MITSloan Management Review

Abstract

The quality initiative six sigma is sweeping the United States. Is it good for whatever ails your company? Consultant Michael Hammer thinks not. He warns that many business leaders, in their quest for operations-performance improvement, fail to distinguish its strengths from its weaknesses. Hammer presents a strategic, holistic approach business-process management in which six sigma is only one of many useful initiatives. If a business process, such as billing customers, is fundamentally defective, why use six sigma to improve the performance of it? Companies that Hammer calls process enterprises (Caterpillar, Johnson & Johnson, Merck, Progressive Casualty Insurance, Bombardier and IBM) have found more success redesigning whole processes. Certainly, six sigma's ability to unearth root causes of problems is outstanding for narrow cost-saving improvements. But it deploys statistical analytic tools to uncover flaws in the execution of an existing process without asking whether the process itself is flawed. Six sigma assumes that the existing design is fundamentally sound a dangerous assumption. For peak performance, companies should position six sigma in the context of process management and assign process owners. When a problem is amenable to a six-sigma solution, the process owner convenes a project team. If deeper change is needed, then a process-redesign team is organized. Process owners ensure that all performance initiatives (six sigma, enterprise resource planning, balanced scorecard, customer-relationship management and so on) are integrated to support strategic goals. Fitting six sigma into the process-management framework allows organizations to enjoy six sigma's benefits while keeping it away from areas where it doesn't belong. Process enterprises already are reaping cost savings, accelerated new-product introduction, improvements in customer satisfaction and increases in profitability.