Several companies implement Six Sigma to reduce costs, improve the customer experience, increase revenue, and develop future leaders and implement a cultural change. The decisions of the company are no longer decided by individual opinions, they are decided by facts with supporting data.

Operation areas tend to be the best place to implement Six Sigma. Operations departments tend to deal with the largest number of repeatable processes. Many companies have implemented Six Sigma based on early studies that showed it reduced costs and decreased problems.

There are several metrics used to measure the data in a Six Sigma process. Depending upon the type of business you are and what area of your business you are focusing on will drive different data metric outputs. How can you properly measure your Six Sigma results?

The financial benefits tend to be the area of greatest importance to many organizations. A Champion is in charge of integrating a finance role into the deployment phase and is in charge of having the finance department sign off on the final number. In the beginning, tools must be created that state what aspects of the Six Sigma process will be measured. Your Champion must establish the outcome measures for the different projects, determine the current performance and identify what actions can be taken to obtain a particular result, and establish a process that will ensure Six Sigma projects maximize the return on investment.

Six Sigma benefits will fall into several categories, it is vital to your company to select categories that are in line with your overall philosophy. Each tracking procedure should be dealt with in the same way.

The following are common categories used to figure out the Six Sigma results:

• Cost reduction - This will impact your bottom line. Start by including resources or other costs and take them out of the business bottom line. Now provide an overall reduction of the expenses that fall to the bottom line. If resources are eliminated as a result of the Six Sigma project, the project receives a benefit for the cost reduction. These reductions should be measured by the amount of annualized cost that was eliminated from the business.
• Increased capacity - This measurement tool will be used to improve the productivity of a process. This benefit is measured by calculating the amount of expense retained in order to prevent future cost increases.
• Cost avoidance - This benefit is measured as the realistic cost avoided as a result of the implementation of the new process.
• Revenue growth - This is measured by calculating the value of new business for the increase in revenue over a pre-defined period.
• Retained revenue - Revenue retained from existing customers at risk. This is measured by calculating the value of existing business over a pre-defined period.
• Improved investment income - The additional investment income earned due to customers paying before their due dates. The financial benefit is calculated by determining the net present value of the accelerated cash flow over a pre-determined period.
• Risk management - Projects that enable the company's risk in functional areas such as audit and insurance. Benefits of these types of projects are measured by improvements in either reduced economic capital or a lower cost of capital.

The Champion can determine if the project falls into the above categories and if it does not fall into one of the categories, a team consisting of the process owner, Master Black Belt, Black Belt, and finance team will create their best calculation of the project. This calculation will need to be reviewed by management in order to ensure the standards and guidelines of the Six Sigma process are maintained.

Key Performance Indicators

Key performance indicators (KPIs) are financial metrics and non-financial metrics that are used to define and measure the progress of a company toward its goals. A good business is able to identify, define, track and act up their KPIs.

KPIs differ for each business. The KPIs you select must reflect the goals of the Six Sigma process you have established.

Many companies believe in following the acronym "SMART: when they are identifying and applying KPIs:

• Specific
• Measurable
• Achievable
• Result-oriented or Relevant
• Time based

A good KPI will include customer related numbers such as: new customers, satisfied customers, or customer turnover. Bad debts are another good KPI to use as you can track where you are losing money. The data from KPIs are becoming a large concern for many companies. The quicker they have results, the quicker they can make a decision. Having large delays can slow your business process down and even cause headache for your customers. The KPIs you identify should yield a weekly or daily availability to your data.

KPIs can be summarized into several sub-categories such as:

• Actionable indicators - These are great for helping a company control the effect of change.
• Directional indicators - These specific if you business is growing or getting worse.
• Practical indicators - What is interfering with your existing company process?
• Quantitative indicators - These can be presented as a number.

KPIs target what is of value to your company. What does your business value and need the most? Strategy maps are a common tool used to measure the KPIs. These maps allow you to understand the KPI process and the management procedures that need to be used.

KPIs are long-term considerations, they often do not change. It is important to define the KPIs consistency from project to project. KPIs should be measurable, dependable, observable, reliable, and specific.

Extra Six Sigma Measurement Tools

Of course every industry will have different tools to measure Six Sigma results.

Some of the following tools may help you get started with your Six Sigma measurements:

• Leadership involvement and support
• Techniques to promote a cultural change
• Choosing the best people for the Six Sigma process
• Delivering proper training to all the people involved
• Setting measurable goals and objectives
• Establishing clear roles and responsibilities
• Paying attention to each phase in the Six Sigma process
• Include project tracking and reporting procedures
• Stress the importance of accountability

Case studies have shown that failed Six Sigma programs come as a result of poor leadership, poor communication, poor training or inadequate training, and poorly defined projects. If Six Sigma is going to be successful in any organization, proper metrics need to be defined from the beginning. Your deployment team needs to be able to measure all the results from the implementation of the Six Sigma program.

Six Sigma does take time to implement. Six Sigma requires a strategic vision with diligence, patience, hard work, and effective leadership. Six Sigma requires a cultural change on the part of everyone at the company in order to achieve long-term success.

There are graphical ways to measure the success of your Six Sigma process. Commonly these graphics are based on the measurements of the outcome of the process and measurements of the variation of the process. The outcome measurement approach can be applied to practically every aspect of your Six Sigma process, but it does require more time and effort to collect and analyze the data. On the other hand, using a direct measurement approach will allow for variables of process capability. The approach assumes the process is stable and can be classified by repetitive measures. Both approaches are limited to different factors, but they are excellent to inform you of the performance prior to and after Six Sigma.

Keep in mind that Six Sigma is a measure of the reliability or predictability of a process. Reliability can be expressed as an absence of failure. A failure occurs when a system does not meet its requirements or expectations. A fault is any defect that contributes to a failure. This means that the failure is a symptom that a fault lies in the process somewhere. Knowing there is a failure means you can identify where in the process there is a problem and implement Six Sigma to fix the problem. The design itself may be the problem. Of course failures may not be observed by the users and may be overlooked. Reported failures also add to the fault of a process.

Faults can exist for a long time without actually casing a reported failure. Some faults may cause thousands of different failures that cannot be traced back to the original source. This may take your company a long time to identify if the Six Sigma process is working properly because there are too many underlying factors. Some systems are designed to be self monitoring and will report the slightest failure. The problem with an automatic monitoring system is that they are only trained to identify certain faults and may overlook small faults that are causing larger problems. Your flow charts will help you identify some of these underlying problems that tend to slip through the cracks. Proper implementation of Six Sigma will also help to expose these small faults and help your company save thousands of dollars before they become larger problems.