Six Sigma

Six Sigma

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.

Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.

What Is Six Sigma?

The term Six Sigma refers to a set of quality-control tools that businesses can use to eliminate defects and improve processes to help boost their profits. It was developed by a scientist in the 1980s while he was working at Motorola.

Six Sigma is a statistical- and data-driven process that works by reviewing limit mistakes or defects. It emphasizes cycle-time improvements while reducing manufacturing defects to no more than 3.4 occurrences per million units or events. This means that an error generally occurs with a six-standard deviation event from the mean because only 3.4 out of a million events along a bell curve would fall outside of six standard deviations.

Key Takeaways

  • Six Sigma is a quality-control process that businesses used to eliminate defects and improve processes.
  • The model was developed by a scientist who worked at Motorola in the 1980s.
  • Companies often choose to use the Six Sigma model to boost their profits.
  • Originally developed as a management method to work faster with fewer mistakes, it is now an industry standard with certifications offered to practitioners.
  • Lean Six Sigma is a team-focused managerial approach that seeks to improve performance by eliminating waste and defects while boosting the standardization of work.

Understanding Six Sigma

Six Sigma is a management ideology that focuses on statistical improvements to a business process and advocates for qualitative measurements of success over qualitative markers. As such, Six Sigma practitioners are business people who use statistics, financial analysis, and project management to achieve improved business functionality.

Six Sigma is a statistical benchmark that shows how (well) a business process works. As mentioned above, an error happens when an event occurs with six standard deviations from the mean with no more than 3.4 occurrences per million events. This means that a process is considered to be efficient if it produces less than 3.4 defects per one million chances. A defect is anything produced outside of consumer satisfaction.

It is also a training and certification program, which teaches the core principles of Six Sigma. Practitioners may achieve the Six Sigma certification belt levels, ranging from white belt to black belt. It is also a philosophy, which promotes the idea that all business processes can be measured and optimized.

Six Sigma has evolved into a more general business-management philosophy, focusing on meeting customer requirements, improving customer retention, and improving and sustaining business products and services. Six Sigma applies to all industries. Many vendors, including Motorola itself, offer Six Sigma training with special certifications carrying the names of yellow belt, green belt, and black belt.

Sigma is a way to measure standard deviation.

The 5 Steps of Six Sigma

Adherents and practitioners of the Six Sigma method follow an approach called DMAIC. This acronym stands for define, measure, analyze, improve, and control.

DMAIC is a statistically driven methodology that companies implement as a mental framework for business process improvement. According to the ideology, a business may solve any seemingly unsolvable problem by following the five DMAIC steps:

  1. A team of people, led by a Six Sigma champion, defines a faulty process on which to focus, decided through an analysis of company goals and requirements. This definition outlines the problem, goals, and deliverables for the project.
  2. The team measures the initial performance of the process. These statistical measures make up a list of potential inputs, which may cause the problem and help the team understand the process’s benchmark performance.
  3. Then the team analyzes the process by isolating each input, or potential reason for the failure, and testing it as the root of the problem. The team uses analytics to identify the reason for process errors.
  4. The team works from there to improve system performance.
  5. The group adds controls to the process to ensure it does not regress and become ineffective once again.

Lean Six Sigma

Lean Six Sigma is a team-focused managerial approach that seeks to improve performance by eliminating waste and defects while boosting the standardization of work. It combines Six Sigma methods and tools and the lean manufacturing-lean enterprise philosophy, striving to reduce waste of physical resources, time, effort, and talent while assuring quality in production and organizational processes. Any use of resources that do not create value for the end customer is considered a waste and should be eliminated.

Six Sigma defines numerous ideas within the business sphere and is sometimes confusing.

Six Sigma Belt Rankings

As noted above, individuals can obtain Six Sigma certification, which solidifies and verifies their professional skills. These certifications are awarded through a belt system similar to karate training. These belt levels are:

  • White belt: Individuals with a white belt have not gone through any formal training or certification. This belt gives professionals a basic framework, which allows them to take part in certain quality control and waste reduction projects.
  • Yellow belt: This level provides additional training beyond the white belt level. Yellow belts can become contributing project team members. They may help managers who have higher belts.
  • Green belt: Those who pass this level must take part in a complete course that trains them to come up with process improvement techniques. The green belt certification is ideal for individuals who work in certain industries, such as project or financial management, as well as health care. Graduates often become project leaders.
  • Black belt: People who graduate from the green belt level can move up to the black belt certification. Successful graduates can break down and deal with more complex jobs and projects. They are taught how to tackle large-scale changes that can impact their companies through lean Six Sigma projects.

People with a black belt can become masters and champions. Someone with a master black belt is considered an expert and strong leader with excellent problem-solving skills. A champion is a lean Six Sigma leader who can maximize profits through the elimination of waste and defects.

You can get certified by going through courses offered by certain schools or companies. Keep in mind, though, that there is no unified standard for the courses. As such, the curriculum for Six Sigma certification varies, which means individual courses can vary depending on the offering entity.

Real-World Examples of Six Sigma

Six Sigma is used by corporations and local governments. Below are two examples of how six sigma improved operational efficiency, saved money, and increased customer satisfaction.


Microsoft (MSFT) is one of the largest software producers in the world. In order to improve the reliability and availability of its networks worldwide, Microsoft implemented Six Sigma methodologies to use a robust data-driven process to help eradicate any defects in their systems and data centers to systematically reduce IT infrastructure failures.

The company first established standards for all of its hardware and software to create a baseline measurement for detecting defects. Microsoft used root-cause analysis, including collecting data from past high-priority incidents, server failures, and recommendations from product group members and customers. Using the historical data, Microsoft established baseline standards from which to measure going forward.

Large amounts of data were collected on a daily and weekly basis from various servers. Data analysis and reporting identified the defects and remediation steps for each defect were then established. The incidents were prioritized based on how severe the defects impacted the business and the company’s underlying services.

Using Six Sigma methodologies, the teams executed eradication initiatives of the defects. As a result of Six Sigma, Microsoft improved the availability of its servers, boosted customer productivity, and increased customer satisfaction.

Local Government

Ventura County, California, credited the use of Lean Six Sigma for a savings of $33 million. The local government began to use the program on a county-wide level in 2008 and has trained more than 5,000 employees on employing the methodology. The county states the savings are coming from hard budget items, which no longer need funding as well as savings in employee hours.

How Can You Get Six Sigma Certification?

You can get your Six Sigma certification through a company or college. Keep in mind, though, that there is no unifying body that standardizes the curriculum. This means that courses can vary based on where you take your course.

What Does Six Sigma Mean?

Six Sigma refers to a methodology that is driven by data and statistics. It is used by businesses to eliminate defects and improve any of their processes in order to boost their profits.

What Is the Difference Between Six Sigma and Lean Six Sigma?

Six Sigma is a process with a certain outcome. Companies implement Six Sigma to help eliminate defects and improve processes so they can boost their profits.

Companies that put lean Six Sigma methods into their plans do so in order to improve performance by eliminating waste and defects while boosting the standardization of work. The key with lean Six Sigma is to add value for the customer.

What Are the Steps of Six Sigma?

The five steps of Six Sigma follow an approach that industry professionals call DMAIC. This is an acronym that stands for define, measure, analyze, improve, and control.

Deixe um comentário

O seu endereço de e-mail não será publicado. Campos obrigatórios são marcados com *

Follow by Email
WhatsApp WhatsApp