Performance initiatives must be more than skin deep
By Staff -- Manufacturing Business Technology, 9/1/2005 6:00:00 AM
Six Sigma sits alongside corporate organization realignment as a top initiative for 2005, especially among companies with more than $1 billion in annual revenues. But the flip side to this is more than 40 percent of executives recently surveyed say performance improvement initiatives failed to achieve strategic business and financial objectives over the last three years.
According to a study released in March by London-based Economist Intelligence Unit(EIU), conducted in collaboration with Richmond, U.K.-based Celerant Consulting, there are two key reasons for the disappointing results:
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Lack of adequate data with which to base decisions; and
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Poor communication between top executives and frontline employees.
Six Sigma is defined as a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process—from manufacturing to transactional, and from product to service.
"Six Sigma simultaneously addresses poor communication and a lack of good data," says Dave Antis, VP, Celerant. "It requires rigorous statistical methods and accurate, relevant data to support them. Its execution depends on communicating the right data—and its connection to strategic objectives—to the right people."
The EIU study, Achieving Operational Efficiency: The CEO Agenda Implemented, found companies rated top performers in terms of revenue growth made better use of performance data and measurement mechanisms, and have stronger communication channels between senior management and frontline employees.
While Six Sigma addresses both these issues, it has hurdles of its own to overcome, including lack of rigor in terms of how it is to be applied. "Six Sigma initially was a fad people jumped on, but it didn't have longevity," says Antis, adding, "It got quick hits, but couldn't sustain itself.
"Companies have begun to realize they can use Six Sigma with greater results if it is truly top down-driven and aligned with what they are all about," Antis continues, adding that too often, projects were driven from the bottom up, and were overly focused on the wrong metrics.
"They say it was top-down, but it was only inside of manufacturing," maintains Antis. "They were too focused on internal metrics, rather than the big picture. It has to be focused on the customer—from the outside in."
What also is critical, Antis adds, is not to relegate Six Sigma to isolated projects—what he calls isolated "little islands"—but rather, to apply it "to the entire value stream. "That's the [direction] where we see success," he says.
