Linking BSC (Balanced Score Card) with Six Sigma

N

Nadeem A.

#1
Hi,

Looking for some thoughts or comments on "HOW TO UTILIZE BALANCED SCORECARD SYSTEM (BSC) into SIX SIGMA (SS) EFFECTIVELY IN A PROJECT BASED ENVIRONMENT?"

IMHO, it would provide a good source of finding a SS project objective plus the business case in define phase.

Any suggestions or inputs will be highly appreciated?

Regards,

Nadeem.
 
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M

Madfox

#3
I am a big believer, and utilizer, of Balanced Scorecards. However, I rarely agree with articles/presentations regarding their use. Before I forget, I highly recommend "Balanced Scorecard" by Niven and "Performance Dashboards" by Eckerson.

I seem to be a lone wolf regarding my perspective, but here it goes:

a) Most organizations set up monitoring/goals/Balanced Scorecards/Dashboards then crunch numbers and evaluate performance. What is rarely done is to analyze a system or organizational change as to the impact that change has on the elements of the balanced score. In plain English, before implementing a mid/high level change or program study the possible effects on the 4 wheels of the Scorecard.
I've seen more profit/operating damage done because of this then by any lack of inspection, forms, corrective actions, etc.
My example (a true one) is posted elsewhere in the Cove:

Should the billing process be part of ISO 9001:2008?

The Balanced Scorecard should be a tool for analysis of impact BEFORE implementation of a change!

b) Balanced Scorecards (BC's) and Dashboards (DB's) are two different things, and should be kept separate. BC's are a strategic-level instrument and DB's are tactical, and never should a BC metric depend on only one DB input.
Also, DB's are often abused. I refer to an article in Business Week early in '06 regarding DB's. The article opened with Larry Ellison sitting on the S.S. Oracle, his mega-yacht, monitoring sales on a real-time basis. Someone else mentioned tracking desk-time of employees. I wrote a letter of response (not published) that DB's are not instruments for "Big Brother" monitoring.

In my private practice I prefer to refer to BC's as "Balanced Ceiling Fans." a) The blades really do have to be balanced. b) The blades really have to have pitch, or bite, to be effective. (A tool to improve, not just monitor.) c) Don't have to have 4 blades, I've used up to 6.
 
Last edited by a moderator:
N

Nadeem A.

#4
Thanks Steve and Madfox taking time to provide informations on the subject. But, still I was waiting for some more inputs into the topic, which could provide some direct thoughts on it. What my thinking is we can take the items addressed in the four perspectives (Financial, Customer, Internal and Learning) and start measuring them by defining defect. These defects can be translated into DPMO (Defects per million opportunities). After the analysis of the of the areas that need to be fixed, we can move towards improving the issues. Here, I have got two more questions:

Is DOE a must in improve phase or we can do it using simple tools?
Is "Control Chart" a must in control phase or monitoring can be done through regular meetings at a defined frequency?

This way we can start initiating DPMO tracking. Hope, to see some more comments.

Regards,

Nadeem.
 
N

Nadeem A.

#6
Steve, it would be great if you could elaborate your opinion. Simply a question of "WHY" it would be a BIG-MISTAKE?

To me, without gaging defect how can we translate into Six Sigma (3.4 DPMO). How do we know that where are we standing with reference to this number?

Nadeem.
 

Steve Prevette

Deming Disciple
Staff member
Super Moderator
#7
WHY linking Balanced Scorecard to defects would be a bad idea (in my opinion).

Dr. Russ Ackoff and others have pointed out that the elimination of bad things does not necessarily leave you with a good thing. For example, I can flip channels using my TV remote and eliminate bad shows, but that does not cause me to create a good show.

A Balanced Scorecard should reflect what you WANT to do as a corporation, not what you DON'T want to do.

Yes, I could assign numerical targets to my measures of what I want, and calculate DPMO from that. However - I offer the following reasons why to NOT do that:

1. Dr. Deming pushed us to eliminate numerical targets, eliminate management by objective. Use of DPMO will push our Balanced Scorecard to be just that - judgement against targets.

2. If the Balanced Scorecard does not use SPC behind it, you stand a strong chance of reacting to random variation. This will be exasperated by the use of numerical targets to create DPMO - you won't know if your DPMO is "bad" due to the process simply isn't capable of making the target, or if there is a special cause trend at work.

3. Sometimes, the worst thing we can do is achieve our goals, and then sit on our [email protected]@. Take the US Space program following the Apollo 11 landing on the moon "before the end of the decade".
 

Steve Prevette

Deming Disciple
Staff member
Super Moderator
#8
To me, without gaging defect how can we translate into Six Sigma (3.4 DPMO). How do we know that where are we standing with reference to this number?
1. That number may not be the "right" number. I recently was at a speach by a Boeing aircraft executive, where they stated that for passenger airplanes, certain components needed to be at nine sigma!

2. Again (from the previous email) the 3.4 DPMO can be driven by the target chosen. Choose a low-ball targer, your DPMO improves. Choose a challenging target that you are not currently capable of, and your DPMO will be alarming.

3. I believe the strength of the dashboard is to be able to lay the indicators side by side and see what they are doing. The DPMO is "one layer removed" from the real data.
 
N

Nadeem A.

#9
WHY linking Balanced Scorecard to defects would be a bad idea (in my opinion).

Dr. Russ Ackoff and others have pointed out that the elimination of bad things does not necessarily leave you with a good thing. For example, I can flip channels using my TV remote and eliminate bad shows, but that does not cause me to create a good show.
But atleast you have reduced the 'Effect' of bad things which could be more dangerous, if NOT eliminating them. Also, focus on "Does NOT necessarily", it means its not always the case.

In my scenario, if I reduce the bad things, we will definitely be heading towards the improvement side, which would be a good signal for us since we have only two things BAD/GOOD. So reducing one side will increase the number on other side or vice-versa.

I don't think using six sigma methodology to reduce our defects would be a bad idea, may be I am biased while talking about six sigma, but I see the results in practice.

Anyways, great to see your thoughts and responses.

Thanks.

Nadeem.
 
Last edited by a moderator:

Steve Prevette

Deming Disciple
Staff member
Super Moderator
#10
One other thought I had on the drive to work this morning - many measures on a Balanced Scorecard are going to one-sided specifications - for example, I may need to make a minimum profit figure, but the sky is the limit in the other direction. I don't see DPMO representing growth of the profits above the minimum required very well.
 
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