Chapter 4. The Healthcare Opportunity

Successful implementation of Six Sigma must begin with a clear identification of the opportunity for improvement in the healthcare organization. The opportunity could exist in support functions, in interaction with patients, in the operation room or the emergency room, in the supply chain, in regulatory compliance, or in facilities. Application of the Six Sigma methodology must be directly related to improved financial performance. The opportunity analysis leads to specific projects for application of the Six Sigma methodology.

The rapidly rising cost of healthcare and a degrading quality of services have been of concern for businesses and individuals. A checkup for a heart problem can cost as much as $15,000. The cost of healthcare accounts for about 15 percent of the cost of product or services, which used to be about 8 percent several years ago. The continual rise and consequential effort to control the cost of healthcare has led to the evolution of managed healthcare and reduction in availability and quality of healthcare services. For practicing physicians, the cost of insurance for protecting against malpractice has forced them to move from metropolitan to suburban areas. The main players in the healthcare services involved are insurance companies, managed healthcare services providers, pharmacies, hospitals, and doctors. Each one is trying to preserve available healthcare resources contentiously, and is feeding each other. For example, insurance will not allow for filling a prescription for three months at a time, thus forcing individuals to make three co-payments. The healthcare services are still evolving and almost completing a circle by the advent of midwife services, pharmacy-based practitioners, and uncontrolled medical service providers. Consumers must weigh between quality and availability of medical services. For some people, it is better to have insurance of some quality rather than have no insurance. Much of the cost of the increase in healthcare has been attributed to increases in malpractice insurance and associated lawsuits. The increased cost of malpractice implies degradation in the quality of healthcare, unless we assume that people had decided to claim malpractice intentionally.

Another global phenomenon in healthcare is increasing utilization of outsourcing. People from European countries have been visiting hospitals in Thailand and India where the cost of superior healthcare is about 20 to 30 percent less. The advent of the Internet has already launched the remote provision of healthcare services. For example, aspects of radiology are being performed in remote villages or cities in India for U.S. healthcare service providers. Medical transcription and billing are other areas which have been outsourced to providers in India. One can see that healthcare services are being fragmented for cost reasons. This trend in healthcare services implies opportunities for improvement in these areas through various means. The sources of problems are everywhere from registration, checkup, illegible prescriptions, tests, hospitalization, billing, and customer service. Hospital care accounts for about a third of the cost of healthcare. It appears that we have developed excellent and expensive methods to treat bones, heart, and brain diseases. However, we have become worse in treating patients for common variations in health.

Six Sigma was developed when the competition in the electronics industry became intense around 1985. Despite being the industry leader in the telecommunication industry, Motorola recognized that in order to continue to be the market leader, its leadership realized that something different had to be done to survive the challenging times. Interestingly, the healthcare industry is experiencing similar challenges in terms of spiraling increases in cost of services, competitive pressures, government regulations, complexity of operations, lack of traceability, and concerns about quality of service. Pressure to perform better, faster, and cost-effectively is mounting daily in the healthcare industry. The Motorola leadership set out their quality improvement journey with ten times improvement in five years (10×5), which later became ten times in two years (10×2), and that is still true. Like any new technology initiative, awareness and understanding through education is the first step. Motorola University became the vehicle to transform Motorola into a high-performance company. Managers were trained in Change management to create a culture to work under challenging and competing environment. Along with this, a strong management review process was established.

Before officially launching Six Sigma on January 1, 1987, the company practiced principles of Six Sigma, especially setting “stretch” goals. Every employee was required to participate in stretch goals of improving performance and generating savings. Besides the stretch goals, an employee participation management program was established to share savings with employees. Employees earning extra money and a strong performance review program propelled the principles of Six Sigma, which led to the official announcement for its corporatewide implementation in five years. About halfway through 1986, the concept of Six Sigma was ready for implementation, and projects were identified for prototyping the concepts. The first four projects, called Small Wins for Six Sigma, were in product development and manufacturing. The Six Sigma measurement methods were applied to establish accountability that drove the improvement. Then the graphics department, corporate law, human resources, and new product development departments followed implementation of Six Sigma.

Several companies, including healthcare facilities, have launched Six Sigma and reported significant savings using Six Sigma. One of the prerequisites for applying Six Sigma is that one does not use the Six Sigma approach unless one can show significant and visible savings. There is no hidden savings even though Six Sigma can eliminate hidden costs. There has been no methodology other than Six Sigma that has been credited with saving billions of dollars.

There have been challenges and failures associated with Six Sigma. Some of the reasons for struggling with Six Sigma are the following:

• Not being able to demonstrate the savings

• Missing the intent of Six Sigma

• Lack of creativity

• Too many or no projects

• Too much Black Belt training

• Too many consultants without hands-on experience

• Too many introductory books and consultants

• Six Sigma as a program of the year

• Minimal leadership commitment

• Too much statistics without statistical thinking

To ease into Six Sigma, the leadership must first understand Six Sigma well. Six Sigma has four components, as follows:

Having understood that Six Sigma is beyond statistics and numbers, a well-thought out approach must be formulated and implemented. The approach must remedy pitfalls and prevent false launches. The most important aspect of the approach must answer the question of why one should implement Six Sigma. The following steps describe a practical approach to implementing Six Sigma in the healthcare industry:

1. Identify improvement opportunities in the organization for savings, and define the value proposition for Six Sigma.

2. Ensure strategic alignment of the organization for achieving desired business objectives and employee incentives.

3. Develop a business case for Six Sigma, identify leading team members, and develop a plan for successful implementation. Innovation must be an integral intent of the Six Sigma initiative.

4. Establish measurements, evaluate performance, and analyze for causes of problems.

5. Plan and manage change through communication and participation.

6. Sustain improvement through performance review and recognition.

A cornerstone of the Six Sigma methodology has been to aim for a dramatic improvement, an improvement that is visible, meaningful, and profitable. Merely setting an incremental improvement goal is not what Six Sigma is about—it can drive for a 70 percent improvement rather than a 10 percent improvement. Setting an ambitious goal for improvement requires a totally different approach. As a result of dramatic improvement, and the resultant savings, everyone can benefit from their commitment to Six Sigma. Depending upon the size of facility, and complexity of organization, savings per project could range from $50,000–$250,000. The projects could be reducing patient waiting time, reducing donors’ blood collection errors, reducing surgical errors, reducing excessive consumption of disposables, or reducing the post-surgery infection rate.

The first five years of Six Sigma at Motorola were very rewarding for the company. Sales grew dramatically; better products with higher margins were introduced that focused on quality, and the company’s reputation soared. Such benefits of Six Sigma could not have been realized just by focusing on some projects. Instead, it was an organization-wide, leadership-driven, process-oriented, middle managerial-led, and employee-owned initiative to improve the corporate performance.

To ensure the basic intent of the Six Sigma methodology is effectively implemented, a practical approach to planning should begin with setting aggressive goals for improvement.¹ An implementation plan for Six Sigma focuses on the strategic intent that will move the company forward, understanding the critical requirements in each area and the key indicators of progress. The plan for Six Sigma should include opportunity analysis, development of a vision, establishment of drivers, definition of strategies, planning for superior execution, and a desire for continual improvement.

Launching the Six Sigma Initiative

The organization must have brainstorming sessions to understand drivers for Six Sigma before launching the Six Sigma initiative. Attending an executive overview of Six Sigma concepts would create an appropriate level of appreciation for the methodology, and generate interests in using Six Sigma for improving performance. Experience teaches us that success or failure of the Six Sigma initiative largely depends upon active involvement of a well-informed leader. Once the leader learns the methodology, opportunities to benefit from the Six Sigma methodology can be identified, and realistic value proposition can be established. Capitalizing on the right opportunity can be a profitably rewarding experience, maximizing return on investment.

Healthcare Scorecard

Launching a Six Sigma initiative starts with a lot of enthusiasm from the “champion” who has found courage and conviction to persuade management to commit to it. With enough resources, interest, excitement, and the help of some consultants, the Six Sigma initiative gets off the ground. After initial training, the promise of Six Sigma starts fading. The interest level wanes, the “champion” moves on, and the Six Sigma crew starts losing its touch. In the Six Sigma journey, it’s only a matter of time before the team loses its momentum and ceases to progress. Sustaining a Six Sigma initiative is at least as important as launching it.

One of the main tenets of Six Sigma is “measure what we value.” Thus, it is important to establish a methodology to ensure performance of the Six Sigma initiative and a scorecard for monitoring performance of the entire healthcare organization, be it emergency, outpatient, pharmacy, surgery, clinical trials, purchasing, or even the senior leadership functions. The Six Sigma business scorecard offers a framework for measuring and managing performance of a healthcare organization. The Six Sigma business scorecard combines the Six Sigma methodology for dramatically improving customer satisfaction with the balanced scorecard approach to achieving financial objectives.² The Six Sigma business scorecard is a balanced and complete corporate scorecard that promotes inspiration by the leader, improvement by the managers, and innovation by employees. Most importantly, the Six Sigma business scorecard produces a Business Performance Index (BPIn), which is linked to expected profitability, therefore providing a direct indication of financial performance. Some of the benefits of implementing a Six Sigma business scorecard include a quantifiable sigma level; alignment with the organizational structure; clear visibility of cost, revenue, and profitability; and the clear expectation of the leadership and management. Any healthcare related organization can develop a performance index similar to the BPIn.

The seven elements of Six Sigma business scorecard include the following³:

1. Leadership and Profitability

2. Management and Improvement

3. Employee Involvement and Innovation

4. Purchasing and Supplier Management

5. Sales and Distribution

6. Operational Execution

7. Service and Growth

These categories provide a launching pad for establishing a set of realistic, easy-to-implement measures that drive improvement using the Six Sigma methodology. Correspondingly, the following is a list of initial set of operational measurements that will provide leading indications of the sustainable performance:

1. Recognition of employees by the chief for superior performance (Rule of 2, either doubling the value, or halving the problems is a good start to define superior performance).

2. Profitability of the organization for continual enhancements of services and returning value to stakeholders for their investment.

3. Rate of improvement in performance of all major functions in an organization.

4. Employee ideas for excellence in idea generation and management.

5. Cost of purchasing as a percent of revenue.

6. Quality of supply chain measured in terms of Sigma.

7. Operational excellence measured in terms of Sigma.

8. Operational responsiveness measured as a deviation from the planned.

9. Customer satisfaction with a maximum score of 90.

10. Sales growth through new services or capabilities.

Because Six Sigma is a data-driven methodology, one must look at more process measurements such as error rate, cycle time, and human capital utilization instead of depending on the financial measurements. Sometimes, financial measurements may be too late to learn about the Six Sigma initiative’s progress. Moreover, after the initial success, it’s tough to sustain a management system without a compelling measure of success and profitability.

Defining Six Sigma Vision and Mission

Once the leadership understands the intent and methodology of Six Sigma, a corporate story must be written that communicates opportunity, participation of the leadership team, and role of employees. It is important to establish clear roles for physicians, nurses, support staff, administration, and the leadership for the purpose of achieving the desired level of the performance improvement.

A company’s Six Sigma vision provides a futuristic outlook of an organization. Superior companies establish their vision irrespective of the Six Sigma initiative. When a company commits to a Six Sigma initiative, supporting homework, such as communication, compensation, recognition, and exciting value proposition, must be completed before launching the initiative. Creating a vision for a Six Sigma initiative requires a complete understanding of the Six Sigma methodology, its intent, and its benefits. Without clearly understanding its benefits, the corporate vision could miss its sense of direction. For example, one company understands Six Sigma as a DMAIC (Define, Measure, Analyze, Improve, and Control), and therefore, a five-step methodology. For another organization, Six Sigma has been understood as a strategy to dramatically improve business. For another company, Six Sigma may mean another type of certification. Management leaders continue to evolve the application of Six Sigma and reap new benefits. Is it a strategy, a methodology, or an enabler? GE sees Six Sigma as its DNA; Motorola sees it as a “culture thing”; and Honeywell sees it as a Standard of Excellence. Six Sigma, which was born as an approach for accelerating improvement, promoting employee teamwork, and achieving total customer satisfaction, has been analyzed to its limits and institutionalized at many corporations. Six Sigma was initially criticized for being unrealistic due to the associated 3.4 defects per million opportunities. Yet today, Six Sigma has become a strategy to improve corporate performance through a culture of continual reengineering and structured self-assessment, a methodology for dramatic improvement, and employee innovation used to produce the best products and services at highest profit. Defining a vision for a healthcare facility could be in terms of handling more patients with highest satisfaction at lowest possible cost, maximum profits, and superior financial returns for investors. This may require understanding patients’ needs, stakeholders’ expectations, trends in treatment methods and technologies, potential collaboration with other healthcare facilities, continually informing the community of its performance, and participating in community activities. The healthcare facility must envision preventive and reactive care for its customers.

Rush Copley Medical Center, located in Aurora, Illinois, has published its Vision 2010 on its website that incorporates its strategic initiatives, its objectives to transforming Rush Copley into a regional medical center beyond the Aurora community. Its key aspects of vision include the following (see http://rushcopley.com):

• Dominate market share in all institutes.

• Lead market in customer and physician satisfaction with scores in the 95th percentile or higher.

• Achieve and sustain Magnet designation.

• Attain employee satisfaction at the 95th percentile.

• Become a renowned technology leader with full system integration, wireless applications, and eHealth initiatives.

• Become an A+ financially rated hospital—with ready access to capital.

Yale New Haven Hospital (YNHH) had adopted Six Sigma for improving aspects of its operations without clearly stating its vision to utilize Six Sigma. In working together with GE, Six Sigma was practiced at one of its medical centers. However, YNHH’S mission represents its priorities without mentioning Six Sigma (see http://www.ynhh.org):

• Patient Care. To provide sensitive, high-quality, cost-effective healthcare services to all patients, regardless of ability to pay.

• Teaching. To be the primary teaching hospital for the Yale University School of Medicine and offer training opportunities for nurses and allied healthcare professionals.

• Research. To provide the setting for ongoing clinical research that helps bring medical advances from the laboratory to the patient’s bedside.

• Community Service. To serve the community as a public health advocate and provide support and services which respond to the area’s healthcare needs through health education, health promotion, and access to care.

Virtua Health is a non-profit, multi-hospital healthcare system located in Marlton, New Jersey. Its mission is to deliver a world-class patient experience through its programs of excellence in women’s health, pediatrics, cancer, cardiology, orthopedics, and geriatrics. In early 2004, the hospital formed a strategic alliance with GE to redefine 21st century patient care. The arrangement will enable Virtua to leverage the resources and strength of GE in order to attain its vision for patient-focused healthcare delivery. Virtua has adopted a Six Sigma approach to problem-solving and performance improvement, which has delivered tangible, measurable results having a positive impact on patient care, employee morale, and the organization’s bottom line. As a result of the improvement initiatives over the last few years, Virtua Health reports total annualized savings of more than $5 million in early stages of implementation (see http://www.virtua.org). Virtua’s mission, values, and STAR initiatives represent its way to provide outstanding service to patients (as shown in the following section). Interestingly, Virtua has shared its experience using Six Sigma on its website, and shows active involvement of its CEO.

Virtua’s Mission

We are dedicated to providing each patient and their family with an outstanding experience, and to ensuring the highest quality healthcare for the community. We are committed to providing our healthcare team with resources, technology and training as well as with opportunities for professional growth.

Values

Integrity: We will be accountable for and take pride in our actions, while maintaining a customer focus. Our values in action:

• We are ethical and trustworthy.

• We maintain the confidentiality of all our customers.

• We are true to ourselves and others.

• We are respectful of others’ needs and concerns.

• We maintain a positive attitude towards each other.

Respect: We will treat our customers with high regard while honoring and valuing their requests and decisions. Our values in action:

• We really listen to our customers.

• We show courtesy and respect our customers’ privacy.

• We accept customers as they are.

• We value one another.

Caring: We will have understanding, empathy, compassion, and the ability to meet the needs of our customers. Our values in action:

• We have a sincere positive attitude.

• We put others’ needs ahead of our own.

• We show genuine sensitivity and concern for our customers.

Commitment: We will be dedicated to acting in accordance with the mission, vision, and values of Virtua Health. Our values in action:

• We exceed the expectations of our customers.

• We follow through to ensure positive outcomes.

• We promote Virtua within the community.

• We go the extra mile.

• We fulfill our responsibilities.

Teamwork: We will work with our customers in a reliable and dedicated fashion toward a common purpose/goal. Our values in action:

• We foster a supportive environment.

• We respect each others’ differences.

Excellence: We will be dedicated to providing the best quality care and services to our customers. Our values in action:

• We strive towards continually improving ourselves and the organization.

• We set and achieve high performance standards.

Outstanding Patient Experience

To ensure that patients are at the center of everything we do, Virtua launched the STAR Initiative in 2000. Virtua employees are committed to these five STAR points:

1. Best People

2. Caring Culture

3. Excellent Service

4. Highest Clinical Quality and Safety

5. Resource Stewardship

One can see that vision for a healthcare facility can demonstrate business focus to its core purpose, or excellence in healthcare services to patients and stakeholders. In order to develop a vision for a healthcare organization, one may incorporate the following:

• Vision: A patient-focused futuristic statement specifying purpose of the organization, and providing direction to all aspects of the clinical as well as staff activities.

• Mission: An operational statement of major activities to achieve a certain performance objective by a specified time.

• Beliefs: Perpetually constant core values of the organization representing leadership style, culture, and priorities for making daily decisions in daily activities. Typical beliefs relate to mutual respect for each other, personal integrity, and commitment to serve patients.

• Goals: Healthcare business objectives such as happy patients, leadership in the marketplace, superior return on investment, and strategic adoption of specific methods such as Six Sigma.

• Initiatives: Key tactics that must be implemented to achieve goals and meet the vision, such as implementing Six Sigma by a specified timeframe, achieving specified rate of improvement in key operations, realizing a specified rate of return, or implementing enterprise-wide systems or tools.

There is no prescribed method of capturing objectives of vision, values, tactics, or even measurements. Leadership of the organization must succinctly document its intent, and communicate to all stakeholders in a consistent and constant manner over a period of time.

Conducting Business Opportunity Analysis

Success of Six Sigma initiative begins with a good understanding of needs for Six Sigma, and evaluation of business performance in terms of its leadership processes, business systems, culture, operational performance, financial results, patient satisfaction, and cost of nonvalue-add activities. In a healthcare organization, identifying opportunities for improving business performance means utilizing tools such as checklists, scorecards, surveys for assessing compliance to regulatory Joint Commission on Accreditation of Healthcare Organizations (JCAHO) requirements, implementation of best practices, levels and trends in internal and external failures. The internal failures could mean unacceptable care of patients, physicians’ efficiency in terms of daily number of patients per physician, number of treatments or tests per patient for full recovery, incorrect prescriptions, illegible prescriptions, patient wait time, ratio of staff to doctor, and external failures may include relapses in patients’ treatment, excessive patient follow-up visits, malpractices or legal complications, and patient or doctor defection.

While analyzing the performance of the healthcare organization, one must first document the business process flow, identify available attributes or variable data, analyze existing data using statistical tools, and quantify inconsistency in various areas. One can use simple statistics such as mean, standard deviation, or the range, median, and mode. Having completed the basic statistical analysis of the available data, one must look into disconnects in the flow, inconsistencies at processes, and causative relationships. At this stage, one must question every incidence of non-normal observations for assignable causes, and excessive variation for redesigning the process in question. In either case, there will be a group of opportunities that will show promise of significant savings. These opportunities would be the candidate projects for application of the DMAIC methodology.

However, Six Sigma is beyond the application of DMAIC to specific opportunities. The leadership must select certain projects at the first go, and initiate the awareness campaign throughout the organization. The sustained benefit of Six Sigma comes from heightened awareness to recognition of dramatic improvement very fast. During the awareness campaign, physicians and staff members must accept the fact that processes and systems can be improved, and there is a potential waste of 15 to 20 percent, if not more. This will be a major challenge for the healthcare community to accept the existence of opportunities for improvement. For so long, healthcare organizations have come to believe that they are unquestionable because they are providing personal health-related services, including saving lives. The healthcare community does recognize that cost of healthcare has been skyrocketing; however, they are fingerpointing the other members of the community. Hospitals point to patients, patients point to PPOs, and PPOs point to malpractice and doctors.

According to Bob Manam, chief of the staff at Rush Copley Medical Center, increase in cost of healthcare is somewhat related to the sense of entitlements expected by patients. Pharmaceutical companies have not targeted their marketing budget informing consumers directly. As a result, patients demand specific medicines, tests, or treatments from their physicians. If they do not get it, patients change their physician, thus creating a demand for more services and increased cost of healthcare. Thus new technology, medications, scans, or treatments all have contributed to an increase in expenses. Our aggressive approach to prolong life using heart surgery, brain surgery, or ventilating has increased life expectancy. Especially, a larger portion of the population, known as the baby boomers, has reached a stage for higher utilization of healthcare services, thus adversely affecting the cost. Greater awareness of health issues such as breast cancer, diabetes, and obesity has led to more demand for medical services, thus pushing the cost up. Additionally, the freedom to choose a service provider or the physician creates competition, increasing the cost of acquisition of the customer. Moreover, malpractice suits have also increased the cost of healthcare premiums.

With the increase in cost of healthcare, there is a burden on physicians to see more patients to increase revenue. As a result, physicians are spending less time with patients, requiring more follow-up visits. Even though there are established best practices, it is difficult to follow them due to the productivity constraint. Physicians are struggling with their ability to see an adequate number of patients and provide the highest quality service. Measurements are being established for physicians to score themselves, thus the resistance to measure objectively. Another issue that has been dragging down quality of healthcare is established DRGs (Diagnosis Related Groups) This makes the in-hospital care driven by certain costs, rather than the quality of patient care. In other words, the cost per disease has been pre-established. Any variations in the patient care would have to be adjusted within the known DRG.

A national campaign to save 100,000 lives in response to the expected 100,000 deaths per year has highlighted investigation of various processes and root cause of errors. According to Dr. Manam, the errors in prescribing medicine stand at about 1 percent that have serious impact, and errors in prescribing medicine with minimal impact stands about 10 percent. The opportunity to reduce waste includes over utilization of resources, unnecessary medicines, unnecessary tests, and lack of implementation of best practices. At Rush Copley, there are many measurements and goals in place to monitor performance and trigger remedial actions. Patient satisfaction is measured to be at 87 percent against the goal of 92 percent. Dr. Manam says that the leadership has been working on various aspects of business to improve patient satisfaction and reduce cost of services. However, to reduce the cost of healthcare, everyone must participate to minimize utilization and maximize effectiveness.

At Mount Carmel Health Providers, a set of ground rules was established for selecting projects that included targeted defect reduction of 70 percent, annualized savings of $175,000, and estimated completion time of 2 to 4 months per project.⁴ Improvement projects at Mount Carmel included physician documentation, accounts receivable, support staff hours, defects in registration documentation, discrepancies in patient type between pre-certification and admission, first-year employee turnover, and processing errors.

At Virtua Health, projects included chemotherapy medication errors, defining “Captain of the Ship” to raise quality and patient satisfaction, reducing bloodstream infections in one surgical intensive care unit (SICU), and improving infertility rates.⁵ One of the challenges in introducing Six Sigma within healthcare has been the existence of legacy or manual systems making it difficult to collect data, and the missing management system for systematically reviewing levels and trends in the performance of key processes, be they clinical or staff. Another challenge has been the litigious impact of reporting medical errors. However, to remedy the perceived barrier of litigation, a law has been passed. Accordingly, “The Federal Office of Personnel Management now requires preferred provider organizations (PPOs) and other fee-for-service plans to collect and report quality performance measures”.⁶ Even though initial areas for reporting performance include breast cancer screening, cholesterol testing, and diabetes care, this is a good start for launching the Six Sigma initiative.

Even though the healthcare industry is at the early stage of adopting Six Sigma-like methods to accelerate its effort for achieving healthcare excellence, opportunities for reaping rewards are abundant. Whether radiology error, medical effort, patient safety, top and bottom line enhancement, supply chain improvement, or the patient wait time, National Healthcare Disparities Report (NHDR) has identified key performance measures for cancer care, diabetes, maternal and child health, respiratory disease, nursing home, home health, access to information, patient perception of care, healthcare utilization, and timeliness. Even establishing right measures could be a Six Sigma project to start dialogue and diagnostics based on facts, rather than just accepting all outcomes as status quo.

Healthcare organizations have been operating as businesses for many years due to the growing cost of healthcare and competition among providers. Each healthcare organization can be viewed as business, staff, and clinical operations. Therefore, one must evaluate all aspects for evaluation health of the healthcare business. The factors to monitor performance would include leadership processes, business management processes, employee related processes, clinical operations, staff processes, and patients’ perception of services. Sources of information may include the following:

• Performance data for clinical operations

• Patient feedback throughout the healthcare service utilization

• Marketing process for revenue growth

• Marketing data (such as regional market share and market size)

• Employee ideas or suggestions

• Employee recognition

• Purchasing and suppliers performance

• Supply inventory level and trends

• Financial reports including balance sheets for the last three years

• Business plan or equivalent document

• Comparison to Best Practices analysis

• Monthly, quarterly, or annual reports

In addition to this information, one must review operations and interview a sample of employees for their observations for identifying opportunities for improvement and seeking recommendations for solutions, thus making their organization more profitable and better serving.

Providing Leadership for Six Sigma

Implementing Six Sigma requires a personal understanding of its intent, commitment to a lot of improvement very quickly, passionate interest for results, constant desire to stay engaged, and networking with employees through communication. Because Sigma requires an enormous amount of improvement, it requires total synergy in the organization that can be realized through planning for execution, communicating performance, participating through reviews, and recognizing superior results. The leadership must demonstrate its explicit and unquestionable commitment to Six Sigma by making it an opportunity for growth rather than a fear of loss of jobs for employees. It is imperative that the leadership must focus on growing revenue in order to benefit from the freed up resources due to improvement through Six Sigma. Thus, the leadership must lead the organization for growth and profitability, allowing employees to benefit financially as well as professionally.

Planning and Expecting Dramatic Improvement

Achieving incremental improvement requires a different mindset than realizing dramatic improvement very fast in an organization. Six Sigma thrives on a sense of urgency and challenge of aggressive goals for improvement. One of the key aspects of achieving dramatic improvement is to engage employees intellectually for generating innovative solutions. Six Sigma requires up to 20,000 times improvement from the current level of performance. Only well planned and executed strategies will work. Thus, the leadership must emphasize homework through planning, scoping, providing resources, and expecting results. Typical Six Sigma projects last about 4 to 6 months, require interdepartmental teamwork, common priority, and a positive attitude toward hard and smart work. Six Sigma projects must produce results that have a directly visible impact on the bottom line. The projects must generate savings that can be shared with employees beyond planned level of profits. During the planning, the following issues must be considered:

• Integration of Six Sigma in strategic plan

• Clearly defined responsibilities, and aligned organization

• Fair compensation and recognition system

• Continual inspiration for excellence, and expectation of results

• Demand for breakthrough solution for visible change

• Publicity of success stories

• Dynamic adjustment to the approach to implementing Six Sigma

• Focus on activities and outcomes

Communicating Outcomes and Errors

A direct communication of commitment to Six Sigma from the chief executive is the first critical communication for an organization-wide implementation. If the Six Sigma initiative is evolving from a department or a division, some level of communication is important in communicating the strategy. Many organizations start the Six Sigma initiative with a set of projects. In such cases, a memo communicating with the selected employees may be sufficient. However, still the leadership communication could be helpful just to inform employees of the intent and evolving plan of the potentially organization-wide initiative. In absence of such a communication, employees may resent the lack of information and perceived involvement.

For the organization-wide communication, a much broader approach is taken. Besides, the message from the leader, press releases, publicity brochures, or pamphlets describing Six Sigma in context of the corporation are prepared; trinkets like lapel pins, mugs, shirts, sweaters, or caps are distributed; a video of the personal message from the chief executive is shown; or the announcement in a multi-facility corporation is broadcast through a satellite link. Even a better demonstration of the leadership interest, the chief executive presents the Six Sigma initiative in person to employees through meetings.

The departmental communication follows up the corporate communication because various departments initiate Six Sigma-related activities to support the corporate initiative. If Six Sigma is launched corporate-wide, the departments may start the awareness training first, before selected employees for further project related training. Once the projects have been identified, a periodic communication of the project performance within and outside the department helps maintain the necessary support for projects.

When a corporate level Six Sigma scorecard is established to monitor progress, each department publishes trends and levels of outcomes and errors. These measurements are reported monthly in an Operations Review, like meeting and shared with the other center directors for resolving any competing issues.

When Six Sigma is being institutionalized, it gets down to the process level, where the objective is to achieve Six Sigma level performance (for example, 3.4 errors per million opportunities for its key output or related in-process characteristics). Key measurements are tracked on a trend chart plotted against the continually improving goal line. The monthly process performance is fed into the center or department measurements, and the weekly or daily performance is reviewed within the department. The process level information is communicated to affected employees by displaying trend charts on bulletin boards, and brainstorming in departmental teams for continual improvement.

Participating in Reviewing Performance

Executive participation in the review meetings and expecting extraordinary results from Six Sigma projects is a norm. Six Sigma has been designed to focus on a clearly defined opportunity for economic benefit very fast. Therefore, there must be an expectation for results at the conclusion of an improvement project. Besides, the leadership must also relate improvement to the bottom line, and gain sharing with employees. If the results from the Six Sigma effort are not as expected, an objective analysis and necessary correction in the approach must be made, including providing additional resources. Employees must see the leadership involvement through expectation, performance, and recognition.

Recognizing Excellence at All Levels

With all the objective measurements for quality, response time, and cost, a strong leadership and its inspiration through recognition and incentives play a significant role in successful implementation of Six Sigma. Such subjective measures are difficult to quantify. Successful companies come up with some creative approaches to inspire employees. For example, Motorola used Total Customer Satisfaction (TCS) Team Competition and a CEO Award for extraordinary accomplishment. Publicizing successes breeds success. Recognition of employee excellence inspires more employees to excel. Companies can measure and publicize a number of projects with exceptional improvement or significant savings.

Endnotes

1. Gupta Praveen. The Six Sigma Performance Handbook: A Statistical Guide to Optimized Results, McGraw Hill, NY, 2004.

2. Kaplan Robert S. & Norton David P. The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, MA, 1996.

3. Gupta Praveen. The Six Sigma Business Scorecard: Creating a Comprehensive Corporate Performance Management System, McGraw Hill, NY, 2003.

4. Schutte, P. “Using Six Sigma Management System to increase primary care office efficiency,” Group Practice Journal, 51 (7), 2002.

5. Kooy & Pexton. iSixSigma.

6. www.ncqa.org.