So far, we’ve discussed Stupid Six Sigma Tricks #10: Conflating systems, methods and tools and #9: Confusing breakthrough with continuous improvement. This month, I’ll spend some time on a more subtle, and no less costly mistake that, in its extreme form, we’ll call Stupid Six Sigma Trick #8: Optimizing processes that lose money. “Well,” you might say, “Isn’t that what Six Sigma is all about? Taking unprofitable processes and fixing them or making profitable ones more profitable?” And you would be right. For the explanation, we need to dip briefly into the world of accounting. As your dentist says, “Don’t worry, it won’t hurt much and will be over soon."

Standard costs—Accounting 101
Why am I talking about cost accounting? Our perception of costs is one of the inputs we use in identifying, prioritizing and selecting projects for Black Belts to work on. If we get a distorted picture of costs, we end up selecting projects that don’t have the expected benefit to the bottom line (Hint: this is another reason Black Belts can claim millions of dollars of savings that aren’t reflected on the bottom line.).

 …