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Six Sigma: So Yesterday?

In an innovation economy, it's no longer a cure-all

At Home Depot (HD ), ousted Chief Executive Robert Nardelli was devoted to Six Sigma. "Facts are friendly" was a favorite mantra of his, neatly summing up his managerial point of view. Six Sigma was used to streamline the check-out process and strategically place vacuum-cleaner displays, for example. But by-products of the program irritated many at the retailer's stores, who thought its constant data measurement and paperwork sapped time given to customers. The bottom line on Nardelli's tenure: Profitability soared, but worker morale drooped, and so did consumer sentiment. Home Depot dropped from first to worst among major retailers on the American Customer Satisfaction Index in 2005.

Now Nardelli's successor, Frank Blake, another General Electric (GE ) alumnus, is dialing back on the Six Sigma rigor, giving more leeway to store managers to make decisions on their own. The story unfolding at Home Depot echoes closely what's happening at 3M after James McNerney's reign. There are signs of a similar pullback at many companies, even at GE, where CEO Jeff Immelt is trying to reprogram his management ranks to innovate around a theme of "ecomagination," with mixed success. And at Young & Rubicam, where GE board member Ann Fudge flamed out as CEO after she tried to sell ad execs on Six Sigma.