“The 1960s and 1970s brought a dawning realization that market share is key to company’s growth and profitability. The 1980s have shown just as clearly that one factor above all others- Quality- drives market share.”
– Buzzell and Gale (The PIMS Principles)
A study by Kevin B Hendricks and Vinod R Singhal in 1997 titled ‘Empirical evidence from Firms that have won Quality Awards’ stated that their statistical tests provided strong evidence that firms that have won quality awards outperform the control firms on operating income-based measures. Study was conducted over a 10-year period, from 6 years before to 3 years after the year of winning the first quality award. Their study also evidenced that the firms which emphasized quality were more successful in controlling costs when compared with the firms in the control sample. Further, the results indicated that firms increased their capital expenditures over the time period prior to winning quality awards. In comparison to the control sample, these firms showed higher growth in both employment and total assets.
According to the study the award-winning companies experienced:
• 91% growth in operating revenue compared to 43% for the control group
• 69% increase in sales compared to 32% for the control group
• 79% increase in total assets compared to 37% for the control group
• 23% increase in number of employees compared to 7% for the control group
• 8% rise in return on sales compared to no improvement for the control group
Based on this data, we can conclude that effective implementation of quality principles leads to improvement in financial performance for most organizations. Lean Six Sigma can help an organization achieve quantifiable improvements by creating a sustainable quality culture and enhancing control over processes and improving customer satisfaction.
Lean Six Sigma helps in the development of a sustainable quality culture involving all stakeholders in the continual improvement process. Lean Six Sigma assesses business process performance objectively based on unbiased data and cost effective solutions are implemented for breakthrough improvements.