 The
Newsletter of Lean Manufacturing & Factory Science
March
11,
2003
www.strategosinc.com
TQM,
Six Sigma and Lean Manufacturing
Does
It Payoff for Shareholders?
The
answer is YES, BUT...
TQM
has sometimes been criticized for not bringing benefits to shareholders.
For example, several companies that have been recognized for outstanding
TQM efforts fell on hard times even when the economy boomed, some
prominent financial publications have questioned the value of TQM and
we've all heard horror stories of Lean or TQM gone awry.
Professors Kevin
B. Hendricks and Vinod R. Singhal studied some 3000 public firms.
They compared financial performance of those using TQM to control groups
of similar companies that did not. The TQM
firms fared significantly better in, profitability, return on assets and
stock performance.
A
surprising finding was that financial
performance did not degrade during implementation.
Implementation cost is not as great as many imagine. In addition, early
savings in the first months appear to offset implementation cost. Essentially,
the system pays for itself all the way.
On
the downside...improved performance
depends on an effective
implementation (often problematic).
In addition, these benefits take years to fully
develop. Here
are some findings of this research:
-
TQM
companies grew their financial measures, including stock price, at
more than twice the rate of benchmark companies.
-
Low
capital-intensive companies obtained more financial benefits from
TQM then high capital intensive companies.
-
Smaller
companies got more benefit from TQM than larger firms.
-
It
takes 3-8 years before performance measures and, eventually, stock
price reflect the results.
-
Benefits
depend on complete and effective implementation. Most efforts do not
meet this standard.
-
Performance
does not degrade during implementation
Visit our latest web page. It summarizes
these findings and extrapolates the results to Six Sigma and Lean
Manufacturing. You can also download a copy
of the original article.
www.strategosinc.com/tqm_benefits_0.htm
All
The Best-
Quarterman
Lee
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