Six Sigma

What Is Six Sigma?

Six Sigma is a set of data-driven methods for improving business processes by finding and removing the causes of errors and variation. The name comes from sigma, the Greek letter used for standard deviation, which measures how widely results spread around an average. At the highest level of performance, a process produces only about 3.4 defects per million opportunities, and that target gives the methodology its name.

Motorola developed Six Sigma in the 1980s. Manufacturers adopted it first, and later service firms, banks and healthcare providers followed. It treats quality as something that can be measured precisely, so decisions rest on statistical analysis rather than opinion.

How It Works

Most Six Sigma projects follow the DMAIC framework, a five-phase cycle:

• Define the problem, the customer requirements and the project goals.
• Measure the current performance of the process.
• Analyze the data to find the root causes of defects.
• Improve the process by testing and implementing solutions.
• Control the improved process so the gains last.

A related framework, DMADV, is used to design new products or processes rather than fix existing ones. Projects are led by practitioners who hold belt ranks, such as yellow, green and black belts, which reflect their level of training. Common tools include process capability analysis, control charts and root cause analysis.

Measuring Defects

Performance is often expressed as defects per million opportunities (DPMO), calculated as:

DPMO = (Number of defects / (Units produced × Opportunities per unit)) × 1,000,000

The result is then converted to a sigma level, and a higher sigma level means fewer defects. The 3.4 figure is the commonly cited target. It reflects a convention that allows the process average to drift by 1.5 sigma over time, so it is a benchmark rather than a literal statistical result.

Advantages and Criticisms

Supporters credit Six Sigma with reducing waste, improving consistency and creating a shared language for quality across an organization. Critics argue that its heavy focus on measurement can be costly and rigid, that certification has become a profitable business for consultants, and that it works best in stable, repetitive processes. For investors, a company's use of Six Sigma is one operational factor among many and is not, by itself, evidence of financial performance.