U.S. Productivity Gains

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Jay Arthur
888-468-1537
303-756-9144
KnowWare International, Inc.
DBA LifeStar
2253 S. Oneida
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Denver, CO 80224

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Copyright © 2007

Economists, in a recent Rocky Mountain News article on productivity gains, say the gains are due to investment in computers and other high tech equipment, but doesn't mention the effects of the Six Sigma (process improvement) craze sweeping the nation. Jack Welch at GE used it to save about a half a billion dollars last year.

Six Sigma is TQM (Total Quality Management) reborn with a focus on results-typically $250,000 or more per project. I worked with one wireless company last year that was able to reduce service order errors and save $250,000 a month. They went from a 17% error rate down to 3% in about nine months. When people aren't fixing and reworking things, they have time to be more productive, hence the increase in real productivity.

Some industries, like air travel, are well below 6 sigma (3.4 defects per million). You'd have to fly every day for 5000 years to experience a plane crash.

Most existing companies are at about 3.5 sigma (or 1% errors). This includes healthcare. Last year's report from healthcare suggested that up to 100,000 people die each year due to medical mistakes in hospitals (1% error). That means if you go into a hospital every day for 100 days, you'll probably end up dead.

Healthcare is trying to turn this around. The JCAHO which audits hospitals has specified some key indicators and many hospitals are turning to elements of Six Sigma to measure, manage and improve these indicators.

Most startup companies, I've found, are at about 2.5 sigma (15% errors). In last years downturn, many internet and telecommunication startups found that their existing processes were too error prone (ICG Communications for example) to weather the economic changes.

Bottom line: productivity gains aren't just technology-driven any more. Process improvement in the form of Six Sigma is driving advances in productivity.

There are three key elements to productivity:

• Effective processes optimized by Six Sigma improvement techniques
• Technology used to reengineering these optimized processes when required
• People who want to do meaningful work, not just fix and repair defects created by ineffective or inefficient processes.

We know how to improve and optimize processes. We know how to employ technology to automate repetitive manual processes. The next step is to understand and leverage the vast well of human motivation. That is the subject of How To Motivate Everyone! Chapter 3