Six Sigma in HR Transformation

Achieving Excellence in Service Delivery

Mircea Albeanu, Ian Hunter

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780367376338
• eBook ISBN: 9781351899864
• Topic: Business
• Subtopic: Business General
• Index: Business

In the business world, especially in manufacturing or quality management, the term Six Sigma usually refers to a set of tools and methodologies developed by Motorola to improve processes by eliminating defects. So why should the HR professional care what Six Sigma is or how it can be applied in the HR function? According to the specialists at Orion Partners, there are ten key reasons: * to create excellence in process delivery; * to reduce defects; * to increase efficiency; * to create a quality focused mindset; * to benefit from best practice; * to bring clarity to the processes of HR; * to use a structured scientific approach; * to speak the same language and improve communication; * to gain control over your processes; * and to strengthen your business case. Mircea Albeanu and Ian Hunter explain some of the basic concepts to show how applying Six Sigma tools and methodologies can be used to manage the practical challenges of improving HR operations to meet your organization's expectations at a lower cost and with greater efficiency. To help illustrate some of the key messages examples are drawn from Orion Partners' work using Six Sigma tools with international organizations over the last seven years. This concise guide is ideal for project and programme managers involved in business transformation, and for HR managers as well as Six Sigma specialists seeking to understand its applications within human resources. About The Gower HR Transformation Series: The Human Resources function faces a continuing challenge to its role and purpose, in many organizations it has suffered from serious under-representation at strategic, board level. Yet, faced with the challenges of globalism, the need to innovate, manage knowledge, attract and retain the very best employees, organizations need an HR function that can lead from the front. The process of transforming the function is complex and rarely linear. It includes the practical challenges of improving HR operations to meet customer expectations at lower cost and with greater efficiency. The Gower HR Transformation Series will help; it uses a blend of conceptual frameworks, practical advice and global case study examples to cover each of the main elements of the HR transformation process. The books in the series follow a standard format to make them easy to read and reference. Together, the titles create a definitive guide from one of the leading specialist HR transformation consultancies; an organization that has been involved in HR transformation for clients as diverse as Bombardier Transportation, Marks & Spencer, Barnardo's, Oxfam, Schroders, UnitedHealth Group, Nestlé, BP, HM Prison Service, Transport for London and Vodafone.

1 Introduction

‘Six Sigma is the most important initiative we have ever undertaken.’

Jack Welch, then CEO - General Electric

In the business world, especially in manufacturing or quality management, the term Six Sigma usually refers to a set of tools and methodologies developed by Motorola to improve processes by eliminating defects.

But why should the HR professional care what Six Sigma is or how it can be applied in the HR function? In Orion Partners’ experience there are ten key reasons why HR professionals should be interested:

1. Create excellence in process delivery - To deliver the day-to-day service consistently and focus more on strategic goals, HR must make sure that its processes run smoothly with no or minimal problems. Six Sigma is an excellent way of delivering process excellence.
2. Reduce defects - From queries that are time consuming to resolve to wrong salaries or inaccurate employee data, all HR processes are prone to producing multiple defects during delivery. Sometimes these defects remain unnoticed until they start to cause problems and when this happens they can affect the organisation at a much higher level, significantly impacting areas such as finance, customer satisfaction or even the legality of the business. It is therefore a high priority to detect and minimise the number of defects produced. Achieving the Six Sigma level or 99.9997 per cent flawless transactions, may not be possible in all HR processes, but by taking the Six Sigma approach defects can often be reduced substantially.
3. Reduce scrap/increase efficiency - Through lean techniques, combined with Six Sigma methodologies and tools, HR can work to reduce resources lost in ineffective, sometimes unnecessary tasks and still deliver the service within the required standards.
4. Create a quality focused mindset - For HR to deliver value, the whole function must be focused on quality, as measured via service level agreements (SLAs) or customer satisfaction metrics. The Six Sigma philosophy introduces this kind of mindset and, in organisation-wide implementations, even embeds it into the culture of the organisation.
5. Benefit from best practice - For HR to undertake effective reviews of processes that will deliver maximum benefit, Six Sigma offers best practice tools and techniques which have been proven in many organisations.
6. Bring clarity to the processes - Processes can contain hidden problems that sooner or later affect the service being delivered, such as bottlenecks, unduly long processing time, or a significant number of defects. Two of the main phases of Six Sigma improvement projects focus specifically on bringing clarity to the process and its metrics, using statistical tools that can offer deep insight into the inner workings of the process, as well as the external factors affecting it, enabling the delivery of improvements.
7. Use a structured scientific approach - Six Sigma is, of course, not the only option for product or service improvement. However it is a proven method based on well-structured scientific methodologies that provides a framework to be applied in any process improvement project.
8. Speak the same language - Time may be lost due to communication issues that arise from use of terminology or jargon. Six Sigma offers a consistent language that reduces confusion in delivering improvements.
9. Maintain control of your processes - It is a common problem that an efficiently designed process can quickly develop issues and revert to inefficiency. One of the tasks of Six Sigma is to make sure that after delivery, the new or improved process will continue to produce consistent results for as long as the process functions.
10. Strengthen your business case - Given the proven track record that Six Sigma has in both the service and production industry, with some of the world’s largest organisations benefiting from its results, HR’s business case to improve itself can gain more credibility if based on Six Sigma; especially where the methodology is already used in other parts of the business.

A note for our readers: We have written this book to give HR teams an insight into the value Six Sigma can add to the transformation process. It is not intended to be a replacement for standard Six Sigma texts which give detailed explanations of the tools and formulae used in the Six Sigma process. Instead our intention is to shed light on when and how these tools may be useful to an HR team.

THE EVOLUTION OF SIX SIGMA

The main concepts that Six Sigma uses date back to the eighteenth century and were created by people who found ways to describe chaos, randomness or astronomical phenomena, through mathematical equations such as Pierre Laplace, Abraham de Moivre and Carl Friedrich Gauss. It took over 200 years for these concepts to be applied in the business world for improving quality in both manufacturing and services.

The cornerstone of Six Sigma is the normal probability distribution, also known as a bell curve (named due to its resemblance to a bell). This distribution was introduced by Abraham de Moivre in an article published in 1733 and then in the second edition of his book, The Doctrine of Chances, in 1738.

Its significance comes from the fact that the distributions of many natural phenomena are approximately normally distributed, meaning that the chart of their frequency of occurrence resembles the bell curve.

Figure 1.1 opposite shows the sigma levels plotted on the normal distribution.

Figure 1.1 Six Sigma levels represented on the normal distribution

Observation in many industries has shown that the recorded data, such as dimensions of parts (in manufacturing) or cost per transaction (in services), often fits the bell curve pattern, which enables analysts to perform various statistical analyses on the data.

A STATISTICAL METRIC

In statistical terms, sigma represents the standard deviation; a measure of the variability within a population around the mean. For example, the mean height in a population may be five foot nine inches, with the majority of people, say 68 per cent, having a height which is within three inches of that mean. This represents one standard deviation from the mean. The next deviation, the second, covers all people with a height within six inches of the mean, approximately 95 per cent of the population. Six Sigma represents the population that falls within +/- six standard deviations from the mean. If you apply Six Sigma to a payroll process for instance, and are calculating the acceptable number of defects allowable per million payroll calculations, then to fall within Six Sigma parameters, there would only be 3.4 defects per million allowed. See table below.

Sigma Level	Defects per million opportunities
1 Sigma	690,000
2 Sigma	308,000
3 Sigma	66,800
4 Sigma	6,210
5 Sigma	230
Six Sigma	3.4

This means, for example, that a payroll process operating at a Six Sigma level will have less than 3.4 errors per million opportunities.

A QUALITY MANAGEMENT METRIC

Six Sigma as a quality improvement methodology appeared in the 1970s after a Japanese firm took over one of Motorola’s TV factories in the United States. It was not long before they were producing the same televisions in the same factory at the same or even lower costs, but with 95 per cent less defects. This significant improvement in performance levels sent a clear message to Motorola; in order to survive it needed to rethink its approach to quality. Bob Galvin, the Motorola chairman at the time, is credited with introducing Six Sigma methodologies for the first time in the early 1980s. This new approach brought more than $16 billion in savings to the company. But it wasn’t until 1988 when Motorola earned a National Quality Award that the secrets of how Six Sigma methodologies could be applied were publicly announced.

Figure 1.2 The evolution of Six Sigma

In 1989 Motorola announced its new quality objective: 3.4 defects per million. Measuring quality by something such as 99% acceptable success rate was no longer sufficient, Six Sigma had pushed the quality demand far higher, tightening the standard.

Soon organisations were claiming that the use of Six Sigma was generating savings of the magnitude of:

• more than $12 billion savings over 5 years at General Electric;
• more than $800 million in savings at Honeywell.

According to iSixSigma Magazine, during the past 20 years, Six Sigma projects saved Fortune 500 companies an estimated $427 billion - the same study found that corporate-wide Six Sigma ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Chapter 1 Introduction
• Chapter 2 Six Sigma Teams, Projects and Techniques
• Chapter 3 Six Sigma Methodologies
• Chapter 4 Lessons Learned from Delivering High Impact Six Sigma Projects
• Appendix 1 Example Project Charter
• Appendix 2 Software Packages Used for Six Sigma Projects
• Appendix 3 List of Useful Statistical Formulas
• Further Reading