What Is the Value of Process Improvement?

By: Chris Anderson

What’s the value of process improvement? One way to look at it is by examining the reason for having a quality system in the first place. Let’s start by understanding the basics of six sigma, which define the maturity level of an organization’s management system. By that, we don’t just mean just a quality management system, but your entire system of management.

Sigma Levels
1 sigma = 67% error rate (or “2 out of 3 transactions are in error”)
2 sigma = 33% error rate (1 out of 3 transactions in error)
3 sigma = 6.7% error rate (1 out of 15 transactions in error)
4 sigma = 0.63% error rate (1 out of 160 transactions in error)
5 sigma = 0.02% error rate (1 out of 4,300 transactions in error)
6 sigma = 0.00034% error rate (1 out of roughly 290,000 transactions in error)

We define a system as “in control” when an organization’s processes exhibit a “3 sigma” (6.7%) or lower error rate. If your organization has not defined its processes, effectiveness criteria, and competencies, it’s more likely that you’re at a 1 or 2 sigma level. In order to achieve the “3 sigma” level, your company must consistently make no more than 6.7 errors per hundred — that’s a 93.3% success rate.

“Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.”
From W. Edwards Deming’s “Fourteen Points”

Are You Operating at a 93.3% Success Rate?

Let’s say you see 60-70% as normal, which is about 2 sigma (66% success). The “delta”, or difference, between 2 and 3 sigma is about 27%. We believe that by adopting a quality process improvement program, you should see your success rate rise from 66% to 93%. That’s a 41% improvement over your current rate! What organization wouldn’t be interested in that?

Once you hit 3 sigma, your next goal is to improve to a 4 sigma level, then 5 sigma, and finally 6 sigma (which is as close as you can realistically get to “zero defects” in most operations).

Now quantify the benefit. What is 27 percentage points of success worth to your customers? The cost of implementing a six sigma process improvement program is small compared to the benefits to your customer (and, of course, to your bottom line). Process improvement practically guarantees customer retention, and can lead to customers advocating for you.

But if that’s not for you, don’t implement a quality program. Learn to live with a 2 sigma error rate — and hope your customers can live with it, too.

See this and other newsletter articles at http://amt-mep.org/files/7613/9955/0659/2014-05.pdf

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