At the end of 20 century, the business environment entered the “information era”. To maintain competitive edges in the information era, many companies started to launch a series of improvement programs
Among them, Six Sigma program was first initiated as a powerful and process improvement tool at Motorola in 1987 and soon became the most popular quality management tool due to the successful promotion by Jack Welch since 1995
Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects in any process - from manufacturing to transactional and from product to service. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma opportunity is then the total quantity of chances for a defect.
Balanced Scorecard (BSC) is a framework for integrating performance measures proposed by Robert Kaplan and David Norton in 1996 and has received a worldwide attention since then. Many large corporations, such as Philips Electronic Co., Ford Motor Company, Powerchip Semiconductor Corp. and Unimicron Corporation are implementing BSC as their strategic management plan.
The four perspectives of BSC proposed by Kaplan and Norton (1996) are finance, customer, internal business process and learning and growth perspectives.
The Balanced Scorecard is a framework to describe the strategy for creating value and tool to manage the execution of that strategy. When used as the centerpiece of the executive decision process, the BSC identifies performance gaps and is used to facilitate decisions on how to address specific performance issues. However, unlike Six Sigma, the BSC is not a solution for closing specific strategic performance shortfalls.
Balanced Scorecard and Six Sigma are complementary because the ‘former’ provides the strategic context for targeted improvement initiatives and the ‘latter’ is a business improvement approach that can solve a myriad of performance issues.
In this example, the airline wants to increase return on net assets. The strategy for doing this requires an aligned ground crew who can turn around a plane quickly and get it back in the air. Consistent achievement of these two objectives enables the airline to offer lower prices. A lower price is a customer value proposition that should attract and retain customers. The airline measures fast turnaround times by tracking the amount of time a plane spends on the ground and the percentage of planes that depart on time. The performance target for these measures is 30 minutes and 90% respectively. To improve its actual performance on these targets, the airline uses Six Sigma to lower non- maintenance cycle time
In short, the Balanced Scorecard describes the strategy for creating value and it aligns resources to ensure the strategy is successfully executed. Six Sigma executes the strategy by using data and process improvement tools. BSC is the compass and Six Sigma is the fuel.
Michael E Nagel, Vice President, Balanced Scorecard Collaborative. Balanced Scorecard Collaborative/Palladium. Asia Pacific Management Review 13(2) (2008).481-496,An Empirical Study for Exploring the Relationship between Balanced Scorecard and Six Sigma Programs,Jeh-Nan Pana, Ming-Yueh Cheng.