Six Sigma Business Scoreboard: Creating a Comprehensive Corporate Performance Measurement System

by Praveen Gupta

Overview

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Filled with performance-measuring techniques that can be used throughout a corporation, the Second Edition of Six Sigma Business Scorecard continues to be a proven tool for gauging and ensuring success in today's complex business environment.

This guidebook was designed to translate an organization's mission and business strategies into performance measures and operating objectives. Widely used around the world, it has become the linchpin of an integrated approach to taking the Six Sigma program of any company to the next level.

Ensure Sustained Profitable Growth

Without a strong grasp of performance metrics, a company can have no clear, quantitative indication of its performance improvement. Six Sigma Business Scorecard offers a unique approach to measuring performance. Readers will learn how to track their improvements in operations and financials-and make critical adjustments if such improvements are not up to expectations-using Six Sigma. Written by an internationally recognized thought leader in business management and a practitioner of process management, Six Sigma, and innovation, this much-needed Second Edition of Six Sigma Business Scorecard delivers an innovative Execution Map allowing you to implement, reap, and quantify the many advantages of Six Sigma.

You'll benefit from:

• Key performance metrics for companies already using Six Sigma, to determine their sigma level
• A well-defined measurement system, which builds on the "Balanced Scorecard," for use throughout a corporation
• The Business Performance Index (BPIn), specifically designed for CEOs, which monitors corporate wellness with ease
• The Innovation Index, for accelerating innovation
• The 4P model, for process management

  Six Sigma Business Scorecard will show you how to implement a successful and a measurable Six Sigma program.

Product Details

ISBN-13:	9780071479431
Publisher:	McGraw Hill LLC
Publication date:	11/28/2006
Edition description:	Revised Edition
Pages:	325
Product dimensions:	6.00(w) x 9.00(h) x 1.00(d)

About the Author

Praveen Gupta President of Accelper Consulting, has gained extensive experience in the field of business management over 25 years. He has been a pioneer of Six Sigma methodology at Motorola, and of optimizing business performance by using his Execution Map consisting of Business Scorecard, Six Sigma, innovation, and process management. For each of the four elements, he has authored a book providing simple-to-use but powerful tools. Mr. Gupta writes a monthly column, "Six Sigma Sense," and has authored or co-authored several books, including The Six Sigma Performance Handbook, Healthcare Excellence, and Business Innovation in the 21st Century. He holds a BSEE from the Indian Institute of Technology and an MSEE from the Illinois Institute of Technology. He is also a member of the Chicago Executive Club, the Turnaround Management Association, and IPC. Mr. Gupta is a Master Six Sigma Black Belt and a Fellow of ASQ. He teaches at DePaul University and the Illinois Institute of Technology, both in Chicago, Illinois.

Table of Contents

Foreword   A. William Wiggenhorn     xiii
Foreword   Mohanbir S. Sawhney     xv
Preface     xvii
Trends in Performance Measurements     1
Technology and Globalization     1
Macro Economic Measures     2
Evolution in Performance Measurements     3
Juran's Financial and Quality Trilogies     5
Business Trilogy     6
ISO 9000 Quality Management System     7
Process Thinking     9
Malcolm Baldrige National Quality Award Guidelines     10
Balanced Scorecard     14
Six Sigma Business Scorecard     14
Take Away     16
Six Sigma-An Overview     19
Complexity and Performance     19
Cost of Poor Performance     20
Basics of Six Sigma     23
Traditional Approach to Six Sigma     24
The Breakthrough Approach to Six Sigma     25
Define     26
Measure     28
Analyze     33
Improve     38
Control     39
Challenges in Implementing Six Sigma     41
Take Away     43
Need for the Six Sigma BusinessScorecard     45
Missing Rate of Improvement     47
Insufficient Process Performance Measurements     48
Deming's 14 Points     51
Measurement Challenges with Quality Systems     52
Limits of ISO 9000     52
Shortcomings of six sigma measurements     55
Limits of the Balanced Scorecard     56
Measurements According to The Goal     58
Developing a New Measurement System     58
Take Away     60
The Six Sigma Business Scorecard     63
Business and Leaders     63
Current Accounting Systems     65
Information Age Paradigm     65
Sipoc Analysis for Constraints     67
Managing the Profitability Process     69
External Factors     70
Process-Based Measurements     71
Six Sigma Business Scorecard     71
Business Processes to Consider     72
Elements of the Six Sigma Business Scorecard     73
Leadership and Profitability     75
Management and Improvement     77
Employees and Innovation     80
Purchasing and Supplier Management     82
Operational Execution      83
Sales and Distribution     87
Service and Growth     87
Six sigma Business Scorecard Measurements     88
Business Performance Index     89
Corporate DPU and DPMO     90
Corporate Sigma Level     91
Comparing Balanced Scorecard and Six Sigma Business Scorecard     91
Take away     92
Planning for the Six Sigma Business Scorecard     95
Leadership and Improvement     95
Extent of Improvement     96
Business Opportunity Analysis     97
Organizational Adjustments     98
Vision     100
Goals     101
Core Competencies     102
Systems Thinking     102
Employees' Involvement     103
Team Structure     104
Understanding Measurements     105
Identifying Process Measurements     106
Action Plan for Performance     109
Corporate Plans     112
Progress Review     112
Take Away     113
Six Sigma Business Scorecard Development     115
Profitability Visibility     117
Measurement Failures     118
Features and Benefits of the Six Sigma Business Scorecard     120
Impact of Customer Requirements on Measurements     121
Factors Influencing Profitability     123
Growth and Profitability     124
Ownership for Performance     126
Step-by-Step Development of the Six Sigma Business Scorecard     127
Sample Measurements     129
BPIn Example     130
Take Away     132
Measures of Innovation     135
Understanding Innovation     137
Managing Ideas     140
Direct Measures of Innovation     142
Take Away     144
Implementing the Six Sigma Business Scorecard     145
Creating Awareness     146
Building the Business Model     146
Establishing the BPIn     147
Establishing Six Sigma Business Scorecard Measurements     148
Ensuring Data Collection Capability     150
War on Waste     152
Managing Change     153
Integrating Technology and the Six Sigma Business Scorecard     156
Take Away     157
Strategy for Execution     159
Strategy     160
Execution     162
Strategy for Execution      163
Organizational Alignment     165
Business Scorecard for Strategy Execution     167
Improving Performance     169
The Execution Map     170
Take Away     190
Adapting the Six Sigma Business Scorecard to Small Businesses     191
Six Sigma Business Scorecard and Business Size     191
Implementing in a Small Business     194
Take Away     196
Monitoring Performance Using the Six Sigma Business Scorecard     197
Management Review     197
Leadership Performance Review     200
Employees' Performance Review     203
Management Performance Review     204
Compensation for Performance     207
Communication with the Community     208
Annual Review     208
Take Away     209
Performance, Profitability, and Standards     211
Dow Jones Industrial Average Companies     211
Performance and Profitability     212
Measurements for Growth and Profitability     215
Balancing the Six Sigma Business Scorecard for Growth and Profitability     216
Business Performance Index (BPIn)     218
Managing for Profitability      221
Managing Sales     221
Reducing Costs     222
Facilitating Growth     224
Inspiring for Innovation     225
Take Away     227
Leadership for Performance     229
Leadership Challenges     229
Lessons in Leadership     232
Seven Practices of Good Leadership for Superior Execution     234
Personal Practices     234
Professional Practices     235
Leadership Expectations     235
Leadership role models     237
Leadership Characteristics According to the MBNQA Guidelines     239
Leadership Improvement     241
Take Away     242
Six Sigma Business Scorecard Validation     245
The 10 BPIn Measurements     246
Employee Recognition (Percentage of Employees Recognized by CEO)     247
Profitability (Percentage of Net Income)     247
Rate of Improvement in Process Performance     248
Recommendations per Employee     248
Total Spending/Sales     249
Suppliers' Defect Rate     249
Operational Cycle Time Variance     250
Operational Sigma     251
New Business/Total Sales      251
Customer Satisfaction     252
Application of BPIn to DOW 30 Companies     252
Correlation Between BPIn and Profitability Performance     254
Take Away     257
Field Implementation     259
Business Scorecard Implementation Steps     267
Take away     274
Integrating the Six Sigma Business Scorecard and Quality Management Systems     275
Six Sigma Methodology for Continual Improvement     280
Six Sigma Business Scorecard for Effectiveness     280
Integrating the Six Sigma Business Scorecard with ISO 9001     282
Cost Containment     282
The Improvement Methodology     283
Steps to Integrate Six Sigma and ISO 9001     287
Conducting Good Internal Audits     289
Benefits of Integrating ISO 9001 and Six Sigma     290
Take Away     291
Note from the Author     293
Index     295

Editorial Reviews

Excerpts from article:

New Book Captures Keys to Short- and Long-Term Business Success

..."Six Sigma Business Scorecard, "published by McGraw-Hill, combines today's most powerful management concepts...The book starts with a comprehensive review of Six Sigma and its ability to generate significant returns by focusing on customer satisfaction and profitability. Gupta then describes the following seven highly critical areas to manage in any organization: 1) leadership and profitability; 2) management and improvement; 3) employees and innovation; 4) purchasing and supplier management; 5) operational execution; 6) sales and distribution; and 7) service and growth. Using these criteria, Gupta develops the Business Performance Index (BPIn), a comprehensive business guide that can judge the overall performance of any organization. The book also portrays how the BPIn can be used to determine a corporate sigma level that is missing in the Six Sigma methodology used today.

Additionally, "The Six Sigma Business Scorecard" includes an interview with Bob Galvin, former CEO of Motorola, in which he shares his views on leadership performance...

Excerpts from review by Paul Harmon

Praveen Gupta was at Motorola in 1987 when Bill Smith first proposed what has become Six Sigma, and has been working to improve processes ever since. Somewhere along the line Mr. Gupta became focused on the problems of relating corporate goals and profits to process changes. Mr. Gupta describes the history and practices of Six Sigma in a few succinct chapters. He goes on to compare and contrast Six Sigma measures with ISO 9000 measures and the measures used by the US's Baldrige award system. In the end he concludes that, while each contributes to improved processes, they do not tend to establish clear links to corporate goals, and ultimately, to corporate profits. Or, put slightly differently, there is no way to conclude, from lots of specific Six Sigma projects, whether the organization, as a whole is getting better.

Next, Gupta considers Kaplan and Norton's Balanced Scorecard system. Balanced Scorecard seeks to shift senior management's attention for financial measures to a more balanced set of measures which include: (1) Financial Measures, (2) Customer-Related Measures, (3) Internal Business Operations Measures, and (4) Learning and Growth Measures. Gupta describes the system and some of its successes. He proceeds, however, to argue that, as a generalization, the Balanced Scorecard has been more successful with senior managers than with operations managers.

In other words, Six Sigma focuses on processes, and rather narrowly defined processes at that, and doesn't reach up to link to strategies and goals. Balanced Scorecard starts with the strategies and goals of senior managers and doesn't reach downward to provide direction for managersand employees engaged with lower-level process improvement.

Gupta concludes that a better performance measurement system is required, and proposes it. Gupta's solution is the "Six Sigma Business Scorecard." In a nutshell, he attempts to merge the best of the scorecard approach with some Six Sigma measurement concepts. Rather than rely on four sets of measures, Gupta proposes that companies rely on seven, including: Leadership and Profitability Management and Improvement Employees and Innovation Purchasing and Supplier Management Operational Execution Sales and Distribution Service and Growth

...I...recommend this book to those concerned with the measurement of corporate performance, with Balanced Scorecard programs, and with Six Sigma programs. Clearly Gupta has thought long and hard about these issues and he provides detailed discussions of many important and difficult issues that those involved in performance management must solve in the years ahead. A company may not adopt Gupta's entire approach, but this book is a valuable sourcebook that describes specific problems and suggests ways of dealing with the shortcomings of existing practices. It will probably inspire others to work on the important problems that Gupta pinpoints.

From the Publisher