Six Sigma is useful in some ways and a total hindrance in others. On 1/3/07, Gruss Gott <[EMAIL PROTECTED]> wrote: > > The 'Six Sigma' Factor for Home Depot > Departure of CEO Nardelli Brings Into Focus > A Management Technique He Championed > By KAREN RICHARDSON > January 4, 2007 > > The departure of Robert Nardelli as Home Depot Inc.'s chief executive > was largely seen as a result of his big pay package, terse management > style and failure to lift the Atlanta home-improvement company's stock > price at a time when the housing boom was at full bore. > > But it also is an example of "Six Sigma" -- a quality-boosting > methodology made famous by Jack Welch, Mr. Nardelli's former boss at > General Electric Co. -- not panning out as promised. > > Developed at Motorola Inc. in 1986 and licensed by that company for > corporate use, Six Sigma was one of several so-called > process-management techniques that took off at U.S. manufacturing > companies facing challenges from higher-quality Japanese products. > These techniques -- aimed at increasing efficiency and cutting costs > -- have since been widely applied across industries such as retailing > and financial services. > > Six Sigma "languished until Jack Welch embraced it in the late 1990s," > says Thomas Davenport, a professor of management and technology at > Babson College in Massachusetts. > > Now QualPro Inc., a company that markets a competing > process-management technique, has issued a study comparing the stock > performance of companies that adopted Six Sigma with the performance > of the Standard & Poor's 500-stock index. QualPro has done work for > Lowe's Cos., Home Depot's main competitor. > > Given that the study was issued by a Six Sigma competitor, it isn't > surprising that the comparisons aren't flattering. > > Motorola, the company that markets Six Sigma, declined to comment on > the QualPro report. Mr. Nardelli didn't return calls. Home Depot > declined to comment. > > A number of former GE executives -- including W. James McNerney Jr., > former CEO of 3M Co.; Dave Cote, CEO of Honeywell International Inc.; > and Mr. Nardelli -- helped spread the Six Sigma word but have seen > their companies' stock prices lag. > > Since announcing the adoption of Six Sigma on July 1, 2001, Home Depot > shares are down 8.3% compared with a 16% rise in the S&P 500 over the > same period. The stock rose more than 2% yesterday on the New York > Stock Exchange, to $41.07, after Mr. Nardelli's resignation. > > Honeywell shares are down 7.2% since its Six Sigma announcement in > early January 2000, compared with a 3.6% fall in the S&P 500. Shares > of 3M are off about 1% since late December 2003 versus the S&P 500's > 29% climb. GE shares rose sharply in the 1990s, but they're down 16% > since July 2000, when the company adopted Six Sigma, compared with the > 2.6% fall in the S&P 500. > > "Six Sigma is not the end all be all," said Robert Ferris, a spokesman > for Honeywell. "It is simply a set of process tools. We would never > suggest that a company's performance is solely linked to the adoption > of these tools." > > Some proponents of Six Sigma say stock price is too simplistic a > measure of the program's effectiveness. > > "Quality programs are not designed to be measured by a company's stock > price," says Jeffrey Pfeffer, professor of organizational behavior at > Stanford University's business school and a Six Sigma advocate. > Improvements generated by Six Sigma, he adds, "may or may not be > reflected in the stock price." > > Charles Holland, QualPro's founder and CEO, disagrees. "There surely > is enough smoke in the study to let you know there are problems with > Six Sigma," he says. "Over a period of five years or more, share price > is an excellent indicator of whether you're getting better as a > company." > > Of the 58 companies reviewed in the QualPro report, 52 underperformed > the S&P 500 index from the time they launched their Six Sigma programs > through Dec. 5, 2006. Other underperformers include Lockheed Martin > Corp., Ford Motor Co. and Xerox Corp. > > Six Sigma companies that beat the S&P 500 include Caterpillar Inc., > Federated Department Stores Inc., Starwood Hotels & Resorts Worldwide > Inc., Target Corp. and Whirlpool Corp. > > Beside offering advice to Lowe's, QualPro has worked with retailers > Big Lots Inc., CarMax Inc. and Circuit City Stores Inc. The Knoxville, > Tenn., firm's "multivariable testing" method -- a technique that > allows companies to test many changes in procedure at once, rather > than individually -- lags behind Six Sigma in popularity. > > The Six Sigma system trains selected employees in its techniques to > monitor, measure and improve processes, and to identify and eliminate > waste and defects. These employees are distinguished by a colored-belt > system, much as karate students are ranked. The highest Six Sigma rank > is a Master Black Belt. Regular black and green belts work under these > masters. > > "If Six Sigma is one of the process religions, it seems to have the > biggest priesthood in these black belts," Babson's Mr. Davenport says. > One of the criticisms of Six Sigma is its reliance on this group of > specially trained employees, particularly in the retail sector, where > staff turnover tends to be higher than in some other sectors. > > During the past couple of years, management analysts and investors > also have questioned whether Six Sigma is suited to help firms expand > through technology, innovation and human interaction. > > The retail sector, in particular, "is a very human thing, with lots of > people going through your store, wanting to talk to somebody about > buying a chainsaw," says Jeff Matthews, general partner at Ram > Partners, a hedge fund in Greenwich, Conn. "That's a lot different > than running a light-bulb plant efficiently." Ram holds an > "insignificant" stake in Home Depot, Mr. Matthews says. > > Mr. Nardelli centralized operations and invested in computer systems > that allowed the huge store base to function more productively. But he > also cut staff, which Mr. Pfeffer -- the Stanford advocate of Six > Sigma -- says isn't consistent with the program's advice to drive fear > out of organizations or to invest in the work force. > > "You can't do just one little thing," Mr. Pfeffer says. "Low > cholesterol is just one measure of health. In the same way, quality > management is just one piece of the puzzle, but not the answer to the > whole puzzle." > >
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Create robust enterprise, web RIAs. Upgrade & integrate Adobe Coldfusion MX7 with Flex 2 http://ad.doubleclick.net/clk;56760587;14748456;a?http://www.adobe.com/products/coldfusion/flex2/?sdid=LVNU Archive: http://www.houseoffusion.com/groups/CF-Community/message.cfm/messageid:223550 Subscription: http://www.houseoffusion.com/groups/CF-Community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
