Six Sigma, green belt, black belt…Is this 6th grade karate class? You’ve heard the buzzwords, but how can you realistically apply this methodology to your small business, or even to your daily life? The first step is to understand Six Sigma. We know the system is powerful enough to earn brand recognition across the globe, and thanks to the likes of Jack Welch and GE Six Sigma has become a way of doing business, not just a manufacturing methodology. So, how can I make it work for me in my small business or personal life?
Let’s start by understanding the basics. Six Sigma is defined as a set of techniques and tools for process improvement. The method seeks to not only identify and remove errors, but also to optimize processes. The sigma or “z” is the deviation from the optimal output. “Six” refers to the number of standard deviations from the ideal situation. This method seeks to answer the question: How close is this process to the ideal?
This chart, courtesy of Wikipedia, is a graphical representation of six sigma.
Though this methodology was developed to minimize defects in a manufacturing processes, it can be easily applied to small businesses. Just like the manufacturing industry, small businesses often sacrifice revenue because of small inefficiencies that gradually add up. Missing links in communication lead to missed deadlines. Skipped steps in a financial transaction process result in an error in account reconciliation. We all know the effects of variation and chaos on processes all too well.
The basic idea behind reducing process variation is that the input determines the output. Therefore a relentless focus on better input necessarily yields improved output. It is important to keep in mind the “critical path” and stay focused on the input, continuously improving, standardizing and controlling the processes surrounding the critical path activities in order to ensure improved KPIs (more on this later). Consistency is key. The more you practice something, the better the outcome and the lower the variation in that process.
Another way to practically apply the Six Sigma methodology to your business is to identify KPIs. What are the key indicators to let you know your business is performing well? If you are a service organization, it may be the number of customers serviced in a month. If you are a lawyer, it would be billable hours. Identify your KPIs and track them regularly to keep a pulse on your business.
What gets measured gets done. This simple rule can be applied to all matters of business management, from employee productivity to sales figures. If the output matters to the overall health of your business (i.e. customer service or accounts receivable turnover), you need to identify the KPI’s, the processes surrounding these KPI’s (marketing, networking etc), and work to continuously improve the input to these processes so you can gain better output. The better the input, the less the process variation. Having an awareness of the key performance indicators and a focus on the critical steps to every process equate to a data driven business done the Six Sigma way!