Does Six Sigma Improve Performance?

This article presents the long-term financial and operational results coming from the implementation of Six Sigma. The results from Six Sigma programs were somewhat mixed. The author found a significant effect on free cash flow (FCF), earnings before interest, taxes, depreciation, and amortization (EBITDA), and asset turnover. Six Sigma did not seem to affect sales return on assets, return on investment, or firm growth. As a result, if firms want to improve cash, earnings, or productivity in using assets, Six Sigma might be of use. In 1998, companies with high cash flows and no quality management program (QMP) had lower FCF in 2002 than companies that had adopted Six Sigma. Companies with low cash flow and no QMP did better than companies using Six Sigma, suggesting that for cash-poor firms, Six Sigma may be a drain on resources. Also, these companies may not have the cash necessary to sustain effective Six Sigma results over four years. Among companies with low and medium asset turnover, Six Sigma led to higher asset turnover. It could be that companies with low asset turnover could benefit more from process improvement implicit in Six Sigma than firms with high asset turnover.