The Glue

A Brief Primer on Lean Six Sigma and Its Benefits

Before I discuss Lean Six Sigma, I'll quickly cover the fundamentals of the two contributing approaches, Six Sigma and Lean.

Six Sigma is typically defined as a disciplined, statistical approach aimed at increasing profitability by reducing defects. There is a large Six Sigma "tool box" of analytical, data-driven approaches that help companies improve quality in this way.

I tend to think about Six Sigma more holistically than many of its current adherents. I also take to heart a comment made by Bill Smith, the Motorola engineer who invented Six Sigma: “If you want to improve something, involve the people who are doing the job.”

So I see the power of Six Sigma as greatest when it is thought of more broadly, as an organizational shift wherein employees use a disciplined approach to improve overall business performance, using data and focusing on controlling process variation. This is even more powerful when built into a Strategy Execution approach, so that improvement efforts are focused on the most strategically important problems for the business.

How Organizational Culture Affects Target Setting

In two previous blogs (Setting Effective Targets & Three More Ways to Set Targets), I talked about the best ways to set targets for performance measures on Balanced Scorecards.

There are also psychological and cultural aspects that impact how an organization sets targets.

If an organization is risk averse or if management tends to look for someone to blame when performance falls short, targets will be predictably less aggressive and easily achievable. This is usually referred to as “sandbagging” and occurs because the penalty for under-achieving a target is so much greater than the risk of being accused of setting soft targets.

On the other hand, organizations that reward real achievement and where missing a stretch target is not punished, but merely analyzed for root causes and addressed, real “stretch” targets are more likely.

If you're in an organization that leans more toward the risk averse culture, how do you encourage employees to set real stretch targets?

First, examine the management style and their reaction to missed targets. If it is punitive in nature, that managerial behavior must change or the employees will never trust management enough to take a risk and set a stretch target.

However, I have seen organizations where the management reaction to missed targets is healthy, yet the targets are still easily achievable for other cultural reasons. Sometimes these reasons are merely perceived, but as we know, perception is reality.

Three More Ways to Set Targets

Earlier this week I wrote about the two best ways to set targets for performance measures (Benchmarking and using Customer Valid Requirements). As promised, here are three more ways to do it.

The third way to set targets is to look back historically at your performance. If you used to perform better than you do now, strive for that historical target and try to determine what has changed to cause your deteriorated performance and turn it around.

A fourth way to set a target is to determine “what the data shows is possible.” Let me cite an example to help illustrate this method:

Do You Have an Innovation Scorecard?

Last week, I had the opportunity to attend the International Society for Performance Improvement conference in Phoenix, Arizona and met one of the distinguished luminaries of the society, Donald Totsi of Vanguard Consulting.  Given the recent article in BusinessWeek (June 11, 2007) entitled, 3M’s Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture, I was captured by his findings about the core indicators of what it takes to implement innovative product and services.

Based on Don’s performance analysis of 10 companies that successfully launched RADICALLY new products and services to meet the demands of their marketplace, here are the top ten cultural practices, in order of their perceived importance of executing innovation: