Wednesday, December 27, 2006

Lean Six Sigma is a Fraud for Engineering Consultancies

Where I work, we use Lean Six Sigma. LSS is a formal method for tracing work flows and processes in order to find inefficiencies. It's a total fraud for our organization. We do not measure the cost of implementation and overstate our results to upper management so that it looks like a success. Because our managers have been forced to use it, there is no effort to find the true value of LSS and our middle managers must report only good news. In short, LSS encourages organizational corruption. It's like being part of Mao's government during the Great Leap Forward. We even get cute little emails from our upper management talking about LSS success stories. Since I work with some of the LSS teams and am privy to our financial information, I can see right through the propaganda.

I'm waiting for the one that reads "Once more, glorious People's Committee on LSS meets Five Year Plan production targets!"

We make money on labor. LSS requires us to take people off of direct projects and put them on overhead to become full time LSS "black belts". If our LSS effort was ever to break even, we would have to release a commensurate number of people currently working full time on overhead. That has not, will not and cannot happen. It is mathematically provable that LSS will always be a money loser for us.

I was doing a little research on the net and all I could find while searching on "Lean Six Sigma Fraud", "Lean Six Sigma Failure" and so on were endless websites from consultants who will help you implement LSS. I think that tells you everything you need to know about LSS.

Update: I found the Wikipedia article on the Great Leap Forward (linked above) and I've edited one particular paragraph I found eerily similar to our situation. It's pure poetry. Just like Edgar Allen Poe's work.

Despite these process improvement innovations, the business climate in 2006 was very favourable and the profit promised to be good. Unfortunately, the amount of labour diverted to LSS meant that much of the business was left to rot unperformed in some areas. Although actual work output was reduced, local officials, under tremendous pressure from the central authorities to report record profits in response to the new innovations, competed with each other to announce increasingly exaggerated results. These exaggerated results were used as a basis for determining the amount of funding to be taken by the State to supply other efforts. This left barely enough for the actual operations costs of the organization, and in some areas, financial starvation set in. During 2006 we continued to be a substantial net exporter of profits, despite the widespread financial famine experienced in the workforce, as upper management sought to maintain face and convince the outside world of the success of their plans.
For more posts on capitalism, visit (what else?) this week's Carnival of the Capitalists.

Update 2: Dennis Howlett (owner of the world's smallest blog :-) ) asked, "Can you say more about how LSS encourages the kind of corruption you're alluding to please? What is the fatal flaw and how is performance as measured in your company out of whack with what the financial results show?"

LSS was chosen without regards to what we do. As a consultancy, the technical aspects of each job are different as are the maturity levels of the projects we are working on. Sometimes we work on equipment installations, sometimes we work on policy IPTs, sometimes it's basic research and so on. LSS relies on repetitive actions to achieve increases in efficiency. In our case, the only repetitive actions come in administrative support.

Given the state of the art in administrative support, just how much more efficiency can you squeeze out of it? And what happens when you do? In order for LSS to break even, you'll have to fire as many administrative personnel as you have LSS black belts and then get rid of some more to account for the time your green belts are now devoting to tasks unrelated to the customer. What are you going to do, have your assistants answer three phones at once? Have intelligent agent software make purchases for you?

The fatal flaw in LSS is the addition of people onto overhead in the form of black belts and green belts. If there was no such increase in overhead staff, we could have done a quick survey of the situation, junked the whole idea and kept on going with what we do. Instead, we now have full-time bureaucratic positions for LSS slurping down the profits, returning next to nothing with the standard resistance to firing them.

In short, they are a recurring cost, they produce almost nothing and they are hard to get rid of. Rather than be the only middle manager who reports that their LSS team has yet to yield results, we lie about it. Hence, corruption.

Perhaps the saddest part of all is that our LSS black belts are all really good people. It's not like they're trying to hide their results or puff themselves up. They're all doing their best with a technique totally ill-suited to our work.

Thanks for the question.

Update 3: Dennis has a larger site. Here it is.


Dennis Howlett said...

Can you say more about how LSS encourages the kind of corruption you're alluding to please? What is the fatal flaw and how is performance as measured in your company out of whack with what the financial results show? (I think that's what you're saying)


Anonymous said...

A few years ago I sold a $1.5M/yr business to a Six SIgma Black Belt. He ran it into the ground in 15 months. Draw your own conclusions.

Anonymous said...

I thkn you'll find this site is a bit bigger. I must have put in my wrong Blogger ID - how on earth that happenbed is beyond me!!

Anonymous said...

Six Sigma is probably not the cause of failure you suspect.
Measurement is a very important component of the DMAIC process. If it is not implemented correctly or if mgmt modifies the numbers to make themselves look good it is not the fault of Six Sigma but more a fault of your organizational culture.

Anonymous said...

Many companies fail to realize that Six Sigma is not a magic bullet. Six Sigma can maximize efficiency in processes but many organizations that tried to force Six Sigma failed because of their culture not because of Six Sigma. Combining Six Sigma with organizational change is the way to go if you want to succeed.

Anonymous said...

I worked for Ford Motor.. who have twisted 6 sigma (forget quality, just show $$ savings). I had great difficulty in doing REAL projects. Engineers would NOT work with you (as you were fixing their process and making fools of them), and actually tried to submarine your efforts. Managers fudged numbers and results, to show great progress and get great bonus' or promitions (for doing nothing). I even had to redo a project that was booked in at $700,000 savings that never worked, never was implemented and never changed anything.. Oh.. yeah.. the person with that project got promoted.

The Master Black Belts were the biggest "fudge masters" there were. Projects like "Reduce defects in the plant to 10%" were common. Ok.. the plant makes many different types of engines.. you can reduce one defect, and 10 more pop up... making this not a possible project. Correct project spec should have been: "Reduce loose head bolt defects in engine line 1, repair bay #2 by 80%"
Problem was.. NONE of the Master Black Belts went into the plant.. let alone understood the process, knew the people, thus had no clue as to what was going on, and where to find a project that was real.

Lastly, I had found projects that were simple.. "Requote (various)services that we were REALLY over paying on". Nearly lost my job for that... I was told off the record by a friend in purchasing, that she suspected the managers were getting "pay-ola" from the vendors for keeping these high price contracts.. so walk away (like she was told to do).

I have found that the 6 sigma process could be of use, but often the project your working on, points to some form of corruption. (ie: Faulty parts from a supplier.. were being accepted and tolerated because a manager was getting free lunches/trips/gifts) when we should have went out for bids to other suppliers... received cheaper/better parts)

Corruption has worked its way into the Foundation of Ford Motor Corp, (and may large companies) and this is why MOST cost savings processes will fail... THey would often point to the corruption, and why a a Ford Focus costs $20,000.

Just my opinion.. based on what I have seen and experienced at Ford Motor Corp.

Kent said...

We decided to tackle the subject of engineerinfonet because, till recently, it was so difficult to get sufficient, accurate information on the subject.

CalvinK said...

Six sigma no doubt is good for quality control but it invest more cost. That's why they implement LSS, lean is nothing about quality but it focusing in cost reduction. People fail on LSS system because they do not understand the concept, they just focusing themself on those tools which would not helps in improvement

Anonymous said...

Hey Calvin instead of rambling like a moron try to write something the average College Grad can understand. Your comment is worthless.

LSS is a scam

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