As I discussed in my December 2003 column, Six Sigma and corporate performance management (CPM) exhibit common themes as they both strive to affect the corporate bottom line by aligning business strategies with prioritized operational initiatives. Quality and performance become the focus and responsibility of all employees. This month, I will continue to examine many of the additional culture, management and organizational themes shared by Six Sigma and CPM.
Employee Empowerment. In the past, only power users and business managers had access to information. CPM and Six Sigma now promote the concept of "information democracy" by making data available to all information consumers; therefore, every employee is responsible for quality and performance. The CPM framework, which aligns organizational initiatives with strategic objectives, ensures that individuals are empowered to manage their own destiny by monitoring and measuring individual key performance indicators (KPIs) and performance target levels. Similarly in Six Sigma, the design, measure, analyze, improve and control (DMAIC) and define, measure, analyze, design and verify (DMADV) methodologies (see my July 2003 column) empower individuals to identify, understand and control process inputs to improve performance levels.
Team Collaboration. One of the important benefits of both CPM and Six Sigma implementations is the elimination of functional and line-of-business (LOB) silos. Throughout the CPM process, barriers of differentiation are removed as the many different functional silos and business levels are forced to develop common and focused business objectives, critical success factors (CSFs) and KPIs. Six Sigma encourages teamwork because all Six Sigma projects are organized around a team of multi-skilled experts led by a process expert and a black-belt facilitator. Techniques such as brainstorming, affinity analysis and root-cause decision trees also encourage open and meaningful discussion. In both CPM and Six Sigma, Web-based environments facilitate team decision making by allowing real- time sharing of data and metrics.
Common Language. Both Six Sigma and CPM have developed their own language that reflects their disparate origins quality management and statistical quality control versus strategy and financial management, respectively. Although each has developed its own unique language, many of the core concepts are consistent. Six Sigma focuses on strategic improvement goals through controlling variations of process drivers, while CPM uses the labels of KPIs and CSFs to characterize similar concepts. Alternatively, myriad statistical tools and methods can be used during the implementation of both CPM and Six Sigma projects. These include voice of customer (VOC), stakeholder analysis, failure mode and effects analysis (FMEA), affinity analysis, quality function deployment (QFD), design of experiments (DOE), simulation, regression, optimization and control charts.
Data- and Fact-Driven. At the core of both Six Sigma and CPM is the reliance on factual data rather than anecdotal evidence or gut-feel management. In Six Sigma, data serves as the basis for making decisions. Analysis techniques are applied to the data to build an understanding of the key variables driving the process, which can then be tweaked for future optimization. CPM also leverages data directly from operational measures to derive KPIs and target metrics to manage, monitor and improve business health. Decisions throughout the organization are based on a single source of shared data that is used for collaborative decision making.
Proactive Style. Today's compressed and dynamic business cycles demand that management now be much more proactive. CPM and Six Sigma leverage their methodologies to encourage out-of-the-box thinking to reevaluate the state of the business and the supporting business processes. Both methodologies focus on defining the root causes of processes and problems to understand the variation and hidden trends in the data. The resulting models offer the ability to better understand complex relationships and predict the impact of decisions on future business. These leading indicators provide management with the ability to assess multiple scenarios, alert them to critical issues and enable them to take corrective actions where appropriate.
Disciplined Approach. Key aspects of both CPM and Six Sigma are the frameworks and structured methodologies used in their implementations. Six Sigma employs the five-phase DMAIC process to improve existing processes and the five-phase DMADV process to develop new processes, products or services. Management and statistical tools are used to ensure methodical and quantifiable increases in process performance. CPM leverages structured approaches such as balanced scorecards, strategic mapping and the house of quality to develop required CSFs and KPIs. The development of KPIs involves a well-defined, multistep process.
Strategy Alignment. The alignment of organizational activities with business objectives results in better strategy execution for both CPM and Six Sigma. In CPM, KPIs are cascaded from the organization's mission, vision, strategies and objectives. This ensures that all individuals are pulling in the same direction and have insight into what effects their activities have on the entire organization. It helps them understand the relationship between business processes and performance indicators. In Six Sigma, projects are selected based on consistency with organizational objectives and the potential effect on the bottom line. Project charters, business case analyses and executive sponsors ensure that the Six Sigma projects track with organizations' strategies and objectives.
Flat Hierarchy. Cross-functioning teams are critical to the success of Six Sigma projects and CPM implementations. The teams drawn from multiple disciplines include the best available talent and are selected to eliminate the "silo" mentality.
Once management has defined an operational goal for Six Sigma or a performance target for CPM, the individual teams are in charge going forward. Web-based scorecards and dashboards encourage collaboration and eliminate the bureaucracy and micro-management issues that are common in most projects.
Incentive Based. Rewards and recognition are an integral part of the equation to ensure successful Six Sigma and CPM implementations. In Six Sigma, salary and bonus structure are typically tied to the quality and performance benefits of the projects. Common metrics include productivity increases, cost reduction, improved product quality and reduced overhead. In CPM, compensation is linked to the business and personal bottom line through personalized dashboards and scorecards that communicate and monitor performance against personal KPIs and targets that are aligned with corporate strategies. Accountability and compensation are driven throughout the entire organization.
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