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THE SIX SIGMA BUSINESS SCORECARD
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Businesses who are themselves large customers must view their suppliers as extensions of their operations and continue to be actively involved in the improvement process. The supplier management processes are defined by the quality management systems a company has implemented. For those systems to have value, the company must establish clear expectations with its suppliers in terms of technical, business, and service requirements. Supplier performance can then be measured against clearly defined goals as well as the rate of improvement.
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5. OPERATIONAL EXECUTION
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Most companies have difficult times implementing a sound strategy effectively throughout the corporation. Strategic blunders throughout a corporation can lead to its major fall. However, the main reason for mediocre performance and profitability is poor execution of simple, well-known principles. Many companies devote resources to developing a sound corporate strategy without somehow recognizing the need to execute it well. They assume people will just figure that part out. Without a well-thought-out execution and institutionalization process, however, the new ideas, strategies, or programs become the cannonball of the year. Employees become immune to new initiatives about which the management is so excited. Leadership thinks it has assigned people to tasks and empowered them to perform; therefore, it now blithely expects results. When a major initiative is launched in an organization, the leadership (CEO or equivalent) must be passionately committed to it. Unfortunately, the whole process of commitment is often reduced to a few slogans. The initiative simply stays a slogan without producing any results. Commitment must instead be based on the real understanding by the leadership of its potential benefits at both personal and corporate levels. Such an approach allows employees to see something for themselves and for the company. If the potential return on investment for their effort is clear and visible, they are interested in working on it; otherwise, no matter how bright an idea or how strong the leadership, the strategy will not yield the desired results.
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CHAPTER FOUR
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In the case of Six Sigma initiatives, many companies have started to train people in herds, expecting miracles. But the miracles are not happening. I was at a company recently where I learned about the performance of its internal processes and was amazed that the company even survived as long as it had. Two days later I read in the newspaper that the company had saved hundreds of million dollars through its Six Sigma initiative. If I had asked the employees about the improvement, however, they would have said that they had not seen a penny from all the savings. To the employees, the savings appeared to exist because of the management s number manipulation techniques rather than because of any actual improvement. Each Six Sigma project at a large corporation is expected to save about $100,000 to $250,000. Some of these large corporations, with the help of recognized consulting firms, have initiated thousands of projects. Recent feedback from one such company is that about 10 percent of these projects are producing significant savings. At another company, a CEO had committed to Six Sigma, hired a consulting company, trained all his professionals (more than a thousand), and initiated many more changes to transform the culture. Those trained Black Belts, however, are having a difficult time identifying projects for improvement. Eventually, because the strategy was poorly executed, many of these employees will leave the company for a better work environment. Larry Bossidy and Ram Charan, in their recent book Execution (2002), have identified the building blocks of execution. Those building blocks include knowledge of people and the business, realism, clear goals and priorities, follow-through, rewarding the doers, employee growth, and self-awareness. What I have seen in many corporations is that execution fails because someone failed to plan to do the job well. The implication here is that the resource requirements needed to carry out the plan well are quite different from those needed to just do it. Without visualizing the end product or service, people fail to recognize how the project will be completed successfully and what will be the measures of successful completion. Another flaw lies in understanding empowerment. Empowerment includes education, authorization and accountability, and recognition. Businesses poorly implement
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