Drive Baldrige Level Performance - ASQ

Drive Baldrige Level Performance

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Baldrige provides the framework, Six Sigma, the methodology.

George Byrne and Bob Norris, IBM Business Consulting Services

For 15 years, organizations worldwide have used the Malcolm Baldrige National Quality Award criteria to help build market competitiveness, improve performance excellence and bolster shareholder value.

In fact, the seven categories of the Baldrige criteria—leadership; strategic planning; customer and market focus; information, analysis and knowledge management; HR management; process management; and business results—have become synonymous with performance excellence. The criteria are routinely used as a framework to help firms assess their leadership competencies, their prowess in strategy development and deployment and their strengths in the arenas of customer care, product and service quality, operational efficiency, human resource management and financial accountability and management.

The criteria are built on a set of interrelated core values and concepts and stress organizational attributes such as visionary leadership, customer driven excellence, organizational agility and management by fact. But, while the criteria enjoy a well-earned reputation for providing a values driven framework of the ideal state toward which organizations should strive, they don’t provide firms with a roadmap or vehicle to implement operational excellence. They don’t prescribe a specific methodology or tool set for organizational change to help enterprises transform how they operate and radically improve their business performance.

Six Sigma Methodology

What if a methodology existed for those organizations, regardless of size or industry, to propel themselves toward achieving Baldrige levels of business performance and process quality—a methodology that could help them achieve and sustain high levels of organizational and process excellence by measuring and monitoring that performance (at multiple levels) in rigorous ways and on a consistent basis?

Fortunately, a powerful methodology to do all these things does exist. It is Six Sigma, and the strategic application of its principles, when implemented on an enterprisewide basis, can help any organization achieve and sustain Baldrige level performance excellence by optimizing opportunities for quality and process improvement identified from Baldrige assessments.

It all begins when an organization’s leaders decide to use the power of Six Sigma’s statistical and analytical tools to drive achievement of Baldrige performance targets in each of the seven criteria categories. It is sustained by the continuous pursuit of Baldrige level quality standards married with the proven power of Six Sigma to drive quantum improvements in business performance on an enterprisewide basis.

How do you go about harnessing and channeling the power of Six Sigma to realize quantum level improvements in business performance? The seven-wedge wagon wheel diagram in Figure 1 illustrates the seven strategic success factors associated with the sustained success of Six Sigma deployments in many organizations today, according to Dick Smith and Jerry Blakeslee.(1)

These critical success factors have been tremendously important, note Smith and Blakeslee, in driving breakthrough performance improvement in companies as diverse as Dow, Dupont, Raytheon, ServiceMaster and Bombardier Transportation.

Figure 2 provides an overview of the Baldrige Criteria for Performance Excellence.(2) Let’s look now at how use of strategic Six Sigma principles can be applied to each of the Baldrige criteria categories.

Leadership

The Baldrige framework is concerned with examining and judging how an organization’s senior leaders establish and implement key organizational values, reinforce the importance of customer focus, set short- and long-term direction, and establish and communicate performance expectations to employees.

As part of this, the Baldrige process seeks to identify how senior leaders empower employees, foster innovation, promote organizational nimbleness and promote organizational and employee learning.

Baldrige assessments help organizations understand where their leadership skill gaps may lie—what needs to be done to improve leadership effectiveness and create a more customer centric culture. They can determine how, where and why top leadership must be involved in driving overall organizational performance and specific performance initiatives, practices and results. The Baldrige framework clearly recognizes the need for visionary leadership.

“An organization’s senior leaders should set direction and create a customer focus, clear and visible values and high expectations,” according to material found on the Baldrige National Quality Program website.(3)

Through their behavior and actions, senior leaders should serve as role models in planning, communications, coaching, development of future leaders, review of organizational performance and employee recognition. However, the Baldrige process doesn’t stipulate or even illustrate how an organization might improve its leadership capabilities.

Here’s where the power of Six Sigma leadership principles can be brought directly into play as the machinery to help launch, manage and sustain quality or process improvement initiatives over time. This occurs readily because the Six Sigma methodology provides a clear and unmistakable path to drive robust enterprisewide quality and process improvement.

Six Sigma consists of a series of key steps an organization’s leaders undertake to understand their markets, identify customer requirements, develop appropriate strategies, determine gaps in performance, set improvement priorities, align organizational resources and select improvement activities (Six Sigma projects) to address performance gaps.

As leaders do these things, they begin to create the conditions for quantum leaps in business performance. But to ensure full success, they must also make a strong business case to their organizations about why change (Six Sigma process improvement, for example) is so critical to driving business results and ensuring customer loyalty.

Leadership must communicate new work expectations to employees (for example, by encouraging a fact based, measurable approach to identifying problems and improving how work gets done). Leaders must generate quick win opportunities from process improvement activities to give their projects momentum. And they must work to sustain success with process improvement activities and projects over the long term by driving changes in the organization’s culture (such as by creating new reward and recognition systems) to support new ways of working.

In Six Sigma deployments, these priorities are driven forward as leaders cascade process and project ownership throughout an organization’s management ranks; undertake stakeholder analysis to identify points of resistance to change; develop communications plans to acquaint all employees with Six Sigma performance goals and metrics; and use specific Six Sigma tools such as root cause analysis, team charters and strategic improvement goals to focus people’s work activities, drive organizational alignment and prioritize the selection of individual improvement (Six Sigma) projects.

These proven leadership practices can be readily applied to driving the achievement of quality or process improvement goals, identified as part of Baldrige assessments.

In fact, doing so will give those quality and process improvement initiatives increased vigor and likelihood of success.

Strategy Development and Deployment

The Baldrige strategic planning process seeks to understand how organizations develop strategic objectives and action plans. It examines how organizations choose their objectives, how action plans and timetables are deployed to achieve them and what measurement mechanisms are employed to assess and monitor progress in achieving specific improvement targets.

The assessment process also asks organizations to describe how data about customers, market trends, competitors, suppliers and others is incorporated into strategic planning activities, what short- and long-term planning horizons an organization uses and how strategic planning objectives take into account the needs of a variety of stakeholders including investors, employees and Wall Street analysts.

Here again, Six Sigma principles and practices can be applied, in this case to bring vigor and rigor to organizations’ strategic planning efforts and to drive achievement of specific Baldrige quality and process improvement objectives (see Figure 3).

As an organization defines and deploys its business strategies, for example, Six Sigma techniques help leaders analyze performance gaps and respond by setting strategic improvement goals to close those gaps. Leaders also begin to configure core processes and establish performance metrics to drive results and identify the people and organizational resources needed to sustain those results.

Specific improvement projects are then designed to support individual strategies (or strategic improvement goals.) The goal is to meet or even exceed critical customer requirements (CCRs).

Customers and the Marketplace

In the customer and market focus criteria, the Baldrige process examines how organizations determine customer and marketplace needs, requirements, expectations and preferences.

The process also seeks to understand how organizations build relationships with customers, measure customer satisfaction, select and segment customers and determine the specific factors that lead to customer acquisition, satisfaction, retention and expansion of the customer base.

Six Sigma can be enormously valuable to an organization by focusing energies on understanding the voice of the customer (VOC), the voice of the marketplace (VOM) or the voices of other key players or stakeholders with whom an organization has key relationships.

Look at Figure 4, which shows how the systematic and consistent collection of customer and marketplace data (such as market trends, competitive data and customer needs) provides a treasure trove of information that energizes the strategy development process and core process improvement when distilled, analyzed and fed back into the organization.

What techniques does Six Sigma employ for this purpose? With Six Sigma, the collection of customer and marketplace data is a finely developed, nuanced process utilizing everything from VOC surveys and focus groups to interviews, industry research, competitive analysis and other channels (see Figure 5).

Rigorous Performance Measurement

The fourth Baldrige category is measurement, analysis and knowledge management. Here, the Baldrige process is concerned with examining organizations’ information management and performance measurement systems and how organizations analyze performance data and information.

How, for example, does an organization gather and integrate data from different sources to support its daily operations and organizational decision making? How does it select and align measures and indicators to track daily operations and overall organizational performance?

Six Sigma principles and practices come into operational play here by providing organizations with the critical tools to drive tight organizational alignment and generate concrete, measurable results from Six Sigma projects.

Not surprisingly, developing appropriate metrics is a major activity of Six Sigma deployments because Six Sigma emphasizes decision making based on fact and data, not guesswork or intuition.

Hard data are also critical when selecting Six Sigma projects to launch. The data results are rolled up to support specific improvement targets, strategic improvement goals or overall business strategies.

An organization may undertake two kinds of Six Sigma projects:

  1. DMAIC (define, measure, analyze, improve and control) to help redesign existing processes.
  2. DFSS (design for Six Sigma) to design new products, processes or services.

How does an organization go about selecting potential Six Sigma projects? First, leaders put a premium on identifying projects with optimal, short-term results. The reasons are obvious: If an organization can secure some quick wins from initial Six Sigma project implementation, it helps build momentum for further projects down the line, in part by proving Six Sigma approaches work.

Second, project selection is based on a clear understanding of potential financial benefit to the organization. How much is a given project likely to generate in cost savings, increased sales, reduced cycle times for new product development or improved levels of customer service and satisfaction?

Other considerations include asking how much a given project supports the organization’s specific business strategies or strategic improvement goals and what type of benefit is likely to be derived from completion. Six Sigma benefits can accrue to an organization as the result of generating revenue, cutting costs or improving productivity.

  • Level one benefits directly impact an organization’s profit margin (projects have a clear, hard dollar impact on profitability).
  • Level two projects bring about the redeployment of resources inside an organization to increase operating efficiency or productivity.
  • Level three projects directly impact operations by avoiding expenditures or increase the chances of increased future revenues.

Ideally an organization will choose DMAIC and DFSS projects (and judge project results) using a variety of metrics and project filters that analyze projects for appropriateness, payback time and resources required.

Align People and Processes

The fifth Baldrige category relates to human resources and examines how organizations motivate employees and help them develop and use their skills in alignment with the organization’s overall goals, objectives and action plans.

The category also looks at the activities an organization undertakes to foster a positive and productive work environment, encourage creativity and innovation, and support personal and organizational growth.

Finally, the HR dimension of the Baldrige assessment process examines an organization’s performance management systems—specifically to understand how employees are given feedback—and sees how well an organization’s compensation, recognition, and reward and incentive practices reinforce critical work behaviors and business strategies.

The Six Sigma methodology brings valuable tools to the table to help organize the human assets required to launch and sustain successful improvement projects. It calls for identifying key individuals to serve as corporate and project Champions of Six Sigma projects and as process owners, Master Black Belts and Black Belts to spearhead the work of individual Six Sigma project teams.

The methodology calls for training Six Sigma leaders in both the DMAIC and (if necessary) DFSS methodologies prior to beginning their project tasks. Further, it stipulates the development of robust reward and recognition systems as incentives for taking on Six Sigma roles.

The importance of creating appropriate reward and recognition systems to drive people’s behavior as part of Six Sigma deployments cannot be overemphasized. While performance assessment will obviously be based on hard data and concrete results from Six Sigma projects, motivating people for the task of project completion cannot be ensured through simple mandating of compliance with Six Sigma work approaches. It most definitely cannot be sustained this way.

Instead, a CEO and his or her top leadership team must develop appropriate reward and recognition systems to build long-term employee commitment to a Six Sigma way of working.

Building a Process Framework

The Baldrige process management category is concerned with identifying the key aspects of an organization’s process management system, including those processes that deal with customer service and satisfaction, product and service delivery and key business and support processes.

The assessment process seeks to illuminate an organization’s design processes for its products, services, and production and delivery systems. How are these processes designed to meet key operating requirements? What specific performance measures and indicators are used to control and improve processes over time?

Six Sigma can be instrumental when organizations develop a business process framework approach. In other words, it places intense emphasis on leaders’ viewing processes not as isolated business activities or siloed business functions but as a family of interrelated and interdependent business processes, all carefully aligned and integrated to meet CCRs on a continual basis (see Figure 6).

Building a business process framework is essential to success with Six Sigma improvement initiatives for several reasons, including:

  • Driving the kind of sustainable, transforming and enterprisewide change in business operations called for by Six Sigma can’t be sustained by top leaders simply delegating duties to others or even by frequent, information rich communications to everyone inside an organization. Instead, changes in business operations must be formalized and institutionalized by leaders taking an end-to-end view of the business, driving tight organizational alignment and keeping customer needs utmost in mind.
  • To fully leverage improvements and operational efficiencies across an organization (and to truly transform the way it operates), management must focus improvement efforts in those areas most critical to customers and the marketplace. An organization’s business process framework (which encompasses core processes) defines its business model—its value proposition to customers.

Thus, if leaders focus improvement efforts within core processes—at what Smith and Blakeslee term “the nexus of product or service output, and market demand”(4)—it will maximize improvements in business performance, leading to increased customer satisfaction and improved customer loyalty. Developing a business process framework is about “constantly adjusting core business processes to stay in sync with customer needs and large scale marketplace requirements,” note Smith and Blakeslee.

To help build a business process framework that supports improvement efforts, an organization’s CEO and top leadership team should ask themselves some important questions early in the planning of their improvement initiatives. For example:

  • Do we consistently fulfill customers’ requirements, or are there gaps in our performance?
  • How do we precisely measure our customers’ view of value?
  • Where does our business performance stand in relation to our competitors? Do we exceed customer expectations, or do we have significant problems with customer satisfaction, loyalty and retention?
  • Do existing improvement initiatives and activities bring continuous, sustainable improvement to business processes (reductions in defects and cost or improvements in productivity and profitability)? Or, has the organization’s business performance plateaued?

As leaders ask these questions, they not only become increasingly customer centric but also start to develop a finely tuned set of performance measures to drive organizational performance and successfully manage and monitor that performance going forward.

Indeed, as discussion proceeds, leaders determine what metrics they must use and the performance levels that must be realized and sustained if customers are to be satisfied (see Figure 7).

Concrete and Measurable Results

That brings us to the seventh and final category of Baldrige performance excellence: business results. Here, the Baldrige process assesses an organization’s performance and improvement in several key areas, including customer satisfaction, product and service performance, financial and marketplace performance, HR results and operational performance.

The assessment also seeks to determine an organization’s performance levels compared to its competition by capturing key data points that can be used as the basis for assessing quality or process improvement efforts.

The value of Six Sigma in operationalizing improvements in this category is that the methodology at its core is all about achieving and reporting specific performance goals, measuring success in meeting customer requirements, monitoring and sustaining a high level of performance and using a complex family of performance indicators (not a single indicator) to ensure effective operations and quality control within an organization.

Six Sigma calls for building highly sophisticated performance scorecards and customer dashboards to track, measure and monitor business (and process) performance looking forward.

Scorecards provide an overview of an organization’s performance from a customer’s point of view and typically show performance across a broad family of business indicators. Dashboards, on the other hand, typically consist of a set of metrics, normally not more than five or six, that provide an at-a-glance summary of a Six Sigma project’s status or the performance of core processes and their alignment with customer expectations from an organization’s perspective.

Look at Figure 8 where the performance of key business processes overseen by process owners or teams is being continuously monitored by process dashboards, while at the output end, customer scorecards display a schematic of key customer quality control measures. The latter enable the customer to see how well its suppliers are doing in meeting specific requirements.

Six Sigma also establishes robust processes to review and report key results, roll results from individual Six Sigma projects into an organization’s profit and loss statement and build performance benchmarks to compare overall organizational and process performance against that of its competitors on a continuous basis.

Six Sigma’s ability to apply performance benchmarks to the assessment of corporate performance enables an organization not only to do descriptive analysis of its performance at any point in time (for example, “We’re better by x% this year over last year”). It also enables a firm to assess its performance compared to other organizations within its industry, region, business tier or market niche. This is possible because of the VOC and VOM activities Six Sigma project teams undertake early in the process.

These activities help firms identify hundreds and sometimes thousands of customer and marketplace requirements critical to the success of any organization in a given industry and to translate these into specifications and performance metrics for either new or improved processes. Once these VOC and VOM data have been translated into critical to quality (CTQ) measures and built into performance scorecards and customer dashboards, they become a powerful baseline for insightful comparative analysis of business results between organizations or among different organizations in a single industry.

The executive dashboard in Figure 9 shows the kinds of metrics one company developed, after synthesizing data from its VOC and VOM activities, translating them into CTQs and building these specific performance categories into this particular customer dashboard.

Figure 10 displays a more in-depth view of one metric from an executive dashboard. It shows a mix of leading, lagging and comparative indicators—in this case for assessing delivery reliability and on-time delivery.

Six Sigma and Baldrige

Increasingly, many Baldrige examiners are viewing Six Sigma as the ideal vehicle for deploying Baldrige improvement initiatives. That’s because examiners are concerned with understanding not just how well an organization does in terms of sustainable results but also how it performs in comparison to its competitors, industry averages and other organizations in its business class and so forth. Performance benchmarks, scorecards and customer dashboards all afford the means to do this.

At the same time, Six Sigma’s emphasis on statistical analysis and careful measurement makes the final reported results from Six Sigma projects extremely credible. In the wake of the recent accounting and corporate reporting scandals reported at Enron, WorldCom and elsewhere, Six Sigma becomes a particularly good methodology for evaluating business results with shareholders, customers, suppliers, regulators, legislators and Wall Street.

Indeed, Six Sigma is a methodology more and more organizations are likely to use in the years ahead to validate their results with the business and media community and foster renewed stakeholder confidence in corporate governance procedures.

When used together, the Baldrige criteria and the robust statistical and analytical tools embodied in Six Sigma complement one another in powerful ways. Indeed, the marrying of Baldrige quality improvement goals and targets with Six Sigma’s proven ability to deliver concrete and measurable results creates a perfect engine for ongoing organizational transformation.

The values embodied in the Baldrige criteria provide an ideal set of performance and quality criteria toward which an organization should continuously strive. Six Sigma, meanwhile, provides the ideal deployment vehicle for leveraging quality, process and performance improvements enterprisewide, resulting in quantum leaps in business performance.

References

  1. Dick Smith and Jerry Blakeslee, Strategic Six Sigma: Best Practices from the Executive Suite, Wiley, 2002.
  2. Malcolm Baldrige National Quality Award, Criteria for Performance Excellence, National Institute of Standards and Technology, 2003.
  3. Baldrige National Quality Program, www.qualilty.nist.gov.
  4. Smith, Strategic Six Sigma: Best Practices from the Executive Suite, see reference 1.

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