Are there any problems associated with Lean Six Sigma Methodologies that could lead to less efficiency?

Yes there are

I have consulted a number of small and medium sized family companies with Lean Six Sigma to improve business performance. When correctly applied Lean Six Sigma enables a company to perform beyond its natural ability. Unfortunately very few business leaders have the courage to accept that their organisation is not underperforming, it is just performing at its normal and natural ability.

Many of the companies I have worked with apply the natural method to improve performance: Identify a problem and Fix it. This is the method most companies default to and are able to understand. Typically improvements done this way are temporary.

The Lean Six Sigma approach to business improvement is wider. Instead of a simple Identify and Fix (and return to old behavior) method Lean Six Sigma aims at measurable and permanent improvements. This is achieved with the Define, Measure, Analyze, Improve and Control DMAIC method. The natural Identify and Fix would in this context be a Define and Improve method.

In DMAIC the problem is first Defined, then current state is Measured to be able to verify improvement after project, root causes for problem are Analyzed, problem is Improved and finally an out of Control plan is created to ensure corrective actions are taken when the process is showing signs of returning to old behavior.

The problem with Lean Six Sigma that leads to less efficiency is the lack of tools and methods to convince entrepreneurs to really trust DMAIC is better than Identify and Fix.

Very few business leaders see the value in measuring and controlling a process when they are looking for a quick fix. When the Lean Six Sigma project has achieved the improvement many times the control part is left out for various reasons. As a result the achieved improvement is only temporary and the business owner has a good argumentation to why Lean Six Sigma is a waste of time, e.g leads to lower efficiency.

If Lean Six Sigma is applied without proper facilitation and without respect for the principles it is built upon it will result in less efficiency

 

Improving service business with Lean Six Sigma

Let’s take the example of a small consultancy company that provides consulting to small and medium sized companies. How can Lean Six Sigma be used to improve such business, or can it?

Define the problem

The dilemma of a small consultancy is how to divide time between sales work and consulting work. Sales brings revenue in the future, consulting creates revenue in the short term. The problem to solve in this example is: how to maximize the efficiency of the sales operation while keeping the revenue stream solid.

Johtoryhmätyöskentelyn kehittäminen

si

Elokuussa 2017 kirjoitin LinkedIniin postauksen kokemuksistani johtoryhmätyöskentelystä perheyhtiöissä:

“Olen työskennellyt toimitusjohtajana, hallituksen jäsenenä, puheenjohtajana tai konsulttina noin kymmenessä suomalaisessa perheyrityksessä. Kaikkia näitä on yhdistänyt seuraavat asiat:

What is Lean Six Sigma

Lean Six Sigma is a business improvement methodology designed to increase productivity and profitability in a verifiable and sustainable manner. Lean Six Sigma is especially suitable for companies that are struggling with profitability problems due to poor sales and customer returns and/or complaints.
Embed from Getty Images

Measuring business

Measuring business and its performance is usually done by measuring key financial indicators such as profit, turnover and return on investment. These are good measures for the overall performance of the business but give little if any information about the underlying daily work done in the company. Proper business process measuring using Lean Six Sigma tools gives the manager data and information that makes problem solving and business improvement possible.

Lean Six Sigma in sales management

How could a systematic approach like Lean Six Sigma be applied to sales management, sales being more an art than a science? The results are not directly causal, rather chaotic, and the masters of selling are very seldom nothing less of artists.

Many of the customers I have met shrug at the word “process”. To many an SME entrepreneur process is synonymous to bureaucracy that slows business down and decreases profits. Undoubtedly a documented and enforced process limits the freedoms of the entrepreneur. What is not so blatantly obvious is that a good process limits the possibilities to waste time on errors.

Sales, like any activity that goes on in a firm is a process. The sales person contacts old and new customers using phone and various messaging systems. Customers are visited, quotations made and orders received. Complaints and returns are handled and the ongoing debate with production and R&D is taking its time. In project business the sales person may also take care of the project management of the sold project. Add a little bit of resource- and communication problems and chaos lurks behind the door. Adding resources to the sales team is a solution that will hide, not solve the problems. One of the key paradigms of Lean is to reduce resources to make problems visible. The corollary is to add resources to hide the problems.

This is where Lean Six Sigma comes in to the sales management process. From a management point of view the value add a sales person is supposed to bring is sales margin and turnover. Everything else is non value added waste of time, defined as Muda in Lean Six Sigma. Let’s approach the sales process with the DMAIC methodology.

Define the scope

Let’s start by defining what is expected of the sales process. Write down what the customer, management and owners expect. What is the purpose of the sales process? What are the critical outputs of the sales process? Are there differences to the scope of the entire company and the sales process?

Measure and make sure you measure right

Typically sales results such as sales margin and turnover are interesting to the management. Especially if a “Management by objectives” paradigm is in use the actual daily work of the sales person gets a less attention. Measuring results gives very little information about what actually is happening in sales. Is the salesperson really visiting customers? What happens after a quotation is sent, an offer given or price indicated? Is the customer engaged in a deal negotiation after the quoting or is she forgotten. Measuring turnover and sales margin gives very little or no information what really is happening in the sales process. If we want to improve sales we need to know how it works and what is done. Getting exact information out from a sales person is a challenge especially if the situation is chaotic.

To make wise decisions we need data about the sales process that we can trust. To achieve this an X-Y analysis, made to identify the key inputs, gives us a list of good quantifiable measurement points that can be numerically and statistically analysed. Depending on the industry and company interesting X’s or measurement points could be: number of customer visits per week, number of sales calls after offer is sent, number of hours spent on project management, R&D or waiting for someone, hours or km or miles spent on the road. A measurement system analysis MSA should be done ensure the data that is extracted is precise and accurate.

Analyse the data from the measurements

After the measurement system is set up and the validity of the measurement data is established it is time to analyse the current state. A good rule of thumb is that a minimum of 30 measurements or samples should be made on each input before any statistically reliable conclusions can be made. Range charts are a good way to analyse the sales process. Very quickly we will see if the customers are visited and if enough time is spent with the customer after the quotation and offer is sent. The measurement data is very likely a surprise, perhaps even a shock to both the sales persons and the management. The perception management and the sales persons had on where and how time and resources were spent will most likely differ from what actually is happening. Here the Measurement System Analysis performed in the previous phase comes in handy as the measurement data and results will be challenged if they do not confirm the generally assumed and expected working model.

Improve the way you work

With the measurement data at hand it is time to start the improvement work. A good Kaizen team includes people from sales, R&D, and production and a Lean Six Sigma black belt to facilitate the work. Based upon the analysis results and Lean tools solve the identified problems one by one. An example could be to increase sales calls by reserving  a regular time every day for calling customers with quotes older than 2 weeks. Results are documented using Deployment Flow Charts DFC or process maps and put on display after management review.

Control the improvements to make them permanent

After the Improve phase it is important to run the measurements once again to confirm the improvement really has happened. It is good management practice to bind the Kaizen team’s and its’ facilitator’s bonuses to the measured improvement.

Sadly more often than not a process or company returns back to old habits after the consultant leaves or latest when the next crisis occurs. As a result of this the results of the improvement work are lost and the work done has turned into waste. Luckily Lean Six Sigma provides tools to make the changes permanent. The Kaizen team selects the key measurements to be followed after the project is finished, creates an Out of Control Action Plan OCAP and a Response Plan RP on what actions need to be taken when the changes are in risk of being reversed. With the help of the OCAP and RP the management of the company can ride through the change resistance following the announcement of the change. With careful management and lean work, the new improved state will become the new normal.

Conclusions

Despite sales being an art, it is a process that can be Defined, Measured, Analysed, Improved and Controlled. Lean Six Sigma methods are well suitable to improve the daily work of the sales manager and his team in a measurable and sustainable manner.

Using Lean Six Sigma in creative work

Lean Six Sigma is mostly used in a production environment which raises the question if it is applicable for creative work such as design or marketing. The basic premise of Lean Six Sigma is to understand the problem and solve it in a  sustainable way. All this is generic, the approach applies itself easily to anything from advertising to sales management and other similar arts of business.

Creative people have the tendency of approaching their work using qualitative terms. Statistical process control seems vague and distant from this vantage point. A typical argument would be that you can not measure art. That may or may not be true. Still, any advertising agency managing director is faced with the dilemma of how to control and improve the profitability of the firm. This gives an illusion of a conflict between artistic freedom and process control.

Art can not be measured, or can it?
Art can not be measured, but the process that creates it can be defined, measured, analyzed, improved and controlled. Let’s take the example of an Arts Director AD in an advertising firm. The managing director has sold a design for a news paper advertorial and gives the project to the Arts Director to execute. She designs the advertorial using inspiration from the subject of the article, selects suitable colors and illustrations and presents the results to the customer. After some feedback rounds the work is approved and the happy customer gets her advertorial followed by a bill from the advertising agency. This is by definition a process and processes lend themselves for improvement.

In Lean Six Sigma we first define the practical problem, convert it into a statistical problem, solve the statistical problem and then convert the statistical solution to a practical solution. Let’s see how this works in the case of the advertorial design using the DMAIC methodology.

Define the problem
The managing director wants to improve profitability. He has a suspicion where the key improvement areas are, but he is not sure about them. He does not want to change things that already works, but he does not really know what does not work. The Managing Director knows the overall profitability of the firm but is unsure of his pricing strategy due to a lack of knowledge of the internal cost structure. In effect he can never be sure about the profitability of a project until it is concluded. This makes the advertorial design project a risk. Further , the goal of a Lean Six Sigma project is to minimize the time spent between an incoming order and the incoming payment from the customer. This could also be called the Voice Of Business.

Measure current state
One of the key elements of Lean Six Sigma is to provide data based, statistical evidence for the improvement that is undertaken. The idea is to make sure the improvement work really resulted in a real improvement. To do that a measurement system is created and measurement points are selected. Indicators such as: sold price, billed price, work hours spent and project profitability per project are examples of measurement points that can be applied to creative work. Attention should be put to select correct  measurements. Lean Six Sigma provides for a number of tools to do proper measurement of any type of process. One way is to take a sample of 30 last sold projects and analyse the results using range and/or control charts to identify process mean and variance.

Analyse the current state
Control charts of the selected measurements are used to confirm process stability and most importantly indicate reasons for instability. In the case of the advertorial design the analyses can be done on average production time, customer satisfaction etc. Focus Groups can be used to ensure the Voice Of Customer is heard. An Ishikawa diagram followed by “5 whys” can be used to track down and identify the root causes for process problems. Create a current state process map to reveal the “hidden factory” using Deployment Flow Charts DFC. One applicable method is to run a Brainstorming session to reveal key problems in the processes followed by an Interrelationship Diagram analysis to identify “the vital few of the useful many”. Quantify the current state in a few simple slides.

Improve the process
Once the key improvement areas and their root causes are identified they can be improved. Analyse the process maps: are all steps in the current process really necessary? Minimize or get rid of non-value added work and solve root causes and significant problems identified in the analyse phase using e.g. Kaizen workshops and selected Lean tools.  Redesign the process to minimize process steps. In this phase it is valuable to ask the question: Would our customer pay for this?

Control the improvement
The last phase in the DMAIC method is the Control phase. First verify that the improvement work was effective: sample the selected measurement points again and do a statistical analysis on the data to verify improvement really has happened. This is a key action to ensure management approval for spending time and resources. A smart Lean Six Sigma practitioner binds part of his project bonus to the results of this analysis. After confirmation of the results a Kaizen workshop with the stakeholders should be held to create response and out of control action plans. Together with continual process measurements these are the key tools to ensure the organisation does not fall back to old habits the next after the improvement project is over.

Conclusions
Art can not be measured, only subjectively appreciated, but the process that creates professional art can be Defined, Measured, Analyzed, Improved and Controlled. Understanding the sales and artistic processes helps the Managing Director control risk and pricing when selling the advertorial design project. Lean Six Sigma is a versatile methodology for business improvement and can be used successfully in almost any business and industry.