A Process Too Good? Or Too Good to be True?
Good blog from Keith Swenson about the dangers of over-emphasizing cost in your process (or more broadly, efficiency):
- 3M started to use Six Sigma from 2001 to 2005 in order to cut costs and increase efficiency. It worked! They cut costs some 21%. However, at the same time they noticed that innovation in new products dropped as well. (See ZDNet: Six Sigma ‘killed’ innovation in 3M)
- Home Depot found that a focus on efficiency decreased moral and satisfaction. Another 2007 Business Week article put it bluntly: “Profitability soared, but worker morale dropped, and so did consumer sentiment. Home Depot fell from first to last among major retailers on the American Customer Satisfaction Index in 2005.”
The 3M and Home Depot examples are interesting – but it wasn’t the “six sigma” that got them – it was the leadership (or lack thereof) and its style. The leaders (ex-GE folks) were convinced that the same six-sigma playbook that worked at GE was what 3M and HD needed. Maybe it wasn’t.
HD lost experienced personnel out of their stores (among other issues). 3M lost sight of what makes them unique in American business. I don’t think either one was a result of Six Sigma – after all, that would excuse the people running the company from responsibility for their judgments and leadership. HD has been on the road back since Blake jumped in as CEO, demonstrating the value of leadership.
Eliminating truly wasteful effort is typically a good thing. But which things are waste, and which things are “cost of doing business”, and which things are “the secret sauce” – these are the insights that separate good from bad, and great from good.
Were the processes too good? Not in my book. In my book, the efforts they took to cut costs optimized on the wrong metric. Maybe a better label would be – “Processes too good to be true.”