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C H A P T E R S E V E N
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IMPLEMENTING THE SIX SIGMA BUSINESS SCORECARD
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nce corporate leaders decide to adopt the Six Sigma Business Scorecard to monitor corporate performance, they need to understand and communicate the relationship between performance and profitability. The first step in implementing the Six Sigma Business Scorecard is to perform a feasibility study to identify which categories of improvement can be easily implemented and which will require greater effort. A crossfunctional team within the organization or an independent group can be assigned to investigate. Based on the processes that exist in a business, the leadership team must develop a Six Sigma Business Scorecard that is suitable to achieve its process improvement objectives. If any doubts about the effectiveness of the scorecard exist, the Six Sigma Business Scorecard can be validated using available historical or estimated performance data. Initial challenges include devising measurable ways for the leadership to recognize employees for improvement, determining the rate of improvement for each department, quantifying innovation by employees, tracking new business as a portion of total sales, and measuring operational excellence in service or support areas. Existing measurements, such as total expenses, total sales, suppliers performance, production performance, and customer satisfaction, are easier to quantify. Common current measurements account for about one-half of the performance indicators of BPIn.
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CHAPTER SEVEN
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The executive team can estimate corporate wellness, determine the Business Performance Index (BPIn), and identify areas to achieve improvement at the highest level. The BPIn and Sigma level can be used as a rough baseline of the corporate performance and as a catalyst to commit to an integrated corporate performance measurement system, the Six Sigma Business Scorecard. The BPIn can be used as a leading indicator of the corporate performance. Using the BPIn creates a strategic intent to implement the Six Sigma Business Scorecard.
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Having committed to implementing a corporate performance measurement system, both leadership and management must be trained to understand the intent, objectives, scope, and measurements of the Six Sigma Business Scorecard methodology. The methodology includes the following:
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Identifying measurements Creating a business growth and profitability model Identifying changes in organizational structure Establishing departmental or functional goals Participating in leadership and employee evaluation Integrating the Six Sigma Business Scorecard with the quality or business management system
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The objectives are to understand the role of measurements in improving the profitability and growth rates, and to implement an effective corporate performance measurement system.
BUILDING THE BUSINESS MODEL
Each business is different in many ways: in culture, products or services, leadership, customer base, location, business objectives, and so on. Although a standard Six Sigma Business Scorecard that works for every business is impossible, a standard measurement system to benchmark with other businesses for
IMPLEMENTING THE SIX SIGMA BUSINESS SCORECARD
improvement and investors is important. That s why the system is designed so that the BPIn provides a standard set of measures at the highest level, i.e., the CEO level, and the Six Sigma Business Scorecard provides functional measurement guidelines. In a sense, the BPIn includes tier I measurements, and the Six Sigma Business Scorecard includes tier II measurements. Development of the business model starts with the simplest form of the cost, revenue, and profitability equation: Profitability f(cost, revenue)
and expands it to the practical expense and income level. This enables the team to identify factors that have an adverse impact on profitability and growth. This model must be clearly understood and easily visualized by all the executives of the business. Executives who take actions based on the business model demonstrate that they are sensitive to concerns about the company s growth and profitability.
ESTABLISHING THE BPIn
When you are creating a business model, starting with the BPIn measurements is the best way to begin because many of these data already exist. In other words, the team can take the historical data, estimate the unknowns in a cross-functional environment, and establish the relationship between the past performance and measurement. If one or two measurements pose a real challenge to the business or if they are irrelevant, those measurements can be substituted for with similar measurements. Executives must buy into the final BPIn measurements, so ultimately the measurements chosen must be workable for the executives. However, the tendency to remove measurements of employee recognition and employee innovation must be avoided. Since the BPIn score is a sum of all these measurements, a minor variation in one or two measurements does not significantly affect its outcome. Although some of the measurements might be adapted to fit the business, the weighting of various categories must not be changed unless there is a clear factual need to make an adjustment. Changing the ratings
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