The Application of the Six Sigma Model at 3M, Inc.

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Executive Summary

Six Sigma is considered to be a quality and efficiency methodology intended to make sure a manufacturer produces products without defect. According to Lütkenhaus and De Freitas (2016), statistical tools are applied to eliminate defects, optimize time, minimize waste, reduce costs, and boost productivity. At 3M, Inc., the application of the Six Sigma model has been intended to achieve the same purposes. This executive summary adopts a strategic perspective to examine how the firm deploys the model before, during, and after McNerney’s tenure as CEO.

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The historical background of the company reveals how it has evolved with time. Its evolution has been characterized by diversification and innovation to a point where much of the sales revenues were generated from newly launched products. The primary strategy adopted by 3M has been diversification where it seeks to produce several products as opposed to serving large markets with a few products.

3M was founded in 1902 as a mining company for abrasives for grinding wheels. Failure was seen as the reason the company relocated to Duluth where the focus shifted to sandpaper products. Waterproof sandpapers were developed in the early 1920s and further diversification of the Scotch brand achieved a milestone in 1925 with the production of pressure-sensitive tapes (Hill et al., 2007). While the list of the products manufactured is long, the key theme within the company’s evolution is its flexibility in innovation that could be seen as the key to the company’s success.

Switching focus to the Six Sigma model, it is important to mention that the company claimed to use the model before the arrival of McNerney. The standard approaches used by 3M included the use of a five-step DMAIC model for the existing processes and DFSS for new product development. The DMAIC improvement model defined goals, problems, scope, and requirements (D); measured inputs, efficiency data, and key steps (M); and analyzed the process design, identified root causes and developed/validated hypothesis (A).

Additionally, improvements were made through removing the root causes, new process implementation, or standardized solutions (I) and control resulted in the establishment of standard measures to maintain the improved performance (C). In essence, it can be seen that the focus of the DMAIC approach was intended to address the current situations at the company where any issues regarding performance at the moment were analyzed and solved (Hill et al., 2007). From a long-term strategic perspective, it can be argued that the DMAIC approach meant incremental quality improvements.

The DFSS (Design for Six Sigma) approach for new product development is arguably the approach that catered for the company’s long-term strategies. The company has evolved through continuous innovations and the innovation culture has been sustained through this approach. From a strategic perspective, effective innovation processes seek to meet emerging customer requirements or to find new ways of meeting the current consumer needs. In 3M, the DFSS approach started with the identification of customer requirements and ended with the translation of those requirements into the product design (Hill et al., 2007).

The deployment of the Six Sigma before the McNerney era, therefore, hoped to improve both the products and processes. Such a strategy has long term implications for the survival and profitability of the company as expressed by the firm’s financial results over the years.

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Before McNerney, 3M’s financial performance was deemed as flat even though the company implemented Six Sigma. The new CEO is considered to have already ‘sold’ the company’s board of directors on Six Sigma before he was hired. His initiatives included developing a program to train senior managers and that subsequently required the senior managers to train middle managers in developing a list of 100 key Six Sigma projects. From this information, it can be argued that the model lacks importance when improperly implemented and that the training program was intended to equip the company’s management with the necessary skills to implement Six Sigma in the pursuit of the corporate strategy.

However, the efficacy of the training program or the new implementations of the Six Sigma is hard to examine because other massive changes made by McNerney may have had a huge impact on financial performance. For example, over 8000 employees were laid off and the R&D budget reduced from $980 to $677 (Hill et al., 2007). Such changes were followed by an averaged 22% growth in profits per year.

After McNerney, the new CEO sought to carry on with the changes introduced by McNerney and to place greater emphasis on the investments in R&D. The arguments put forward included that innovativeness was at the heart of the company’s culture that has been sustained through R&D. diminishing resources for that department confirms some skeptics who believe that since Six Sigma focused on eliminating deviances in product quality, there is hardly any chance of innovation.

This is because innovation requires the implementation of new product idea and features which ultimately result in greater deviances in product features and quality (Hill et al., 2007). However, the McNerney era could be seen as focusing on the short term strategic requirements where the company needed to address the flat revenues. The DMAIC approach was used by McNerney as evidenced by the changes made in the business process.

Additionally, the CEOs after McNerney, George Buckley and Inge Thulin re-focused the application of the Six Sigma to the DFSS. Such a change in approach is evidenced by Buckley’s actions in greater investments in R&D and Thulin’s stated commitment to Buckley’s ‘innovation machine.’ The corresponding financial growth of both the local and international markets indicate that the company’s innovation processes assure it of sustained growth in the future. From a strategic perspective, the implementation of Six Sigma at 3M can be seen as a success (Hill et al., 2007). Additionally, it serves an indicator of how companies seek to achieve a balance between opposing strategic objectives; that is – improvement and innovation as a means to achieve continuity and success in the market.

The case of 3M in applying Six Sigma also reflects the challenges in implementing two opposing operational objectives using the same tool. The case also helps in addressing the question of whether the Six Sigma is enough because of these opposing objectives. A company’s operations drive its financial outcomes through the production or corporate process or innovation initiatives.

In production operations, the financial outcomes depend on the efficiency and the quality of the output. In innovation operations, the financial outcomes are tied to the commercialization of new products. Using the Six Sigma tool in a company may require the firm to select one of the two operational objectives at the expense of the other. This is because process improvement means the elimination of deviances while innovation means the introduction of product deviances. The question of whether the Six Sigma is enough can be addressed by first examining whether the two objectives can be achieved mutually rather than exclusively.

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The interview with Brad Sauer reveals how 3M has applied Six Sigma and how this application has led to the progress of the company. There is a revelation that the Six Sigma has been part of the company’s long-term strategy. It was expressed that the tool has been applied majorly to help the company modify its processes as needed. Hundreds of new projects have been implemented which translates into new process improvements.

To sustain the application of Six Sigma will require that all salaried employees will continue to be trained, at least on the fundamental Six Sigma methodology. Sauer states in the interview that the training is project-based, meaning employees receive specialized training to help implement the Six Sigma. Most importantly, however, is that the long-term strategic objectives of implementing Six Sigma at 3M are intended to pursue growth, cash generation, and cost savings.

An important question answered by Sauer in the interview is how important Six Sigma is as compared to other process improvement models. For 3M, Six Sigma has been implemented in different systems and information can be shared in any of the systems. Additionally, Six Sigma is described as offering a structured approach that gets people to obtain data and back things up. In an era where data is a critical strategic asset, Six Sigma means the company can continue making informed decisions. Six Sigma at 3M, therefore, can be described as a success story to be emulated by any company pursuing similar objectives. The question of whether Six Sigma is important can be answered by considering the successes it has brought the company.

Action Plan

Introduction

The action plan presented herein seeks to help 3M incorporate the concept of lean operations in the Six Sigma model. The rationale is that the efforts of McNerney in eliminating redundancies in the workforce and limiting investments in R&D freed up resources and helped in cost saving. In manufacturing organizations, lean production seeks to improve the manufacturing processes through waste reduction (Chugani et al., 2016). Incorporating the lean principles in the Six Sigma efforts can be seen as a means of further improving the processes as lean manufacturing and Six Sigma both pursue the same objectives of process improvements.

Additionally, the question of whether Six Sigma is enough for a company like 3M is addressed by increasing the scope of the approach. In other words, Lean Six Sigma (LSS) is deployed as the ultimate business improvement model. Studies such as Antony et al. (2017) have revealed that LSS has become one of the most common methodologies that have helped companies register great successes in their operations. At 3M, lean operations will go a step further in enhancing financial performance.

Action Plan for Implementing Lean Six Sigma

Problem statement: Six Sigma approach in itself fails to address some of the major issues in operational efficiency, for example, lean production.
Solutions: Implementing Lean Six Sigma (LSS) is a practical solution that embeds the concept of lean to the Six Sigma Model to broaden the scope of process improvement.
Task/Project Who Due date
Implementing lean manufacturing Operations dept. November 15, 2020
Optimizing inventory Warehouse management dept. November 30, 2020
Optimizing production times Operations dept. December 10, 2020
Reducing labor redundancy HR dept. December 20, 2020
Implementing total quality management (TQM) Quality control dept. January 30, 2021
Implementing lean procurement Procurement dept. February 30, 2021
Outsourcing distribution Sales and marketing dept. December 30, 2020
Lean path to R&D and innovations R&D dept. March 20, 2021

Rationalizing the Action Plan

3M currently uses the DMAIC improvement model where each project undergoes through the five steps: define, measure, analyze, improve, and control. One of the best methodologies for process improvement is a lean approach that tends to share some of the key objectives with Six Sigma. 3M’s financial success during the McNerney era using the Six Sigma came as a result of paying more attention to process enhancement than innovation. However, it does not mean that McNerney eliminated the innovative culture of the company.

On the contrary, his efforts were intended to control the R&D investments to make sure that resources were not wasted. The application of lean operations at 3M supports McNerney’s efforts and offers 3M an even longer-term strategic objective. Additionally, lean operations can be implemented as one project that can be broken down to smaller tasks as shown in the action plan.

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Define

In the DMAIC approach, the first step involves the definition of goals, requirements, scope, and the problems faced by the company. In this case, 3M needs to further improve its operational efficiency across all major functions. The goal is to implement lean operations to help 3M better pursue the goals of growth, cash generation, and cost-saving. The aspect of cost saving is best achieved through waste minimization. In lean operations, waste and redundancies across all processes are eliminated.

Measure

The validation of the problem can be achieved through McNerney’s initiatives at 3M, for example, laying off workers to reduce labor redundancies. The resulting financial performance was an indication that lean approaches can help save costs and boost performance. Extending the same solutions across all functions would be expected to yield the same results. The efficiency data include the degree to which waste is minimized and how must is saved in terms of costs.

Analyze

The hypothesis for the Lean Six Sigma is that it helps to broaden the scope of process improvement through increased operational efficiency. The LSS will require the company to redesign its processes to address all areas where the levels of wastage are high. Lean manufacturing, according to Chugani et al. (2016), means adding the components that add value to a product and reducing or eliminating those that are unnecessary.

Improve

The action plan represents a standardized solution where new processes or new process designs are implemented to address the problem analyzed in the previous phase. Each of the tasks in the action plan is intended to enhance the specific function in the company’s operations through waste reduction and other methodologies associated with lean production. The root causes of the wastage are eliminated to allow the company to save operational costs.

Control

The last aspect of the DMAIC framework in Six Sigma is control, an element concerned with establishing standard measures and to review the performance. The standard measure in the proposed LSS is the application of lean principles in 3M’s business processes. The performance of the lean principles is determined by the costs saved and the upward financial growth associated with the cost savings. Other standard measures of performance can be established to assess the efficacy of the LSS.

Total Quality Management and Lean Path to R&D and Innovation

The inclusion of these two tasks in the action plan is intended to help the company strike a balance between innovating and quality of the product. A TQM approach seeks to make sure all production efforts are carried out to achieve and maintain high quality. Implementing best practices and principles in TQM, for example, customer focus, continuous improvement, training and education of the employees, resource management, and organizational culture and behavior supports the objectives of both lean operations and Six Sigma’s process improvement. A company can only conquer markets if the consumers appreciate their products and services.

Even within an innovative culture, meeting the customer requirements is a necessity and is one of the greatest dimensions of the concept of quality. The TQM is also implemented to make sure that lean processes do not minimize wastage or save costs at the expense of quality. Maintaining quality in a lean environment can be a challenge and TQM offers a solution.

A lean path to R&D innovation, on the other hand, is intended to make sure that the R&D operations are efficient. Additionally, it seeks to ensure that resources are not wasted on practices that do not lead to the commercialization of new ideas. A lean path to R&D is not straight forward or linear and a company may experience some challenges in attempting to implement the concept. Such an approach is also novel, but it offers a company with better practices in thinking, experimentation, and learning.

The most important point to note is that such a path often begins with an understanding of the purpose and cause of lean practices. At 3M, lean R&D practices can be achieved through efficient resource use in prototypes designs, development, and experimentation. Costly practices with less likelihood of materializing can be replaced by viable ideas for innovation. The customer in R&D, it is argued here, means seeking to introduce products that are needed by the consumers. New inventions should also be backed by adequate market research that validates investments in the R&D projects.

Other Considerations

Other areas of operation where the lean concept is applied as shown in the action plan include inventory and labor optimization. Excess inventory and employees are some of the biggest cost centers in a manufacturing firm. The HRM function is required to implement a framework that allows the company to eliminate all labor redundancies. The warehouse management function is responsible for managing the inventory levels and influencing production decisions such as when and how much to order.

Reorder levels and lead times are calculated based on the production capacity, which is subsequently determined by the demand capacity. A reduction in production times can be a result of lean manufacturing where time is considered essential in the cost-saving efforts.

Case Study Answers

What will be the benefits, costs, and risks of the Six Sigma program, and how will they be tracked and reported?

Implementing Six Sigma can benefit an organization by improving its financial performance. These benefits are achieved through “business and process improvement” (Hill et al., 2007, p. 467). McNerney states that he has seen Six Sigma energizing organizations, increasing sales and cash flows, strengthen management development, and satisfy the customer better. These elements are considered the keys to a successful business. The costs associated with Six Sigma may include training and development programs.

McNerney’s initial action was to set up an ambitious training program for hundreds of senior personnel. Such a program requires resources and hence become a cost center. The risks include disruptions in business processes as new improvements are effected. Additionally, uncertainties within the business operations may arise as the hundreds of projects keep interfering with the business environment.

The costs and benefits can be tracked through financial records and reporting. The essence of Six Sigma is to enhance a company’s monetary performance meaning Six Sigma can be reported in terms of its contribution to performance improvement. Any investments associated with Six Sigma projects can be recorded as expenses in the income statements. Any assets and capital resulting from Six Sigma projects can also be reported in the statement of financial position. According to Hill et al. (2007), “the savings from the project were also tracked by the financial organization in 3M” (p. 468). The risks, on the other hand, can be tracked and reported through the company’s risk management framework.

How should the various functional areas in the organizational be included in the Six Sigma initiative, and what role should the senior and middle management play in this change initiative?

The DMAIC model can be used to ensure that all functional areas are included in the Six Sigma initiative. Its deployment is intended to improve the current processes, meaning that the Six Sigma initiatives can emanate from any of the company’s functional areas. The most important point to note as highlighted by Hill et al. (2007) is that the processes were “strategically selected by upper management” (p. 468). The upper management tends to have a broader view of the firm and all its function. Therefore, the top management can ensure that all functions feature in the Six Sigma projects. In the interview with Brad Sauer, it has been stated that everyone can apply the model to their functions or jobs. Examples given include sales, customer service, manufacturing, and marketing.

The role of senior and middle management can be manifested by the training program introduced by McNerney. McNerney states that “senior executives were charged with leading the training efforts for all middle managers and coming up with a list of 100 key Six Sigma projects” (as cited in Hill et al., 2007, p. 467). From this statement, the senior managers are expected to train the middle managers to enable them to develop the necessary Six Sigma projects. The statement also answers the question of how all functional areas will be included. In other words, it explains that the middle managers are responsible for the Six Sigma meaning each functional area headed by a middle manager will participate in the Six Sigma initiatives.

What role should Six Sigma play in corporate strategy?

Corporate strategies are the most essential and broad strategic levels that focus on entire organizations. These strategies are formulated by the senior-most executives and direct the operational and tactical level strategies. The role of Six Sigma in the corporate strategy can be defined by comparing the objectives of both the Six Sigma model and the company’s corporate strategy. At 3M, for example, the company’s corporate strategy is founded on innovation and quality of products offered to the customers. The deployment of Six Sigma at 3M, therefore, can be seen as a supporting tool for the corporate strategy.

The corporate strategy also sets the overall direction of the company. At 3M, the organizational strategy is defined by the three major outcomes explained by Sauer in the interview: “cost saving, cash generation, and growth” (Hill et al., 2007, p. 473). With these strategic objectives, Six Sigma is again implemented to help the company in their pursuit. Besides serving as a supporting framework for implementing corporate strategies, Six Sigma can also play a critical role in the formulation of the strategies. The projects implemented in the Six Sigma model have a strategic significance. The senior management can use these projects to understand the strategic requirements of the company from which the corporate strategies can be developed.

What are the human resource implications for deploying Six Sigma (e.g., employee selection, roles, organizational structure, reward systems)?

The human resource implications for deploying Six Sigma will be determined by the overall objective of the initiatives. Consider, for example, McNerney’s changes that accompanied Six Sigma at 3M. He “laid off 8000 workers (about 11% of the workforce) and slashed capital expenditure from $980 million to $677 million by 2003” (Hill, et al., 2007, p. 471). Such changes, when perceived as part of the Six Sigma project, can be interpreted as reducing labor redundancies or streamlining the labor force. If such a project is to be pursued, the implications for employee selection would include fewer hiring activities and a change in the selection procedures. The employees hired would need to have competencies that allow them fir into the trimmed workplace, including possessing additional skillsets to allow them to handle more than one job functions.

Reducing the number of employees may also result in significant changes in the employees’ roles within the company. Changes in job designs might occur requiring employees to be reshuffled. Implementing Six Sigma also entails introducing new projects to the company’s operations. Such projects may also redefine the roles of the employees as project teams are created and disbanded with each project initiative.

Additionally, implementing process improvement may also mean redesigning certain work processes and functions where the implications also include changes in employee roles. The organizational structure is also affected the same way as the job roles with the redesigned processes potentially changing certain aspects of the company’s organizational structure. Lastly, the reward systems will also change as a result of all the changes in job roles.

How will six sigma affect the innovative culture at 3M, and is Six Sigma enough?

The innovation culture at 3M may suffer if the use of Six Sigma overemphasizes on product quality. McNerney’s reduced investments in R&D are evidence that process improvements and innovation can have an inverse relationship. However, it all depends on the motives of the company’s CEO. For example, George Buckley “continued Six Sigma in the manufacturing and administrative areas but reduced it in R&D” (Hill et al., 2007, p. 471).

The reason for his actions is that he wanted to carry on with McNerney’s Six Sigma and at the same time maintain the innovative spirit of the company. Reducing Six Sigma in R&D and the corresponding increase in R&D investments are evidence that Six Sigma can preserve the innovative culture. The answer to the question of whether Six Sigma is enough is yes. At 3M, it has already produced the expected results and taken the company in the desired direction.

References

Antony, J., Snee, R., & Hoerl, R. (2017). Lean Six Sigma: Yesterday, today and tomorrow. International Journal of Quality & Reliability Management, 34(7), 1073-1093. Web.

Chugani, N., Kumar, V., Garza-Reyes, J. A., Rocha-Lona, L., & Upadhyay, A. (2016). Investigating the green impact of Lean, Six Sigma, and Lean Six Sigma: A systematic literature review. International Journal of Lean Six Sigma, 8(1), 7-32. Web.

Hill, A., Linderman, K., & Schreder, R. (2007). Case Study: Six Sigma at 3M, Inc. University of Minnesota.

Lütkenhaus, D., & De Freitas, M. (2016). Strategic management applied to the Six-Sigma suitability appraisal for R&D in FMCG companies. Revista iPecege, 2(1), 80. Web.

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