Understanding the standards of Six Sigma metrics and the advantages they represent is one thing. What’s also important is developing an understanding of the variety of Six Sigma metrics, and their value in showing how well programs and projects are measuring up to business goals and objectives. This is critical to ensuring the right metric choices and offsetting the risk of project failure.
This article looks at the key categories of Six Sigma metrics. These are operational and financial in nature and include productivity, people, safety, assets and quality. It also defines some of the best-known metrics within each categories.
Productivity
The most common measures in this category include labor productivity, or units produced divided by labor hours or money, and total people productivity. The latter measure includes salaried workers. Sales per employee measures productivity by annualized sales dollars, while asset productivity compares units produced to the net book value of property, plant and equipment, plus inventory.
A different aspect of productivity that’s often measured is total productivity maintenance. Operational effectiveness rate, for example, measures the impact of equipment availability, performance and output quality. Preventative maintenance monitors the ratio between preventative actions and unplanned actions when it comes to total maintenance.
People
Among the best-known measures in this category are turnover and unplanned absenteeism rates. Turnover measures the impact of both voluntary and involuntary employee terminations by dividing the number of terminations by the typically annualized average employment during the period. The rate of unplanned employee absenteeism (versus pre-approved vacations, holidays and long-term medical) is measured by the number of people absent without approval divided by the total number of employees.
Safety
Safety is largely gauged in relationship to OSHA rules and guidelines. There are a large number of metrics in this category. Two track numbers of OSHA 200 log incidents and OSHA lost workday incidents. The first relates to injuries or illnesses requiring more than first aid and tracks year-to-year comparisons for comparable time periods. Lost workday metrics track injuries or illnesses that result in light duty or lost time, also tracked year-to-year. Another helpful metric is workman’s compensation cost per employee – measuring annual worker’s comp premiums by total employees.
Assets
To understand asset performance is to have a handle on operational efficiencies. Total inventory turns is one of the best known, measuring the number of times inventory flows through the process for a given sales volume. It’s helpful to finance (reflecting the current asset picture) and operations (showing the ability to cover production requirements and/or customer orders). This metric’s converse is days supply of inventory, where inventory is often measured in physical terms, versus financial. This creates a more easily understood measure for inventory reduction purposes.
Quality
Quality and Six Sigma tend to be synonymous, so it’s no surprise that numerous quality metrics can be put to use. Cp and Cpk, for example, measure potential and actual process capability. Defects are another common measure – both defects per unit and defects per million opportunities (DPMO). They are important as defects represent a failure to meet Six Sigma’s “Critical to Quality Characteristic” that customers care about. Others metrics revolve around warranty activities, such warranty dollars paid, as well as warranty claims made.
