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1- REDUCING THE POWER TARIFF?
2- REFORMS IN THE CBR
3- NEW BOARD OF DIRECTOR OF AIC
4- SIX SIGMA TO PAKISTANI ORGANIZATIONS
5- KESC: A REVIEW

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APPLYING SIX SIGMA TO PAKISTANI ORGANIZATIONS

 

 

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By Kamran Kiyani 
(General Electric)

June 07 - 13, 2004
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Six Sigma is a quality improvement methodology that has revolutionized business over the past decade. While pioneered at Motorola in the 1980s, it did not rise to prominence until when GE's Jack Welch championed it in the mid-1990's. Jack saw Six Sigma as the missing piece in his revamp of the mammoth that GE was. He drove it through all levels in the company until Six Sigma became 'the way GE does business'. It was almost simultaneously adopted by Allied Signal and implemented in similar rigor. Motorola, GE, Allied Signal and several other blue chips posted billions of dollars in savings each with their Six Sigma initiatives. As GE CEO Jack Welch put it "the financial rationale for embarking on this quality journey is clear." These results generated plenty of publicity and Six Sigma quickly became a mainstream paradigm.

This paradigm gradually grew from a Quality Management initiative to a management philosophy. The past 9 years have seen Six Sigma become a symbol of professionalism and management maturity. Both large and small organizations have implemented Six Sigma programs with shining results. Recently, even some public sector departments in the US have successfully launched their own Six Sigma programs.

In this article I will explore Six Sigma and its application to Pakistani organizations.

PERCEPTIONS OF SIX SIGMA IN PAKISTAN

Six Sigma is not well known in Pakistan. The few professionals who have heard of it see it as a quality improvement initiative specific to manufacturing. Little is known about the use of Six Sigma in the service and financial industries. These misconceptions are compounded by a view that Six Sigma can only be applied to large organizations. As such, the use of Six Sigma in Pakistan is limited to Multi-National Companies who have internal Six Sigma programs running globally.

Though I searched high and low, I also could not find any Pakistan based Six Sigma consulting firms. This may explain the lack of information available. Lets take a look at what Six Sigma is and how it has benefited organizations around the world.

WHAT IS SIX SIGMA

Six Sigma originated as a quality improvement methodology with a near-perfection goal of 3.4 Defects Per Million Opportunities (DPMO). The aim of a Six Sigma effort is to reduce variation in processes and products and to bring them in line with the customer's needs. Initially, it was used only by Manufacturing Quality teams where it exhibited incredible benefits. Eager to deliver in all functional areas, Six Sigma professionals extended its use to Transactional and Service Delivery environments as well. Over time Six Sigma has evolved into a full-scale management technique that includes the right organization architecture and decision making processes.

Motorola defines Six Sigma as "A management driven, scientific methodology for product and process improvements which creates breakthroughs in financial performance and customer satisfaction." Motorola recorded savings of around USD 14 Billion over the 10 years of implementation between 1987 and 1997. Their sales during this period grew five-fold with profits climbing at nearly 20% per year. Similarly GE saved $12 billion over five years and added $1 to its earnings per share. Honeywell (AlliedSignal) recorded more than $800 million in savings. GE continues to produce annual benefits of over $2.5 Billion through their Six Sigma program.

WHAT DOES A SIGMA LEVEL SIGNIFY

Well-managed, customer-oriented organizations with strong quality control initiatives operate between 3 and 4 Sigma. This translates to 99.37% and 99.9937% defect free processes. While the percentile sounds good, consider the following 4 Sigma processes:

- 13500 items lost in the mail per hour
- 8539 incorrect surgical operations per week
- 1.5 million wrong drug prescriptions each month

At Six Sigma, these processes start looking more reasonable:

- 7.4 items lost in the mail per hour
- 4.7 incorrect surgeries in a week
- 864 wrong drug prescriptions each month

The gap between 4 and 6 Sigma was costing GE an average of USD10 Billion per year. GE's strength through the recent recession as well as the growing stock price attest to the continuing benefits of Six Sigma.

LEVELS OF ENGAGEMENT:

So how do you go about implementing Six Sigma in your company? Most companies initially bring in Six Sigma consultants for problem solving. They ask these experts to solve some pressing issues while they observe the Six Sigma in action. This "test run" leads to a higher level of commitment: An internal Six Sigma program run under the guidance of external consultants. These consultants train selected staff members in Six Sigma techniques and designate them as Black Belts, or internal experts.

As Black Belts run Six Sigma projects in the company and savings and revenue increases start to build up. This is the right time to escalate to an enterprise-wide deployment of Six Sigma. This means training a significant percentage of employees as Green Belts and selected Six Sigma experts as Master Black Belts.

ROLES:

Each decision put through the Six Sigma discipline is assigned to a team of 3-4 Green Belts, led by a Black Belt. The 'Belt' terminology reminds most people of marshal arts, so lets talk briefly about Six Sigma roles.

Six Sigma 'Black Belts' are full-time Six Sigma positions. They are internal consultants who lead improvement teams and are responsible for delivering benefits. The Black Belt position is frequently used to groom future leaders.

Six Sigma 'Green Belts' are employees trained in Six Sigma. They apply Six Sigma to their work and participate in improvement teams but do not have full-time Six Sigma responsibility. The Green Belts role is applicable to all levels and functions in the organization.

And Six Sigma 'Master Black Belts' are Six Sigma trainers. They mentor Black Belts and translate the company's imperatives into bite-size projects that can be led by an improvement team. Master Black Belts typically fall in the upper management team.

Finally, Six Sigma 'Champions' are functional managers whose departments benefit directly from the Six Sigma project. They help provide resources to the Six Sigma team and remove hurdles from the improvement path. The Champion role may not necessarily be a permanent title.

IMPROVEMENT STRUCTURE:

The Six Sigma improvement model consists of five detailed steps or phases Define, Measure, Analyze, Improve and Control. These phases include well-known quality and process improvement tools like the QFD, SPC, FMEA, Lean Enterprise, Process Mapping and the list continues.

PHASE 1: DEFINE

The 1st phase, Define, lays out the goal of the improvement effort and the resources available. The improvement team is formed in this phase. This phase also includes seeking approval for time commitment and the budget. The problem definition and project goals laid out in this phase form the foundation of the Six Sigma Project and ensure that all personnel are focused on the REAL problem.

PHASE 2: MEASURE

 

 

In the Measure phase the team collects the Voice of the Customer to discover the product features most important to the customer. These are termed Critical to Quality (CTQ). Here, the team compares the product or process with the customer defined CTQs to determine where we stand today (Six Sigma Term: Baseline Performance). The results of the Measure Phase comparison provide a glimpse of how well or badly the product/process is performing with respect to the customers' expectation.

PHASE 3: ANALYZE

The Six Sigma team uses the Measure phase results as a starting point and sets a goal for the improvement. Next they delve deeper into the factors that impact performance in the Analyze Phase. This is where statistical and process tools are used to get to the Root Cause. These causes are then prioritized according to their impact on Customer Satisfaction (CTQ's).

PHASE 4: IMPROVE

With things looking clearer, the Six Sigma team works towards improvement. The Improve Phase consists of brainstorming possible solutions to address the root cause and assessing them for practicality and impact. The team decides on a set of solutions and pilots them in this phase to ensure they work.

PHASE 5: CONTROL

With a successful solution available, the team implements it in gradual progression. Solutions must be sustained for them to have a long-term impact on the bottom line. So the Control Phase consists of locking in the solution and ensuring long-term performance. Some of the popular tools used in this phase are Poke Yoke (Mistake Proofing) and the FMEA (Failure Modes and Effects Analysis).

At this point, the Six Sigma Project is considered complete. The team seeks a final agreement with the Project Champion on the benefits achieved before officially closing the project.

OTHER FACES OF SIX SIGMA

The DMAIC methodology I mentioned here is obviously limited to "improvement" in an existing product or process. So what about new product design? Six Sigma experts at GE modified DMAIC to fit new product development as well. Known commonly as Design For Six Sigma (DFSS), it consists of Define, Measure, Analyze, Design, Verify. Notice the 2 new phases at the end.

REQUIREMENTS OF A SIX SIGMA PROGRAM

What are the ingredients of a successful Six Sigma program? And do Pakistani organizations have them?

The 4 often quoted factors in a successful implementation are:

Commitment from the Management team
Training and Advice
Resource Commitment
Linking Six Sigma to the reward structure

1. COMMITMENT FROM THE MANAGEMENT TEAM

It is absolutely critical that upper management is committed to the Six Sigma initiative. Like any other successful initiative, Six Sigma demands a top-down direction and accountability. Top managers must communicate the importance of Six Sigma to their staff and hold them accountable throughout the implementation.

As such, a Six Sigma initiative demands established communication and accountability channels within an organization. The vast majority of businesses maintain these channels even at the lowest ebb of professionalism, while public sector organizations in Pakistan typically fall short of this

It is a Six Sigma consultant's job to educate the management team on the benefits of Six Sigma and allay any concerns they may have.

2. TRAINING AND ADVICE

Six Sigma training is widely available in the North America, Europe and East Asia, mostly provided by consulting companies. Unfortunately, this training is limited within Pakistan and expensive when bought from abroad. Some Pakistani consulting firms are now making efforts to build their Six Sigma resources. One such example I know of is Applied Excellence in Islamabad.

What training is necessary? That depends on who is getting trained. Here's a snapshot table from iSixSigma, identifying the major groups of individuals, the suggested training agenda, approximate cost and duration of the training.

TRAINING YOUR BUSINESS OR ORGANIZATION

GROUP

MAIN TOPICS

APPROXIMATE
COST PER PERSON

DURATION

MANAGEMENT TEAM AND CHAMPIONS

* Six Sigma Overview
* Benefits and Case Studies
* How To Implement Six Sigma
* Tools and Resources

$1,000-$2,500

1-5 days

SELECTED SIX SIGMA LEADERS (BLACK BELTS AND MASTER BLACK BELTS)

* Six Sigma Overview
* Six Sigma Methodology and Tools
* Statistics Training
* Computer Application Training
* Project Selection and Execution

$12,000-$50,000

4 weeks delivered over a period of 2-6 months

ALL EMPLOYEES

* Six Sigma Overview
* Benefits
* What To Expect Going Forward
* Simple Case Study and Exercise

Variable, depending on if taught in-house or if consultant(approximately $2,000 per day plus expenses) is used

0.5-1 day

(Source: iSixSigma)

 

 

3. RESOURCE COMMITMENT

As mentioned above, the organization needs to identify personnel for Six Sigma specific roles. Black Belts (BBs) need to be identified and trained. In addition to BBs the organization should be ready to assign 5-15% of key employees' time to specific improvement projects.

The Six Sigma roles and their job descriptions are as applicable to Pakistani organizations as they are anywhere else.

4. LINKING SIX SIGMA TO THE REWARD STRUCTURE

All those who work for an organization keep their paycheck in mind. Just as we expect a factory to produce X widgets per hour, we should tie Six Sigma projects to a time commitment and measure the output. The quickest way to initiate success is to tie the results to the business bottom line, create performance goals, and compensate employees appropriately.

Performance linked compensation is not new to Pakistan though public sector organizations may struggle with it.

This analysis brings us to the crux of the issue: Implementing Six Sigma in Pakistan, where the industry wide Sigma level is much lower: possibly less than 0.5 Sigma.

PAKISTANI INDUSTRY AND MANAGEMENT PROFESSIONALISM

Pakistani companies can be categorized into 3 major chunks: Public Sector organizations, family owned concerns and MNC's. Each of these is unique in its readiness for Six Sigma.

PUBLIC SECTOR ORGANIZATIONS:

The Public Sector governance has clearly improved in the past 5 years and prospects continue to look good. Successful Six Sigma implementation requires commitment from top management as well as a coherent command structure (excuse the pun) and the recent efforts aimed at improving governance have positioned the public sector for improvement. However, unfortunately, the Pakistani bureaucracy is still too bureaucratic to dive straight into a Six Sigma effort.

Six Sigma requires more than training and consulting advice. It is a cultural change that demands unwavering leadership ready to make tough decisions. Like their corporate counterparts key government officials will need to be trained in Management and Leadership before they are ready to drive a cultural change in their departments.

Despite the issues, Six Sigma implementation in the Pakistani government may not be as distant into the future as it seems today. "Change comes quick to those ready for change". The decision makers in the Pakistani government must be ready for change.

FAMILY OWNED ORGANIZATIONS

Majority of family owned businesses in Pakistan are concentrated in the Manufacturing sector and about half are being run by their founders, (now in the over-40 bracket). Less than a third of these businesses employ more than 400 staff, or at least openly declare that they do. (Source: AERC Study on family owned businesses.) The overwhelming majority of family owned businesses are interested in expanding their businesses but have no clear growth strategies. Their situation is similar to their western counterparts 2 centuries ago. American and European family owned businesses were struggling with growth when Adam Smith wrote 'The Wealth of Nations'. Today's Pakistani businesses have a doubtless advantage: They have 3 centuries of western management experience and research available to them.

Despite the advantage, business owner-managers hesitate in adopting these "foreign imports". The most commonly quoted fear is the uniqueness of the Pakistani corporate culture and the imagined incompatibility of modern management concepts with the business environment in Pakistan. And this hesitation results in limited growth.

Fortunately, the new generation of owner-managers taking over from their entrepreneur parents are more open to change. Family owned businesses are beginning to value professionalism and are ready for the leap to Six Sigma.

MULTINATIONAL CORPORATIONS

Many Multinationals are increasing their investment portfolio in Pakistan, establishing themselves as significant players in the economy. These organizations are frequently the pioneers at introducing modern management practices to the Pakistani business community.

Several multinationals already have Six Sigma available to their operations in Pakistan. They are applying Six Sigma in manufacturing, transactional processes (Finance) as well as the service sector.

CONCLUSION

If we succeed in implementing Six Sigma across industries, it can help Pakistani businesses gain a 'sustainable competitive advantage' over their international competitors.

Most Pakistani businesses are small and agile. This makes their management and communication structures simpler and the implementation of Six Sigma easier. What we need is visionary managers and business owners willing to take their business to a higher playing field.

As I mentioned, Six Sigma training costs are very high at the moment, but more affordable training is becoming available locally.

Six Sigma in the Pakistani public sector remains a distant dream, though closer to realization than it was 5 years ago. Fulfilling this dream would mean a quantum leap in governance, cost management and effectiveness.

If the Pakistani industry is an aircraft preparing for take-off, the adaptation of Six Sigma could be the take-off point.

Kamran Kiyani is a Six Sigma professional at GE. He is currently stationed in Singapore.