6 Sigma Mystique Takes Beating In Downturn

May.31, 2009 in 6 Sigma

6 Sigma Mystique Takes Beating In Downturn
Why are companies that embraced 6 Sigma – like GM, Caterpillar, and Motorola — doing no better in this downturn than the companies that ignored it?
Companies have spent hundreds of millions of dollars adopting 6 Sigma, the popular business management system inspired by Toyota Motor Corp’s legendary approach to manufacturing.

They justified the investment by claiming 6 Sigma, and its emphasis on measuring and improving processes to eliminate waste and cycle times and improve quality, cost, delivery and services, would make them leaner and more nimble — in good times and bad.

So why are companies that embraced 6 Sigma – like General Electric Co, Caterpillar Inc and Motorola Inc — doing no better in this downturn than the companies that ignored it?

Caterpillar, for instance, reported its first quarterly loss in 17 years last month and lowered its full-year profit and sales forecast. Earlier this month, GE reported a sharp drop in income because of troubles at its hefty finance arm. And Motorola has already warned of a deeper-than-expected loss when it reports this week.

Given the vast sums these companies have collectively spent on the quality-improvement system over decades, it seems reasonable to ask whether the global recession has taken the bloom off the 6 Sigma rose.

In his new book “Enough,” John Bogle, the legendary investor and founder of the Vanguard Group, partially blames the focus on metrics — a hallmark of 6 Sigma – for the disastrous business decisions that led to the current crisis.

“With 6 Sigma,” Bogle told to Reuters April, “you’re counting just about everything that can be counted. And my problem is that process triumphs over judgment.”

Tom Peters, the management guru, agrees. “You can measure everything except what’s important,” he said. “And you could say that it was exactly that which couldn’t be quantified, that which wasn’t real, that got us in this trouble.”