ContributorsMulti-process HRSourcing

Six Sigma in HR

Embracing this discipline can help your company perform at a higher level, improve customer satisfaction, and identify and resolve all sorts of problems.

by Ranjan Sinha

Jack Welch, the former CEO of General Electric, applied the Six Sigma approach to transform GE’s business and helped popularized the discipline. According to Welch, it is “A highly disciplined process that helps us focus on developing and delivering near-perfect products and services.” Today, this methodology can also be applied in a number of ways, including how companies recruit valuable workers.

Six Sigma was developed 20 years ago at Motorola, which, at the time, was suffering huge losses in the electronic market due to competition from Asia. The name Six Sigma is statistical in nature and reflects a measurement of how far a given service deviates from “perfect.” In practical terms, it helps to determine how much a service provider deviates from delivering perfect service.

WHY IS SIX SIGMA IMPORTANT?
Six Sigma measures variability and aids companies in improving overall quality. It is fact-based and data driven and is executed on a project basis before it is applied throughout the organization. This management system achieves sustainable competitive advantage by providing a set of tools for improvement efforts to eliminate defects for its users. Six Sigma is a highly customer-focused program—management listens to the voice of the customer to find out what is important and captures what he wants. The program defines a structured way for businesses to solve problems. Users of Six Sigma try to pinpoint which elements of service delivery are critical to overall quality.

They begin by grasping a better understanding of business processes and which good or bad elements can be controlled. This is the strength of Six Sigma. Most Fortune 1000 organizations use Six Sigma to some capacity in manufacturing and customer service and are now looking into how to implement it for HR. Some Six Sigma practitioners include: Allied Signal, Avery Dennison, Bose, Caterpillar, CitiGroup (Visa/MasterCard), Deere & Co., Delphi, Dow, DuPont, Eaton, Ford, Foxboro, G.E., IBM, Johnson & Johnson, J.P. Morgan, Lockheed Martin, ServiceMaster, and Sony.

Some skeptics question whether Six Sigma matters. The answer is yes. Businesses have to be managed within a deviation of six sigma; anything less would be catastrophic. In HR, particularly, the impact can harm competitiveness and a company’s success if results fall outside of six sigma. Here are some examples:

  • A regional postal sorting facility operating at 2.6 sigma (99% effective) might lose 20,000 articles of mail each hour; at six sigma (99.99966% effective), only seven articles are lost per hour.
  • In hospitals, a 2.6 sigma level may lead to 5,000 incorrect surgical operations in one week, compared with just two incorrect procedures per week if they operate at Six Sigma.
  • Even more astounding, at 2.6 sigma there are two short or long landings at most major airports daily; operating at six sigma, the number of short or long landings is one every five years .

 

Six Sigma has applications related to transactional components of HR. If you polled HR executives, nine out of ten would be familiar with Six Sigma. In payroll processing and recruitment process outsourcing (RPO), Six Sigma has been implemented successfully. Some estimates show that only 33 percent of companies are happy with their external staffing agencies. With the war for talent increasing, employers want to lower recruitment costs and reduce the administrative burdens associated with RPO. You may have effective recruiters but across the project or in different branches of an agency, there are differences in the quality of recruiters used by staffing firms. Six Sigma removes variation from the human aspect of recruiting such as interviews, because performance levels are based on the nature of each recruiter.

CRUSING THE SIX SIGMA HIGHWAY
Six Sigma is driven along a powerful road map called DMAIC—Defines, Measures, Analyzes, Improves, and Controls. This system provides incremental improvement for existing processes not meeting specifications.

The first step is defining the business case, which is driven by some measure of profitability. From there, the project charter states the problem, goal, and business case; establishes scope; includes a cost-benefit projection; and projects milestones. Next is initial process mapping (see Figure 1) , which has the suppliers on the input side and the customers on the output; the process yields different results. For example, if the scope of the project is to find hirable employees, the talent bank of potential hires is the input, and the output is the selected group of hirable candidates. The final step is the “voice of the customer” process, which involves gathering feedback from customers to determine key issues and meet CTQs (critical to quality) defined by the customer. The goal is to proactively meet the customer’s expectations with innovation.

The second stop on the DMAIC map is to measure and gather information on the problem at hand, which involves identifying and prioritizing the metrics. Once this occurs, you establish a data collection plan to determine what to measure, how to collect the data, how it will be measured, and how the data will be displayed. After validating the measurement systems, the next step is measuring the actual process to reach the final steps of identifying process capability and displaying the data.

All of this data needs to be analyzed to figure out the root cause. There are many ways analysis can be conducted. The first is to create a list of what the potential problems are, organize them, and then verify what is causing these problems. Once a problem is determined, you have to ask “why” five times to find an answer.

A cause-and-effect diagram can be used to visualize and identify the root causes. You take your problem statement, e.g., “Workers in sector four have not met goals to assemble 100 dolls every hour” and identify possible causes for this problem, which are then organized into clusters. Each cluster is labeled with a main problem, and bones are arranged for each cluster (see Figure 2). If you know the causes, you may be able to make changes which reduce or eliminate the problem and help meet your goals. The diagram helps problem solve.

Another method is either the process door or data door method. Process door is used to improve an understanding of process flow, address problems with cycle time, and reduce process costs. It involves either basic or detailed flow diagrams with value adds and non-value adds. The data door helps explain what creates variations in a process by using scatter plots or stratification. When you have variable data, which can be divided into categories and analyzed, stratification is used. The data related to your problem needs to be treated individually; it is stratified in layers and checked for variations.

The next step is to find the reason for these variations. A scatter plot is a graph used to visualize the relationship between two variables (see Figure 3). The dots on the scatter plot represent the data points and can either show a strong correlation between variables or no correlation at all. Scatter plots also show how one variable is affected by a change to another variable.

Hypothesis testing uses statistical analysis to detect differences between two or more groups of data. The goal is to determine if the variation is random or if real differences exist. There are different types of hypothesis testing: t-test, chi-square test, and ANOVA. Regression analysis quantifies the relationship between two or more variables (X) and (Y) by fitting a line through all data points. Lastly, Design of Experiment is a method for determining the relationship between variables (X) affecting a process and the output of that process (Y) to predict either the gain or loss resulting from the changes in process conditions.

The fourth stop on the road map is improve. The purpose of this step is to develop, implement, and evaluate the results from the analyze stage. You have to prioritize and generate solutions and perform a cost-benefit analysis of proposed solutions. Next, you select the solution and assess the related risks. The pilot program is operated to make sure the solution you’ve chosen works. It can be run at three phases: original, test, and full scale. The final step is plan implementation: planning the tasks and subtasks; planning when, where, and who is involved; and planning the resources needed.

The final stop is control. This is the responsibility of the process owner who is accountable for process design and performance. Once you have identified the cause of the problem and a way to fix it, you have to make sure methods are put in place to control the problem and improve on the final plan. The solution needs to be documented and standardized in training manuals, training curriculum, etc. A quality-control process chart documents how standards are maintained. The chart has the product name, process name and code, date of issue, the issuer, who gave approval, revision date, reason for revision, and a signature. The QC chart includes a flowchart which shows the plan and what needs to be done. Each step has work instructions, control/check points, and the correct response.

Next is ownership and monitoring, which sets upper and lower control limits; process change management; and the evaluation of project results. After the project is closed, key learnings document the results and what was learned, and establishes recommendations.

TRANSITIONING WITH SIX SIGMA
During times of transition, you can take two very different approaches: Six Sigma or Lean. When problems are simpler in nature, the Lean method works best, you do not focus on the measurement of processes and tasks. The approach is flow-focused to remove bottlenecks and achieve material velocity. It removes waste and reworks inventory to reduce flow time. The problem has low complexity with known solutions, which produces immediate results in approximately one to two weeks.

In comparison, Six Sigma removes variation from processes to achieve uniform flow with a focus on the problem or project. Results take longer to achieve with three to four months to research projects. There is a higher complexity of the problem with the root cause unknown.

How can an organization determine if it is ready for Six Sigma? There has to be willingness to change, a healthy dose of self-criticism, and a flat organization structure with decision making at all levels. The company should already reward for intelligence and creativity and be involved in rigorous strategic planning. The ability to measure client satisfaction, market share, cost, and productivity are just as important. Companies not ready for Six Sigma tend to be resistant to change, have a blame mentality, a low appreciation of staff, the inability to dedicate project resources, and a rigid, hierarchical organization structure.

Once you have determined that you are an ideal candidate for Six Sigma, you have to figure out which processes or operations to revise using Six Sigma. If the process or operation has an impact on customer satisfaction or, at the time, wide variance, this is a good starting point. If there are clear improvement opportunities and processes with “ease” of measurement, Six Sigma should be implemented. Lastly, processes or operations which exhibit an ease of defining “opportunity” and “defect” are ideal as well.

Six Sigma processes are executed by a team effort. Senior management has to be openly committed to support the process, while managers in the project area act as champions of Six Sigma. The entire process is overseen by Six Sigma master black belts, a dedicated position to mentor the project teams. These are full-time team leaders, trainers, and facilitators, while Six Sigma green belts are team members.

The philosophy behind Six Sigma is easily broken into five key points:

  • Identify the process and customers right up front.
  • The time spent identifying root causes, and not just symptoms, is time well spent. Do not forget D, M, A, then I!
  • Show me the data! Only valid data please—the structure is to be analyzed and discussed.
  • Great ideas with poor support will fail. Here is a simple equation: Q x A = E. Quality multiplied by acceptance will produce excellence.
  • Put good people in a bad process and the process will win every time.

Six Sigma is a proven method that has improved the bottom line of numerous industries; it is now time for HR to embrace it with open arms. In the next installment in this Six Sigma series, we will discuss in detail how Six Sigma can create improvements for the payroll and recruitment functions.

Tags: Contributors, Multi-process HR, Sourcing

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