Six Sigma, stock returns and operating performance

Purpose - This paper aims to expand the literature on financial and operational performance by analyzing the effects of undergoing through Six Sigma training. Design/methodology/approach - The effects of implementing Six Sigma trainings is analyzed for 108 Fortune 500 companies. The authors estimate long-term stock returns and 14 financial ratios of Six Sigma companies, both pre- and post-adoption periods. Furthermore, The authors match the 108 companies by size and industry to 108 non-Six Sigma companies also within the Fortune 500. Findings - Looking at long-term stock returns, the evidence shows that Six Sigma firms need at least four years before they start to outperform the controlling sample. Furthermore, looking at operational performance, unlike prior reported results, the authors find supporting, and more importantly, persisting statistical evidence that Six Sigma firms are less liquid and have a negative growth in staff levels in comparison to the matching firms. Social implications - The findings of this suggest that if Six Sigma provides any value to the company, it comes at the expense of overloaded staff levels, as evidenced by the fact that Six Sigma firms have less growth in staff levels than the matching firms. Originality/value - It is one of the first paper to thoroughly investigate the effects on both financial performance and operational performance of spending, sometimes billions of dollars, in Six Sigma training.