GOING BELT CRAZY

American Standard is far from alone in netting big savings in its finance operations using Six Sigma techniques. Developed initially by Motorola Inc. and made famous by General Electric Co. ex-CEO Jack Welch, the Six Sigma methodology has been incorporated by most of the nation's largest multinationals over the last two decades–although only about 15% have made it their central philosophy. "These are organizations like GE, Johnson & Johnson and 3M, that make it their primary strategic process management and improvement tool," says Jack West, former president of the American Society for Quality, one of the largest Six Sigma certifiers. "[They] take full advantage of Six Sigma to focus every member of the organization on performance optimization." At these organizations, everyone from the CEO on down works with Six Sigma analysis.

But in more recent years, less than jumbo-sized and even midsize companies have begun to figure out ways to bring more economical versions of Six Sigma thinking to their business processes. They can hardly afford not to. West reckons that the average Black Belt project weeds out half a million dollars of inefficiencies, so the training programs easily pay for themselves. "They're more than paying for themselves every year," says West, who is himself a Master Black Belt.

Still, Black Belts don't come cheap. The average certification course can cost employers up to $50,000 per trainee, including the expense of plucking employees from the workforce for up to four weeks and footing the travel and accommodation bills.

At the heart of Six Sigma lies a strategy referred to as DMAIC–define, measure, analyze, improve and control. This methodology reduces virtually any job into individual steps that can be statistically measured and then improved. While Six Sigma was originally intended to reduce defects in manufacturing, the methodology has been revamped so it can be applied to a variety of business processes across enterprises. Without Six Sigma, "most companies put together a team to work on a problem that isn't well defined, and the team typically wants to jump to the 'improve' stage," says Kevin Grayson, a certified Black Belt and Six Sigma program coordinator at North Carolina State University. "They don't take the time to properly define or measure the problem."

MAPPING OUT THE PROBLEM

Six Sigma makes teams slow down, Grayson asserts, and look at an entire process and understand it before trying to fix it. In addition, after solving a problem, many companies don't make an effort to stick to the new solution–that is to say, they fail to control their processes and incorporate the solutions themselves into those processes, Grayson notes. "Thus, the problem resurfaces six months later," he says.

Six Sigma candidates go through lengthy training programs, and then, to prove they have mastered Six Sigma, they must complete full-scale DMAIC projects before qualifying. In fact, Six Sigma practitioners must continue to run DMAIC initiatives intermittently throughout their careers to retain their certification.

There are three main certifications: Green Belt, Black Belt and Master Black Belt, and the requirements increase with each level. Black Belts, for example, must successfully complete two projects that can each take up to two years and net a pre-determined level of savings, while Master Black Belts must mentor other Black Belts before obtaining their certification.

Despite the costs and rigors, there are probably tens of thousands of certified Black Belts operating in U.S. companies today, although there is no official number. The American Society for Quality has trained over 3,000. In addition, large companies, such as GE and Motorola, do their own training. There are also university-based certification programs, as well as smaller boutique programs nationwide.

Even so, treasury departments at companies not quite so jumbo are finding they can do a lot of good with just a basic understanding of Six Sigma and a few Black Belts to light the way. One cost-saving practice involves using a Black Belt in one department to lead programs in any number of other departments across an organization.

GET READY TO SHARE YOUR BELTS

That was the case at UOP LLC, the $1.2 billion energy services company now owned entirely by Honeywell International Inc. Executives used a Six Sigma program two years ago to overhaul the company's entire cash operations, cutting the number of banks it uses by half, reducing bank accounts by more than half, and cutting fees by 40%.

The project took about a year of planning and input from executives in many departments, but similar to the situation at American Standard, only one Black Belt–borrowed from the quality group–was needed to lead the project. "We looked at the structure of our cash operations and saw we had a lot of outdated systems, processes and procedures in place," says Ted Potaczek, manager of U.S. treasury operations at UOP.

For example, his staff had to manually process wire transfers and keep the wire templates updated. With 1,000 wire templates in the system, the process was a drain on labor. "Now, as a result of this project, all of our wires are automated from SAP systems to the bank with straight-through processing." Six Sigma's demand for efficiency also prompted the group to start using check imaging technology to speed the time it takes to credit customers' accounts with payments they have made.

UOP was able to leverage an important advantage in keeping its training expenses down. Because of the company's link to Honeywell, one of the oldest and most respected adopters of Six Sigma, costs were minimal as employees were trained by certified Honeywell instructors. For those who don't have this perk, outsourcing the training can be expensive and companies can afford to enroll only a fraction of their workforce beyond the Green Belt program. American Standard's finance group, for example, has only one Black Belt among its 100 employees, although there are nine Green Belts and most others have completed an online Six Sigma basics course. At UOP, all nine treasury employees are Green Belts.

But one thing Six Sigma converts seem to share is a conviction that the methodology simply makes business processes and their intersections work better. "Six Sigma has proved its value at UOP," says Potaczek. "It provides us with a road map for how to get things done."