Corporate Sigma Optimizing the Health of Your Company with Systems Thinking K10219.indb 1 11/12/09 10:01:44 AM K10219.indb 2 11/12/09 10:01:44 AM Corporate Sigma Optimizing the Health of Your Company with Systems Thinking Anwar El-Homsi Jeff Slutsky K10219.indb 3 11/12/09 10:01:44 AM Productivity Press Taylor & Francis Group 270 Madison Avenue New York, NY 10016 © 2010 by Taylor and Francis Group, LLC Productivity Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10 9 8 7 6 5 4 3 2 1 International Standard Book Number: 978-1-4398-0394-3 (Hardback) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. 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CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data El-Homsi, Anwar, 1951- Corporate sigma : optimizing the health of your company with systems thinking / Anwar El-Homsi, Jeff Slutsky. p. cm. Includes bibliographical references and index. ISBN 978-1-4398-0394-3 (hbk. : alk. paper) 1. Total quality management. 2. System analysis. 3. Organizational effectiveness. 4. Business planning. I. Slutsky, Jeff, 1956- II. Title. HD62.15.E42 2010 658.4’013--dc22 2009042135 Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the Productivity Press Web site at http://www.productivitypress.com K10219.indb 4 11/12/09 10:01:45 AM For Saadedine El-Homsi and Heather El-Homsi Anwar El-Homsi For Jason, Alison, and Jackie Greene and Mike Wolkoff Jeff Slutsky K10219.indb 5 11/12/09 10:01:45 AM K10219.indb 6 11/12/09 10:01:45 AM Contents Foreword ...............................................................................................xv Acknowledgments ..............................................................................xvii Introduction: Taking Charge ..............................................................xix Chapter 1 Leadership Sigma: The Brain ............................................1 1.1 Leadership and Management ..........................................3 1.2 Purpose of Leadership .....................................................3 1.3 Importance of Leadership ...............................................4 1.4 Core Competencies for Successful Leadership .............5 1.5 Leadership Core Competencies ......................................6 1.5.1 Strong Interpersonal Skills .................................6 1.5.2 Personal Qualities ................................................7 1.5.3 Technical Knowledge ..........................................9 1.6 Leadership Tasks .............................................................11 1.6.1 Assess How the Organization Functions .......11 1.6.2 Know the Organization’s Objectives...............11 1.6.3 Determine How the Organization Can Achieve Its Objectives and Improve ...............11 1.6.4 Have a Vision for What the Organization Should Become ...................................................11 1.6.5 Infuse Leadership Qualities into the Organization ......................................................12 1.7 Improving Leadership ....................................................12 1.8 Developing Leadership ..................................................13 1.9 Leadership and Systems Thinking ...............................14 Notes ...........................................................................................15 Chapter 2 Corporate Beliefs: The Soul .............................................17 2.1 Corporate Culture ..........................................................18 2.2 Organizational Mission ................................................20 2.3 Organizational Core Values ..........................................21 2.4 Organizational Vision ....................................................26 vii K10219.indb 7 11/12/09 10:01:45 AM viii  •  Contents 2.5 Shared Vision — The Secret .........................................28 Notes ...........................................................................................30 Chapter 3 The Road to Corporate Wellness ....................................33 3.1 Corporate Balanced Scorecard ....................................34 3.2 The Four Perspectives ....................................................36 3.2.1 Financial Perspective ........................................36 3.2.2 External Perspective ..........................................37 3.2.3 Internal Perspective ...........................................38 3.2.4 Learning and Growth Perspective ..................38 3.3 Corporate Critical Success Factors...............................39 3.3.1 Corporate Objectives .......................................40 3.3.2 Corporate Performance Measures ..................41 3.3.3 Corporate Targets ..............................................41 3.3.4 Corporate Improvement Actions ....................41 3.3.5 Strategic Alignment by Cascading the Balanced Scorecard ...........................................41 3.4 Strategy Map ..................................................................44 3.5 Case Study: Acme Circuits ...........................................44 3.5.1 Acme Circuits’ Corporate Balanced Scorecard ...........................................................44 3.5.2 Acme Circuits’ Strategic Map ..........................45 Notes ...........................................................................................51 Chapter 4 Human Capital: The Heart ..............................................53 4.1 Employee Satisfaction ...................................................54 4.2 Personal Balanced Scorecards......................................56 4.3 Personal Vision ...............................................................57 4.4 Personal Mission .............................................................58 4.5 Personal Key Roles ..........................................................59 4.6 Personal Critical Success Factors ................................60 4.7 Personal Objectives ........................................................61 4.8 Personal Performance Measures ..................................62 4.9 Personal Targets ..............................................................62 4.10 Personal Improvement Actions ....................................62 Notes ...........................................................................................70 K10219.indb 8 11/12/09 10:01:45 AM Contents  •  ix Chapter 5 Becoming Lean: Trimming the Fat .................................71 5.1 Brief History of Lean ......................................................72 5.2 Elimination of Waste .....................................................75 5.3 Lean Principles ................................................................79 5.4 Lean as a Business System .............................................82 5.5 Other Essential Lean Tools ..........................................84 5.5.1 Cellular Manufacturing ...................................84 5.5.2 Production Smoothing ....................................86 5.5.3 Standardized Work ..........................................86 5.5.4 Total Productive Maintenance (TPM) ...........87 5.6 Business Philosophy for Lean .......................................89 5.7 Other Resources .............................................................90 Notes ...........................................................................................91 Chapter 6 Six Sigma Protocol: The Medicine ..................................93 6.1 Brief History of Six Sigma .............................................93 6.2 What Is Six Sigma? .........................................................95 6.3 DMAIC Model ................................................................95 6.3.1 Define Phase ......................................................96 6.3.2 Measure Phase...................................................99 6.3.3 Analyze Phase .................................................100 6.3.4 Improve Phase .................................................100 6.3.5 Control Phase ...................................................101 6.4 Process Capability Study .............................................102 6.5 Six Sigma Metrics .........................................................103 6.5.1 Process Shift .....................................................105 6.5.2 Types of Metrics ...............................................106 6.5.2.1 Defect per Unit (DPU) ....................106 6.5.2.2 Rolled DPU .......................................107 6.5.2.3 Defect per Million Opportunities (DPMO) ...................107 6.5.3 Counting Opportunities .................................108 6.6 Six Sigma Infrastructure .............................................109 6.6.1 Role of Executive Management .....................110 6.6.2 Role of Champions ..........................................111 6.6.3 Role of Finance .................................................111 6.6.4 Role of Master Black Belts ..............................111 K10219.indb 9 11/12/09 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