Six Sigma Project Performance


Savings Pig 2.0

Over the last several decades, Six Sigma has defined, established and exploited the real-world connections between quality and business. As Six Sigma has refined its focus on “breakthrough improvement,” we have witnessed a commensurate increase in the key measures of business performance.  Thus, quality and business have become inextricably linked, whereas before, their system-level connections were not well understood; and any discussions thereof, was often theoretical and speculative.

Only through the efforts and documented experiences of a great many Six Sigma Black Belts (across a wide array of industries) have such connections been made real and verifiable on a global scale.  In short, Six Sigma Black Belts are a virtual powerhouse of performance.  Plain and simple, Six Sigma Black Belts have clearly demonstrated their value.  Clearly, they know how to successfully organize and lead breakthrough improvement projects to realize substantial and durable gains for the key stakeholders of a corporation, enterprise, institution or government agency.*

For those organizations that have fully embraced Six Sigma and meaningfully implemented its strategies, tactics and tools, it is conventional practice to expect a Black Belt project to yield substantial benefits in the form of immediate and verifiable cost savings.  Beginning in the early 1990’s, the average savings per Black Belt project was about $150,000. By the year 2000, the average project savings jumped to slightly more than $250,000, or about $1 million in hard benefits per Black Belt.

During the early 2000’s, a few of the early adopters experienced project savings around $350,000, like General Electric, DuPont and Ford Motor Company.  At this point in time, it was more than reasonable to expect a large-scale company to achieve about $1.4 million per Black Belt per year (given the successful completion of 4-5 projects per year).

Given such facts, an organization of 100,000 employees that was willing to dedicate at least two percent of its workforce to becoming full-time Black Belts, could expect a net annual benefit (to the bottom line) in the range of $1.5 to $2.5 billion.  However, by 2005, the median value of “hard” financial savings per project dropped to about $250,000; and remains at about this level today.  As one might expect, these numbers vary considerably depending on the industry and world location being considered.

Of course, there are many reasons that can potentially explain the drop in average project savings, chief among which are things like the prevailing economic conditions, the commoditization of Six Sigma and the overall degradation of curriculum integrity, as well as a global shift in deployment strategy.

None the less, as time moves forward, it is likely that various forms of future research will provide great insights into the true causes.  For example, it is now generally known that Six Sigma Black Belt project savings are positively correlated to company size (in terms of revenue and headcount).  In other words, larger organizations can generally expect higher project savings when compared to mid-sized and small companies.

Its also fairly well known that many of today’s Six Sigma deployments are now decentralized and autonomous, often taking shape at the grassroots level of an organization.  This is in stark contrast to days gone by, where project performance was tied to executive incentives and the project performance metrics were vertically integrated.  Given these two examples, it is easy to understand why the average project savings has leveled out over time.  Regardless, Six Sigma is still the “big dog on the porch” in terms of verifiable return-on-investment; and will likely remain so for quite some time.

* The meta-analysis discussed in this blog was based on selected industry surveys, Internet research and the author’s collection of personal computer files.

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About Mikel Harry

Dr. Harry has been widely recognized in many of today's notable publications as the Co-Creator of Six Sigma and the world's leading authority within this field. His book entitled Six Sigma: The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations has been on the best seller list of the Wall Street Journal, New York Times, Business Week, and Amazon.com. He has been a consultant to many of the world’s top senior executives, such as Jack Welch, former CEO and Chairman of General Electric Corporation. Dr. Harry has also been a featured guest on popular television programs, such as the premier NBC show "Power Lunch." He is often quoted in newspapers like USA Today and interviewed by the media, such as The Economic Times. In addition, Dr. Harry has received many distinguished awards in recognition of his contributions to industry and society. At the present time, Dr. Harry is Chairman of the Six Sigma Management Institute and CEO of The Great Discovery, LLC.
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