MBNQA,ISO 9000, SIX SIGMA

Dr. Ina Primiana, SE, MT

What is Business Excellence?“Business excellence is regarded as an overall wayof working that balances stakeholder interests andincreases the likelihood of sustainable competitiveadvantage and hence long-term organisationalsuccess through operational, customer-related,financial and marketplace performance excellence”

– Edgeman, R.L., Dahlgaard, S.M.P., Dahlgaard, J.J., and Scherer, F. (1999), " Leadership, Business Excellence Models and Core Value Deployment ", Quality Progress, Vol. 32, No. 10, pp. 49 - 54

A caution on “Models”

• George Box: “All models are wrong, but some are useful”

• Simplified approximations of reality that provide insight.

Some Models• Process Improvement Models

– ISO 9000 : 2000– CMM– P-CMM– CMMI

• Business Excellence Models– Baldrige (MBNQA) Model– Balanced Scorecard– EFQM Business Excellence Model

• MBNQA and EFQM are inspired by Deeming, Juran and Crosby

What is the Malcolm Baldrige National Quality Program?

• It is an award for “Excellence” among US companies• Created by Public Law 100-107, 1988• Administrated by National Institute of Standards &

Technology (NIST)• National award program• Business excellence Model - encompasses all

dimensions and functions of an organization• Promotes a commitment to excellence• Self evaluation tool• Evolving to meet changing business needs

MBNQA - Objectives

• To Recognize Excellence

• To Identify role model organizations

• To Promotes understanding and sharing

“The Baldrige Award honors American businesses and organizations that have demonstrated an unparalleled commitment to quality and performance improvement”

- President George Bush

Award Eligibility Categories

• Business– Manufacturing Businesses

– Service Businesses

– Small Businesses

• Education Organizations

• Health Care Organizations

MBNQA Criteria Key Characteristics

• The Criteria focus on results

• The Criteria are non-prescriptive and adaptable

• The Criteria support a systems perspective

• The Criteria support goal-based diagnosis

The Model

Criteria of MBNQA

Industry Leadership

Core Values

Core values & Concepts • Visionary Leadership• Customer Driven Excellence• Organizational & Personal Learning• Valuing Employees & Partners• Agility• Focus on the Future• Managing for Innovation• Management by Fact• Social Responsibility • Focus on Results and Creating Value• Systems Perspective

MBNQA Criteria for Performance Excellence

Organisation Profile: Environment, Relationships & Challenges

1. Leadership(120)

2. Strategic Planning(85)

3. Customer and Market Focus(85)

5. Human Resources Focus(85)

7. Business Results(450)

6. Process Management(85)

4. Measurement, Analysis and Knowledge Management (90)

Driver Triad

Brain Centre

Work Core

MBNQA – The Structure

Seven categories

19 category items

32 areas

1. Leadership (120)

1.1 Organisational Leadership (70) a. Senior Leadership Directionb. Organisational Governancec. Organisational Performance Review

1.2 Social Responsibility (50)a. Responsibilities to the Publicb. Ethical Behaviourb. Support of key communities

2. Strategic Planning (85)

2.1 Strategy Development (40)a. Strategy Development Processb. Strategic Objectives

2.2 Strategy Deployment (45)a. Action Plan Development & Deploymentb. Performance Projection

3. Customer & Market Focus (85)

3.1 Customer & Market Knowledge (40)3.2 Customer Relationships & Satisfaction (45)a. Customer Relationships Buildingb. Customer Satisfaction Determination

Why ‘Measurements’?• "When you speak on something, but you can not express

the same in numbers, you don't know what are you talking about” - Lord Kelvin

• "Very often, we count what does not count and fail to count what counts” - Albert Einstein

• You can neither predict nor control what you cannot measure – DeMarco

• Projects without clear goals will not achieve their goals clearly - Gilb

• "If you don't know where you're going, any road will do.“- Watts Humphrey

• "If you don't know where you are, a map won't help." - Watts Humphrey

4. Measurement, Analysis and Knowledge Management (90)

4.1 Measurement and Analysis of Organizational Performance (45)

a. Performance Measurementb. Performance Analysis

4.2 Information and Knowledge Management (45)a. Data and Information Availabilityb. Organizational Knowledge

5. Human Resource Focus (85)5.1 Work Systems (35)a. Organisation and Management of Workb. Employee Performance Management Systemc. Hiring and Career Progression

5.2 Employee Learning and Motivation (25)a. Employee Education, Training and Developmentb. Motivation and Career Development5.3 Employee Well-Being & Satisfaction (25)a. Work Environmentb. Employee Support & Satisfaction

6. Process Management (85)

6.1 Value Creation Processes (50)

6.3 Support Processes (35)

7. Business Results (450)7.1 Customer - Focused Results (75)7.2 Product and Service Results (75)7.3 Financial & Market Results (75)7.4 Human Resources Results (75)7.5 Organization’s Effectiveness Results (75)7.6 Governance and Social Responsibility

Results (75)Should include Current levels, trend, Comparison withcompetitors and comparison against Benchmark

Scoring System

• Evaluation on three dimensions– Categories 1 to 6

• Approach• Deployment

– Category 7• Results

The Journey To Business Excellence

0 – 250Early

Development

251 – 350Early

Results 351 – 450Early

Improvement

451 – 550Good

Performance

551 – 650Emerging Industry

Leader

651 – 750Industry Leader

751 – 875Benchmark

Leader

876 – 1000World Leader

Efforts

MBNQA Score

Where CMM / ISO Stands in MBNQA?

Organisation Profile: Environment, Relationships & Challenges

1. Leadership

2. Strategic Planning

3. Customer and Market Focus

5. Human Resources Focus

7. Business Results

6. Process Management

Driver Triad Work Core

Brain Centre

PCMM

CMM / ISO

4. Measurement, Analysis and Knowledge Management (90)

Baldrige Trivia

• Baldrige award winners outperformed S&P 500 by 4.4 to 1

• Baldrige participants outperformed S&P 500 by 2 to 1

– Study by Commerce Department's National Institute of Standards and Technology, April, 2001

Some MBNQA Winning Companies

• IBM• Motorola • Ritz Carlton

MBNQA – 2001 Awarding Ceremony

(Left to right) Commerce Secretary Don Evans; Karen Hollingsworth, vice president, First in Service Performance Excellence, Clarke American Checks; Charles Korbell, president and CEO, Clarke American Checks; President Bush; Education Secretary Rod Paige.

Some Sample Measures from

MBNQA – 2001 Winners

Small Business Category - Pal's SuddenService (MBNQA – 2001)

• Customer scores for quality in 2001 averaged 95.8 percent, as compared with 84.1 percent for best competitor.

Manufacturing Category - Clarke American Checks, Inc. (MBNQA –

2001)• In 2000, Clarke American associates averaged 76 hours of training, more than the "best in class" companies tracked by the American Society for Training and Development.

• Tracks manufacturing cycle time- In plant cycle time has improved by over 44% since 1995, outperforming their best competitor.

• Tracks check manufacturing units per hour - Overall units per hr. has improved over 150% since 1991, exceeding levels of best competitors.

• Determines the Waste Levels - a key measure of operation efficiency; sustained decrease since 1995

Some Indian Efforts Based on MBNQA

• Tata Business Excellence Model• Rajiv Gandhi National Quality Award • IMC Ramkrishna Bajaj National Quality Award

Balanced Scorecard

'The Balanced Scorecard' - Robert S. Kaplan & David P. Norton: Harvard Business School Press, 1996

•Good Management Tool•People Focus is less•Societal Focus is absent

EFQM Business Excellence Model

10

9

8

914

9

20

615

RecapThe attributes to achieve Business Excellence • Leadership• Strategy• Employee• Customer• Resources• Integrated Processes• Aligned Measurements & Improvements

Six Sigma Variation

(a)Three sigma

Producing someProduct out of space

(b)Six sigma

Producing almostNo product out of space

*Ppm = Parts per million

Sigma Level Long-Term ppm* Defects1 691,462 2 308,538 3 66,807 4 6,210 5 233 6 3.4

Sigma Levels and ppm defects

Conformance Percent

Sigma LevelPercent Conformance1 68.7 2 95.45 3 99.73 4 99.9937 5 99.999943 6 99.9999998

Six Sigma Effectiveness

At the core of Six Sigma is the following equation :

Y = f(X)Strictly speaking, this means that Y (the dependent variable) is a function of X (an independent variable). To Six Sigma practitioners, this means that an output is a function of inputs an processes, where

Y = output (key business objectives and measures)f = function (interrelationships to be controlled and managed)X = controllable and noncontrollable variables that affect Y

Key Players in Six Sigma efforts

• Champion. A senior level manager who understand the dicipline and tools of six sigma, select projects, establishes measurable objectives, serves as coach and mentor, remove barriers and dedicates resources in support of blackbelts. A champions “owns” the process – monitoring projects and measuring the saving realized.

• Black belts. The black belts is the key to Six Sigma. These are specially trained individuals. A black belts leads a defined project on full time basis, working strictly on defining, measuring, analyzing, improving and controlling processes to reach desired outcome. Black belts do nothing else; their only responsibility is to root out variation and identify the vital factors.

Champion Decision Making

The Six-Sigma Process /Methodology

Uses statistical Tools to identify the vital few factors, the factors that matter most for improving the quality of processes and generating bottom line-results. It

consist of four or five phases:

DMAIC Define Define the project goals and customer (internal and external) deliverables

  Measure Measure the process to determine current performance

  Analyze Analyze and determine the root cause (s) of the defects

  Improve Improve the process by eliminating defects

  Control Control future process performance

Six Sigma methodology is not rigid. The point is that this is a set of tools aimed at helping managers and employee understand andimprove critical process

DMAIC, MAIC, PCOR, GETS

Air Academy: Prioritize, Characterize, Optimize and RealizeGETS: GE Trans System-Gather, Evaluate, Tranform and Sustain

Overview of the Six-Sigma Process