Executive Briefings

Six Sigma Is No Cure-All for Business Ills, Says Hackett Group. Here's Where It Falls Down on the Job

A good number of companies have jumped on the Six Sigma bandwagon in recent years, following the example of General Electric and a handful of other Fortune 500 companies. Six Sigma is a quality program that seeks to reduce the number of errors in an operation to infinitesimal levels. Many businesses have successfully applied its continuous-improvement tenets to finance, information technology, procurement, human resources and other administrative functions, notes the Atlanta-based Hackett Group. But the program has not succeeded across the board. By its nature an incremental approach to process improvement, Six Sigma "is not the best tool when the goal is broad transformational change," says Richard T. Roth, Hackett's president of global enterprise solutions. "It's like using a screwdriver to make a structure more stable when a hammer is required." Failures occur when companies take an overly theoretical approach, failing to adjust the program to their unique corporate cultures, says senior business adviser Penny Weller. Problems also crop up when companies use a piecemeal approach, launching unrelated continuous-improvement programs in multiple areas, she says. Still, Six Sigma has demonstrated its value. According to Hackett, executives can reduce annual selling, general and administrative costs by $60m per $1bn of revenue by achieving "world-class" performance in finance, IT, procurement and human resources. One Hackett client, combining Six Sigma with "Lean" concepts, slashed payment-processing time by 50 percent.

Visit www.thehackettgroup.com.

 

A good number of companies have jumped on the Six Sigma bandwagon in recent years, following the example of General Electric and a handful of other Fortune 500 companies. Six Sigma is a quality program that seeks to reduce the number of errors in an operation to infinitesimal levels. Many businesses have successfully applied its continuous-improvement tenets to finance, information technology, procurement, human resources and other administrative functions, notes the Atlanta-based Hackett Group. But the program has not succeeded across the board. By its nature an incremental approach to process improvement, Six Sigma "is not the best tool when the goal is broad transformational change," says Richard T. Roth, Hackett's president of global enterprise solutions. "It's like using a screwdriver to make a structure more stable when a hammer is required." Failures occur when companies take an overly theoretical approach, failing to adjust the program to their unique corporate cultures, says senior business adviser Penny Weller. Problems also crop up when companies use a piecemeal approach, launching unrelated continuous-improvement programs in multiple areas, she says. Still, Six Sigma has demonstrated its value. According to Hackett, executives can reduce annual selling, general and administrative costs by $60m per $1bn of revenue by achieving "world-class" performance in finance, IT, procurement and human resources. One Hackett client, combining Six Sigma with "Lean" concepts, slashed payment-processing time by 50 percent.

Visit www.thehackettgroup.com.