4. Getting Early Support: Selecting a Six Sigma Provider
Here is the basic corollary in deploying Six Sigma. It’s probably a good idea to bring in a Six Sigma provider (consulting group) to add to your resources. I have seen few large companies deploy Six Sigma successfully when using only internal resources. Would you rather have a few internal people who have seen one or two Six Sigma deployments, or hire an external group with experience with a few dozen Six Sigma deployments? The consultants become variable cost rather than fixed cost. Even 3M, which had great internal resources, chose to use external consultants to kick-start their program. Because of 3M’s internal resources, they were able to internalize the program quickly.
Of course, we’ve all had bad experiences with consultants—usually from the Big Six consulting firms. The standing joke is that a management consultant comes in, asks for your watch, looks at the watch, and tells you what time it is. Consultants have also been accused of having an interesting comparison to sea gulls.
But the fact of the matter is that just about all major Fortune 500 company deployments have used an outside provider. At a minimum, they’ll hire in outside resources from successful Six Sigma companies to buy the capability. And those resources will usually have great depth in Six Sigma deployment experience, perhaps having served as a consultant at one time or another. These new resources will probably have a limited experience in actually deploying Six Sigma. Even Motorola used some outside consultants to put together the original Six Sigma and statistical training material necessary to deploy skills throughout the company. Companies that used outside consultants include AlliedSignal, Honeywell, GE, Dow, DuPont, Ford, 3M, Nokia, Sony, Johnson and Johnson, and many others. Because of the large numbers of Six Sigma deployments, a select few Six Sigma consulting companies have a wide range of experiences in working with large companies to deploy Six Sigma.
My company noticed an interesting slogan displayed by a local plumbing company on the side of one of its trucks, “Often out promised, and seldom out delivered.” That became our slogan as well. You’ll find that Six Sigma providers will tend to say they can do anything you ask for. The challenge is to cut through all the bull and get to the truth. Unfortunately, there are at least two external consulting ghosts in business that haunt Six Sigma deployments: consulting associated with TQM (Total Quality Management) and business process reengineering. Most of us remember those two change initiatives and shudder about going through those again. TQM was one of the worst, but TQM is also an initiative to which Six Sigma is often compared.
These TQM consulting engagements usually lasted for years and included training events everywhere in the company. One of American business’s fatal management flaws is to confuse activity with results. During a TQM deployment, there was always a huge amount of activity: training sessions, reward and recognition sessions, TQM conferences with thousands of people involved. The problem was that most TQM companies rarely saw better business performance.
Generally, the expectations for business performance improvement were not clearly stated and not well tracked. The TQM team typically used the number of people trained as the driving metric. Training doesn’t have an impact on the organization unless training drives new organizational behavior in consistent and positive ways. For example, many companies trained their people in Stephen R. Covey’s Seven Habits of Highly Effective People. Those training programs fell flat because the leaders of the organization were not clear about the behavior changes expected from the program.
Larry Bossidy called TQM from his experience, “Mugs and Hugs.” His point was that there was a whole lot of action, but no impact on the bottom line. And Larry was right. A CEO for a large carpet manufacturer told me that when he added up all the alleged saving from his TQ teams together, the number would sometimes dwarf the actual revenue for the year. This is a classic symptom of the business leadership not linking the program to actual financial targets.
Arthur D. Little surveyed 500 manufacturing and services companies and found that only a third felt TQM was making a significant impact on their businesses. Likewise, A.T. Kearney studied 100 British firms and only a fifth felt TQM left a tangible legacy of business improvement. And I’ve seen other surveys that reported even worse results than that. TQM was weak because its activities were never linked to the company’s external realities, strategies, or to clear financial targets. One of our client companies, a large railroad company, was wrestling with deploying Six Sigma after their relatively unsuccessful launch of TQM. They finally created the slogan, “Six Sigma will put brains into TQ.”
Both Larry Bossidy and his mentor, Jack Welch, consciously and publicly shied away from TQM. Interestingly, they both got right on board with Six Sigma, and both admit it was worth it. In fact, in Jack’s book, Winning, Jack says, “These days, with Six Sigma being increasingly adopted by companies around the world, you can’t afford not to understand it, let alone not practice it.”
Then, in the 1990s, reengineering replaced TQM as the next business panacea. While the idea of reengineering made sense, the methodology was either nonexistent or weak. Reengineering was the method to streamline business processes and eliminate waste. However, it was not related to external realities or financial targets.
In a Harvard Business Review article, the authors studied over 100 companies doing reengineering. These companies claimed some improvement in business processes but little impact on overall business performance. In fact, reengineering developed a reputation as a method to adjust an organization’s headcount to a lower, more cost-effective level. Again, reengineering was not effectively linked to the external realities, financial targets, or strategy.
Michael Hammer, developer of reengineering, claims Six Sigma is not as effective, and, yet, every company that has deployed Six Sigma will claim significant business results. In fact, Hammer’s “official definition” of reengineering from his book, The Reengineering Revolution, is as follows:
The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.
This revolutionary definition easily describes Six Sigma. Hammer should have been ecstatic that Six Sigma provided the “how” to Hammer’s “what to do.” Since Hammer’s 1993 book, Reengineering the Corporation, came out about the time AlliedSignal launched Six Sigma, in the second millennium Six Sigma is thriving. You don’t hear about companies reengineering anything. In fact, the company’s old reengineering group is usually right there to help with the Six Sigma deployment. Another consultant-heavy program bites the dust!
Six Sigma, Consultants, and Consulting Costs
So, why do consultants and Six Sigma work so well together? For one, Six Sigma is very heavy technically. Our Master Black Belts achieve the equivalent of a master’s degree in advanced statistics and change leadership. Also, the corporate deployment protocols are well documented and accepted. Many of the Six Sigma consultants learned Six Sigma as a corporate employee involved in a Six Sigma deployment.
When investigating the ROI of a Six Sigma deployment, the consulting fees are only a small percentage of the improvement in your financial targets. For example, within two years after deploying Six Sigma, both AlliedSignal and GE earned about $880 million to the bottom line. Consulting fees were just a very small percentage of those gains. Richard Schroeder, Six Sigma leader at AlliedSignal, found that AlliedSignal easily paid for all the consulting costs for the first two years within the first six months of deployment. The ROI for consulting services is very quick, especially if you write the contract for consulting services correctly.
Intellectual Property. Six Sigma deployments consist of a huge amount of intellectual property (IP) because training is so crucial. My company alone has over 160 course offerings and over 1,000 course modules already developed over a period of eight years. Few companies have adequate resources with the capability to generate the IP, and generating IP internally would cost a lot of money and, more critically, a lot of time.
The training material must represent the best in instructional technology, so piloting mediocre training material is not a wise strategy. To engage a consulting group that has an IP portfolio, licensing the IP for use inside the company is faster, more effective, and more efficient when compared to developing the IP internally by internal resources. Plus, a good consulting company will accelerate the speed of internalizing the program by training your trainers.
As business leaders, we frequently grossly underestimate the time and actual cost of developing training materials and training support. We often overlook the idea that we don’t have many people within the organization that have the core competency in Six Sigma needed to develop a comprehensive program. Besides, you are probably looking at a change initiative like Six Sigma because you really don’t have the capability to drive that change residing within the company.
Some companies I’ve worked with have had a solid core of people who would quickly learn the guts of Six Sigma. 3M, for example, had a large number of statisticians from which to draw, and that group was converted to their primary Six Sigma training arm. But 3M still called on my company to provide the initial IP and initial training experiences, and 3M turned the program over to internal groups about 12 months later.
While 3M did this, my company still worked closely with 3M’s internal talent to customize the training material to match 3M’s previous good work in process improvement. 3M ended up with a state-of-the-art program very quickly and, as it turned out, very cost effectively.
Accountability for Results. The key to success in using a Six Sigma provider for your Six Sigma deployment is to achieve specific financial targets by working together toward the priority. I remember initially consulting with AlliedSignal. Fred Poses, President of the Engineered Materials Sector, told me that I would have an AlliedSignal office, business card, and phone number. I would also have AlliedSignal expectations.
He was clear in stating his expectation that he wanted his people to think I was one of them and I should work with them as if I was. He ultimately made me an offer to join AlliedSignal to direct the Six Sigma effort, and I joined AlliedSignal as an employee. This view of true partnership is the way the corporation and consultant relationship should be viewed.
Creating a Partnership
The process of creating a partnership with the Six Sigma provider is essential to the success of the deployment, both legally and in spirit. The provider must understand that they are accountable for results and maybe even rewarded for outstanding results. In a sense, the provider should feel like they work for and report to the company. The account manager should feel like and behave as one of your organization’s senior leaders.
Transfer of Technology. The partnership represents the expectation to leave the company with the skills and capabilities to drive Six Sigma without the need of external consultants. This transfer of technology must happen quickly. Great care must be taken not to end up with a provider that establishes a beachhead into your company and stays inside for years. Two or three years should be the maximum expectation of the length of the Six Sigma engagement. Some companies have internalized Six Sigma in less than one year.
Steering Teams. Careful definition and use of steering teams and Champions to direct the provider are called for. Your own employees are, in fact, ultimately accountable for the success of the initiative, not the consultants. The provider should have a group representing your company functioning as a Six Sigma board of directors to which it reports.
Customization teams consisting of company personnel and provider personnel are common. The last thing you need is the perception that the consultants are running the Six Sigma deployment. The company needs to see clearly that their leadership is in charge and excited about it. Every activity should be perceived as close collaboration between the company and the providers.
The consultants will always be matched with internal resources with the consultants providing the initial drafts of the deployment plans. At all times, your internal resources must be aware that they have the accountability for both the success of the program and hitting the financial targets.
Program Reviews. You also should include scheduled program reviews to the provider’s contract to ensure that corporate strategy and corporate financial goals are met. And it’s reasonable to require the provider to do a customer survey about six months into the deployment and to share the results. Be sure to provide a list of people to be surveyed. If you want to know where the provider is weak and strong, these surveys tell it all.
If you are ever called as a reference for the provider, you’ll want to be able to say that this provider was effective. Their costs were in line with the market, the provider saved you months in deployment time, the consultants knew what they were doing, and they helped beat financial targets by 20%. If you can say those things, you had a great provider.
Identifying, Prioritizing, and Selecting Providers
Identifying Providers. Identifying potential providers is uncomplicated in the age of the Internet. You simply search some keywords. The Six Sigma keywords will give you more providers than you know what to do with. In 1998, there were probably only five or six consulting companies specializing in Six Sigma deployments. Now there are hundreds. But determining which provider is the best for you is not so simple because there is a broad differentiation among these competitors. Some are excellent, and some are horrible. Web sites like Isixsigma.com should work well in your initial search activities.
Probably the best way to arrive at a short list is to poll the companies that have already deployed Six Sigma and find out from them who they used. It’s especially helpful if you poll your own people to find out who they know and where. Personal friends or acquaintances can give you more accurate appraisals of their providers.
Other sources of information about providers are the numerous Six Sigma conferences, such as the ones sponsored by IQPC and ISSSP. These conferences are widely attended by consulting companies, and you can pick up materials and get some good face-to-face contact.
I provide a list of questions to ask at the end of this chapter. These providers will generally make formal presentations throughout the conference, so you are in the position to evaluate their technical capabilities.
The RFP: Prioritize and Select Providers. The best tool for making your way through this confusing market is to develop a Request for Proposal (RFP). The RFP will ensure consistency in the way you evaluate potential providers. It will also help you clarify what you need to create a successful Six Sigma program before you actually get started. I have included an example of an RFP format in Appendix A, “RFP Sample Format.” You will probably find that you will use a combination of these to construct your final RFP.
RFPs are tricky. The purpose of the RFP is to get critical information about each provider in a systematic way and develop a short list of consulting companies to invite in for formal face-to-face presentations. If you ask for too much information, the prioritization process and selection process get cumbersome. If you don’t ask for enough information, you may make the wrong decision.
Selecting Providers: The RFP Decision Matrix. Ultimately, being able to convert the provider responses on the RFP to scores on a decision matrix is valuable to the selection success. Table 4.1 shows an example of a decision matrix. The secret is to develop a matrix that follows your RFP outline. Notice the RFP elements are listed in the Criterion column. Your selection team will then weight the importance of each RFP criterion on a one-to-five scale and designate the weights in the Assigned Weight column.
Table 4.1 Example of a Decision Matrix Comparing Three Potential Six Sigma Providers to Critical Criterion for Your Company
Finally, each provider on the finalist list is rated on how well they address each criterion, again on a one-to-five point scale. Then the criterion weights and the provider weights are cross-multiplied and the products are summed. The provider with the highest total score is the frontrunner.
For example, Table 4.1 shows an example of evaluating three potential Six Sigma providers. This particular company chose the following four criteria as the most important: Executive Credibility, References, Material Development, and Deployment Methodology. These were all rated as fives on the one-to-five scale. The numbers listed for the total scores (262, 308, 234) are calculated by adding the cross-multiplication of the provider score for each criterion and the criterion weight. This result indicates Provider 2 is the top provider in addressing the 21 criteria.
You have the option to make the decision matrix even simpler. Table 4.2 shows an example of a decision matrix that perfectly follows the actual outline of the RFP. This matrix ensures that everyone on the selection team reads each RFP carefully and makes the scoring process simpler. You might use the simple matrix for your initial screening and the more complex matrix for the final presentations. You can complete the complex matrix as each provider presents.
Table 4.2 Example of a Decision Matrix Comparing Four Potential Six Sigma Providers to Critical Elements of Your RFP
Differentiating Providers
Differentiating providers can be a problem because there are so many Six Sigma providers in existence. The next few sections will provide some criteria for consideration when you are going through the throes of selecting a Six Sigma partner.
Corporate History. Asking the potential provider for a summary of their corporate history is insightful. How long have they been in business and what have they accomplished throughout their corporate life? Questions referring to the size of their corporation, the number of years they’ve been focusing on Six Sigma, the number of clients they’ve supported through corporate deployments, and their deployment philosophy should be addressed. The selection criteria are: are these guys real, are they a mom-and-pop shop or a real corporation, are they new to Six Sigma consulting, or do they have authentic expertise? Do they have a corporate headquarters or do they work out of garage?
Corporate Deployment History. Does the provider have a significant number of corporate deployments on record? Some Six Sigma providers will have an impressive list of clients, some of which are seen on other provider web sites. But some providers list clients with which they do limited work, like training a few people here and there. The provider you’re looking for is one that has worked with a company at the corporate level and is the primary provider for corporate-wide Six Sigma deployments. Is the provider experienced in supporting companies your size?
Experience in Your Industry. Although Six Sigma is robust enough to be applied to all industries, finding a provider that is experienced in your industry makes sense. Qualification by similar industries may be acceptable. For instance, industrial chemical processing in batches or continuous manufacture is similar to pharmaceuticals manufacturing at the processing level. Likewise, metals fabrication often follows similar processing to industrial chemicals processing.
Thought Leaders, Customization, and Flexibility. Every Six Sigma deployment must be tailored to your company and mesh with your culture. There is no “one size fits all” deployment. The ability of your provider to quickly customize their Six Sigma training portfolio is very important. Your provider should have senior consultants who have the experience in working with several companies.
They also should be “thought leaders” in that they know the guts of Six Sigma and have the ability to deliver to you the program that makes sense to your company. Or do the providers have limited knowledge and specializations in Six Sigma? Reviewing resumes of the consultants who will likely be supporting you is an important step in the selection process. The provider should describe the process of customization in detail.
Reference Checks. References are of key importance when selecting a provider. References can vouch for the effectiveness, efficiency, and quality of the services provided by the provider. References can also be a resource to test for how well the providers transfer their technologies and enable their clients to completely internalize the Six Sigma methods.
Be sure to ask the provider for references that are strong and at least one reference that might be weak for the provider. Also, ask each reference for a list of additional people you can talk to so you don’t limit your contacts to only those provided by each provider.
IP Portfolio. Because Six Sigma covers such a vast array of topics, from deployment strategy to process improvement roadmaps, the intellectual property (IP) of each provider becomes an issue. Are they equipped to give you what you need? Are there any gaps in their IP? You should obtain a comprehensive list of their IP and also see some physical examples. The references of each provider will also be a great source in addressing the quality of the provider’s IP. Webex’s are a valuable tool in reviewing IP with potential providers.
Bench Strength—Consultant Experience. In this popular time of Six Sigma, just about anyone who has completed training as a Black Belt considers themselves worthy to be a Six Sigma consultant. In fact, there are several CEOs of Six Sigma providers that have never been fully involved in a corporate deployment of Six Sigma.
One CEO of a Six Sigma provider drove Six Sigma into four manufacturing plants in Asia as his base experience. You would love to see a proportion of the consultants who actually drove Six Sigma into a company as a corporate leader. The alternative to this experience would be consultants that have managed corporate deployments as a senior consultant.
The other problem lies in the tendency of every Six Sigma provider asserting that their consultants are the best in the business. So, how do you know? Reviewing resumes is the first step, along with asking references if there were particular consultants that were extremely effective during the deployment. In my own company, I have always been surprised at how often the names of some of my most outstanding consultants pop up as specific requests from new clients.
You’d like to see the consulting group have a broad experience base collectively. You’ll be looking for operations expertise, new product development experience, transactional process improvement experience, and sales and marketing core competencies. Also, if the provider keeps customer evaluations for each consultant, reviewing those evaluations will tell you most of everything you need to know.
One issue that presents itself often is whether the provider’s consultants are employees or independent contractors. There is a sense that if the provider’s consultants are independent contractors, the consulting engagement may be hampered. This should not be a big concern.
The expectations are similar for both employees and independent contractors. Sometimes the expectations are most clear to independent contractors, and their personal revenue is directly affected by how well they meet expectations. And, even consulting companies that emphasize the employee model will have a percentage of independent contractors, so you will probably never know who’s an employee and who’s a contractor.
The bottom line is providers that use independent contractors have lower fixed costs and are likely to be more financially healthy that those providers that use an employee model. The provider that uses independent contractors will be more flexible and have greater expertise than employee-driven companies because contractors can be hired and released with greater ease. The important issue is that the contractors are not to bill you separately from the provider. The provider should be the single point of contact with you.
Global Presence. If your company has a strong global presence, selecting a provider that can work effectively around the world becomes more important. You’ll want to know if the providers have offices around the world and where. You’ll also want to know into how many languages their IP portfolio has been translated. The process of accurately translating English-based materials into other languages can be time consuming, expensive, and fraught with difficulties. It is best to have the bulk of the portfolio translated at the starting gun.
Questions to Ask Providers
The following are additional questions to include in your RFP, to have the potential providers answer in addition to the RFP, or to be included while a select few providers are doing face-to-face presentations.
Questions to ask:
1. How large is your organization?
2. How many years have you focused on Six Sigma?
3. For approximately how many clients have you completed Six Sigma implementations?
4. How many clients do you have active at this time?
5. Have you ever worked with both U.S. and European companies?
6. For a $2 billion company, what would you expect as the ongoing yearly cost savings?
7. For a $2 billion company with locations throughout North America and Europe, how many Master Black Belts, Black Belts, and Green Belts would you expect to have to keep Six Sigma going?
8. How long do you feel it would take to recover the initial cost of implementing Six Sigma?
9. How long do you feel it would take to have the program become self-sustaining?
10. Do you recommend closed (client-only) or open (public) classes when training Master Black Belts, Black Belts, and Green Belts?
11. For a three-division North American (40 locations) and European (20 locations) company, what would be a rough (range) cost for your services? This includes executive training all the way down to assisting in Green Belt training, as well as auditing.
12. Is there any area of Six Sigma that you specialize in?
13. I would like the name and number of references that I can contact. What is one that you are most proud of and one that you are least proud of?
Terms of Engagement
Gain Sharing. The final contract agreed to by you and the provider will represent the nature of your relationship. A common trend today is to put a great percentage of consultant revenue on a gain-sharing agreement. The better the financial targets are met, the more money the provider makes. Although this is a relationship to consider, it can lead to trouble. First, the provider will be very concerned about the method of financial tracking you use.
The provider will probably never be happy with the way you track the money. Gain sharing can easily end up in an adversarial engagement. Also, there are many components of a deployment of which a provider has no control. That gets very frustrating for the provider. Best be clear about your expectations in the contract and leave it at that.
Selecting the Account Manager. The account manager should be treated like a senior leader in your company. In the spirit of partnership, the account manager is critical to the success of the engagement. This person should be selected before the contract is signed and delineated clearly in the contract.
Elements of the Contract. Every company has a legal department through which the contracts follow. The minimum elements should include the following:
• General description of objectives and scope of services.
• Terms of agreement.
• Who the consultant is.
• What services are to be provided.
• Where the services will be provided.
• When the services will be provided.
• Organization of personnel supplied by consultant.
• Status reports: status meetings.
• Facilities and services to be provided by customer.
• Competitive restrictions.
• Handling of intellectual property of both parties.
• Warranties and liabilities.
• Insurance coverage requirements.
• Confidentiality between both parties.
• Termination by either party.
• Modification, amendment, supplement, or waiver.
Summary
The use of external consultants will improve the efficiency and effectiveness of your Six Sigma deployment. Leveraging expertise that has been developed from participation in multiple deployments will serve to accelerate the program. Selecting the right consulting company that has the right chemistry for your company is crucial. I have seen companies lose time and results by selecting the wrong consultant at the beginning.
Selecting consults with impeccable ethics and the flexibility to match the program to your situation are two criteria you will review. Like anything else in business, good planning early on and clarity of expectations through the RFP will pay off over the short term.