Phase 4 Performance and Control

Overview

You’ve identified, selected, and trained Champions and Black Belts. You’ve communicated with the organization about what Lean Six Sigma is and how it will be used strategically. You’ve developed project charters and sent teams off on their journeys. What comes next? Let’s hear again from Lou Giuliano, someone quoted often in this part of the book because he has such excellent advice:

What it takes is constant attention. Every time I visit units we talk about this, in our business reviews we talk about these efforts. I go to the training classes, I go to the Best Practices symposiums, and I get other people talking about it.… You’ve got to have some other people in the organization who can pay attention to what’s really happening, figuring out who’s getting it and who’s not getting it, figuring out who’s backsliding and deciding, ‘Well, I’ll send people to training but I won’t let them work full-time,’ and go out and confront those issues and get the process working.

—Lou Giuliano, CEO, ITT

That’s what this chapter is about: how you pay attention to your Lean Six Sigma deployment, and what you should be paying attention to.

Planning Ahead What will happen when you start getting results?

Throughout this book, we’ve said that even though Lean means “cutting costs,” you shouldn’t equate that with “cutting people,” though there have been some companies who have had to use it for that purpose. To truly get to excellence, you have to capture the hearts and minds of every employee, as well as their hands. If you have to lay off people, do it before Lean Six Sigma is deployed. People will have to work harder and longer to compensate for the staff reductions, but finding they can often cut out 20–40% of their work (the non-value-add portion) is a great incentive for adopting Lean Six Sigma.

This issue is just one of several that can appear once your Lean Six Sigma is up and running, but that can be prevented or minimized by up-front planning. Let’s look at:

1. How to adjust to requiring less time to do the work (and perhaps fewer people)
2. What to do about rotating Black Belts into management positions

Issue 1 What happens when you can do the same work in less time?

“You have to be careful because a lot of companies use value-added analysis as a rationale for laying people off,” says Mike Joyce of Lockheed Martin. “There are two sensibilities here. The first one is that is just pure business, and I think most people understand capitalism. If there is no business out there, I’ve got to shrink. It has nothing to do with the work we do or how we do it, or the people or how good or bad they are. It’s just the reality that this market is nonexistent anymore at the size that we need it. So if it’s a market-driven thing, then yes, you’ve got to lay people off to survive.

“But that’s a completely separate issue from ‘I need people to help me get better,’” says Joyce. “The more distance you can put between those two realities, the better off you are. At Lockheed, we said, look, LM21 is definitely going to change the distribution of work and where people get deployed. It’s going to happen, especially in areas like materials management, where we know our stockrooms are targets for eliminating idle inventory… we’re going to have people that can be redeployed. The key is that we know this a year in advance of its happening. So it’s management’s job to decide how we are going to redeploy those people, and what we have to do to get them ready for redeployment.”

A similar issue was faced at Stanford Hospital and Clinics, though in the early years, says Karen Rago, she was more concerned about getting enough staff to provide good care for Stanford’s patients. She’d spend her evenings and weekends making emergency calls to staff trying to get them to work even more overtime. But then the improvement efforts starting paying off… and many areas were wildly successful in reducing the hours of care. Unfortunately, that happened at a time when patient loads were dropping, so she suddenly found herself overstaffed—and Rago was now making calls telling people to stay home. Fortunately, at that time she had enough staff who didn’t mind losing the hours so she could let attrition take care of reducing the workforce without needing to lay off anyone. In fact, throughout her more than two decades at Stanford, there were very few layoffs thanks to proactive planning and attrition.

In other organizations, people freed up are used on teams to produce further improvements. Often, when demand outstrips available resources, the new improved processes are able to deliver more revenue with the same cost, but with much greater efficiency combined with greater job satisfaction. Where headcount reductions are unavoidable, careful upfront planning and instituting early retirement programs can be used to address these reductions.

Issue 2 Can you really rotate Black Belts into management positions?

One tradition associated with Lean Six Sigma is that the people chosen to be Black Belts are being groomed to segue into leadership positions after two or three years. The question you have to ask yourself is whether you can afford to make that promise to people.

The answer is yes. Caterpillar, for instance, went through a down cycle that started in the late 1980s and continued for six or seven years, where they simply didn’t hire many new people. To them, using Lean Six Sigma experience as a way to quickly raise the professional skills of highly qualified people is a godsend that will allow them to more easily fill leadership vacancies that will open in the coming years. The Lockheed Martin SMEs (subject matter experts) are in a similar position: their intensive experience with Lean Six Sigma is viewed as an asset, and they are, indeed, being rotated into managerial positions. Experience has shown that the major problem is that Black Belts are promoted into management positions before their two-year assignment is completed.

Avoiding the Pitfalls in Lean Six Sigma Deployment

A Fortune 100 company involved in Six Sigma deployment commented to one of its suppliers who was in a similar situation, “We had the same vision as you, but we ended up in an entirely different place. We slid from a transformational change deployment back down to a targeted deployment because we let people have part-time Black Belts, we let people call this an initiative, we let other initiatives coexist with it and saw it as just one of many initiatives instead of the thing we’re going to do to drive the strategy into reality.” Oddly enough, this company has put some pretty significant results on their bottom line—but they said, “If we’d just had full-time resources, and created an environment where Lean Six Sigma was seen as THE best way to achieve corporate goals, we would have four times as much money.”

This company was doing very well by some standards, but a few years into deployment recognized how much more they could have achieved had they taken steps to avoid some of the most common pitfalls:

1. Allowing projects to drift away from strategic management priorities or allow project scope to creep outwards, jeopardizing the results and schedule
2. Undertaking too many projects at the same time, which clogs the pipeline and reduces productivity the same way that too much work-in-process leads to delays and waste in any process (Little’s Law)
3. Inadequate tracking of results
4. Little or no sharing of best practices
5. Forgetting about the people not directly involved in deployment

Pitfall #1 Drifting away from priorities

The problem of drift is most acute in organizations that do not have links between Lean Six Sigma resources and P&L management, that don’t invest their Champions with the power to select projects based on shareholder value, and/or that allow projects to proceed without P&L management oversight. This pitfall can be avoided by using complexity value stream mapping to identify project opportunities, and by following a good DMAIC system that includes tollgate reviews by Sponsors and other managers between phases (see Figure 9.1). You need to decide:

• How often and in what way Sponsors, Champions, and others will review projects
• What metrics or indicators will be watched
• What other processes will be used to monitor progress and keep projects on track

Figure 9.1: The DMAIC Process With Tollgates

In addition, it must be clear which people or roles have what accountability and responsibility (see Chp 8, p. 224). Monitoring and accountability provides the means to judge whether a project is on track to contribute to positive business results, or straying from its charter.

Pitfall #2 Too many projects in the pipeline

Avoiding the second pitfall requires your organization to be judicious in how resources are deployed. It’s better to focus on getting a few high-potential projects done right than to just flood your workplace with dozens of less-important projects. When you have the right resources working on the right things, learning and results are maximized by short project cycle times.

Given that everyone’s goal is to run projects that will give measurably significant results within a year, the tendency is to push as many projects into the improvement process as can be defined. But an example from Chapter 4 taught us one of the counterintuitive laws of Lean Six Sigma: you can speed up results by reducing WIP (a consequence of Little’s Law). Pushing excess work into a process clogs the process and dramatically increases lead times. In the Chapter 4 case, a sales team needed to get quotes from marketing to complete a sales bid. Marketing was able to guarantee a fast turnaround time only by creating a Pull system. They capped the number of quotes they would allow into the process (their WIP) at 48, then developed criteria for triaging which quote request would be released into the process as soon as the WIP dropped to 47.

The same principles apply for the management of Lean Six Sigma projects. Let us assume that you have 20 Black Belts, and that the average time it takes them to complete a project is 4 months (for a completion rate of 1/4 projects/month/Black Belt). But now you’ve decided that you want to get projects completed in an average of 3 months. What is the maximum number of projects that should be “in process” at any one time? Applying Little’s Law we have:

Since you have 20 Black Belts and only 15 projects, that means some projects will have two Black Belts assigned (or that there will be 5 “floaters” who go wherever they are needed). Intuitively, this equation makes sense: by doubling up 1/4 of your resources (= 5 Black Belts), you save 1/4 of the original lead time (= 1 month). The math won’t work out this perfectly each time, but you should always do a reality check like this to see if the figures you get make sense.

Until your organization has a few years of project experience under its collective belt, this calculation will result in a ballpark figure only. You’ll need to closely monitor results to see if you’ve overestimated (or underestimated) completion rates, lead time to results, etc., and make adjustments accordingly. But basically if you know how many Black Belts you have and can make reasonable estimates at their average completion rate, you will be able to put a cap on the number of projects and prevent excess projects (WIP) from clogging your Lean Six Sigma pipeline.

In this case, for example, if you want to get a completion rate of 2 months, then 10 projects is the maximum. Before another project is launched, one will have to be completed or scuttled. This discipline really forces people to prioritize projects around business objectives, ROIC etc. You will have to do some detailed planning to avoid competition for shared resources, but this first cut is a major step forward for the majority of companies.

The result makes intuitive sense on another level as well. A “lone wolf” Black Belt cannot possibly have all the skills and experience possessed by a complementary team, and experience shows that there is greater risk of a project producing disappointing results when a team and its project only have a single Black Belt as opposed to those with multiple Black Belts. If your organization can’t afford to assign multiple Black Belts to a project, then be sure you don’t overload any individual Black Belt with too many projects. Focus on developing Green Belts to the point where they can operate independently with Black Belt guidance. That’s the best way to get the fastest velocity of ROIC generation.

Pitfall #3 Inadequate tracking of results

Chapter 8 (p.235) talked about the need to establish metrics up front. Unfortunately, too many companies discount the necessity of having reliable means to judge project results and impact, or underestimate the difficulty in creating such a system. Lean Six Sigma results must be quantified to appropriately evaluate their impact and make good decisions about whether your resources are being used wisely. Guidelines given elsewhere in this book can help you identify metrics and establish a tracking system.

Pitfall #4 Little or no sharing of best practices

Rapid learning is at the heart of rapid results from Lean Six Sigma. Organizations gain the most by escalating the learning of each team across the organization through best practice sharing.

Therefore, as soon as you have projects launched (or even before!), you should be thinking about how you’re going to leverage the lessons that team learns:

• Will the results be applicable to other areas of the company? Where? (Be sure to think of both lessons about the particular process and about making improvements in general.)
• How to document learnings in a way that is useful to others.
• How can you give others in the company open access to every team’s results? Typical approaches include holding Best Practice symposiums, using web-based documentation in a searchable database (accessible by any employee), having teams present results at regular staff meetings, and so on.

Pitfall #5 Forgetting about the people not directly involved in deployment

Chapter 7 made a strong case for engaging the entire organization in Lean Six Sigma deployment, starting with key influencers and moving out from there. Ignoring people not directly involved can create resentment; involving them does the opposite. “We communicate our plans and metrics to all our employees via our quarterly all-hands meeting,” says Manny Zulueta, the VP of Lockheed Martin’s procurement center. “By keeping everyone updated on a regular basis, no one is surprised about what we’re doing from an organizational standpoint.”

Vigilance Warning signals and decelerators

Morale among the Black Belts at a financial services company could best be described as mixed. Most of them loved the work: being able to work with different teams, applying their analytical skills to problem solving, seeing quality improve. But the stress was starting to get to them. They were having a harder time getting managers to pay attention to them or to assign people to projects. There was little commitment to putting team members through any kind of training, so the Black Belts had to spend more time dealing with conflict and confusion and less time helping team members improve processes. The Black Belts were also increasingly the butt of in-house jokes and resentment, and as a result had become a tight-knit group that didn’t welcome “outsiders.”

For organizations that are already in the midst of Six Sigma, there are warning signals of trouble. Sometimes, those signals are gut feelings or an uneasiness that employees are just paying lip service to Six Sigma. But in many cases, there are more concrete signals that Six Sigma has become disconnected from the core business.

1. Downward trends in deployment and results indicators (or no tracking of results)
   • Projects take longer to complete; due dates are regularly missed
   • Financial returns drop steadily (Black Belts begin working on smaller projects that would be better suited to Green Belt leadership)
   • The time for completing Black Belt certification creeps upward
   • Stated goals for projects become increasingly modest
   • Projects get sandbagged (“under promised”)
2. Flagging support for Six Sigma projects
   • The company leaders no longer personally demonstrate a commitment to Lean Six Sigma (this happened at Honeywell, and Larry Bossidy had to return to reinvigorate the process)
   • Black Belts and Champions have a difficult time recruiting people to staff projects
   • Attendance at meetings drops off
   • More and more people question their involvement in Six Sigma (“it’s taking time away from my regular job”; “this isn’t helping me get more efficient, it’s just adding to my workload”)
   • Participation, commitment, and philosophy varies widely between locations and/or divisions
   • Where once high-caliber employees were assigned to Six Sigma deployment and Black Belts were carefully screened, now “problem” individuals or those who don’t have enough real work are assigned to the Six Sigma team
   • Project selection is not or never has been driven by ROIC or other key strategic factors
   • Black Belts start departing (see sidebar)

     Watch for departing Black Belts

     Lou Giuliano, CEO of ITT, has found that seeing Black Belts resign their positions is an indicator of trouble because they are typically successful people who have risked their careers to work full-time on Lean Six Sigma. They have a lot of initiative and relish the challenges of fixing business problems. They only leave Black Belt deployment if they are frustrated with a lack of support or if Lean Six Sigma becomes inconsequential. “It’s my job to fix those problems,” says Giuliano.

3. Evidence of Six Sigma isolation
   • The Six Sigma staff show signs of becoming a clique of cowboys or commandos who take all the credit for improvement and are impatient with anyone who doesn’t share their enthusiasm
   • Project selection becomes a local activity leading to suboptimization of Six Sigma resources: some areas are overstaffed, some projects languish because of a lack of available Black Belts
   • Cynicism mounts toward the Six Sigma initiative and cross-team collaboration problems start to develop
   • Metrics for Six Sigma projects are set independently of corporate strategy, and are measured only in terms of cost reductions or amount of dollars generated per Black Belt (no customer, quality, or cycle time indicators)
4. People increasingly slide back into old ways of doing work
   • The initial focus on customer needs dissipates; internally oriented metrics slowly creep in as the main measures used to select and monitor project success:
     • Projects are selected based on imposed executive mandates and/or managers’ pet projects, not on objective criteria
     • Projects are chosen based on cost cutting criteria only (customer priorities are lost in the shuffle)
     • Projects aren’t checked against corporate priorities
   • Best Practices sharing is inconsistent or non-existent
   • Senior executives’ behavior contradicts the basic tenants of Six Sigma (they don’t base decisions on data, react inappropriately to special/common causes, don’t use good decision-making processes, focus on outputs [Ys] instead of the underlying drivers [Xs], etc.)
5. A gradual erosion of Six Sigma roles and responsibilities
   • Champions are pulled into non-Six Sigma related work
   • Black Belts spend more time on project selection and chartering than driving results by leading projects
   • Master Black Belts are assigned to projects that really should be handled by Black Belts
   • Sponsors focus solely on day-to-day operations, relegating Six Sigma to the zealots who are increasingly separated from the main culture of the organization

You may have already seen some of these warning signals in your own company, and may have even instituted some countermeasures in hopes of restoring the original enthusiasm and commitment to Six Sigma.

A Champion must be alert for these signs and engage the appropriate management to keep the momentum. Remember it is about RESULTS, it is not about meeting training goals, counting the number of teams kicked off, or presentations about what is going to be done. Management must insist there be a P&L financial validation to “book” the savings as real by constantly asking the right questions, specifically is the project on schedule!

One point of several earlier chapters was that you’ll be more likely to reach the financial (and improvement) results if you are successful in changing the norms within the organization. For Lean Six Sigma to endure, it must become part of the culture. For that to happen, it must be part and parcel of the norms within the organization, “the way we do things around here.”

Conclusion Achieving transformational change

The last four chapters have discussed a number of ideas that can help make Lean Six Sigma a powerful engine for ongoing performance improvement. Some of the most important of those ideas are summarized in Figure 9.2 [next page].

To end this section of the book, let’s hear once more from several of our contributors, starting with Nick Gaich, Vice President of Materials Management and Customer Service, Stanford Hospital and Clinics:

“There has to be some courage in the organization to allow these things first to be acknowledged and second, to support them. Because you’re going to have so many cultural and political hurdles along the way, if you don’t have a sound structure behind it, and you cannot clearly demonstrate what these changes mean, that’s where I think most organizations fail long term, because it has become just the program-of-the-year. That’s not what this is all about. Instead of the term empowering, a movement towards ‘self reliance’ for both our customers and our staff has become our goal of ultimate achievement.”

Figure 9.2: 10 Deployment Principles that Always Work

1. Executive and key influencer engagement (training of CEO and direct reports)
2. A strong and respected Corporate Deployment Champion should report to CEO
3. P&L managers own Black Belt resources & are accountable for project results
4. Deploy critical mass of key resources full-time (1% headcount Black Belts/Champions)
5. Resources should be selected from “future leaders of the company”
6. Establish a process for value-based project identification and selection within the business(es)
   • Select value streams based on customer needs and value creation (ROIC%)
   • Prioritize and staff critical projects in the value stream based on delay time
   • Use Kaizen “blitz” for 5- to 30-day proejcts, Black Belt teams for 30+-day projects
7. Actively reduce Projects in Process to reduce project cycle times (Little’s Law)
8. Track results rigorously: Lean Six Sigma results should “pay as you go” and be confirmed by CFO/Controllers
9. Black Belts must receive team leadership training.
10. Provide a “performance improvement” platform that allows for future innovations.

Geoff Turk, Corporate Six Sigma Champion, Caterpillar

“There are a lot of ways to approach deployment. You can do a targeted deployment where you select certain areas and only do it there. You can do a functional deployment where you say, ‘Let’s take all the engineering guys because they understand the statistics stuff, and maybe the accountant guys because they can play with numbers too, and we’ll just do it in these functional areas.’ Or you can do the transformational change deployment where you affect the way work is done across the entire organization. And the people at Caterpillar who are bragging big-time about Six Sigma, who are putting up the big numbers on the scoreboard, are doing the transformational change.”

But, Turk adds, Caterpillar didn’t get there overnight. “We started with this huge grass-roots effort and a few big projects. It’s kind of like starting fires around the middle and burning to the center, you know; you get the whole organization going. But if you don’t start with enough breadth and magnitude down at the frontline level, it doesn’t become the way you work. It doesn’t become the common language.”

And a final lesson from Lou Giuliano, CEO, ITT Industries

“Bottom line: with Lean Six Sigma, everybody’s job description changes. Everybody’s number-one task becomes improving the processes for which they have responsibility…. The only thing that would make this not work was if our leadership skills weren’t good enough to really demonstrate to people the value that we could get from this. Because I get tremendous energy, tremendous enthusiasm, fantastic feedback from everyone involved.”