This journalist displayed a total lack of understanding of the complexities involved in determining stock price. Instead of an honest article on the true worth of Six Sigma, backed with facts, she basically served as an advertiser for one company. She focused on one point that a company, QualPro, made in what appears to be an attempt to drive sales on their product and services.

Ms. Richardson attempts to show that if a company embarks upon Six Sigma their stock price will decrease, and she backs that up with select data that has been supplied by QualPro. The fact is, there might be a correlation between the two factors (Six Sigma and share price), but there is no proven causality. It is very similar to the example we give in one of our training classes. The town of Oldenburg, Germany, from 1930-1936 records an increase in the population of humans at the same time that there is an increase in the population of storks. Now Ms. Richardson and her followers would say, “Disney is correct, storks bring babies.” We all know that is absurd. In fact, if one investigates the situation and studies the data they would show that Germany was industrializing at the time; people were moving into the cities from the outlying areas; people needed houses in which to live. During the 1930’s the architecture employed gables. It so happens that gables are attractive to storks and so they build their nests under gables. In fact, an increased number of gables, caused by a swelling of population, caused an increase in the population of storks. Now, using the logic of Ms. Richardson and QualPro, they would have us believe that storks brought many babies to live in the town of Oldenburg. Yes, this conclusion is ridiculous, but it is just as ridiculous to conclude from the data presented in the Richardson article that Six Sigma caused the price of stocks to go down.

The poorly researched article implies that the implementation of Six Sigma has actually been very damaging for companies who have embarked upon improving processes using the Six Sigma methodology. Most people are savvy enough to know that there are many factors that have an impact on stock price and the use of an improvement methodology is not the only factor. Factors such as leadership, industry, market sentiment, revenue, world events, world markets, company size, debt, earnings volatility, dividends payout ratio, dividend yield, sales, expenses, news coverage, etc., have a big impact on share price.

The facts that the article uses are rather baffling. Honeywell, GE, and Home Depot are all highlighted as companies that have embarked on Six Sigma since the beginning of 2000 and their stock prices are down. Ms. Richardson states that “GE shares rose sharply in the 1990s, but they are down since July 2000, when the company adopted Six Sigma.” First of all, GE embarked upon Six Sigma in 1996. Check the records and one will see that the stock price rose steadily from that time to 1999. In fact, it did so well that in 1999 the stock split 3-for-1. Can one now deduce that Six Sigma was the sole reason the stock prices rose so high? Of course not; that would be making the same mistake that Ms. Richardson and QualPro have made. Six Sigma cannot be given sole credit for either direction the stock price goes. It is important that Charles Holland investigate the facts before he makes a claim about GE that is totally erroneous.

The article claims that Home Depot, Honeywell, and GE stock prices have all declined since the companies’ launch of Six Sigma. I don’t know of any program or management endeavor that is effective immediately (regardless of what QualPro might say). For large companies it can take some time before changes in their business system of management take hold. Interestingly enough, all three charts at the end of the article show that since 2002 the stock prices of these three companies have steadily and aggressively climbed. One might use the argument that it was Six Sigma that helped the companies climb out of their lows. What has happened in the article that Ms. Richardson wrote is that she has used some facts without fully investigating and then made statements which border on absurd. One can take the same facts and say that Six Sigma is solely responsible for three companies completely reversing their stock price decline and driving a dramatic surge.

An example of two different businesses was used in the article to question whether Six Sigma is applicable/relevant in all industries. Of course there is a difference between “wanting to talk to somebody about buying a chainsaw” and “running a light-bulb plant efficiently.” As opposed to concluding that neither company should try to improve the way they do business, one should conclude that each company needs to look at how they perform their process, make their products, and perform their services and then determine the best approach to take to improve how each is done. In other words, not all companies who embark upon Six Sigma will or should implement and deploy the same way and with the same level of intensity.

The subject article gives the impression of an “advertorial” -- written with the intent of spotlighting a particular company and its methodology. That is okay if the readers understand that advertising is taking place and not honest, fact-based reporting. We have addressed that stock price is far too complicated to focus on one input factor as the driver behind it. It would have been much more reasonable if one factor had to be blamed, that the writer point to September 11 or corporate mismanagement as the cause for the stock price to decline. But let’s not be foolish enough to say Six Sigma caused the decline. Many corporate leadership teams would disagree with that conclusion.

QualPro indicates that they have worked with some companies and have achieved success. Is that to imply that providers of Six Sigma can’t provide a list of companies that they have worked with that have had tremendous financial gains? Most Tier 1 providers of Six Sigma services can show by validated financial data that the companies they work with save an average of 2 percent of total revenue each year.

The article and the QualPro website trumpet QualPro’s methodology (which is called Multivariable Testing--MVT), indicating it is a “fix-all” that only QualPro has. I visited the QualPro website to see what the company has to offer. I was a bit disappointed in the information that the website carried. Once again I found some statements to be very short-sighted and in many cases, inaccurate. Included in the inaccurate statements are: (1) “The four-step Six Sigma methodology lays out a very loosely structured path”…(Six Sigma is a five-step methodology and it is very rigorous if complied with); and (2) “The tools used in Six Sigma are not powerful.” (Those who know the capability and opportunities provided by design of experiments, discrete event simulation, multiple response optimization, robust design techniques, etc., can experience the full range and power of the “tools.” See the article “the Dumbing Down of Six Sigma” by Dr. Mark Kiemele at www.airacad.com.)

It would be wise for Ms. Richardson to use the methodology she is espousing in her article, namely Multivariable Testing, to accurately assess the impact that Six Sigma is having on share price. Anytime there are a number of factors that can impact a response variable such as share price, Six Sigma mandates the use of Multivariable Testing (or Design of Experiments, which Air Academy Associates has been introducing to clients since 1990) to be able to independently determine what the effects of each of the factors and their interactions are on the response variable, in this case share price. It is ironic that the author is denigrating and failing to use the very methodology that she is trying to promote in her article.

The QualPro website contains the following statement -- “Although MVT® could become one of the most widely used management tools and has been applied by leading companies in every industry to create billions of dollars of value--no book on it has been published, until now.” QualPro has now published a book and understandably would like to create sales. I can’t help but wonder if that desire helped prompt the article that was written by Ms. Richardson. I would be interested in seeing the documentation that supports QualPro’s claim of the validated billions of dollars that MVT has saved industries. I would also like to see the supporting evidence that MVT caused those savings and that it was not some other yet-to-be-identified cause. Savings of this magnitude are truly documented and verified by many companies, to include those highlighted in the article, and those savings have been documented to be driven by process improvement efforts such as Six Sigma.

I invite Ms. Richardson to publish this response. Better yet, I invite her to truly investigate what effects Six Sigma has had for many companies to include decreased expenses, increased revenue, decreased warranty costs, decreased office mistakes, decreased insurance premiums, increased profit margin, increased market share, etc. Rather than accept the erroneous conclusion that Ms. Richardson arrived at in her article “The Six Sigma Factor for Home Depot,” one should look at years of facts which support the positive results of Six Sigma efforts implemented and deployed correctly. Just as our analysis supports that storks do not bring babies, the data also supports that Six Sigma does not drive down stock price.