, so we’ll fake it and hope it works.
    Which it won’t. Frankly, a $30 MILLION dollar business isn’t technically a small one in most industries, and neither is having 100 employees. The general standard is more like 5, 10, or in some industries, 20 million. Hard to imagine you’re that crunched for cash, although Trump’s businesses go Chapter 11 regularly, and he’s got billions. Anyway, buy the Board or the investors all a copy of one of the better books on theoretical Six Sigma (like one by Mikel Harry perhaps, or one on how it worked at GE) and use it to convince them this would be a great thing – what’s it going to cost? A couple hundred bucks? Then once they’ve got the idea, surely you can squeeze out a few thousand a year, start off small, just training one or two Black Belts and a few Greens, walk into that freezing cold, scary water very slowly. Once they’ve been trained and talking it up and coming up with all the great ideas that belts do, THEN talk serious roll-out. Usually with just a little effort you can show the benefits of a few changes. A little DMAIC can go a long way.
    A business of this size that can’t afford this minimal effort to make the kind of improvements that Six Sigma can effect has bigger problems than a $29.95 paperback in hand can cure. Do some math: even $30,000 for training is only one tenth of one percent of gross revenues. Maybe what everyone really needs is some risk aversion therapy.

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    #106454

    Savage
    Participant

    If only it were that easy.

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    #106458

    Barbara Holtzman
    Participant

    Well, you made me laugh. Some things are easy….
    Yeah, I was a bit glib – but really, everyone else was suggesting this person (and I’m being pc, but it’s probably a guy) get champions and black belts and green belts, oh my – when he clearly said NO MONEY TO SPEND because he’s got investors who think sqeezing every cent out of their investment and reinvesting nothing in something like SS is a good thing. They need education, convincing, and horror of horrors! they need changing. And excepting infants in diapers, you just can’t change anyone else unless they want to be changed, in which case they do it themselves anyway. Talking and reading about it is the only way to make a start with folks like that, and better to have then read a $25 book than spend just enough money to train just enough people so the people who got trained, and maybe their managers,  know they need more before they can really do anything, but since they don’t have the means or the people to actually do it all the effort put into the idea looks like a failure.
    Remember, I said I was a social worker. I may be a fancy consultant now, but I did my share of in-the-trenches therapy and casework. No matter how wonderful whatever you are offering is, and how wonderful it might be for whoever if you could only get them to do it… if they don’t wanna, don’t think and/or feel it’s going to work for them, and worst of all don’t have the vision or even the faith to do whatever needs to be done, your cause is lost. Oh – did I say the worst thing was lack of vision and faith? No, the worst thing is fear. Being afraid of change is the worst thing, but unless you face up to the issues keeping that fear in place, you can’t face up to the fear, either.
    And you never know. Never underestimate the value of a little information. To paraphrase Margaret Mead, global changes have occurred through the efforts of only a few. More than once, I’ve nagged about an idea to a client, sometimes for years, only to have them come back from a vacation or something and tell me, for example, “I met this guy on the plane, and he told me about this Six Sigma stuff you mentioned (mentioned.yeah.2 presentations, 6 memos, a white paper, and a proposal, three lunches, a breakfast and a dinner. yeah, mentioned.)….”
    I don’t know where you are, but out here in the east it’s been raining seems like every day. You can sit around and grouse about the weather, or when we get one of those glorious days like yesterday, you can take every possible break you can and walk in the sun (and in my case, on the 53rd floor of the Empire State Building, stare out into the crystal clear horizon until you swear you can see Ohio. Hey, I was thinking at the same time. I was.) 
    It is rarely as easy as it sounds to write it out. The trick is knowing that.

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    #106459

    Stevo
    Member

    Barbara, my wife has her masters in social work, and I have to come to work to get away from all of this psycho babble, but you’re here and I can’t stop you.  So take a shot at “using six sigma to treat social issues” post.
    I was going to say that as a social worker or therapist that you’re overwoked and underpaid, but you blew that one by stating you’re a consultant.
     
    Stevo

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    #106526

    Business Investor
    Participant

    I really appreciate all the advice and opinions from those
    responding to my original question. Judging from the
    posts related to my question and a good search of this
    site and the Internet, it would seem that there are a lot of
    highly experienced people in the field of six sigma but a
    dearth of information about how to do it in small business.
    I am seeking a COOKBOOK or PROCESS MAP for
    installing six sigma in my company. It is true that I am one
    of the owners and do have the vision, power and will to
    change things. But in accordance to the by-laws of our
    corporation, we are bound to follow the Rules of Robert
    when proposing business initiatives during a board
    meeting. The other board members have asked to see
    the process map, in the form of a cookbook, to help them
    grasp the essence of what it takes to install six sigma.
    Please understand that votes from the other board
    members is necessary to “put the issue on the table” for
    more detailed consideration. They want to be presented
    a cookbook for consideration prior to casting their vote.

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    #106535

    Anonymous

    A suitable recipe is as follows:
    – Define the business requirements
    – Design the metrics (targets)
    – Find sources of variation to target
    – Reduce the variation through characterisation
    – Control the process
    This is just a variation on the  ‘original’ DMAIC process as documented and published by Jack Scholl of Motorola’s MOS 3.

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    #106540

    Business Owner
    Participant

    The cookbook presented by Andy U appears to be a
    sound way to solve shop floor problems. I am aware of
    the DMAIC strategy. I am also aware of other problem
    solving strategies that work to fix process problems. I am
    also greatly appreciative of Andy U’s comments.
    However, the cookbook offered by Andy U does not help
    guide me on how to install Six Sigma within our small
    business. I need a executive’s cookbook that guides me
    at a strategic level. Should I establish financial targets
    before I define the mission? How should the financial
    targets be derived? How can I integrate Six Sigma into
    the 5 year strategic plan? Who should be made
    responsible for the oversight of Six Sigma and what are
    the limits of responsibilites? How much should we
    budget for Six Sigma and over what period of time? What
    can we expect for payback? The cookbook would ideally
    frame these types of questions. Your continued interest in
    my post is gratefully appreciated.

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    #106544

    Anonymous

    The Five Phase Process is not just limited to the ‘shop floor.’ The ‘cookbook’ I described was presented by Rich Schroeder in about 1989 and formed the basis of Motorola’s ‘Five Imperatives.’
    Furthermore, the Five Phase Process is very ancient and is as follows:
    Planning -> Administration -> Production ->Controlling -> Accounting.
    Andy

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    #106546

    mjones
    Participant

    Business Investor-
    Andy U is absolutely correct! DMAIC can apply to the mgt system just as it does for a project on the plant floor.
    Consider: For a project we start with Defining the problem, then making sure our Measurement system is valid, looking at baseline data, determining were we are and what the opportunities are, but focusing on the most significant (Pareto principle). Next we Analyze data we collect and make sure we are making databased decisions based on statistically significant results. Improve is an objective search (best is math-based) for an optimal solution and finally, Control is setting up a defined and effective process to assure we hold the gains so all this hard work was not wasted.
    At executive, tactial level: Define is looking at the opportunities, seizing on the vision of what is needed, and developing long-term goals; Measure is setting the metrics for where you wish to be as you progress toward your visions; Analyze is the defining of projects that you will strategically assign to your GBs & BBs to move you toward your objectives; Improve is the work of your GBs & BBs on their assigned projects; Control is tracking the progress of the GB/BB projects and the progress of your organization toward your goals with appropriate review/follow-up to assure that Controls from the projects are, in fact, followed for the long term.
    To your questions:
    “Should I establish financial targets before I define the mission?” You could, but I’d suggest that first you define your goals based on a long-term focus of where you are and what you want to accomplish.
    “How should the financial targets be derived?” Again, based on what you want to accomplish. For instance, what are your costs of poor quality now? What are the costs of rework, returns, warranty, customer defection due to defective products and support processes, loss of opportunities due to sales persons not understanding products, work not obtained because the support infrastructure is not responsive and you over/under-bid projects, costs of buying the “cheapest materials” that end up creating rework? Probably you don’t know many of these numbers because they are very hard to measure. If you do have a measure of a few of them, you can presume what you don’t measure is probably at least 10 times that much. Example: a company I was working with some years ago had data from the plant floor showing their cost of scrap was $100,000 per year. After some investigation, it turns out they were selling $65,000 worth of scrap metal (steel, copper, etc.) to recyclers each year. Obviously, the actual cost of scrap was grossly underestimated. Therefore, their cost of scrap was not the 1% or so of gross sales, it was at least 10 times that. When we looked at warranty costs we found similar hidden numbers — in fact most of the costs of responding to complaints were not even recorded. You will have to do some very serious introspection to get this. And you will have to think non-traditionally to do it.
    “How can I integrate Six Sigma into the 5 year strategic plan?” Remember that SS is a method to solve problems and develop processes/products (Design for Six Sigma). It is not a silver bullet. It is a process that requires a lot of work but has great results — if done properly. So, once you know the waste you have now, you can decide how far and how fast you want to go to address it. That goes into your 5-yr plan, updated based on progress of course.
    “Who should be made responsible for the oversight of Six Sigma and what are the limits of responsibilities?” Probably that is you. Once you get deeper into it — and you will need to educate yourself a lot on this — you can delegate the implementation and improvement process, but you must always own the overall linkages to the strategies that you and your senior management have developed.
    “How much should we budget for Six Sigma and over what period of time?” Of course this depends on your implementation plan and challenges you wish to initially address. No one can say specifically what this should be without digging into your process. But, as a guess: If I was chair of your Board of Directors, I’d insist you and two of your best people attend BB classes, and I’d want the entire leadership team (including the BoD) to have an Executive Overview — as a minimum. The tab for this will be about $50,000 – $75,000 for training and travel — although you could cut this bill in half if you look around for MEP support (as mentioned in previous post). But that is the out-of-pocket cost; the larger cost is the time you and your people are attending training and working on projects. Presume that a BB project will require ~400 to 600 work-hours of the BB’s time and 800-1600 work-hours of team time. This indirect cost (burdened) will probably be $50,000 – $80,000/project.
    (As an aside: As you know so well, in a small company a few people wear many hats and do many things; that is why I suggest that you attend BB training and complete a project. You need to understand this technology to get the most from it. SMEs who sent their GM/CEO to my BB classes had substantially better results than those who did not. It demonstrates your commitment in a way that cannot be duplicated and puts you into a knowledge position for this technology. This is a level of knowledge that you probably already have for virtually all the other elements of your operations. Or, put another way, why would you choose to not know about a technology and process that is probably critical to your organization’s ultimate survival?)
    “What can we expect for payback?” Excellent question! Many numbers are published, but my experience is that a typical BB project from a small company (~100 employees) yields a net annual return of $150,000 to $500,000, with a median of about $300,000. Assuming you and your 2 BBs complete your 3 initial training projects and your 2 BBs complete an additional 2 projects in the first 12 months, your 5 projects should give you a return of about $1,000,000 on your investment of training of $70,000.
     Sound too good to be true? Well, if my numbers from my experience are out of line, there will be posters who will not hesitate to challenge me, so stay tuned for that.
    Again, for this to work, to get the returns I list, you MUST take this seriously. Develop your strategy and work long and hard to implement it, over the long-term. A half-hearted slap will be a total waste. There are numerous examples of that. This is a commitment to a minimum of 5 years to really, really put work and energy into this initiative. Anything less will yield pitiful and disappointing returns.

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    #106548

    Business Investor
    Participant

    I really do appreciate the time and effort committed by
    mjones. You have enlightened me greatly. Although I did
    not get the cookbook I need, there is enough information
    in your recent post for me to develop one. Thank you very
    much for your patience, time, and answers.

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    #106553

    Coolio
    Participant

    Mjones – are you a BOA six sigma assosciate?  Who else would focus on pareto’s in measure and be focused entirely on cost savings (as opposed to growth) instead of an in process “x”.  As long as you can get a BOA finance person to sign off on your project, you can be MBB certified.

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    #106560

    mjones
    Participant

    You are most welcome. Good luck in your efforts!

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    #106564

    mjones
    Participant

    Coolie-
    His question had to do with strategic planning for an implementation process and a long-term management strategy. Issues are typically much higher than process-x’s that the BBs will get into. (He will learn all this in BB training.)
    You do suggest a valid point about cost savings — SS can and should be used to address growth opportunities that produce sales and profits and, therefore, value to the bottom line. I used the example of cost savings for simplicity. Also, for an organization just starting SS there are usually plenty of savings opportunities, and this example directly relates to his concerns regarding budget, costs, returns, etc. But certainly, SS is not limited to cost savings and the value of opportunities may far exceed the cost savings for a company.
    Your other questions/cmts are not relevant to his question or my cmts.
    Best regards.

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    #106612

    John J. McDonough
    Participant

    B.I.
    In designing the process map for your roll out of Six Sigma, I would also take some learning from the DFSS process.  The steps Andy describes are perhaps more easily understood in the context of a process improvement activity.  For doing something from scratch (I assume you’re not upgrading an existing TQM or similar process) the DFSS approach might be a little more clear.
    At a high enough level, they really are no different, and they are no different from how reasonably skilled management would execute any initiative.  Step back far enough and what you do is:

    Decide what you are going to do
    Understand how well you need to do it
    Develop some alternative approaches
    Select the best among the alternatives
    Put in place some mechanism to make sure the process stays on course
    If you look at DMAIC or DFSS, they both really don’t do any more than this.  The DMAIC emphasis is a little more on tweaking something that already exists, and the DFSS emphasis is more towards a clean sheet of paper, but really, all the steps are largely common sense.
    IMO, when developing a new business initiative, DFSS can be very powerful because it really helps focus on what you really need to do, as opposed to what you think you need to do.  It also provides a way to frame the current intiative in terms of the “grand vision”, so I would suggest boning up on it a bit so at least some of the gems are there in the back of your mind as you form your proposal.
    –McD
     

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