Wednesday, August 29, 2012

SIX SIGMA: CRITIQUE

It’s one of the most ultimate management jargons of all time, thanks to its initiation by Motorola and subsequent promotion by Jack Welch! But over the turn 0f the century, companies that swore by this concept have been caught in an abyss. Is the practice worth it any more? by Ashutosh Harbola
 
What went wrong? Vijay Govindarajan, Professor of International Business at Tuck School of Business, comments to B&E, “Six Sigma is about continuous improvement whereas radical innovation is discontinuous change. So they conflict.” Eugene C. Reyes, VP-Business Development North America, BPO International, Inc. gives a scathing critique of the concept to B&E, “Six Sigma, TQM and even ISOs can stifle areas of business where innovation is key.” Quality has merit, but can have a self-limiting effect when it comes to innovation. In a 2003 study, Nitin Nohria (current Dean of HBS), W. Joyce and B. Robertson found that there was “no direct causal relationship” between some specific management techniques (including Six Sigma) and “superior business performance.”

Then how did Jack Welch succeed in implementing Six Sigma and ensuring fantastic success for GE (earnings grew 13% in just two years of implementation)? That was because Jack, despite targeting outstanding improvement in quality, was never fanatical about achieving the “3.4 defects per million” impossible target. His prime rule for any manager implementing Six Sigma was that the manager should “understand Six Sigma is all about customers winning in their marketplace and GE’s bottom line.” In other words, Jack cancelled any Six Sigma programme that had a chance of eating into the earnings – “Six Sigma should just be selectively applied,” were his key words in the Welch Way. Strangely, CEOs of most other Six Sigma companies never realised this necessary connection; as a matter of fact, Jack Welch never let them on to it since the very end of his tenure. But empirical evidence cannot be ignored, and as much as we may not want it, Six Sigma is on a sure path to a silent demise.

Dr. Chris Trimble of Tuck School of Business suggests to B&E, “The solution is not to kill Six Sigma, but to create ‘safe havens’ where a company can pursue disciplined experiments – while simultaneously striving for excellence in day-to-day business.” Chris, we suspect even that point is long gone...
 
 

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