Six Sigma versus Total Quality Management - Essay Example

Six Sigma versus Total Quality Management CONTENTS Introduction………………………………………………………………………. 2 2 What is Six Sigma?................................................................................................. 3 3 Why Six Sigma?..................................................................................................... 4 4 Success examples with Six Sigma……………………………………………….. 6 5 Total Quality Management (TQM)……………………………………………… 8 6 Six Sigma vs. Total Quality Management (TQM)………………………………. 9 7 TQM objectives………………………………………………………………….. 10 8 Comparison with Six Sigma……………………………………………………... 12 9 Conclusion……………………………………………………………………….. 13 10 References………………………………………………………………………… 14 Six Sigma versus Total Quality Management Introduction The use of quality management has become widespread among organizations. In today’s world of global competition and increasing demand by customers it becomes very essential for organizations to produce quality service. Though the aims of business may differ, but the basic concept of satisfying the customer remains same. Organizations are implementing several programs designed for continuous improvement, participative management, and self-directed work teams which in turn seek to energize employees by making them a more integral part of the workplace. During the past few decades, quality management has emerged as a major competitive edge in business and a source of long term profitability. Different techniques and concepts have evolved to improve product or service quality, including Zero Defects, Six Sigma, quality circles, TQM, Quality Management Systems (ISO 9001 and others) and continuous improvement. Essentially, it means setting up systems and processes that ensure product or service quality and that people are rewarded for doing the right thing, thus keeping their highest-quality performance strong and accurate. This paper attempts to compare, contrast and analyze two such techniques i.e. Six Sigma and Total Quality Management. What is Six Sigma? Bill Smith, a senior engineer and scientist at Motorola in the year 1986 introduced the concept of Six Sigma (Quinn, 2002). The main purpose was to standardize the way defects are counted. Six Sigma provided Motorola the key to addressing quality concerns throughout the organization, from manufacturing to support functions. The application of Six Sigma also contributed to Motorola winning the Malcolm Baldrige National Quality award in 1988 (Motorola University, 1994). Six Sigma not only improved Motorola’s products and processes, it also saved the company more than US $15 billion in the 10 years after it began the program (Microsoft Office System, Operation Agenda, N.D.). Six Sigma is not a quality management system, such as ISO-9001, or a quality certification system. Instead it is a methodology for reducing defects based on process improvement. Six Sigma is a methodology to manage process variations that cause defects, defined as unacceptable deviation from the mean or target; and to systematically work towards managing variation to eliminate those defects. The objective of Six Sigma is to deliver high performance, reliability, and value to the end customer1. In GE’s 1997 Annual Report (GE, 1997), CEO Jack Welch proudly states that Six Sigma “focuses on moving every process that touches our customers—every product and service —toward near-perfect quality.” The impact of the Six Sigma process on improving business performance has been dramatic and well documented by other leading global organizations, such as General Electric, Allied Signal, and Citibank. Today there are many mid-sized and smaller firms investing in Six Sigma programs. The central idea behind Six Sigma is that if you can measure how many “defects” you have in a process, you can systematically figure out how to eliminate them and get as close to “zero defects” as possible (GE, 1999). Six Sigma is a statistically-based process improvement methodology that aims to reduce defects to a rate of 3.4 defects per million defect opportunities by identifying and eliminating causes of variation in business processes. In defining defects, Six Sigma focuses on developing a very clear understanding of customer requirements and is therefore very customer focused. The Six Sigma methodology is based on a concept called DMAIC: Define, Measure, Analyze, Improve, and Control the framework that provides a stronger platform for deployment and execution (Mekong Capital, 2004). Why Six Sigma? Survival in the competitive market was the sole reason for Motorola to adopt Six Sigma. Motorola was being beaten time after time in the competitive marketplace by foreign firms that were able to produce higher quality products at a lower cost. When a Japanese firm took over a Motorola factory that manufactured Quasar television sets in the United States in the 1970s, they promptly set about making drastic changes in the way the factory operated. Under Japanese management, the factory was soon producing TV sets with 1/20th the number of defects they had produced under Motorola management. They did this using the same workforce, technology, and designs, making it clear that the problem was Motorolas management. Eventually, even Motorola’s own executives had to admit “our quality stinks,”. Finally, in the mid 1980s, Motorola decided to take quality seriously. Motorola’s CEO at the time, Bob Galvin, started the company on the quality path known as Six Sigma and became a business icon largely as a result of what he accomplished in quality at Motorola. Today, Motorola is known worldwide as a quality leader and a profit leader. After Motorola won the Malcolm Baldrige National Quality Award in 1988 the secret of their success became public knowledge and the Six Sigma revolution was on. Today its hotter than ever. It would be a mistake to think that Six Sigma is about quality in the traditional sense. Quality, defined traditionally as conformance to internal requirements, has little to do with Six Sigma. Six Sigma is about helping the organization make more money. To link this objective of Six Sigma with quality requires a new definition of quality. For Six Sigma purposes I define quality as the value added by a productive endeavor. Quality comes in two flavors: potential quality and actual quality. Potential quality is the known maximum possible value added per unit of input. Actual quality is the current value added per unit of input. The difference between potential and actual quality is waste. Six Sigma focuses on improving quality (i.e., reduce waste) by helping organizations produce products and services better, faster and cheaper. In more traditional terms, Six Sigma focuses on defect prevention, cycle time reduction, and cost savings. Unlike mindless cost-cutting programs which reduce value and quality, Six Sigma identifies and eliminates costs which provide no value to customers, waste costs (Pyzdek, 2000). The key areas of focus in Six Sigma are as follows: It is based on continuous focus on the customer’s requirements; It utilizes measurements and statistics to identify and measure variation in the production process and other business processes; It scans for the root causes of any problems; Emphasis on process improvement to remove variation from the production process or other business processes and therefore lower defects and improve customer satisfaction; Pro-active management focusing on problem prevention, continuous improvement and constant striving for perfection and Setting up goals and very high targets. Success examples with Six Sigma AlliedSignal and General Electric became early adopters of Six Sigma, with GE reporting benefits of more than US $300 million during its first year of application. Their CEOs, Larry Bossidy and Jack Welch played a vital role in popularizing Six Sigma. Today Six Sigma is being used across a wide range of industries like banking, telecommunications, insurance, marketing, construction, healthcare, and software. Healthcare: North Carolina Baptist Hospital says, "The Six Sigma process improvement deployment at North Carolina Baptist Hospital is starting to show the kind of results that convert skeptics to believers." and "A Six Sigma process improvement team charged with getting heart attack patients from the Emergency Department into the cardiac catheterization lab for treatment faster slashed 41 minutes off the hospitals mean time" Banking: Bank of America has used Six Sigma for credit risk assessment reduction, fraud prevention, and customer satisfaction improvement, etc. Bank of Americas Six Sigma initiative resulted in benefits of more than US$2 billion; and increased customer satisfaction by 25%. Insurance: Insurance companies have used Six Sigma for critical tasks like premium outstanding reduction and various cycle time reductions. For example, CIGNA Dental reports pending claim volume reduction by over 50%. Construction: In engineering and construction of the Channel Tunnel Rail Link project in the UK, the Bechtel’s project team uncovered a way to save hundreds of job hours on one of the tunneling jobs. The Institute of Quality Assurance has interesting success stories on Wipro, Citibank, and Motorola. Military: The United States Navy has adopted Six Sigma as part of AIRSpeed, an overall set of practices designed to improve efficiency in aviation maintenance. The other components of AIRSpeed are Lean and Theory of Constraints. The United States Air Force process improvement program based on Lean and Six Sigma is named Air Force Smart Operations 21 (AFSO21). Computer Programming: JPMorgan Chase & Co. tried combining Six Sigma with the computer programming methodologies of Extreme Programming (XP), and Capability Maturity Model Integration (CMMI). The result: the three systems did not mutually contradict, but reinforced each other well, leading to better development1. Total Quality Management (TQM) TQM is a set of management practices throughout the organization, geared to ensure the organization consistently meets or exceeds customer requirements. TQM places strong focus on process measurement and controls as means of continuous improvement. Total Quality Management is an approach to the art of management that originated in Japanese industry in the 1950s and has become steadily more popular in the West since the early 1980s2. According to Dale et.al. (2001) TQM is described as an umbrella of concepts and ideas in various fields related to quality management. It involves the mutual cooperation of every one in an organization in order to produce products and services which meet and even exceeds customers expectation (Dale, 1999). Total Quality is a description of the culture, attitude and organization of a company that has an objective to provide, its customers with products and services that satisfy their needs. The culture requires quality in all aspects of the companys operations, with things being done right first time, and defects and waste eliminated from operations. Studies found that several companies have difficulties in implementing TQM. Surveys by consulting firms have found that only 20-36% of companies that have undertaken TQM have achieved either significant or even tangible improvements in quality, productivity, competitiveness or financial return. As a result many people are skeptical about TQM. Important aspects of TQM include customer-driven quality, top management leadership and commitment, continuous improvement, fast response, actions based on facts, employee participation, and a TQM culture. TQM is a customer oriented management technology. The customer, not internal activities and constraints, comes first. Customer satisfaction is seen as the companys highest priority. The TQM Company is responsive to customer requirements and responds quickly to them. In the TQM context, ‘being sensitive to customer requirements’ goes beyond defect and error reduction, and merely meeting specifications or reducing customer complaints. The concept of requirements is expanded to take in not only product and service attributes that meet basic requirements, but also those that enhance and differentiate them for competitive advantage2. Six Sigma vs. Total Quality Management (TQM) Six Sigma provides companies with a series of interventions and statistical tools that can lead to breakthrough profitability and quantum gains in quality, whether the products of a company are durable goods or services (How Six Sigma Compares to Other Quality Initiatives, 2000). It basically upon many of the successful elements of the previous quality improvement strategies and incorporates unique methods of its own. Compared to other quality management and improvement systems, Six Sigma stands out as a methodology for identifying the causes of specific quality problems and solving those problems. Six Sigma can often be used to complement other quality management or improvement systems. TQM objectives Total Quality Management (TQM) is a structured system for satisfying internal and external customers and suppliers by integrating the business environment, continuous improvement, and breakthroughs with development, improvement, and maintenance cycles while changing organizational culture. TQM aims for quality principles to be applied broadly throughout an organization or set of business processes (Mekong Capital, 2004). There are two main reasons for Six Sigma been successful, when compared to TQM. First, Six Sigma is focused on achieving business goals. The project orientation of a typical Six Sigma effort is crucial, and the typical project returns in excess of $50,000. Many of them have even greater impact. The structure of Green Belts, Black Belts, Master Black Belts and Champions is very effective at identifying problems, and then putting teams together to solve them. On the other hand, TQM efforts rarely had any real project or implementation component, and it was difficult if not impossible for upper management to find any significant contribution to the bottom line. With management’s preoccupation with the bottom line, anything that does not contribute will not stay on the radarscope for long. The second reason for Six Sigma success is the high level of upper management involvement and commitment which comes about because of the business focus. If management sees measurable financial results accruing from Six Sigma, it is easier to become a proponent, and to commit the resources required for sustaining activities (Montgomery, 2001). Comparison with Six Sigma TQM and Six Sigma have a number of similarities including the following: A customer orientation and focus A process view of work A continuous improvement mindset A goal of improving all aspects and functions of the organizations Data-based decision making Benefits depend highly on effective implementation A key difference between TQM and Six Sigma is that Six Sigma focuses on prioritizing and solving specific problems which are selected based on the strategic priorities of the company and the problems which are causing the most defects whereas TQM employs a more broad based application of quality measures to all of the company’s business processes. Another difference is that TQM tends to apply quality initiatives within specific departments whereas Six Sigma is cross functional meaning that in penetrates every department which is involved in a particular business process that is subject to a Six Sigma project. Another difference TQM provides less methodology in terms of the deployment process whereas Six Sigma’s DMAIC framework provides a stronger platform for deployment and execution. For example, Six Sigma has a much stronger focus on measurement and statistics which helps the company define and achieve specific objectives (Mekong Capital, 2004). Conclusion As the competition gets tougher, there is more pressure on organizations to improve quality and customer satisfaction while decreasing costs and increasing work output. The customers that form the base of today’s world market are sending a clear and undeniable message: produce high-quality products at lower costs with greater responsiveness. Six Sigma is emerging as a cornerstone philosophy among the world’s leading corporations as it has proven itself by generating substantial business returns. It is also seen as a great training ground for 21st century leadership. To compete in a world market, a company needs to move toward a Six Sigma level of performance. Finally it can be said that Six Sigma is complementary to TQM because it can help to put issues in the order of importance within a broader TQM program and provides the DMAIC framework which can be used to meet TQM objectives. References Dale, B.G., Wu. P.Y., Zairi, M., Williams, A.R.T., and van der Wiele, T. (2001) Total quality management and quality: An exploratory study of contribution. The TQM Magazine. Vol 12. No. 4. pp 439-449. Dale, B.G. (1999) Managing Quality. Third Ed., Blackwell publishers Ltd. Oxford. GE, (1997) Annual Report. General Electric Company, Fairfield, Connecticut. GE, (1999) What is Six Sigma: The Roadmap to Customer Impact 6σ. Retrieved September 9, 2006, from http://www.ge.com/files/usa/en/commitment/quality/sixsigma.pdf How Six Sigma Compares to Other Quality Initiatives, (2000) Retrieved September 10, 2006, from http://media.wiley.com/product_data/excerpt/37/04713967/0471396737.pdf Mekong Capital, (2004) Introduction to Six Sigma. Mekong Capital Ltd., Vietnam. pp 1-17. www.mekongcapital.com Microsoft Office System, (N.D), Six Sigma: High Quality Can Lower Costs and Raise Customer Satisfaction. Operation Agenda. Montgomery, D, (2001) Beyond Six Sigma. SQC Newsletter. December 2001. Motorola University, (1994) About Motorola University: The Inventors of Six Sigma, Motorola, Inc. Retrieved September 7, 2006, from http://www.motorola.com/content.jsp?globalObjectId=3079 Pyzdek, T. (2000) The Six Sigma Revolution. Retrieved September 9, 2006, from http://www.pyzdek.com/six-sigma-revolution.htm Quinn, D.L. (2002) What is Six Sigma? Retrieved September 10, 2006, from http://media.wiley.com/product_data/excerpt/40/04712512/0471251240.pdf School for Champions (N.D.) Strategies to Succeed in Business with Total Quality Management. Retrieved September 9, 2006, from http://www.school-for-champions.com/tqm.htm Wikipedia, (2006) Six Sigma. Wikimedia Foundation, Inc. Retrieved September 7, 2006, from http://en.wikipedia.org/wiki/Six_Sigma Read More