In Six Sigma We Trust

"It didn't take Robert Nardelli long to find a new job.

"Running Chrysler for private-equity firm Cerberus Capital Management probably is a good position for Mr. Nardelli... But Mr. Nardelli's enthusiasm for the management systems he used in an even earlier job at General Electric might slow the Auburn Hills, Mich., car company down.

"One such tool, the Six Sigma approach for defect reduction and process streamlining, didn't work too well at Home Depot. The system is designed to improve quality and wrings costs out of industrial manufacturers like GE. It sounds tailor-made for Chrysler, which already uses similar techniques but still needs to develop high-quality vehicles to lure buyers. Mr. Nardelli's application of it at Home Depot revealed serious drawbacks when applying it to companies with broad retail-distribution arms.

"Six Sigma led Mr. Nardelli to address problems… by trying to optimize revenue per worker. That meant stretching staff and cutting compensation and other incentives. Those moves left Home Depot's orange-smocked legions thin on the ground and led to a decline in customer service, worsening the Atlanta retailer's problems.

"Of course, Six Sigma may help Chrysler improve design and manufacturing. But like Home Depot, the auto maker depends on a far-flung sales force. Mr. Nardelli may have an even harder time optimizing these relationships…

[So], "Cerberus's choice remains a bit odd... Bringing in a new boss with a history of ticking off workers could… impede Chrysler's ability to secure the concessions it needs. For Cerberus, that is a gamble."

(“breakingviews.com / Financial Insight: Can Nardelli Help Chrysler?; Management Tools Used At Home Depot and GE May Not Serve Car Maker.” Wall Street Journal: August 7, 2007. pg. C.12)


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