Six Sigma Vs. Balanced Scorecard: What You Need To Know

Deciding on the best management strategy and appropriate framework can be a long and difficult task. You want to select the best methodology possible and improve your organization, so selecting the right tool for the job is important. Six Sigma and the Balanced Scorecard are two of the most popular frameworks available for management. Below I’ll describe each of them, their individual benefits, and which you should think about implementing.

Six Sigma

Six Sigma, in its most simple form, is a methodology that allows you to test your process management, innovation, and improvement, using both empirical and statistical methods. It emerged out of the quality movement, and takes a deep look at processes and products and how you can improve them. Six Sigma helps organize a hierarchy of ‘process experts’ for every level of the production cycle. If a company uses the Six Sigma methodology, they adhere to a series of steps that will help them reach one specific goal, like “decrease amount of material used” or “lower production cost."

Six Sigma helps organizations:

• Cut their operational costs, by allowing them to understand what business processes need optimization.
• Increase productivity and efficiency through the identification of which processes are successful and which are deficient.
• Improve employee and customer satisfaction once fractured processes are repaired and improved.

“Processes” can be defined as the most effective and efficient way to get things done in an organization in order to achieve a goal.

Let’s look at a few practical examples.

If your company creates widgets, your goal is to organize your manufacturing process in the best, most efficient way possible. You’d do that by laying out your shop floor properly, which would help ensure the least amount of defects in the finished widgets.

Or, maybe you’re a delivery company, so you want to focus on the quickest way to move packages from your facility to their final destination. In that case, you’d focus on mapping out routes so the drivers would stop at fewer lights, make fewer left-hand turns, etc.

The Balanced Scorecard

The Balanced Scorecard (BSC) is a strategic planning and management framework that looks at four perspectives—financial, customer, processes, and learning/growth—in order to meet and achieve the company’s objectives.

The BSC helps organizations:

• Analyze their operational strategy, which allows them to identify and focus on the true drivers of long-term success.
• Turn strategy into action by taking four unique perspectives into account, instead of only paying attention to the financial perspective.
• Align their measures with their mission in order to avoid strategic missteps that can easily happen when short term measures crowd out long term goals.

BSC is a framework which allows the use of other frameworks within it. It helps you describe your strategy and assess what you’re doing in an organization and makes sure all of the elements that make up your organization are working together efficiently and effectively. When scorecarding is correctly implemented, organizations will often see better departmental and organizational alignment with their goals and mission.

Six Sigma Vs. Balanced Scorecard

Despite their differences, these two unique frameworks are not incompatible. There are organizations that use both—Six Sigma to improve key internal processes, and the Balanced Scorecard to manage the strategy. Of course, some practitioners argue that Six Sigma is an be-all, end-all solution, while others have the same argument for the BSC.

As with anything, HOW you use the tools is almost as important as WHAT tools you use. Let’s say you let the team tasked with implementing Six Sigma run around your organization and improve every process they can identify. Not only is that going to cost you a great deal, but it’s also irrational, because the team could be improving a process that isn’t strategic. Or that you created a Balanced Scorecard then never got around to improving broken processes.  Most likely nothing ever got done.

That being said, it is my opinion (and the opinion of many others) that you can use both of these frameworks together to create an “ultimate” management solution. For example, Six Sigma deals almost exclusively with internal processes, which happens to be one of the four perspectives that the Balanced Scorecard examines. Therefore, the BSC could be used to identify which processes are important, and Six Sigma could be used to improve those broken processes.

Do you use Six Sigma, the Balanced Scorecard, or both? Tweet @clearpointstrat and tell us how you use one or the other to achieve measurable results.