www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page i

“Praveen Gupta has developed an excellent methodology for aligning

senior management, supervisors, and employees in continuously

improving the critical drivers of sustained high performance.”

—Robert F. Anderson, President, Robert F. Anderson and

Associates, Inc.

“This book must be studied by all who are driven to create a corpo-

rate environment that attracts good employees, demands results,

and produces sustained profitability.”

—Lonnie C. Rogers, President, Ideal Aerosmith

“The Six Sigma Scorecard simplifies implementation of the Six

Sigma initiative by using measurements for better, faster, and cost-

effective performance throughout the company. The Business

Performance Index (BPIn) is an excellent tool for executives to

monitor corporate performance for growth and profitability.”

—Anton Hirsch, President, Corbra Metal Works

“The Six Sigma Business Scorecard makes it easy to understand the

value of the process measurements by explaining their relationship

to profitability. Using a business scorecard is an excellent idea to

ensure improvement.”

—Chuck Georges, Vice President of Manufacturing, Molon

Motor & Coil Corporation

“Synthesizing the tenets of Six Sigma methodology and the SIPOC

elements with the balanced scorecard, Praveen has given leaders in

all disciplines the business tools to measure and direct their effec-

tiveness in terms of profitability and growth.”

—Brian O’Reilly, Director of Quality & Regulatory Affairs,

Dentsply Professional

www.EngineeringEbooksPdf.comThis page intentionally left blank.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page iii

SIX SIGMA

BUSINESS

SCORECARD

Ensuring Performance for Profit

PRAVEEN GUPTA

McGraw-Hill

New York • Chicago • San Francisco • Lisbon • London • Madrid

Mexico City • Milan • New Delhi • San Juan • Seoul

Singapore • Sydney • Toronto

www.EngineeringEbooksPdf.comebook_copyright 6x9.qxd 10/21/03 11:42 AM Page 1

United States of America. Except as permitted under the United States Copyright Act of 1976, no part

of this publication may be reproduced or distributed in any form or by any means, or stored in a data-

base or retrieval system, without the prior written permission of the publisher.

0-07-143147-0

The material in this eBook also appears in the print version of this title: 0-07-141730-3

All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after

every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit

of the trademark owner, with no intention of infringement of the trademark. Where such designations

appear in this book, they have been printed with initial caps.

McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales pro-

motions, or for use in corporate training programs. For more information, please contact George

Hoare, Special Sales, at [email protected] or (212) 904-4069.

This is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and its licensors

reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted

under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not

decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon,

transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without

McGraw-Hill’s prior consent. You may use the work for your own noncommercial and personal use;

any other use of the work is strictly prohibited. Your right to use the work may be terminated if you

fail to comply with these terms.

THE WORK IS PROVIDED “AS IS”. McGRAW-HILL AND ITS LICENSORS MAKE NO GUAR-

ANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF

OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMA-

TION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE,

AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT

NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A

PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the func-

tions contained in the work will meet your requirements or that its operation will be uninterrupted or

error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inac-

curacy, error or omission, regardless of cause, in the work or for any damages resulting therefrom.

McGraw-Hill has no responsibility for the content of any information accessed through the work.

Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental,

special, punitive, consequential or similar damages that result from the use of or inability to use the

work, even if any of them has been advised of the possibility of such damages. This limitation of lia-

bility shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort

or otherwise.

DOI: 10.1036/0071431470

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page v

To my parents, Prem Vati and Kishan Lal Gupta,

Bill Smith, the inventor of Six Sigma,

and the astronauts of space shuttle Columbia,

for their ethics, vision, and sacrifice, respectively.

www.EngineeringEbooksPdf.comThis page intentionally left blank.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page vii

For more information about this title, click here.

CONTENTS

xiii

Bob Galvin’s Reflections

Foreword

Preface

Acknowledgments

Introduction

xxi

xxiii

xxvii

xxv

CHAPTER ONE. TRENDS IN PERFORMANCE

MEASUREMENTS

Technology and Globalization

Macroeconomic Measures

Evolution in Performance Measurements

Juran’s Financial and Quality Trilogies

Business Trilogy

ISO 9000 Quality Management System 7

Process Thinking

Malcolm Baldrige National Quality Award Guidelines

Balanced Scorecard

Six Sigma Business Scorecard

CHAPTER TWO. SIX SIGMA—AN OVERVIEW

Complexity and Performance

Cost of Poor Performance

Basics of Six Sigma

Traditional Approach to Six Sigma

The Breakthrough Approach to Six Sigma

Define

Measure

Analyze

vii

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page viii

viii

CONTENTS

Improve

Control

Challenges in Implementing Six Sigma

CHAPTER THREE. NEED FOR THE SIX SIGMA

BUSINESS SCORECARD

Missing Rate of Improvement

Insufficient Process Performance Measurements

Deming’s 14 Points

Measurement Challenges with Quality Systems

Limits of ISO 9000

Shortcomings of Six Sigma Measurement

Limits of the Balanced Scorecard

Measurements According to The Goal

Developing a New Measurement System 56

CHAPTER FOUR. THE SIX SIGMA BUSINESS

SCORECARD

Business and Leaders

Current Accounting Systems

Information Age Paradigm 61

SIPOC Analysis for Constraints

Managing the Profitability Process

External Factors

Process-Based Measurements

Six Sigma Business Scorecard

Business Processes to Consider

Elements of the Six Sigma Business Scorecard

1. Leadership and Profitability

2. Management and Improvement

3. Employees and Innovation

4. Purchasing and Supplier Management

5. Operational Execution

6. Sales and Distribution

7. Service and Growth

Six Sigma Business Scorecard Measurements

Business Performance Index (BPIn)

Corporate DPU and DPMO 86

Corporate Sigma Level

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page ix

Comparing Balanced Scorecard and Six Sigma

Business Scorecard

CONTENTS

CHAPTER FIVE. PLANNING FOR THE SIX SIGMA

BUSINESS SCORECARD

Leadership and Improvement

Extent of Improvement

Business Opportunity Analysis

Organizational Adjustments

Vision

Goals

Core Competencies

Systems Thinking

Employees’ Involvement

Team Structure

Understanding Measurements

Identifying Process Measurements

Action Plan for Performance

Corporate Plans

Progress Review

106

103

100

CHAPTER SIX. SIX SIGMA BUSINESS

SCORECARD DEVELOPMENT

109

112

111

Profitability Visibility

Measurement Failures

Features and Benefits of the Six Sigma Business Scorecard

Impact of Customer Requirements on Measurements

Factors Influencing Profitability

Growth and Profitability

118

Ownership for Performance

Step-by-Step Development of the Six Sigma Business Scorecard

Sample Measurements

124

BPIn Example

117

120

123

115

114

121

CHAPTER SEVEN. IMPLEMENTING THE SIX

SIGMA BUSINESS SCORECARD

127

Creating Awareness

Building the Business Model

128

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page x

CONTENTS

129

Establishing the BPIn

Establishing Six Sigma Business Scorecard Measurements

Ensuring Data Collection Capability

War on Waste

134

Managing Change

Integrating Technology and the Six Sigma Business Scorecard

135

132

130

138

CHAPTER EIGHT. ADAPTING THE SIX SIGMA

BUSINESS SCORECARD TO SMALL BUSINESSES

141

Six Sigma Business Scorecard and Business Size

Implementing in a Small Business

144

141

CHAPTER NINE. MONITORING PERFORMANCE

USING THE SIX SIGMA BUSINESS SCORECARD

147

Management Review

Leadership Performance Review

Employees’ Performance Review

Management Performance Review

Compensation for Performance

157

Communication with the Community

Annual Review

158

150

153

154

158

CHAPTER TEN. PERFORMANCE, PROFITABILITY,

AND STANDARDS

161

162

Dow Jones Industrial Average Companies

Performance and Profitability

Measurements for Growth and Profitability

Balancing the Six Sigma Scorecard for Growth and Profitability

Business Performance Index (BPIn)

Managing for Profitability

171

172

168

171

165

Managing Sales

Reducing Costs

Facilitating Growth

Inspiring for Innovation

174

175

166

CHAPTER ELEVEN. LEADERSHIP FOR

PERFORMANCE

177

Leadership Challenges

Lessons in Leadership

177

180

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xi

Seven Practices of Good Leadership for Superior Execution

182

CONTENTS

182

Personal Practices

Professional Practices

Leadership Expectations

Leadership Role Models

Leadership Characteristics According to the MBNQA Guidelines

Leadership Improvement

183

185

189

187

CHAPTER TWELVE. SIX SIGMA SCORECARD

VALIDATION

191

The Ten BPIn Measurements

192

1. Employee Recognition (Percentage of Employees

Recognized by CEO)

193

2. Profitability

3. Rate of Improvement in Process Performance

4. Recommendations per Employee

5. Total Spending/Sales

6. Suppliers’ Defect Rate

7. Operational Cycle Time Variance

8. Operational Sigma

197

9. New Business/Total sales

10. Customer Satisfaction

195

197

198

195

194

196

194

Application of BPIn to Dow 30 Companies

Correlation between BPIn and Profitability Performance

198

200

CHAPTER THIRTEEN. INTEGRATING THE

SIX SIGMA BUSINESS SCORECARD AND

QUALITY MANAGEMENT SYSTEMS

Six Sigma Methodology for Continual Improvement

Six Sigma Business Scorecard for Effectiveness

Integrating the Six Sigma Business Scorecard with ISO 9001

206

Cost Containment

The Improvement Methodology

Steps to Integrate Six Sigma and ISO 9001

209

208

213

Conducting Good Internal Audits

Benefits of Integrating ISO 9001 and Six Sigma

215

216

REFERENCES

Index

223

203

208

219

www.EngineeringEbooksPdf.comThis page intentionally left blank.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xiii

BOB GALVIN’S

REFLECTIONS

Because the Six Sigma Business Scorecard takes the Six

Sigma methodology to a new level by creating perfor-

mance standards, it must incorporate input from Bob Galvin,

Chairman Emeritus of Motorola, Inc. Bob is the first CEO

who has implemented Six Sigma companywide. During my

association with Motorola over about 20 years I have looked

up to Bob and his team of executives for lessons in leadership.

In 1988 the Leadership section of the Malcolm Baldrige

National Quality Award (MBNQA) guidelines was based on

Bob’s leadership practices when he was CEO of Motorola. His

exemplary performance as a leader is still recognized and

sought after worldwide. He has a reputation as a visionary.

Although he’s retired and spends time learning to play the

cello and maintaining his energy through athletics, Bob con-

tinues to provide leadership advice on various aspects of busi-

ness and to various sectors, including the U.S. government.

Bob is involved in several projects to keep his ever-learning

mind active in providing value for society and guidance to

Motorola.

I sought Bob’s thoughts about the Six Sigma Business

Scorecard and corporate performance in the current business

environment. His personal vitality, the depth of his convic-

tions, and his enthusiasm for sharing ideas are evident in his

reflections.

xiii

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xiv

xiv

BOB GALVIN’S REFLECTIONS

On Achieving and Sustaining Superior Corporate

Performance

Leadership must provide direction in bits and pieces in such a

way that it stimulates activities. Leaders must often engage in

anecdotal, relevant, and contributory activities. For example,

Motorola developed a team competition (TC) that was adopted

from Miliken & Company. It created the same type of mental-

ity that permeates a football team competing in the Super

Bowl. The TC provided an opportunity for teams to get together

and showcase their winning attitudes and successes. These

events are large sessions where people really get excited about

sharing their work and are enthusiastically led by their CEO.

Such sportslike competitions provide reward and personal

stimulation and encourage employees to achieve superior per-

formance. Leaders cheering for their teams demonstrate their

commitment to competitive and superior results throughout

the corporation.

On the CEO’s Role in Achieving the Desired Corporate

Performance

Achieving superior performance is personal. The CEO and

other high-level executives must commit themselves to

improving their personal quality and the people they influ-

ence. For example, a phone company executive who attended

a Motorola Briefing (to share the experience of winning the

MBNQA) decided to improve his personal quality and perfor-

mance. He enhanced the way he did his job by speaking more

nicely to people and becoming punctual for meetings. As a

result of these personal changes, in one of his next meetings,

meeting attendees all got together and finished the meeting

one minute before it was supposed to start!

Quality is translatable. Whether it is a vice president, a

manager, a crew supervisor, or a supervisor, personal vitality

must be demonstrated in a way that appeals to the employees.

Therefore, once the improvement initiative is in motion, it is

unstoppable because of the vital spirit of everyone involved.

For example, Bill Smith at Motorola, who taught me the con-

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xv

BOB GALVIN’S REFLECTIONS

cept of Six Sigma, demonstrated this principle well in how he

communicated Six Sigma. I would invite people and ask what

they were doing only to discover that a lot of neat things for

process improvement were occurring that I could learn (from

employees such as Bill Smith).

As for the skeptics, we do not need to do anything with

them. They discover for themselves that if they are left out,

they will no longer be vital members of the team. At the per-

sonal level, these concepts are simple to implement. We must

teach employees how to map jobs, determine the time needed

to do them, identify opportunities for improvement, and apply

statistical thinking and simple tools that have been embraced

by people like you and me.

As for the link between quality and profitability, I firmly

believe that the link is evident. It must be absolutely clear that

when we make fewer mistakes and prevent latent defects from

being shipped to customers, the savings are directly transfer-

able. The improvement must lead to lower costs, faster delivery,

and higher customer satisfaction. In the Motorola corporate

auditing department, when the process was mapped and under-

stood better, auditors realized that the audits could be done in

10 to 20 percent of the time they previously took.

Regarding CEOs or executives who do not see the direct

link between poor quality and profitability, I say they must be

blind. They may need a little arm twisting. If they do not work

out, they must leave the company. The disposition process

must be clearly communicated. The boss must evangelize Six

Sigma or the improvement process; otherwise, it will not be a

successful initiative.

CEOs can communicate their message about quality

through case histories, success stories, and anecdotes about

experts. Jack Germain, Bill Smith, and Dick Buetow, all lead-

ers in quality, were credible people based on their experience

and contributions in their respective professional areas. They

were believable people.

I never expected any of my people to be perfect. I wanted

them to at least listen to what the leadership was saying and

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xvi

xvi

BOB GALVIN’S REFLECTIONS

participate in the process. People can participate in the

process by simply mapping the way they do their work and dis-

covering opportunities for breakthrough. For example, people

in the patent office were doing a fine job. However, as they

participated in the Six Sigma process, they discovered that the

time used to file patents could be reduced significantly.

Many quality gurus have already taught us that quality

never costs money. However, quality improvement, or directly

linking to profitability, may need awakening. I hope that

Six Sigma Business Scorecard will awaken lots of people

and be able to change them with help from several “Bill

Smiths.”

Art Sundry led that awakening at Motorola when he stood

up at a management meeting and proclaimed, “Our quality

stinks!” People like Sundry have credentials. He was a suc-

cessful leader who still desired to improve. He kept looking for

opportunities to improve and places to find some tools to help

him improve. Improvement in performance is an aggregation

of a lot of little details.

Different people take different stimuli. At Motorola, we

happened to be lucky that we made a point of having an open

dialogue in officers’ meetings. At such meetings the chief must

listen instead of talk. People begin to respond when the leader-

ship listens. We do not change over a weekend. Because of the

open communication environment, Bill Smith had the courage

to present his idea about Six Sigma, and listeners were willing to

entertain it. In such an environment, officers know what needs

to be done, take risks, and challenge the existing processes.

They find a champion, nurture the seeds of success, and

multiply that success into many successes.

Bill Smith wanted to see me, and he took the risk to do so. I

immediately listened to him, and when I could not understand

his hypothesis, I asked him to come again the next morning.

On Sustaining the Corporate Performance

The CEO of a company is like the captain of a team. If a CEO

cannot stimulate the team, he or she does not hold high

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xvii

BOB GALVIN’S REFLECTIONS

xvii

promise for the company. Leaders such as Roger Miliken of

Miliken & Company and John Pepper, ex-CEO of Proctor and

Gamble, bring in 10 to 15 like-minded individuals who have

similar beliefs. The leader becomes a zealot and goes about

promoting his or her quality religion throughout the company.

The demeanor and conduct of the institution where quality

has emerged radiate throughout the entire corporation. As

quality improves, financial measures improve. By giving atten-

tion to all, people recognize that employees’ contributions are

a much-appreciated phenomenon. The CEO must listen and

react to employees’ ideas.

Speaking of attention, Motorola developed an excellent

education program through Motorola University. The objective

was to get employees into the classroom for communicating

corporate beliefs, to learn the new processes, and for encour-

aging team competition, where good ones share success stories

for others to follow. Personal visibility is a human need. At

Motorola we even invited suppliers to learn about our

improvement process. All said they also wanted to be better

suppliers. Institutionalizing corporate beliefs, values, and

goals throughout the theater of operations is critical to sus-

taining long-term performance. When the CEO’s belief per-

meates each and every employee, the results will surprise us,

as we experienced at Motorola from 1987 to 1992.

On Creating a Sense of Urgency to Achieve Superior

Financial Results

I set my own deadlines for achievement, and my people had to

satisfy their objectives. If someone does not understand the

objectives, then the leader has to work with the person.

Sometimes we make changes in personnel if the objectives

and the current employee skill set appear to be divergent.

Financial measures take care of themselves. If we map the

process and do the work in the most effective way, we end up

having good results. Such an approach brings down the cost,

is appreciated by the customers, and is reason enough for

repeat business and even more business.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xviii

xviii

BOB GALVIN’S REFLECTIONS

On Executives’ Accountability for Improvement

Every month at Motorola, the top 15 to 25 executives met.

One was designated to be the main speaker and to present the

best idea to improve quality in his or her area. For that meet-

ing, the executive became a teacher, sharing ideas with his or

her counterparts. Whatever the “religion” preached at the

company, one must accept it or go to another “church.”

On Thoughts about a Participative Management Program

We first learned about the participative management process

early, in the 1960s. We took the essence of it, refined it in the

Motorola way, and implemented it. This process allowed

employees and groups to establish stretch goals to generate

savings or execute their tasks better. The savings were shared

with employees of the group. This process did wonders for us.

We created numerous pockets of excellence and success sto-

ries. Employees earned a significant percentage of their salary

due to the savings they realized for Motorola.

The CEO Quality Award was created to recognize the

extraordinary successes of a team or an individual who has sig-

nificantly improved a process, leading to higher customer sat-

isfaction or less waste of resources. For people who received

the CEO Quality Award, it was a very important award, as the

standards to achieve this award were very tough.

On Motorola Today

The Six Sigma and process improvement initiatives were

attenuated in the mid-1990s due to company growth.

However, they are being restored currently. The way they are

being applied today is somewhat different. The program is

now called Six Sigma Digital. People who are advocating it

and living it are very enthusiastic about it. There is a personal

vitality to the entire program that comes through Chris

Galvin, Chairman and CEO, and Mike Zafirovski, President

and COO. They have truly personalized it.

Interestingly, the leaders at GE, Honeywell, Citibank, and

other companies all recognize that they have learned something

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xix

BOB GALVIN’S REFLECTIONS

xix

from Motorola that helped them bring about their recent suc-

cesses. Motorola’s being recognized is a rewarding experience.

On Thoughts about the Six Sigma Business Scorecard

An important word is flexibility. Any scorecard must not pre-

sent a rigid construct. The scorecard must allow flexibility to

excite the human mind. It is much easier to influence people

who are involved in the process.

I believe people will read Six Sigma Business Scorecard, get

excited about something in it, and generate many ideas for

performance improvement. For example, using the title of

Chief Growth Officer instead of Chief Technology Officer

makes sense. That is a clever idea. It makes sense to bring the

business plan mentality to the technology front.

www.EngineeringEbooksPdf.comThis page intentionally left blank.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxi

FOREWORD

Now more than ever, corporations the world over are scram-

bling to redefine the processes, techniques, and strategies

they need to survive in an age of uncertainty. The sterling

stocks of the 1990s, tarnished by world strife, ethical aberra-

tions, miscalculation, and complacency, are in need of a new

framework for survival. Praveen Gupta provides just that by

merging two powerful performance improvement processes,

Six Sigma and the Balanced Scorecard, to create Six Sigma

Business Scorecard.

I worked with Praveen at Motorola University for several

years. His experience there, at other parts of Motorola, and

AT&T Bell Laboratories before that, and his current role as a

Six Sigma performance consultant make him well qualified to

comment on the fluid approaches needed in our constantly

changing corporate climates. Both Six Sigma and the Balanced

Scorecard have been used historically to manage functions and

operations. By blending these processes, Praveen takes their

power to the next level, challenging us to redirect our use of

these tools to the measurement of the value-added activities

of our efforts. Rather than purely statistical processes, Praveen

provides a roadmap for improving profitability and involving

employees intellectually, by demanding dramatic improvement

from organization leaders.

By implementing the tools offered in Praveen’s model, the

reader should expect more than process improvement and

xxi

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxii

xxii

FOREWORD

revenue monitoring. The goal here is the rapid improvement

in profit and sustainable business growth.

Many winners of national and regional quality awards have

gone on to stumble because they focused on process improve-

ment, defect reduction, and cost reduction without aligning

those efforts with customer satisfaction, employee develop-

ment, business growth, and profit improvement. The Six

Sigma Business Scorecard places new emphasis on the latter.

I applaud Praveen for leading business outside of the lines

by developing this dynamic hybrid. His powerful formula

demands that institutional leadership be held accountable for

achieving dramatic rates of improvement, while investing in

the intellectual capabilities of all employees. I am sure that

you will enjoy and learn as much as I did from The Six Sigma

Business Scorecard. It is an important work that offers key

solutions to the challenges of our times.

A. William Wiggenhorn

Chief Learning Officer

CIGNA

Philadelphia, Pennsylvania

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxiii

PREFACE

This book has been written to create a comprehensive cor-

porate performance measurement system that will enable

leadership to balance profitability and growth. Having worked

with many CEOs, owners, presidents, and general managers,

I have had the opportunity to observe that visibility of contrib-

utors to profitability has been lost. There lies an ocean of

information unutilized in the absence of a business model that

identifies components of profitability and establishes measure-

ment standards.

Six Sigma Business Scorecard offers a new approach to

establishing a corporatewide measurement system that will

enable leadership to monitor a company’s performance against

expected performance. Customers expect better, faster, and

cheaper; the Six Sigma Business Scorecard promotes these

requirements. The Business Performance Index (BPIn) allows

an organization to determine the “sigma” level as a relative

measure of performance. This is the first time a model for

establishing corporate sigma level has been developed as a

leading indicator of corporate performance.

The first four chapters in the book establish a baseline and

define the Six Sigma Business Scorecard. The next four chap-

ters focus on implementing the Six Sigma Business Scorecard

system. Chapters 9–12 focus on monitoring performance

using the Scorecard. The final chapter integrates the ISO

9001:2000 and Six Sigma methodology where the scorecard

is used to establish measures of effectiveness and Six Sigma is

xxiii

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxiv

xxiv

PREFACE

used as a methodology for continual improvement. Six Sigma

Overview and Leadership for Performance chapters have been

included to maximize the benefits derived from the Six Sigma

Business Scorecard.

This book expounds on Leadership for inspiration,

Managers for improvement, and Employees for innovation. To

sustain profitability and growth, a clear responsibility for

growth has been identified as Chief Growth Officer (CGO),

who is responsible for internal and external research and

development.

The target audience for this book includes leaders, man-

agers, supervisors, and employees who are responsible for

achieving superior results and making their business or depart-

ment perform better, faster, and cost-effectively on a continual

basis.

Six Sigma Business Scorecard presents the revolutionary

method for determining corporate sigma level that was

employed successfully by Motorola in the early 1990s.

Corporations who have been implementing Six Sigma need a

method to determine the corporate sigma level. This book

does just that.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxv

ACKNOWLEDGMENTS

Iam grateful to my family (Archana, Krishna, and Avanti) for

allowing me to write this book at odd hours, and to many

friends and colleagues for listening to my unsolicited and

painful ideas. My sincere thanks to Frank Brletich and Caryn

Penru for their review, recommendations for, and edit of the

manuscript. Thanks to Rajiv Varshney for jazzing up the figures

and Rajeev Jain, Jim McNulty, Barb Schultz, and Terry Luczak

for their thoughtful discussions.

The book would not have passed beyond the thought

process without knowing Ken McCombs, Senior Editor at

McGraw-Hill. Ken has been phenomenal in believing in the

Six Sigma Business Scorecard concept and in helping patiently

during the development of this book. The staff at McGraw-Hill

has done a wonderful job of making Six Sigma Business

Scorecard a reality.

I am thankful to Bob Galvin, Chairman Emeritus, Motor-

ola, Inc., for sharing his views with readers of this book, and

Bill Wiggenhorn, Chief Learning Officer, Cigna, for reviewing

the manuscript and preparing the Foreword. Bob Galvin

was the first CEO to launch Six Sigma at Motorola, and Bill

Wiggenhorn was the catalyst for institutionalizing Six Sigma at

Motorola. I am honored to receive encouragement from these

two great leaders.

xxv

www.EngineeringEbooksPdf.comThis page intentionally left blank.

www.EngineeringEbooksPdf.comFM_Gupta_141730-3 8/11/03 4:12 PM Page xxvii

INTRODUCTION

Businesses today seek an effective corporate performance

measurement system to maximize the bottom line. With

the advent of the Internet, ongoing globalization, and stan-

dardization in management systems, business leaders must

focus on how to measure performance to monitor their con-

tinued viability and success. Many existing performance mea-

surement systems were designed to support business practices

and to monitor progress. With shrinking margins and competi-

tive pressures, however, corporate performance measurement

systems must do more than monitor. They must identify

opportunities for optimizing profitability and growth, without

pitting one against the other. The idea is to use performance

measures to add value, instead of simply measuring for a for-

mality. That is precisely what the Six Sigma Business

Scorecard is designed to do.

The Six Sigma Business Scorecard combines the Six Sigma

methodology for dramatically improving customers’ delight

with the Balanced Scorecard method for achieving financial

objectives. The Six Sigma Business Scorecard utilizes strategy

to maximize profitability and growth, accelerate improvement,

foster leadership accountability, and encourage employee

involvement....

Six Sigma Business Scorecard: Ensuring Performance for Profit

Six Sigma Business Scorecard: Ensuring Performance for Profit