Lean Six Sigma Benefits for Small to Medium Businesses

During several discussions over the past few weeks, I get asked: “how can Lean Six Sigma (LSS) be applied to various industries and sizes of businesses.” Through these discussions, I hear several different arguments about how to use or not to use LSS to small to medium companies or governmental sectors. After much thought, I decided to develop a series of articles on the benefits and application of LSS within small to medium companies and governmental agencies.

Let’s first start with what is the definition of small to medium businesses and the Lean Six Sigma benefits for small to medium businesses.

What is small to medium business?

Through my research, I did not find one single definition for small or medium businesses.  Depending on whom you talk to or article, there are several definitions. It depends on the industry and type of business that you have. There is not one single metric that defines what a small to medium business is.  However, I was able to great the following list of what a small to medium business might mean:

• Privately own in either of the following capacities:
  • Corporations
  • Partnerships
  • Sole proprietorships
• Employee size
  • Small business – fewer than 100 employees
  • Medium business – 100 to 999 employees
• Annual revenue
  • Small business – less than $50 M in annual
  • Medium business – more $50 M to less than $1 B

I gathered these factors from the following websites:

• https://www.gartner.com/it-glossary/smbs-small-and-midsize-businesses/
• https://www.fundera.com/blog/sba-definition-of-small-business
  • Breaks down the information by industry

After reading the article, Think Small with Six Sigma from SPIE, I learned that roughly 2/3 of all employees in Europe and nearly half of all US Employees work for small to medium businesses.  That is a vast workforce population. Larger companies are using small to medium businesses more and more.  These businesses are representing up to as much as 75% to 80% off the entire business processes.   More substantial corporations that use Lean Six Sigma, Lean, or Six Sigma are asking their small to medium business partners to implement some quality program to ensure that their end customers experience is top-notch regardless of who is serving them. 

Small to Medium Business Processes

Regardless of what type of business or industry that, you are in, there is a business process for anything. Irrespective of the business process has been formally mapped out, or if SOPs (Standard Operating Procedures) exists or not. Each business and employee follow some type of process.  Examples of  high-level business processes are:

• Customer Service- regardless in a call center or receptionist
• Payroll
• Billing customers for services or products
• Accounting processes
• Sales processes irrespective the size of the company
• Human Resources processes
• Delivering the service
• Data Analytics
• Creating reports
• Finance processes
• IT processes
• Product development process or Lifecycle process

However, one of the biggest things that I’ve seen within any business is that leaders and employees are unsure what the process is.  One employee may know what they need to do, but they are unsure what the upstream or downstream employee is doing. They are unaware that mistakes or issues are occurring. Edwards Demming put it best “ If you can’t describe what you are doing as a process, you don’t know what you’re doing.” 

When I hear business leaders or owners talk about the issues within their business, I immediately know that they do not understand what their business processes are. They are unsure how to fix them.  The following are the common complaints that keep business leaders and owners up at night :

• My customers are complaining about the quality of the service
• We do not seem to move fast enough to satisfy our customers
• Our products are not meeting customer specifications
• We are unable to keep up with customer demand
• We are losing our customers to our competitors
• We are losing revenue even though we have tried to fixed things
• My employees are always complaining
• My employees are always complaining about one another
• Our business is growing, but we can’t keep up with the growth

Lean Six Sigma Benefits for Small to Medium Businesses

Before diving into how to apply LSS within small to medium businesses, we need to touch upon what are the benefits of using it. LSS has soft and hard benefits.  The hard benefits are generally tangible things, for example:

• Reducing processing cost
• Increasing revenue
• Improving cash flow
• Eliminating the need for capital expenditure
• Faster quote to cash
• Reduce the need to hire additional employees
• Reducing operating costs
• Reduce the need for extra inventory
• Reducing machine operating time
• Reducing overtime hours
• Reducing cycle time to deliver the service or creating the product

LSS soft benefits do not have the same tangible effect as hard benefits.  However, these soft benefits are beneficial for the business.  Examples of soft benefits are:

• Customer focus
  • The focal point becomes the customer instead of the company
  • Happy customers usually lead to more revenue
  • A good and bad review can make or break a business
• Improved employee morale
  • Happy employees enjoy coming to work every day
  • Happy employees treat customers and other employees with respect
  • Unhappy employees can result in high turnover and loss of talent
• Improved employee effectiveness
  • Employees perform better when they are happy
  • Better performance means satisfied customers
• Leading by fact and alignment
  • LSS provides a way for owners, leaders, and managers to manage the company based on facts
  • LSS eliminates the need for guessing
  • LSS provides critical measurements for a business to define success

Can you think of any other benefits? What are your thoughts on applying LSS to small to medium businesses?

In my next article, I’ll go over how to apply Lean Six Sigma within small to medium businesses.

If you want to learn how to use Lean Six Sigma within your business, Contact Me