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5 Facts Executives Need to Know About Lean Six Sigma - GoLeanSixSigma.com

Business leaders may be aware of Continuous Improvement efforts, but they may not understand exactly how it could impact their organization. Most Lean Six Sigma blogs address the “What” of Lean Six Sigma, but it’s critical to discuss the “Why” behind it—leaders and executives deserve a better understanding of the purpose of bringing Continuous Improvement into their culture.

So what does Lean Six Sigma do for an organization?

1. Increases Efficiency

In order to stay competitive, organizations need to produce excellent products and services as efficiently as possible. Minimizing the energy, time and money it takes to deliver is a big task. Lean Six Sigma facilitates that task by revealing and targeting waste in the system. Removing uncovered waste frees organizations to increase their capacity and deliver more to their customers.

Increasing efficiency includes improving employee productivity. Most employees agree that a large percentage of their time is wasted on tasks that don’t add value. It’s not their fault. Employees are doing their best with the process they were handed and processes don’t improve on their own. As Dr. Deming said, “A bad system will beat a good person every time.” Without structured Continuous Improvement, trying harder is a waste of effort.

“A bad system will beat a good person every time.” Without structured Continuous Improvement, trying harder is a waste of effort.

Once employees have permission to study the processes they work in, they can pinpoint unnecessary steps—entering data into duplicate systems, waiting on multiple approvals and handoffs. They can ask revealing questions—”Do 6 people need to approve this? Do 12 people need to touch every application?”

Default solutions typically involve throwing money at the process, adding people to the effort or—the fool’s gold of panaceas—automation. But If employees implement Lean Six Sigma first, they can clean up the process and then assess if it requires additional resources—creativity before cash.

2. Reduces the Cost of Poor Quality

In 1986, NASA’s Challenger Space Shuttle launched and exploded 73 seconds after lift-off. Millions watched as we became a nation in shock, mourning the loss of 7 astronauts. The cause of the explosion was a defective O-ring seal. The price of fixing the O-ring was a few hundred thousand dollars. In contrast, the final cost of the disaster to NASA totaled $1 billion along with a profound loss of the public trust. This is an extreme example of the cost of poor quality, yet there are millions more like it—both in the news and out of the public eye.

The cost of poor quality is something all organizations must contend with. If organizations aren’t actively attacking waste and poor quality, costs will inflate quickly. Traditional costs like scrap, defects and repairs can consume approximately 4-10% of sales revenue. These are visible costs that can be tracked.

However, hidden costs can consume up to 15-35% of sales revenue and are much harder to identify. These costs are typically hidden, hard to track and ignored since you don’t pay attention to what you don’t see. We get used to things like expediting, ordering excess supplies, late deliveries, employee frustration, overtime, and long cycle times—they become the way we do business.

Quality great Joseph Juran divided the Cost of Poor Quality into four categories:

  1. Prevention
  2. Appraisal
  3. Internal Failure
  4. External Failure

Prevention and appraisal cost much less than internal and external failures.

Not all types are equal

Conceptually, every dollar spent in prevention is equivalent to $10 spent on appraisal. But internal and external failures cost much more. Internal failures can cost $100 and external failures that reach the customer can cost $1,000 or more. These are representational estimates, but the underlying scale holds true.

The ideal is to be smart and shrink the overall amount spent on quality. This means the bulk of an organization’s investments should be spent on prevention and appraisal. If organizations increase preventive efforts, such as training employees to become Lean Six Sigma problem solvers, then all other costs will decline or decrease. Internal and external failures would be minimized.

If organizations increase preventive efforts, such as training employees to become Lean Six Sigma problem solvers, then all other costs will decline or decrease. Internal and external failures would be minimized.

Improving efficiency and reducing the cost of poor quality results in greater profitability. But high-quality goods and services don’t simply happen. Imagine the impact of reducing your organizations poor quality costs.

3. Improves Customer Experience

Process improvement done well has a positive impact on the customer experience. For some organizations this is the number-one reason to implement Lean Six Sigma. Today’s customers have high expectations and low loyalty. If an organization doesn’t deliver, they go elsewhere.

Ideally, Lean Six Sigma process improvement improvements are targeted to impact the things customers care about. Reducing Lead Time, eliminating defects and improving accuracy and completion rates.

There are many tools and approaches in the Lean Six Sigma toolkit that help process improvement teams better understand customer requirements and the customer experience—Process Walks, Voice of Customer Translation Matrix, and creating SIPOCs are good places to start. All of these tools shine a spotlight on the process from the customer perspective. This paves the way for improvement teams to make process changes with positive customer impact.

If an organization is ready to focus on improving the customer experience, Lean Six Sigma is a vehicle for bringing a much-needed perspective and encouraging customer-centricity.

4. Helps Achieve Strategic Goals

Organizations that stand the test of time are able to execute on their strategy. Strategies can be grand or simple, but the quality of the strategy is meaningless unless there’s a way to turn it into a reality. Lean Six Sigma provides a great vehicle to bring strategic plans to life.

The biggest challenge with making strategy a reality is helping employees see how they fit into the plan and how they can contribute to the strategic goals. Creating that line of sight is imperative yet not often done well. One way to connect employees to the strategy is to let them work on Lean Six Sigma improvement projects that are directly connected to strategic goals.

If these six goals look familiar, it’s because these are common strategic goals for organizations. Some strategic goals are based on the problems organizations are struggling to solve.

Below is an example of a government organization’s strategic goals:

Source: LA County Registrar-Recorder/County Clerk

If these were your organization’s goals, which goal could be supported by Lean Six Sigma? All of them. Improvement initiatives and projects can be vehicles to get the work done—especially when it comes to improving processes.

5. Grows People

Build Problem Solvers

An organization’s most important asset is their employees. Employees are the biggest investment for any organization. Why not spend the time nurturing and growing your investment? Don’t you want your people to be the best they can be?

Spend time and money on training—grow your people. Your employees get valuable life skills and abilities, and you get an army of problem solvers.

What would happen if everyone in the organization was an effective problem solver? What if there was a common language for solving problems? What if everyone tackled problems the same way? Over time, as problem solvers gain experience, the problem-solving cycle becomes shorter, results multiply and organizations become agile enough to handle rapid change.

Build Better Leaders

Of all of the reasons, this is the most critical. Lean Six Sigma helps build better leaders—and the world needs better leaders!

The number one reason why employees leave jobs?—their boss. They may not leave the company or the industry, but they leave because they feel mistreated by their boss. If leaders don’t create a healthy culture, employees seek employment elsewhere—taking all of their skills, training and knowledge with them. Poor leadership can destroy an organization.

A healthy culture is one built on respect for ourselves and each other. A healthy culture is an environment where process improvement flourishes. People are encouraged to take ownership, solve problems and implement ideas in a blame-free workplace.

Lean Six Sigma is not simply about building problem solvers. In order to build better problem solvers, organizations need to grow better leaders. One way to grow better leaders is to have them focus on supporting the problem-solvers. They must encourage a mentoring relationship for growth. They must focus on being a better leader, not on being a manager.

Why Start a Lean Six Sigma Journey?

Leading people, navigating the changing marketplace and guiding organizations to achieve their missions can be a rewarding struggle. It’s hard, and it could be easier. Consider what happens when you embrace a problem-solving culture:

  1. Increased efficiency
  2. Reduced cost of poor quality
  3. Improved customer experience
  4. Help with achieving strategic goals
  5. The growth of your people

Even one of these is a compelling enough reason to embark on a Continuous Improvement journey. Choose your “why” and take a step.

Tracy O'Rourke

Tracy is a Master Black Belt at GoLeanSixSigma.com, the co-author of The Problem-Solver’s Toolkit and co-host of the Just-in-Time Cafe. She is also a Lean Six Sigma Green Belt Instructor at UC San Diego and teaches in San Diego State University’s Lean Enterprise Program. For almost 20 years, she has helped leading organizations like Washington State, Charles Schwab and GE build problem-solving muscles.
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