Dr. Larry Weinstein - Wright State University - Professor of Operations Management

The Application of Six Sigma Techniques
to nonprofit Arts and Cultural Organizations

Larry Weinstein
Department of Information Systems and Operations Management
Raj Soin College of Business
Wright State University
Dayton, OH 45435
937.767.1216
larry.weinstein@wright.edu

Abstract
Six Sigma is a comprehensive system for achieving and sustaining process improvement. Organizations have successfully utilized it for cost reduction, productivity improvement, market-share growth, customer retention, cycle-time reduction, defect reduction, culture change, and product/service development (Pande et al. 2000). In this paper, I describe the need for nonprofit arts and cultural organization to adopt this system and the challenges they face in successfully implementing it.
Introduction
      Six Sigma is a comprehensive system for achieving and sustaining process improvement. Organizations have successfully utilized it for cost reduction, productivity improvement, market-share growth, customer retention, cycle-time reduction, defect reduction, culture change, and product/service development (Pande et al. 2000). In this paper, I describe the need for nonprofit arts and cultural organization to adopt this system and the challenges they face in successfully implementing it.
The Current Challenge
      Although organizations directed towards the arts and culture are present in all segments of the economy, we find most occur within the nonprofit sector (O’Neil 2002). The scope of nonprofit arts and cultural organizations includes art galleries and museums, educational institutions, nonprofit performing venues, symphony orchestras, chamber music ensembles, as well as opera, theater, and dance companies. In almost all cases, nonprofit arts and cultural organizations provide services rather than manufactured products to their customers.
      The United States Internal Revenue Service defines nonprofit arts, culture, and humanities organizations as “private nonprofit organizations whose primary purpose is to promote appreciation for and enjoyment and understanding of the visual, performing, folk, and media arts…” The majority of these groups is small, with fewer than 10 employees and budgets of less than $500,000 (O’Neil 2002). Using a broad definition for an arts and cultural organization that includes arts schools and film, radio, television, printing, and publishing organizations, the IRS reports there were 23,779 nonprofit arts, culture, and humanities organizations circa 1998 with $19.4 billion in revenue, $15.2 billion in expenses, and $46.5 billion in total assets (Weitzman, Jalandoni, Lampkin, and Pollak 2002). Nonprofit arts groups, including museums, orchestras, theaters and dance companies, contributed $166.2 billion and 5.7 million jobs to the U.S. economy in 2005. The economic impact of these nonprofits grew by 24 percent, or 11 percent adjusted for inflation, between 2000 and 2005, according to the report. The calculations include artists' salaries, the money that arts groups spend on services and supplies, and audience spending on hotels, meals, and parking. Also included is money “re-spent'' on salaries and goods within the local community, for example, on groceries purchased by an employee of the printing firm that publishes an arts group's programs (Arnold 2007). These figures include more than 1,500 professional theaters, 1,200 symphony orchestras, 600 youth orchestras, and 120 opera companies operating in the United States (Cowen 2007). They also include approximately 1,800 music educational institutions (The College Music Society 2003)and 300 art schools in the United States(Peterson 2006). Clearly, these figures demonstrate that there is a large potential audience for the techniques I describe in this paper.
Threats to Funding
      Many believe that the government should not support the arts, or that the government should reduce arts funding in order to weed out inefficient nonprofit arts and cultural organizations (Ott 2001). Critics argue that nonprofit arts and cultural organizations should compete directly for consumer resources with for-profit organizations and that, unlike some acceptable policy domains such as prisons, defense, and infrastructure, the area of cultural policy cannot be justified as an essential or unavoidable governmental responsibility. Critics question whether the purported cultural significance of the arts is sufficient reason to justify continued expenditures while other sectors are expected to prove their economic benefits and public good (Craik 2005). Thus, in competing for financial support, the arts community is also expected to focus on tangible results that have broad political backing, such as improved educational performance and economic development. Defending arts on economic terms is not a universally accepted approach. A 2004 Rand Corporation study that questioned this strategy found that most research efforts to tie arts to economic growth fail to prove cause-and-effect and obscure more basic reasons to support arts. It is unclear whether the economic benefits of the arts will always be greater than putting the same money and priorities into other investments, such as sports stadiums or malls or job development (McCarthy et al. 2004).
      Baumol and Bowen (1966) argue that the arts will always require financial support from sources other than ticket sales in order to survive. Baumol observes that in a progressive sector such as manufacturing, wage demands increase as productivity increases. However, in a nonprogressive sector such as the performing arts, the productivity level remains relatively constant, and any wage increase results in an increase in labor costs (Baumol 1967).
      Brooks (2006) explores the limitations of trying to evaluate efficiency in nonprofit organizations. He suggests that many standard measures that gauge economic performance, such as Return on Investment (ROI), do not accurately reflect the mission of such organizations and that these organizations pursue a social mission that does not necessarily enhance their financial bottom line. They therefore often face a conflict between attempting to increase net revenues while adhering to their organization’s mission. To be appropriately efficient, these organizations should maximize net revenues attributable to non-core, or support, activities and rely less on revenues derived from their core, or primary programs (Brooks 2006).
      Nonprofit arts and cultural organization administrators may improve efficiency in their support and core activities by adopting managerial techniques that have helped organizations in the manufacturing, healthcare, and government sectors. Unfortunately, many managers have been slow to adopt modern management practices. One reason cited for this dilemma is that senior employees of nonprofit arts and cultural organizations typically have been trained in the academic discipline of their organization rather than in the broader management skills. Key personnel in arts organizations have primarily been experts in the artistic work that was at the core of their organization’s mission and were only secondarily managers (DiMaggio 1987). Because of their limited resources, managers also often delayed or abandoned initiatives requiring extensive investment and ongoing commitment (Cray et al. 2007). However, today’s arts administrators carry more responsibility than their predecessors. The coordination and administration of the nonprofit arts organizations require skilled managers who are not only familiar with the arts, but also with sophisticated management techniques. They must be competent in fundraising, grant writing, human resource management, administration, and logistics. They face the dual challenges of coping with rising expenditures for artists, art works, production, and educational projects (Baumol’s so-called cost disease), and the uncertainties of forecasting and acquiring the revenue required to support their programs (Cowen 2007). For many of their organizations, the primary focus has shifted from artistic concerns to the overall quality of the organization’s administration and management (Do 1993). The Six Sigma approach I describe in this paper provides a systematic process to help managers to address these challenges.

What Is Six Sigma?
      Six Sigma is “a business improvement strategy used to improve business profitability, to eliminate waste, to reduce costs associated with poor quality, and to improve the effectiveness and efficiency of all operations so as to meet or even exceed customers’ needs and expectations” (Antony and Bañuelas 2001). Six Sigma utilizes a well-defined methodology and an extensive set of quality and statistical tools (Raisinghani et al. 2005). It has been described as “a disciplined method of using extremely rigorous data collection and statistical analysis to pinpoint sources of errors and ways of eliminating them. It is “an information-driven methodology for reducing waste, increasing customer satisfaction, and improving processes, with a focus on financially measurable results” (Harry and Schroeder 2000).
      Businesses have attained dramatic results by applying Six Sigma methods for quality improvement. Organizations that have successfully implemented Six Sigma typically report that this approach has enabled them to reduce costs and improve productivity in their processes, eliminate errors and improve customer satisfaction, and develop nearly defect-free new products that delight customers (Mutize 2003). The Six Sigma process has been successfully implemented in firms such as Motorola, General Electric, Allied-Signal (Honeywell), ABB, Lockheed Martin, Polaroid, Sony, Honda, American Express, Ford, Lear Corporation, Solectron, and many others. Motorola generated savings of $15 billion during an 11-year period (McClusky 2000). General Electric saved $2 billion in 1999 alone (Sandholm and Sorqvist 2002). Raytheon realized a cumulative gross financial benefit of $1.8 billion (Tatham and Mackertich 2003; Barth 2005).
      Six Sigma is based on a five-step process referred to as DMAIC. These steps include:

The more common techniques used in Six Sigma include use of descriptive statistics, run charts, process control charts, probability plots, check sheets, Pareto charts, benchmarking, brainstorming, nominal group technique, force field analysis, cause and effect diagrams, affinity diagrams, interrelationship diagraphs, tree diagrams, scatter diagrams, linear regression, and ANOVA hypothesis testing. Several quality texts describe these techniques in detail (Pande et al. 2000; Breyfogle 2003). Many community colleges, universities, and professional training organizations also provide training in Six Sigma techniques (Klaus 1996).
            Although the Six Sigma process initially was developed and implemented within the manufacturing sector, today organizations in all sectors use these techniques. We can find successful applications in human resources, information systems, education, banking, accounting, finance, public utilities, shipping, transportation, the airline industry, pharmaceuticals, and healthcare (Antony 2006; Wyper and Harrison 2000; Brewer and Eighme 2005). However, a search of the literature failed to uncover any research that addressed the application of Six Sigma in nonprofit arts and cultural organizations.
Application of Six Sigma Process to Service Organizations
      The service sector represents a diverse and complex range of organizations that is characterized by the inseparability of production and consumption, intangibility of services, perishability of services, and heterogeneity of services (Ghobadian 1994). The Six Sigma process is appropriate for the service environment for several reasons. First, all work—whether in a service or manufacturing environment—occurs through a system of interconnected processes. Within any sector, highly customized, mass-customized, and standard processes exist with each category providing a different opportunity for applying Six Sigma (Bios 2002). We use Six Sigma techniques to study and improve these processes. Second, all processes exhibit variability. It is this variability that can result in a service that fails to meet customers’ needs and expectations. Six Sigma provides the tools for understanding the sources of that variability and for developing effective strategies to reduce or eliminate them. Third, all processes create data that explain variability. Six Sigma is a method for using rigorous data collection and statistical analysis to pinpoint sources of quality problems and determine how to eliminate them (Harry and Schroeder 2000; Hoerl and Snee 2002; Antony 2006). Last, research shows that service processes perform at an average defect rate of 3.5 sigma, or 23,000 faults per million actions (Yilmaz and Chatterjee 2000). This rate would be considered unacceptable in most manufacturing environments and accordingly, it underscores the need for the application of these techniques to improve service processes.
            A service-providing organization must address several important issues in its implementation of Six Sigma. These include:

      The use of Six Sigma requires that we clearly identify the customer and the requirements of the process we are studying. We categorize customers as internal or external. Internal customers are people or entities within the organization that use the organization’s products and services; external customers are people or entities outside the organization that use the organization’s products and services. Direct external customers are the entities or people outside the organization who receive the products and service the organization produces. Indirect external customers, or stakeholders, are those outside the organization who have some kind of stake in the work the organization does but who are not the primary reason for its existence. For example, a university orchestra conductor who directs an instrumental teacher’s students is the teacher’s internal customer. In order to meet that internal customer’s requirements, the teacher must ensure that the student has adequately rehearsed the repertoire selected by the conductor. An organization that hires the student for a performance or teaching position is the instrumental teacher’s direct external customer. The taxpayers who support the university and the performance venue are its stakeholders. The instrumental teacher and the organization in which he works must identify the needs and expectations of their customers and ensure that the curriculum adequately prepares the student to meet them.
      A customer can be an individual, a group, another nonprofit arts and cultural organization, or a non–arts-oriented organization. The organization can serve its customer at single or multiple sites, through face-to-face interaction, or electronically through recorded media or the Internet. For each situation, the organization needs to clearly understand who its customer is, what the customer’s requirements are, and by what service delivery process it can meet those requirements.
Six Sigma Project Selection
      An organization should have a systematic process for selecting an improvement project. As part of that process, participants need to be trained to prioritize quality-related issues and identify opportunities for quality improvement and project selection. Projects should be linked to the organization’s business strategy, to its customers’ and suppliers’ requirements, and to the organization’s current needs, capabilities, and objectives. We can group the generic list of possible criteria into three categories (Pande et al. 2000).

Applying Six Sigma in Nonprofit Arts and Cultural Organizations
      The issue of quality is central to the success of nonprofit arts and cultural organizations. However, by their nature, these organizations may face certain challenges in applying the five-step DMAIC model. Despite the significance of arts and cultural organizations, Weisinger et al. (2006) argue that there has been little emphasis on the application of quality management techniques in these organizations. For many years, they have avoided the issues of accountability, outcomes measurement, and the measurement of value because their stakeholders had not required it. Further, many in the field would argue that much of their work is not appropriate for such analysis (Weil 2002). To investigate this issue, we first consider the role of quality in nonprofit arts and cultural organizations.
      Garvin (1984) suggests that quality has multiple dimensions and that each organization must determine upon which dimensions to base its competitive strategy. Although his proposed eight dimensions of quality (performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality) apply primarily to the manufacturing sector, several authors have attempted to relate Garvin’s approach to service quality. Suggested measures include accessibility and convenience, accuracy, competence, completeness, consistency, courtesy, credibility, reliability, responsiveness, security, timeliness, and waiting time (Evans and Lindsey 2004, Berry et al. 1985).      Operationally defining the dimensions of quality for the arts however can be difficult (Abbe-Decarroux 1994; Tobias 2004; Thompson 2007; Zdzinski 1991). For example, Goh and Xie (2004) ask, “Would it be totally meaningless to attempt to place a quality level on Tchaikovsky’s 1812 Overture, or the performance of the work by a particular symphony orchestra—even with every note of the composition played flawlessly? Likewise, how could we compare da Vinci’s The Last Supper with Van Gogh’s Sunflowers using conventional quality performance indices?”
      Throsby and Nielse (1980) propose, in relation to the evaluation of quality in the performing arts, that there is no universal rule that will always distinguish performances of quality from others. What contributes to quality in a performance is a complex set of attributes, but the overall quality is perceived in the impact of the total event. One could draw up a list of elements thought likely to contribute to the quality of that performance and use that list to direct attention to how choices based on quality are or should be made (Throsby and Nielse 1980). They suggest a list of evaluation criteria (see Table 1) and raise two questions in regard to interpreting this list: first, taking any single element in isolation, could one identify a scale of measurement against which it could be judged and second, could we combine the various criteria into a balanced composite judgment? They suggest three categories for these criteria: those for which an objective scale or means of classification might be proposed (non-aesthetic); those that, while depending on subjective interpretation, may nevertheless be able to be agreed upon by a sufficiently large majority of people to be predictable as consensus judgments (non-aesthetic but with a major aesthetic component); and those in which subjective considerations are so important that a general consensus could not be reliably predicted (aesthetic).
      So can we expect that all work performed by nonprofit arts and cultural organizations will be suitable for Six Sigma improvement techniques? And if not, could we classify the work of nonprofit arts and cultural organizations to determine a priori whether a particular activity might meet its requirements?
      For non-aesthetic activities, there should be numerous opportunities for effective Six Sigma projects. Many of these activities are performed by other service-providing organizations. Their successful application of Six Sigma techniques is well-documented. However, for aesthetic activities, or those non-aesthetic activities that include an important aesthetic component, this might not be the case. Could we operationally define attributes such as creativity, musicianship, originality, tone, intonation, and precision in order to create adequate matrices to evaluate performance improvement? Could we reach a consensus judgment on the technical factors or on the benefit to the audience, society, and the art form? If not, then applying Six Sigma improvement techniques to such activities would be extremely difficult or meaningless. Certainly this is a question that deserves future study.
      Preece (2005) proposes that we categorize the work of performing arts organizations into two types of activities: primary and support. Primary, or core, activities include programming, production, personnel, promotion, and production. Support activities sustain the organization by supporting its primary activities and include governance, administration, fundraising, and outreach (Preece 2005). In almost all cases, we find that support activities are non-aesthetic and therefore should be suitable for the application of Six Sigma techniques. Table 2 shows examples of possible Six Sigma applications for support activities. Primary activities usually will fall either into the category of aesthetic or non-aesthetic but including an important aesthetic component. The application of improvement techniques may be more difficult for these (See Table 3).
Critical Success Factors for a Six Sigma Program
The most important factor for a successful implementation of Six Sigma is management support and commitment. Any successful initiative such as Six Sigma requires top management involvement and provision of appropriate resources and training. Without these, the true importance of the initiative will be in doubt.
The literature suggests that the successful implementation of a quality initiative often requires a cultural change within the organization. The organization’s values must coincide with those underlying the quality philosophy (Deming 1986; Hellsten and Klefsjo 2000; Lagrosen 2003) and it must create a working culture in which employees are able to effectively utilize process improvement practices (Huq 2006).
Six Sigma implementation may involve substantial change to an organization’s infrastructure. It requires greater use of cross-functional teams and collaborative decision making. The organization also may wish to implement mechanisms to increase employee motivation, such as incentive-based compensation and appraisal indices that emphasize team performance (Oliver 1996; Schuster and Zingheim 1992). The organization can improve implementation through effective communication that explains the Six Sigma process, how it relates to each individual’s job, and its benefits. Management and employees in an organization practicing Six Sigma should receive training in the DMAIC methodology, in basic statistical techniques and communication skills, and in identifying, executing, and managing Six Sigma projects. The organization may wish initially to implement short-term improvement projects to maintain participant interest.
      This paper introduces some of the relevant issues for the application of Six Sigma techniques in a nonprofit arts and cultural organizations. This sector provides significant opportunities for the application of these methods to improve efficiency and quality through process improvement. These techniques have proven extremely effective in manufacturing, service, and government sectors. Because nonprofit arts and cultural organizations perform many of the same tasks as organizations in other sectors, there is sufficient reason to expect that their application of Six Sigma techniques should be successful. This is certainly not a short-term project for any organization. Six Sigma implementation is a long-term process (Panda et al. 2000; Henderson and Evans 2000; Eckes 2000; Antony and Bañuelas 2002, Bañuelas and Antony 2001). However, Six Sigma techniques are a proven methodology that can provide an enormous benefit to the operational effectiveness of nonprofit arts and cultural organizations.

Table One:   (Throsby and Nielsen1980)
1.   Source Material
(a) Nature of source material
(b) Overall standard of script, text, score, translation.
2.   Technical Factors
      (a) standard of performance (acting, dancing, singing, instrumental)
      (b) standard of production (direction, interpretation, choreography, conducting, arranging)
      (c) standard of design (scenery, costume, lighting)
      (d) standard of facility (capacity, seating, arts and cultural organizationustics, lighting)
3.   Benefits to audience
      (a) entertainment and recreation
      (b) psychological and emotional stimulation and fantasy
      (c) intellectual stimulation
      (d) articulation and interpretation of the individual’s attitudes and experience
      (e) active participation and involvement of the audience
      (f) development of the individual’s taste
4.   Benefits to society
      (a) attraction of new audience
      (b) promotion of social evaluation
      (c) cultural preservation
      (d) promotion of a regional or national identity and culture
      (e) promotion of international understanding
      (f) education-especially of the young
5.   Benefits to the arts form
      (a) innovation (creativity, novelty, experimentation)
      (b) training (of performers, directors, production and technical staffs)
      (c) development of local creative artists (writers, choreographers, composers)
      (d) provision of examples of the best professional standard
      (e) potential for touring interstate and overseas

Table Two: Examples of Support Activities for nonprofit arts and cultural organizations that might be suitable for Six Sigma Projects

Governance:           Budgeting, Strategic Planning, Organization Assessment, Process for Establishing Alliances and Partnerships
Administration:        Payroll, Human Resources Administration, Purchasing, Accounting, Facility Maintenance, Customer Service, Organizational Development
Fundraising:            Grant writing, Event Planning, Newsletter Development
Outreach:                Advertising, Scheduling/Coordinating Programs

Table Three: Classification of Primary Activities

Aesthetic (A) or Non-Aesthetic (N) or Non-Aesthetic with aesthetic component (NAC)

Art Museums Performance University Arts Performance
Facilities Programs Organizations

Primary Activities

Programming                NAC                 NAC                 NAC                       NAC
Personnel**                   N                      N                      NAC                       NAC
Promotion                     N                      N                      N                            N
Production                    N ***                 N                      NAC                       A

** The scope of the personnel function within a non profit arts and cultural organization would normally have two important dimensions: the one concerned with the purely administrative function being non-aesthetic; the other concerned with selection and management of professional performers among other tasks, having a significant aesthetic component.

**** I refer here to the production of the exhibit, not the production of the art itself. The production of the arts curriculum within a university would include a strong aesthetic component. The production of the performance by a performance organization such as a dance company would be considered an aesthetic activity.

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Author Identification
Larry Weinstein, Ph.D. is an Associate Professor at Wright State University. His research has appeared in CMA Management, Computers & Operations Research,
IFAC Articles of Merit, International Journal of Arts Management, Journal of Corporate Accounting and Finance, Journal of Education for Business, Management Accounting Quarterly, Quality Progress. Sensor Review, Six Sigma Forum, and Total Quality Management and Business Excellence.

Education
Ph.D. (1996)
Operations Management The University of Kentucky
M.S. (1988)
Manufacturing Management Kettering University
B.S. (1985)
Engineering University of Cincinnati

ISO 9000 Registered Provisional Auditor: Registration Accreditation Board (1996)
Certified Quality Auditor (CQA) American Society for Quality (1995)
Certified Quality Engineer (CQE) American Society for Quality (1994)
Certified in Production and Inventory Management (CPIM) APICS (1993)