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## Six Sigma and Quantitative Benchmarking

Six Sigma is known for using statistical methods.   And this is why is it useful for benchmarking.   In their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, by Ikel Harry, Ph.D., and Richard Schroeder, the authors describe three kinds of benchmarking, internal benchmarking (comparing divisions within a company), competitive benchmarking (comparing with competitors within an industry), and functional benchmarking (comparing with competitors across industries).  These three types of benchmarking are discussed in more detail in the previous post.

But how do you compare in such a way as to make sure you are comparing apples to apples, and not apples to oranges?  You use the process of quantitative benchmarking, which allows such a comparison.   It has two components.

1.  Yield or defect rate

For a particular product, service, or transaction, the percentage of units of production that come out defect-free is called the final yield.   The defect rate is therefore 100% minus the yield rate.   So a process that has a 15% defect rate has a 85% yield.   They are two different ways of measuring the same phenonemon.

2.  Opportunities for defects

If there are ten processes that are involved in making a unit, and each one has five different ways of creating a defect, then there are 10 x 5 = 50 opportunities for defects involved in the manufacture of that unit.   Obviously then, the more complex the product, and the more complex the manufacturing process to create that product, the higher the number of opportunities of defect will be.

What you do is take the yield to the power of 1 over the number of opportunities for defect, and you will get the average yield per opportunity for a defect.   This expressed in percent can be converted to a sigma level.   Here’s an example from the book.

 Product Final Yield Defect Opportunities Average  Yield Per Opportunity Sigma Level A 85% 600 .85 ^ (1/600) = 99.97% 3.5 B 96.8% 48 .968 ^ (1/48) = 99.97% 3.5

So product A and B, despite being of different complexity, can still be compared with this method with the result that each product has the same capability per opportunity.  This allows the benchmarking of quality of similar processes, even if they produce products that have widely varying yields and number of opportunities for defects.

It is the statistical tools of Six Sigma that allow benchmarking beyond the mere competitive benchmarking, which is more common, to the more ambitious functional benchmarking that allows one to learn from a wider variety of “best practices” not just in one own’s industry, but across all industries.   Then Six Sigma can be used to implement measurable change within one’s own company and processes to match those that are best-in-class,

So what specifically do the authors recommend companies benchmark?  That is the subject of the next post.

## Six Sigma–The Three Types of Benchmarking

When you think of benchmarking, the usual picture that comes to mind is a comparison of your product or service with that of your competitors.  In their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Ikel Harry, Ph.D., and Richard Schroeder show that there are three types of benchmarking.

1.  Internal Benchmarking

This kind of benchmarking is a comparison among diverse functions within a single company, to see how efficiently processes are carried out between divisions.    This is a type of benchmarking that is good for rationalizing the processes in a company to make them internally consistent.

2.  Competitive Benchmarking

This kind of benchmarking is the one people normally think of when they hear the term “benchmarking.”   It is a comparison of the processes of one’s company with that of one’s direct competitors.  It is not just used for improving by using the “best practices” of competitors; it can be used to identify similar processes in a competitor.   This can make competitors potential candidates for mergers and acquisitions if enough similar processes can be identified, because the merging of the two companies will be less traumatic if their processes are similar.

Comparing customers’ reactions to one’s products to those reactions to one’s competitor’s products can also be instructive.  It can help your company recognize what its strengths and weaknesses are with regard to the competition.

3.  Functional Benchmarking

Less well-known that the other two types of benchmarking, this takes processes and compares them not with the processes of other competitors within the same industry, but across industries as well.   This requires processes that, of course, are not specific to an industry, but are used within the overall sector, for example, a comparison of the average number of annual training hours required of employees.  Here what you are doing is expanding the scope of the inquiry into what “best practices” are, and you are in fact widening the playing field of examples to learn from.   This is why it is the most forward-thinking of the three types of benchmarking, and the authors credit Motorola’s success on the Bandit pager project to a large extent on the extensive functional benchmarking they did to improve their manufacturing processes in preparation for the project.

So now having established the different kinds of benchmarking, at least with regards to how wide the base of comparison is to be, the authors then discuss why Six Sigma is helpful in the benchmarking process.   That is the subject of the next post.

## The Daily Evolver–Gateway to Integral Theory

I’ve written a previous post about the website The Daily Evolver, which belongs to Jeff Salzman, back on October 5, but I wanted to write another post because I’ve really gone more into depth into the website after going and listening to all the programs available on the The Daily Evolver podcast.

Jeff Salzmann has two kinds of podcasts, one of which I refer to as the ascending current, where he has a conversation with Dr. Keith Witt, an integral psychoanalyst who is knowledgeable about the latest research in neurobiology.   He and Dr. Witt have conversations about integral theory and psychology in a segment he calls “The Shrink and the Pundit.”

Then there are the podcasts that I refer to as the descending current, and these are where Jeff Salzmann takes some topic fresh from the news headlines and analyzes it according to integral theory.   Both of these podcasts are illuminating, and I have enjoyed both of them.

However, the podcasts go back to March 30, 2013.   On the website The Daily Evolver, I found that there are additional podcasts available going as far back as February 26, 2011.   Some of these are full-length programs, others are short, 5-7 minute samples of the full-length program, which is available for a subscription to Integral Life.    I highly recommend this if you can afford \$99 for a full year subscription (a better deal than the monthly subscription price of \$14.95/month) because you not only get access to Jeff Salzman’s archives, but those of the entire spectrum of programming on Integral Life, of which The Daily Evolver is only one offshoot of money.

In additional to archived podcasts before March 30, 2013, there are also articles and other interviews that are not part of the “Shrink and the Pundit” or the other type of podcast, wehere Jeff Salzman analyzes current events according to Integral Theory.   For these reasons I recommend listening to the podcast, but also checking out his website.

A final portal to Jeff Salzman’s work on integral theory is YouTube–there are quite a few videos, some of which are referenced on the Daily Evolver, but others which show up in other channels, like the new Conscious 2 television program from the UK on which Jeff Salzman appears numerous times.

As I mentioned on my previous post, the reason why I’m devouring as much as I can of Jeff Salzman’s work is because it really inspired me to learn more about integral theory.    I used the excuse that, well, there’s no one I know of that is also interested in integral theory, so I don’t know anybody to converse with about the things I read or watch related to it.   But after I listened to Jeff’s podcasts and videos, I realized he is conversing with me.   I need to converse with myself about the material, and have the faith that I will end up connecting with others who have the same interest in the material as I do.

Also, I have to say that having an integral perspective gives you grounds for being an optimist, which seems so counter-intuitive given the tenor of much of what you read in the newspapers.   So don’t go for gloom and doom, go for ZOOM!, which is what will happen to your evolution when you tune into The Daily Evolver!

## Six SIgma–Why Benchmark?

In the fourth chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Mikel Harry, Ph.D., and Richard Schroeder discuss the issue of bench-marking and how it is related to Six Sigma.   Benchmarking is basically comparing your company’s business and industrial processes to those of their competitors.   The goal is identifying your company’s strengths and weaknesses vis-a-vis the competition.

Some companies don’t benchmark because they feel they are already better than the competition, or that a comparison with the competition is impossible because their company culture is “unique”.   Let’s take the second excuse for not benchmarking first:   a company culture may be unique, but in all likely the business and industrial processes are not.   There must be some processes that a company has in common with the competition.

The first excuse depends on what the Six Sigma level is of the company and its competitors.   If your company is at 5 Sigma, and the competition is at 4 Sigma, that’s one thing.   But what if there is only a difference of, say, 0.4 Sigma between you and the competition?   That’s not a lot of gap between you and the competition.    What’s more, if your company is at 3.5 to 4 Sigma, and the competition is not as good as you are, that still puts you in the category of average as far as all companies are concerned.

Here’s some characteristics of such an “average” company whose processes are between 3.5 and 4 Sigma:

Although it has a quality-assurance program, and is profitable and growing:

• It spends 20-30% of sales dollars repairing or reworking products before shipping.
• It contracts with 10 times the number of suppliers necessary.
• 5-10% of its customers are dissatisfied with the product, sales, or service and would not recommend the product or service to someone else.
• It does not believe that the goal of zero defects (6 Sigma) is realistic; however, it is also unaware that increasing to a best-of-class Sigma level (5.5 Sigma) would make their product 100 times more defect free.

This is why a company should benchmark–because complacency may prove fatal if the competition gets it into their heads to take up a quality-improvement like Six Sigma, and overtake your company while it standing still.

## Six Sigma–Shifting the Focus from Manufacturing to Design

In the last section of the third chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Ikel Harry, Ph.D., and Richard Schroeder describe how to achieve the highest quality improvements using Six Sigma:   by shifting the focus from manufacturing in such a way as to minimize defects, to designing in such a way as to eliminate them from the start.

Experts have shown that 70-80% of a product’s total cost is determined by its design, meaning that the higher the quality that is designed into the product, the lower its cost.   About the same percentage of quality problems are actually designed into the product.   So the initial Six Sigma projects that correct for defects in the manufacturing stage may only account for 20% of the quality problems.

To go beyond this, therefore, companies need to focus on designing quality in, rather than trying to inspect it in.   How does a company go about this?   The first place to go is gather and analyze customer feedback, to show how a product is actually used by the customer.

In fact, some of the findings with regards to the Six Sigma Breakthrough Strategy are:

• Businesses that achieve a level of superior quality are three times more profitable than those that achieve inferior levels of quality.
• Businesses that improve their quality gain 4% in market share each year.
• Each significant positive shift in process capability equates to 10 times improvement in profitability.
• Businesses that achieve significant quality improvements earn 8% higher prices for their products.

And these significant quality improvements can usually be gained only when a company reexamines its design process to design quality it, rather than try to correct the “baked-in” quality problems on the manufacturing line.

Of course, it’s not enough to have good quality, it’s important to have better quality than your competitors.   To make sure of this, companies need to participate in “benchmarking,” which is the subject of the fourth chapter of the book, and the next few posts.

## Six Sigma–Calculating the Cost of Quality

The cost of quality equation has two seeming simple quantities:   the cost of nonconformance, i.e., the cost to the company of having defects in the product, and the cost of conformance, i.e., the cost to the company of reducing the number of defects in the product.   Simply put, if the cost of conformance is less than the cost of nonconformance, then it is worthwhile to perform quality control measures.    Cost of quality = cost of conformance – cost of nonconformance.   If the value is negative, that means it is not costing, but saving the company money by implementing the quality control measures.

How does this relate to Six Sigma?   Well, the common wisdom is that for each level of Sigma, the cost of implementing quality controls that produce that level of Sigma goes up, and not just in a linear way.   This means that it should cost more to go from 4 Sigma to 5 Sigma then it does to go from 3 Sigma to 4 Sigma.   However, at each level of Sigma, the cost of nonconformance, that is, the cost to the company of having defects in the product also goes down, because the number of defects goes down with each increase in Sigma level.   That is why it is important to look to look at the calculating of the cost of quality in detail.

Cost of Conformance

• Appraisal Costs (inspection, testing, test equipment, quality audit)
• Prevention (quality planning, process planning, Six Sigma projects, training)

Cost of Nonconformance

• Internal Failure (scrap, rework, additional inventory costs)
• External Failures (warranty claims, service and repair costs, product liability claims/lawsuits, cost to company reputation)

One of the key aspects of Six Sigma is its initial emphasis on improving existing processes, and then, once the quality improvements have been gleaned from this stage, it can shift to essentially recreating processes which prevent the defects from occurring.   Although this may seem more costly than just improving existing processes, think of the result:   a reduction in the necessity for inspection and repair, one of the costs of nonconformance.

That’s why Six Sigma ultimately leads one from the manufacturing process to the design process, where the highest-level gains in Sigma are to be made.

That is the subject of the next post…

## Six Sigma–Towards a New Cost of Quality Metric

In the third chapter of the book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Mikel Harry, Ph.D., and Richard Schroeder talk about how being better is cheaper.

There is old dictum about trade-offs on a project:  “Faster, Cheaper, or Better:  Pick Two”.   This means that of the three constraints on a project–time, cost, and quality–you cannot demand improvement on all three at the same time.   If you want a project done in less time, you may have to add more people to it, because if you don’t, they may rush and be more prone to mistakes, which will lower the quality.   Likewise, if you want to raise the quality, you will have to raise the cost to achieve that, correct?

Well, here’s where the authors challenge that conventional wisdom.   In the traditional view of the cost of quality, if you improve the quality, up to a certain point the costs you spend on those improvements will “pay for themselves” in terms of the lowered cost of poor quality, i.e., the cost the company will have to pay because of defects.    But the idea was that at some point there would be diminished returns, as each level of Sigma that you improve costs more and more to implement.    It was generally thought that this would occur around the 4 Sigma level, above which point Six Sigma techniques are said to be effective.

However, the authors say there are three problems with conventional wisdom.

1)  First of all, these notions of the “cost of quality”, meaning the cost of implementing quality improvements, usually come from considering improvements along the lines of detecting and fixing defects, not preventing them as far back as the design stage.  If you prevent defects in the first place, then you end up saving money by not having to create inspection (detection) systems later on in the manufacturing process.

2)  Many costs of poor quality are not captured adequately by most types of accounting systems, which include not just warranty claims, but product liability claims, for example.

3)  The conventional thinking of cost of quality usually centers around inefficiencies in the manufacturing process, but Six Sigma also can deal with inefficiencies in other parts of the business, such as the engineering, accounting and service sectors of companies.  What happens if the product is defect-free, but is delivered late to the customer?  The customer won’t be satisfied by getting a product after the time it is needed.

All three of these reasons are why the actual picture is that the cost of quality decreases as you increase the level of quality as measured in terms of Sigma levels.   Although this has the aura of a revelation about it, it’s not too different from Deming’s original thoughts on quality that increased quality results in lowered overall costs of manufacture.

In the next post, I go into more detail about what the newer cost-of-quality metric entails.  Understanding these details helps one understand why Six Sigma should be considered a business initiative and not just a quality initiative.

## Six Sigma–Not Just Another Management Fad

At the end of the second chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporation, Ikel Harry, Ph.D. and Richard Schroeder talk about the difference between Six Sigma and other quality initiatives that have been popular in the past two decades in a section called Learning From Past Mistakes.

What are the differences that make Six Sigma stand out as a business initiative?

Some of the business improvement initiatives that companies have tried in the past two decades include such initiatives as:

• downsizing
• outsourcing
• activity-based costing
• new-product development
• re-engineering
• material requirements planning
• Kaizen
• creation of world-class factories

Some are designed to improve the companies bottom line, and some are designed to improve quality and performance, but few are designed to improve both at the same time.   Six Sigma is designed to do just that.   How is it designed to do that?   Because it aligns the needs of the corporation and the customer with the needs of the individual worker.   The Six Sigma breakthrough strategy makes every employee throughout the corporation accountable for understanding and implementing its methodology, so it is not something which feels imposed by management but rather owned by all departments.

Some of the other business initiatives mentioned above, although beneficial to a company, do not create lasting changes in an organization if they are not adopted and owned by the entire company.    That may be one of the explanations for the 1.5-Sigma drift, where processes that achieve an increase of Sigma level often “backtrack” by as much as 1.5 Sigma over the long haul.   This is because the process was changed and improved, but the improvement was not really owned and adopted in a heartfelt way by those who owned the process, and they gradually slipped back into previous bad habits.

It is important to get management involved so that those quality initiatives are chosen which essentially “give the customers what they want” and not what the engineers think they want.    This is the alignment between the corporation and the customer mentioned above.   And the workers in the various departments must get involved so that, in confronting problems that they are often the first ones to see, they often times are the first ones to come up with solutions.   This makes the individual worker align with the needs of the corporation, to create a product that is profitable and which customers demand.

This is why Six Sigma is not just another management fad.

## Six Sigma and Statistics

In a previous post covering the book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations by Mikel Harry, Ph.D., and Richard Schroeder, I mentioned that Kaizen and Six Sigma are both predicated on the improvement of processes, but that Six Sigma has the statistical rigor that Kaizen does not necessarily have.   That is why Kaizen is suitable for improving quality up to about the 3-3.5 Sigma level, but once a company’s processes reach the 3.5 Sigma level, Six Sigma is the only way to reliably improve beyond that point.

The statistical rigor of Six Sigma is something I want to discuss in this post.   Sometimes statistics seems very mysterious to many Americans, but that is only because it is taught in college, and only in certain curricula.   In Japan, however, calculus and probability/statistics are taught in high school, which is why a high school graduate in Japan can handle the mathematics behind quality control, whereas a high school graduate in the U.S. needs additional training to be able to handle it.   The difference between the educational systems in Japan and the U.S. was one of the realities Japanese companies needed to face when hiring American workers for their manufacturing plants in the U.S.

As an example of how mysterious it is to American students, I can relate a time when I was in graduate school at the University of Illinois at Urbana-Champaign, and I met a fellow graduate school student at our Friday night “graduate student support group”, which we jokingly referred to our group that met at a local bar to unwind.    One Friday, he looked kind of glum, and I asked him what happened.   He said, “our statistics professor said today that up to 50% of us in the class were doing below average work–I really thought we were doing better than that.”   I told him honestly that I didn’t think the professor was maligning the students’ academic performance as much as he was giving a definition of the word “average” in a tongue-and-cheek way (one which my friend obviously failed to detect).   That considerably brightened his mood, although it firmed up my resolve to never go with my friend to Las Vegas.

But for those who work with statistics know that it is a way of teasing out of the apparent chaos of individual data measurements the coherence of explanation.   It allows one to make the invisible visible.   How do you do that?  Well, as Galileo Gallilei once said:   “Measure what is measurable, and make measurable what is not so.”    In fact, the power of statistics is so compelling that a famous science fiction writer H.G. Wells wrote in 1935, “Statistical thinking will one day be as necessary for efficient citizenship as the ability to read and write.”

In fact, the authors of the book go so far as to say that “statistical knowledge is to the information and technological age what fossil fuel was to the industrial age.”   Fossil fuel is what makes engines go, and statistical knowledge is what makes industrial processes which create those engines improve.

However, Six Sigma is not without its detractors, and one the reason why people are skeptical of Six Sigma is because they perceive it to be yet another quality initiative, another fad that gets hyped by management every time there is a new CEO at the helm.   Although this skepticism is healthy to a point, it is caused by a misunderstanding–Six Sigma is not just a quality initiative, but rather it is a business initiative which can affect the entire enterprise, and not just operations.   That topic is the subject of the next post.

## Sacred Communication–The Two Kinds of Compassion

In her Sacred Communication workshop series that has given at our Unitarian Universalist Church in Park Forest, Rev. Henrietta Byrd has given the main theme of the series:  in order to communicate in a sacred manner, which means to communicate in a way that recognizes the divine spark in others, you need to first be able to recognize that you yourself have that same divine spark, and therefore you need to communicate with yourself in a sacred manner as well.

Spiritual evolution, at least in the sense that is captured in the system called Spiral Dynamics, means expanding one’s “unit of concern” or compassion outward from ourselves, to our family members, to members of our own “tribe” (however it be defined ethnically, politically, or otherwise), to all of the members of the human race, and even to the other lifeforms on the planet.   But somewhere along the way, even those of us who strive everyday to be compassionate towards others need to receive some of that compassion for ourselves.

Now, compassion actually comes in two types, what one normally thinks of as compassion, which in Integral Theory is referred to as “yin” or “female” compassion, and “tough love”, which is “yang” or “male” compassion.   This is the kind of compassion that does not offer help directly, but essentially strengthens the other person’s own capacity to help themselves.    Democrats tend to focus on “yin” compassion, and Republicans on “yang” compassion, but in reality, both are required in life.   The real wisdom comes from knowing under what circumstances to apply the right type of compassion.

Given that there are two kinds of compassion towards others, it follows as a part of the Sacred Communication workshop, that we must treat ourselves with compassion, which means knowing when to give help to ourselves even at the cost of giving help to others, and when it is time to strengthen our ability to help ourselves through encouragement and self-discipline.   Everyone who has ridden in an airplane in the past few years knows that the safety instructions at the beginning of the flight include the instruction that, in the event of a cabin depressurization, oxygen masks will descend automatically, but that if you are travelling with a small child, you must put on your own mask first before assisting the child.   Well, wait a minute, how compassionate is that?   It’s actually very compassionate from a practical standpoint, because since you are caring for the child and you pass out from lack of oxygen, you are not going to be in a position to give any further assistance to the child, including putting that child’s oxygen mask on.

So there are sometimes when you will have to forego helping others because you need help yourself.   And in the same way, this is compassionate towards others because you cannot give of your own substance to others when you have no substance left to give.

But you need to have “tough love” for yourself as well.   If getting up a half-hour earlier than you normally do in order to do a regimen of stretching, yoga, and meditation, is something that will give you long lasting benefit, then you need to be able to give yourself a pep talk when you set the alarm for 6:30 rather than for 7:00 AM.   Because of the the nature of mental momentum, a part of you will prefer to remain in bed for that half an hour to get an additional dose of sleep, and you need to be able to use that “yang” compassion and say, “okay, time to get out of bed.”   But don’t say it as if you are scolding a child, rather use some positive self-talk, like “time to get up and get your body, mind and spirit ready for the day!”

These techniques, which Henrietta Byrd discussed in her Sacred Communication workshop, are helpful in creating a better relationship with yourself, a prerequisite for creating better relationships with others.   And in fact, the very fact that I went to the workshop at all shows the power of self-help.   You see, I’m working on a project that has been going on since the beginning of the year, and it culminates in an event that is happening in two weeks.   So since it is in the final phase of the project, it is necessarily a busy and, at times, stressful period.   I’ve had meetings during the day, evening, and on weekends to make sure the project completes successfully and this last Saturday was my first FREE DAY in WEEKS.   I wanted to do absolutely nothing all day but relax and unwind.   But at 7:30 AM when I woke up, I said, “I’ve got the whole day TO MYSELF.”  What a luxury, I thought.   Well then, if it is a luxury to have the whole day to myself, I should use it on something for myself.   I remembered that there was the Sacred Communication workshop at 9:00 AM, which I didn’t commit to going to at first because I wanted to see if I would have the energy to do so after a long and exhausting week.

But the very fact that the workshop was designed to be for myself and nobody else, made me suddenly want to go and do it, even if it meant that I had to leap out of bed, get ready and out the door in order to make it on time (which I did).   And because I did something special for myself on my first free day I’ve had in weeks, I have been in such a good mood all weekend.   Because doing something good for yourself like that means that underneath, you believe you are worthwhile enough that you deserve it.   And that knowledge has fueled even further my sense of self-worth, and has made me a better communicator.

So just remember, if you are going to help others, you are going to have to first learn how to help yourself.