Tough Times and Lean Six Sigma

Although I’ve spent my entire career working in the quality and process improvement fields, my undergraduate degree is in economics. I learned that economic cycles are normal, although that’s not to say that they’re uncaused or that the pain created during economic downturns isn’t real. Economic downturns result when there is an imbalance of some sort in the economy. When people recognize the imbalance they adjust their behavior until they perceive that the situation has been corrected. For example, many past recessions have resulted when businesses overestimated future demand, resulting in overproduction. When businesses saw that their inventory levels were large relative to actual demand, they cut production and used various means to sell their excess inventory. Thanks in part to our profession’s efforts implementing lean and other process improvements, this source of imbalance is less common and less severe. But, as is now obvious, there are other ways to screw up an economy.

The current down cycle appears to be the result of an imbalance in the amount of money loaned to home buyers. Due to various government programs and policies implemented over the last 70 years that were designed to promote home ownership, more money was allocated to this segment of the economy than the market could bear. The result was a rise in home values that was largely uninterrupted, with a few notable regional exceptions in the 1980s. The expectation was that home values would continue to increase. Money was loaned to marginally qualified buyers with the expectation that in the future they could borrow on their equity to make their payments. When home prices began to fall, the problem with this strategy became apparent and securities backed by mortgages lost value. The devaluation affected the reserves of lending institutions, resulting in a “liquidity crisis,” a fancy way of saying that there was no money to borrow. Not only did mortgage financing dry up, lending of all kinds contracted. Businesses that were otherwise in pretty good shape found themselves unable to obtain financing for payroll, accounts payable, taxes and other normal financial needs. A general contraction of economic activity ensued and, Voilà! We find ourselves in another recession.

So, despite our best efforts, here we are. The question is, what is our proper role as quality and process improvement professionals? I believe it is a crucial one. There is little any individual or single organization can do to bring the whole economy back. However, there are things they can do to weather tough economic times. As it happens, our profession is uniquely equipped to help do this.

Organizations in tough times have more reason than ever to utilize their resources wisely. They must focus on doing the right things right and doing them efficiently. The right things are those things that customers are willing to pay for. Value-added things. The organization must learn precisely what their customers want. Use Kano analysis to identify basic, expected, and exciting quality factors. Use quality tools such as QFD and tree diagrams to translate these customer demands into meaningful internal Critical to Quality requirements (CTQs.) Use lean and Six Sigma to design and build processes to deliver these values with a minimum of wasted effort and resources. This means using lean to identify value streams and moving as close as possible to one piece flow in these value streams. Where one-piece flow can’t be achieved, use logic and common sense to identify the reasons keeping you from this goal, then take the appropriate action quickly. When the causes of the problems can’t be readily identified by ordinary means, use Six Sigma techniques and rigor to ascertain the root causes. Use Kaizen to address issues within a value stream and assign Green Belts and Black Belts to work cross-functional, long-term, or larger systems issues.

Of course, the skills required to undertake these activities don’t happen by magic. The organization must fund training and development programs to provide these skills to their employees. Even in hard economic times, one must still invest.

Individuals can also take action on the one thing they are best able to control: themselves. During tough times you will be asked to perform new tasks, perhaps those of change agents. It is no longer enough to merely be good at your routine job. You must help your organization survive by finding ways for it to improve service to stakeholders. Every additional dollar you can help obtain from customers, and every dollar you can save for investors, makes it that much more likely your organization can afford to keep you. Volunteer for Lean Six Sigma teams, ask to attend training programs, read up on Lean Six Sigma on the internet and in the library. Read a book.

If you are unemployed, consider investing in upgrading your skills to improve your marketability. Study after study confirms that certified Lean and Six Sigma “Belts” are more desirable employees, as well as better paid. Imagine your competitive advantage if you can tell a prospective employer that you’re a trained Green Belt or Black Belt who only needs a project to become fully certified. And you’d love it if it were their project. They not only save a bundle by hiring an already trained professional, they get a skilled change agent to help them weather the economic storm.

In short, tough economic times may be a dark cloud. But you may well be able to find refuge in the silver lining of process excellence!