The role of Six Sigma in improving financial performance

Abstract

As the rise of globalisation continues to pressurise companies to improve performance, there is a lot of hype surrounding Six Sigma’s abilities to do so. After all, for managerial techniques to be credible, they need to improve profit. It is therefore concerning that to date only one empirical study examines the role of Six Sigma on performance and it finds mixed empirical results. This study aims to replicate the preceding study over a more recent time period and include the impact of sector on performance. This study examined 43 Six Sigma firms listed in the United States and their financial results for a four year period from 2004 to 2007, compared to 43 homogenous firms that formed a control group. The results for five operational and five financial measures were tested using analysis of covariance to see whether, given equal initial levels of the measure, the Six Sigma firm would outperform the control firm after four years. The main contribution of this study is to show how little Six Sigma contributes to financial and operational performance overall. Companies looking to implement a Six Sigma initiative should be cognisant of this before investing in high initial investment costs.