ES438 Quality Systems

Assignment


Six Sigma and EFQM Model: A comparison


Alessandro Melgao Barbosa Filho - 1327649
Professor Graeme Knowles

Coventry, 12 March 2014
1

Introduction

The aim of this work is to compare the Six Sigma business approach to the EFQM Excellence
Model.
On the first two sections - EFQM Excellence Model and Six Sigma respectively - an overview
of each model is presented. Those information are from specialized literature and does not have the
objective to cover application of the methods. This extra information will be presented as needed
during the development of this work.
On the next sections the areas where Six Sigma contributes, does not contribute and those
where it conflicts with the practice of the EFQM Excellence Model will be discussed.
At the end a recommendation for additions and modifications for the Six Sigma approach is
presented in order to develop and excellent organization according to the EFQM Excellence Model.

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Contents
Introduction ............................................................................................................................................ 1
EFQM Excellence Model [1] .................................................................................................................... 2
Six Sigma [2] ............................................................................................................................................ 5
Areas Where Six Sigma contributes to EFQM Excellence Model ............................................................ 8
Areas where Six Sigma does not contribute to EFQM Excellence Model ............................................. 10
Conflicts between Six Sigma and EFQM Excellence Model .................................................................. 10
Recommendations ................................................................................................................................ 11
Conclusion ............................................................................................................................................. 12
References ............................................................................................................................................ 13

Table of Figures
Figure 1 - EFQM Excellence Model Diagram [1] ..................................................................................... 3
Figure 2 - Six Sigma level of performance for a stable process. ............................................................. 5
Figure 3 Conversion of published defect rates to Sigma ranges [3]. ................................................... 6
Figure 4 - Cost of quality as a percent of revenue for organizations at specified sigma level [3]. ......... 6
Figure 5 - Six Sigma's leadership hierarchy ............................................................................................. 8



Number of words: 2556
3

EFQM Excellence Model [1]
The EFQM Excellence Model created by the European Foundation for Quality Management is
a framework that helps to assess the progress of an organization towards excellence. It is based on
nine criteria and is best explained following the diagram below:

Figure 1 - EFQM Excellence Model Diagram [1]
The criteria under Enablers refer to how the organization undertakes key activities. In a
perspective of the RADAR logic, Approach, Deployment, Assessment and Review are used when
assessing them. On the other hand the criteria under Results are concerned to the results being
achieved and in a perspective of the RADAR logic the element Results is used to assess.
The arrow on the bottom shows that innovation and learning improve enablers and therefore
improve results as well.
Leadership: Excellent Leader are the ones who develop and facilitate mission and vision
achievement, who develop systems and organisational values for success, who retain constancy and
purpose during periods of change and do all of this by his actions an behaviour, inspiring others to
follow.
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Policy and Strategy: Excellent Organisations bases its mission and vision on the stakeholders
present and future needs and expectations. They should also develop, review and update it using data
from research, learning, measurements and external activities.
People: Excellent Organizations releases the full potential of their human resources. Those
resources have to be planed, managed and improved; competences and knowledge must be
identified, developed and kept. People must be empowered, involved, have and opening for dialogue
and also recognised, rewarded and cared for.
Partnerships and resources: In excellent organisations external partnerships, finances,
buildings, equipment, materials, technology, information and knowledge must be managed.
Process: Excellent Organizations systematically designs, manages and improves its processes
to satisfy customers and other stakeholders. Products and Services are developed and delivered and
customer relationships are managed and enhanced.
Customers, People, Society and Key Performance Results: Excellent Organizations measure
and achieve outstanding results in regard to their customers, people, society and key elements of their
policy and strategy.

5

Six Sigma [2]

Sigma is the Greek letter used in statistics to represent standard deviation. A sigma level like
Six Sigma is used to describe how well a process meets the customers requirements.
Figure 2 illustrates the standard deviation for a stable process.

Figure 2 - Six Sigma level of performance for a stable process.
Achieving six sigma would mean coincide with +6 value. A normal distribution gives you a
value of two times in a billion opportunities but for historical reasons a shift of 1.5 sigma was
introduced in the process and became a standard in industry. With this shift the value is now
equivalent to 4.5 standard deviations which means that the Six Sigma process accepts 3.4 defects per
million opportunities (DPMO).
A broad range of organizations, processes and business sectors have successfully applied
these concepts. As soon as a process can experience defects or errors related to quality, cost of the
service or product or timeliness the Six Sigma techniques can be methodically applied to reduce it and
consequently improve customer satisfaction.
Figure 3 is used to convert any know process directly into a sigma level. Most companies work
between the three to four sigma levels based on their defect rates.
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Figure 3 Conversion of published defect rates to Sigma ranges [3].

Companies working bellow three sigma cannot be profitable for long, therefore only
monopolies and government agencies operates at these levels. This is clear when the cost of quality
is analysed, Figure 4 shows those levels based on the percentage of the sales destined to error
correction, in other words money spent on non-value-added activities.

Figure 4 - Cost of quality as a percent of revenue for organizations at specified sigma level [3].

Among those non-value-added activities, the most common ones are reworking, management
approval, touch-ups, fine-tuning, next-day deliveries as compensation for delayed of failed process
0%
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15%
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and fixing. Those costs often go unreported, considered as the cost of doing business or masked as
operation costs. It leads to higher costs and lower customer satisfaction then lost sales and
consequently lower revenues that can threaten the very existence of the company.
As a rule of a thumb an error that costs $1 to prevent, will cost $10 to detect in-house and
$100 if the customer is the one to detect it. Moving up on sigma levels is to move towards error
preventing, therefore the companies expenses with quality is expected to drop to between 1% and
2% of the sales revenue.
In a Six Sigma company all the waste money that a three sigma company have is reinvested in
the bottom line of the company, boosting the revenues and therefore making those percentages drop
even quicker.
Six Sigma tools are applied within the DMAIC performance improvement model that can be
briefly described as follows [4]:
D Define the goals of the improvement activities
M Measure the existing system
A Analyse the system to identify ways to achieve the desired goal
I Improve the system
C Control the new system


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Areas Where Six Sigma contributes to EFQM Excellence Model
As shown on the review the first principle of EFQM is Leadership. In a Six Sigma context
leadership has a crucial role and is represented by the famous belts hierarchy [5, 6], this hierarchy is
shown on Figure 5.
Champion: Is the one responsible for the implementation of Six Sigma within the organization.
He is also responsible for the strategic planning and for aligning the companys objectives with
Six Sigma development projects.
Master Black Belt: Chosen by Champions, they devote 100% of their time to Six Sigma. They
assist champions and guide Black Belts and Green Belts. Master Black Belts are specialists on
processes enhancement.
Black Belt: Have profound knowledge on the companys processes as a whole and Six Sigma.
They are specialists on the use of statistics tools for processes enhancement. Their primary
focus is on project execution while Champions and Master Black Belts focus on identifying
them. They are also tutor of Green Belts and also devote all their time to Six Sigma.
Champion
Master Black
Belt
Black Belt
Green Belt
Yellow/ White Belt
Figure 5 - Six Sigma's leadership hierarchy
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Green Belt: They are the employees who have their job responsibilities but also take up Six
Sigma implementation. They support Black Belts to achieve the overall results.
Yellow/ White Belt: Know about Six Sigma, usually have been trained as corporate initiative
but are not expected to actively engage in quality improvement activities.
Leadership trainings is not a core ingredient on a Six Sigma curriculum, but studies using the
Multifactor Leadership Questionnaire Short Form-5X (MLQ) on leadership skills (Avolio and Bass,
2004) over more than 330 Black Belts showed that they are above average in all seven
transformational and transactional leadership components when compared with the normative group
of 1,755 leaders. The study also reviewed for a 150 Six Sigma professionals from the same organization
the MLQ improved as the Six Sigma hierarchy goes up. The explanation for this fact is that individuals
selected for those positions are already strong leaders and are also more confident in their leadership
skills [7].
In another words: Six Sigma leaders are excellent leaders!
Next item on the EFQM list is Policy and Strategy. An excellent company focus on stakeholders
needs and desire. The whole objective with Six Sigma is improve quality delivering better products
and services while making more profits. The means to do those improvements are through the use of
data, exactly as expected from an excellent company.
The majority of EFQM areas are broad and therefore have many specific requirements. In some
cases Six Sigma helps with some aspects within on area but conflicts or not contribute to other aspects,
this is the case of the EFQM people area.
As mentioned before Six Sigma companies focus highly on quality interests, inclusive when the
subject is personnel. Among the Six Sigma major players (Champion, Master Black Belt, Black Belts
and Green Belts) the effort to identify, develop and keep knowledge is very high, as much as their
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recognition and reward [8]. On the Conflicts section will be discussed the personnel area for non-Six-
Sigma players.
Resources are usually very well managed on Six Sigma companies. High quality equipment and
materials are required to lower the DPMO at Six Sigma levels. IT is also on the core of Six Sigma policies
for information and knowledge management [9]. All this aims to achieve finance stability with large
revenues.
Processes are definitely the area where Six Sigma most contributes to the EFQM Excellence model.
Processes development and improvement in order to satisfy customers and stakeholders is what Six
Sigma is all about and it has been widely recognized as one (maybe the best) process improvement
model [10].
Six Sigma is all about results therefore is contributes largely on the EFQM Excellence Model
regarding to customers results and policy and strategy key elements results. A company that offers
ultra-high-quality products and services certainly brings excellent results regarding customers
satisfaction.
Areas where Six Sigma does not contribute to EFQM Excellence Model
Physical resources such as the building itself is not part of any Six Sigma concerns. Although
Six Sigma companies can have very well cared buildings it is not because of Six Sigma but is necessary
for an excellent company.
Regarding partnerships, Six Sigma will only care if this partnership is affecting its own quality.
Imagine for example a Call Centre C have adopted Six Sigma, another company H is Cs headset
supplier. It is Christmas season and C decided to hire twenty more employees to keep its one-minute-
or-less policy up to speed. H is expected to deliver those new headsets in 24 hours but fails to do it,
the result is a thousand delayed calls, a thousand errors. Be sure that this partnership will be taken
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care of. An excellent company actively looks forward to improve the quality of its partnerships and
not only reacts when it causes problems.
Besides being highly results oriented, people results and society results are not concerns of
Six Sigma therefore it does not contribute directly to them. As stated before Six Sigma helps greatly
on the development of its key players but does not care directly about its other personnel.
Conflicts between Six Sigma and EFQM Excellence Model
Besides Six Sigma contributes to excellence on a companys policies and strategy, it may also
narrow its view from the future. Six Sigma companies are extremely focused on quality and how to
please the stakeholders, all those processes embedded to Six Sigma difficult innovation and creativity
[11, 12].
As mentioned on the contribution section personnel in a Six Sigma company have a dual
comportment. It over-valorise their players and tends to forget the others. The only improvement
expected for the others is to give them Yellow Belt trainings so they can help (or at least do not make
a mess). The hierarchy system might also break communication channels which is not an excellent
company policy.
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Recommendations
Business models are not marriages and therefore companies on the modern world should not
devote itself to only one.
Each model presents its own advantages and disadvantages and none of them are perfect.
The results obtained by a company utilizing a certain model might differ greatly from another company
using the same model, this is due to different contexts. No one should expect start their car in different
places, follow the same instructions and arrive in the same place.
The best way to achieve consistent results is combining different models and adapting them
to companys specific context. That is how the majority of the models were born in first place.
If the choice is between Six Sigma and EFQM excellence model, choose both! They are
complementary and all the conflicts can be reasonably easily solved. The problem of high focus on
process reduce creativity and innovation can be solved stimulating it by bonus for example, letting
some strategic processes more flexible or even having a dedicated research and development
department. The problem of under-valorisation of personnel can be easily corrected only by focusing
more on them, a strong human resources department is perhaps a good option, along with a well
elaborated career plan.
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Conclusion
Six Sigma and EFQM Excellence Model are very compatible and contributes effectively on the
development of one another.
EFQM is broader than Six Sigma and therefore needs some extra measures such as better
focus on partnership, society and personnel.
The few conflicts between the models can be reasonably easily fixed as suggested on the
Recommendations topic.
In conclusion both models can bring excellent results and Six Sigma is very valid way to achieve
excellence in most of the EFQM Excellence Model requirements.
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References

[1] EFQM, Introducing Excellence. 2003: Brussels.
[2] Keller, P.A., Six Sigma Demystified. 2nd ed. Demystified, ed. McGraw-Hill. 2011, New York:
McGraw-Hill.
[3] Keller, P.A., Six Sigma Deployment. 2001, Tucson: QA Publishing. LLC.
[4] Keller, P.A. and Pyzdek, T., The Six Sigma handbook: a complete guide for green belts, black
belts, and managers at all levels. 2009: McGraw-Hill Professional.
[5] Help, S.S. Six Sigma Certifications. 2009 05/03/2014]; Available from:
http://www.sixsigmahelp.com/six-sigma-certifications/.
[6] Souza, W. Six Sigma + CMMI = Mais Qualidade. 2009 04/03/2014]; Available from:
http://www.blogcmmi.com.br/alta-maturidade/six-sigma-cmmi-mais-qualidade.
[7] Loethen, L. Six Sigma and Leadership: There's a connection. 2008 06/03/2014]; Available
from: http://www.qualitydigest.com/inside/six-sigma-article/six-sigma-and-leadership.html.
[8] Salary.com. Six Sigma Black Belt - U.S. National Averages. 2014 05/03/2014]; Available from:
http://www1.salary.com/Six-Sigma-Black-Belt-Salary.html.
[9] Barone, S., Lo Franco, E., Statistical and managerial techniques for six sigma methodology:
theory and application. 2012, Chichester, West Sussex: Wiley.
[10] Schonberger, R.J., Best Practices in Lean Six Sigma Process Improvement. 2008: Wiley.
[11] Betts, M. The downside of Six Sigma, ISO 9000, etc. 2005 04/03/2014]; Available from:
http://blogs.computerworld.com/node/1329.
[12] Smart, A. Six Sigma Is Draining Employees Creativity. 2013 12/03/2014]; Available from:
http://switchandshift.com/six-sigma-is-draining-employees-creativity.