ROI On Six Sigma Programs Directly Related to Investment Size, Survey Shows
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|Michael Marx, Research Manager|
Investments in Six Sigma Above $2 Million More Likely to Generate a Six-Fold Return; Executive Compensation Likely Plays a Role
Seattle – November 2, 2005 – A new survey of almost 1200 Six Sigma professionals shows that the more companies invest, the greater the return. In the survey, released in the November/December issue of iSixSigma Magazine (www.isixsigma-magazine.com), companies that invested less than $500,000 in their program were most likely to break even at best. “But companies that invested $2 million or more in their Six Sigma programs were most likely to see at least a two- to five-fold return,” commented Michael Cyger, CEO and publisher of iSixSigma Magazine and www.iSixSigma.com, “and about a quarter to a third of those companies saw a six-fold return.”
The survey also proved what experts have been saying for a decade or more. “The single most important factor in success is executive support,” said Michael Marx, research manager for iSixSigma. “The higher the level of executive commitment, the more successful the program.” Respondents who rated their programs as ‘poor’ said that 56 percent of their executives were uncommitted. Conversely, when respondents said their programs were somewhat or highly successful, “Nearly 87 percent of their executives were somewhat to highly committed,” added Marx.
This commitment may be tied to executive compensation. “Over 84 percent of respondents who rated their programs as ‘unsuccessful’ in the first two years had no executive compensation tied to Six Sigma results,” explained Cyger.
Those figures changed dramatically if companies had even 1 percent of executive compensation tied to Six Sigma. “Over a third of the respondents who rated their programs as somewhat successful met that minimal criteria,” he said. “And more than 60 percent of the self-rated highly successful programs had executive compensation.”
One surprising result from the survey was the success of enterprise-wide deployments compared to pilot programs. “For decades, some experts have been telling companies to start small, to do a pilot test so they can learn what works and what doesn’t before they roll out Six Sigma across the entire company,” said Cyger. “But our survey results contradict that advice.”
Only 42 percent of respondents said their companies started with a full deployment. But those programs were three times more likely to report an eight-fold ROI in the first two years.
The conclusion from all these results is obvious. “You get what you pay for,” said Marx. “A higher level of investment results in a higher return on investment.”
Michael Marx, Research Manager