Over the last two years, corporate performance management (CPM) has garnered respect with a reputation for aligning business strategy with targeted metrics, powerful analytics and flexible reporting options to actually deliver improved business results. Six Sigma has also built a strong following by leveraging a disciplined methodology with statistical techniques to drive impressive results to the bottom line. Although Six Sigma and CPM have different lineages (operations versus planning), they each promote employee empowerment, proactive management, customer-focused strategies, benchmarking, stretch goals and fact-based decision making.
Over the years, alternative approaches, methodologies and techniques have emerged to improve the bottom line through increased corporate effectiveness and streamlined operations. Typically, each technique had roots in specific functional areas and never migrated beyond the boundaries of that specialization. However, with Six Sigma and CPM, a unique opportunity exists to meld the best of both worlds into a fully integrated performance-driven enterprise solution. The integration potential will become more obvious as we view the common themes across several key dimensions strategy, culture, management and organization (see Figure 1).
Figure 1: CPM and Six Sigma Themes
Customer Focused: Both CPM and Six Sigma focus on improving the quality of products, applications and services delivered to the customer (where the customer is defined in the broadest sense as a stakeholder). Six Sigma captures the voice of customer (VOC) during the define phase of design, measure, analyze, improve and control (DMAIC) where it translates VOC into critical-to-quality (CTQ) design and process parameters. CPM typically leverages the balanced scorecard framework to capture the customer perspective along with the financial, internal process and employee growth perspectives and then drives those requirements down through the organization eventually creating key initiatives. They are two different methodologies, but they have same effect to create customer intimacy and meet customer needs.
Performance Driven: CPM and Six Sigma are both focused on improving the bottom line by understanding how the company is performing in terms of revenue growth, profitability, productivity and customer satisfaction. The success or failure of a performance management strategy is contingent on translating mission and vision into strategies, objectives, critical success factors (CSFs), key performance indicators (KPIs), targets and actionable initiatives. Six Sigma facilitates this process by providing an effective quality function deployment (QFD) framework to drill from mission to action plan and to cascade objectives through the organization from the executives to the workforce. This process is also effective for prioritizing the implementation of Six Sigma projects.
Process Optimization: CPM and Six Sigma are both concerned with streamlining operations and improving process performance to drive profits to the bottom line. While Six Sigma initially focused on very specific operational process goals (3.4 defects per million opportunities in any given process or product), it is now being leveraged as a change agent to improve many corporate performance activities (e.g., strategy formulation and integration, financial reporting and analysis, demand forecasting). Six Sigma processes such as DMAIC and Design for Six Sigma (DFSS) have been leveraged in assessing, improving and developing CPM processes and infrastructure.
Competitive Differentiation: CPM provides the framework for delivering competitive advantage through improved performance across the enterprise. As mentioned previously, strategic goals are aligned with employee objectives and specific key initiatives to ensure development of innovative products and services that meet or exceed customer expectations (and at lower cost points). Six Sigma provides the methodologies to optimize the implementation of those key initiatives and ensure that the improvements will be integrated into the long-term operational processes. Six Sigma also provides a competitive advantage by reducing the costs of quality from more than 25 percent of sales (at 3 sigma) to less than one percent of sales (at 6 sigma). This provides a significant cost advantage to companies that have initiated both CPM and Six Sigma strategies.
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