Introduction to Six Sigma: Six Sigma is a statistical concept that measures a process in terms of defects. Achieving “Six Sigma” means your processes are delivering only 3.4 defects per million opportunities (DPMO) – in other words, they are working nearly perfectly. Sigma (the Greek letter σ) is a term in statistics that measures standard deviation. In its business use, it indicates defects in the outputs of a process, and helps us to understand how far the process deviates from perfection.
A sigma represents 691462.5 defects per million opportunities, which translates to only 30.854% of non-defective outputs. That is obviously a poor performing process. If you have a process functioning at a three sigma level that means you’re allowing 66807.2 errors per million opportunities, or delivering 93.319% non-defective outputs. That’s much better, but we are still wasting money and disappointing our customers.
The central idea of Six Sigma management is that if you can measure the defects in a process, you can systematically figure out ways to eliminate them to approach a quality level of zero defects.
In short, Six Sigma is several things:
- A statistical basis of measurement: 3.4 defects per million opportunities
- A philosophy and a goal: as perfect as practically possible
- A methodology
- A symbol of quality
- History of Six Sigma
Since the 1920’s the word ‘sigma’ has been used by mathematicians and engineers as a symbol for a unit of measurement in product quality variation. (Note it’s sigma with a small ‘s’ because in this context sigma is a generic unit of measurement.)
In the mid-1980’s engineers in Motorola Inc in the USA used ‘Six Sigma’ an informal name for an in-house initiative for reducing defects in production processes, because it represented a suitably high level of quality. (Note here it’s Sigma with a big ‘S’ because in this context Six Sigma is a ‘branded’ name for Motorola’s initiative.)
(Certain engineers – there are varying opinions as to whether the very first was Bill Smith or Mikal Harry – felt that measuring defects in terms of thousands was an insufficiently rigorous standard. Hence they increased the measurement scale to parts per million, described as ‘defects per million’, which prompted the use the ‘six sigma’ terminology and adoption of the capitalized ‘Six Sigma’ branded name, given that six sigma was deemed to equate to 3.4 parts – or defects – per million.)
In the late-1980’s following the success of the above initiative, Motorola extended the Six Sigma methods to its critical business processes, and significantly Six Sigma became a formalized in-house ‘branded’ name for a performance improvement methodology, i.e. beyond purely ‘defect reduction’, in Motorola Inc.
In 1991 Motorola certified its first ‘Black Belt’ Six Sigma experts, which indicates the beginnings of the formalization of the accredited training of Six Sigma methods.
In 1991 also, Allied Signal, (a large avionics company which merged with Honeywell in 1999), adopted the Six Sigma methods, and claimed significant improvements and cost savings within six months. It seems that Allied Signal’s new CEO Lawrence Bossidy learned of Motorola’s work with Six Sigma and so approached Motorola’s CEO Bob Galvin to learn how it could be used in Allied Signal.
In 1995, General Electric’s CEO Jack Welch (Welch knew Bossidy since Bossidy once worked for Welch at GE, and Welch was impressed by Bossidy’s achievements using Six Sigma) decided to implement Six Sigma in GE, and by 1998 GE claimed that Six Sigma had generated over three-quarters of a billion dollars of cost savings. (Source: George Eckes’ book, The Six Sigma Revolution.)