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Six Sigma methodology is perfect for discovering innovative ways of improving your organization’s operations. Likewise, there’s more to the business process improvement methods than just manufacturing and production processes. If you are considering to publicly list your company or want to find ways to improve your market value, Six Sigma can help. Combining with business analysis, Six Sigma looks to calculate your shareholder value analytics (SVA). In today’s article, we will discuss what SVA is, why you should use it, and how it relates to Six Sigma.

What is ‘Shareholder Value Analytics (SVA)’?

SVA is a precise calculation of your company or organization’s value in the public market. This analytical tool assesses the returns you make to your shareholders and measures the financial pros and cons of your strategies. We use SVA as a measure of a company’s operations simply because all public corporations will try to maximize shareholder value. If you’re able to do this, chances are you have found innovative ways to efficiently increase your operations. Additionally, stock market analysts will use SVA to calculate your organization’s success and value. Business analysts will typically shy away from looking at only your revenue and profit since these figures can be manipulated and tell different stories. SVA, on the other hand, is not nearly as misleading and paints a more concrete picture of your operations.

Why Should You Use SVA?

There are a variety of questions your management team and shareholders will ask that you can answer by looking at your SVA. These include analyzing your operational strategies, calculating how much value you deliver to your shareholders, and seeing how you perform compared to your competitors. To make an accurate prediction for your shareholder value, you must look towards your economic value added. This metric will calculate your organization’s profit by measuring the return and cost on capital. Likewise, you must also effectively manage shareholders’ opinions. Much of the stock market is driven by expectations investors have on certain organizations. If you can prove your organization has effective operations and is resourceful with its capital, your SVA will increase.

SVA & Six Sigma

Your shareholders will only expect a payout if your returns on equity are higher than your costs. Saying this, an increase in your shareholder’s value will correlate with effectively running your organization. This is where Six Sigma methodologies come into play. There are multiple ways for you to increase the efficiency of your operations.

First, we look to the 5 K’s of Kaizen. These steps look to minimizing your usage of resources, carefully placing items, and increasing customer relations. When more people buy your products and believe they are of superior quality, your shareholder value will increase. Likewise, implementing the steps of DMAIC is an excellent way to find inefficiencies within your business processes. With the management of a Six Sigma Black Belt or higher, your team will use DMAIC to find innovative ways of improving any and all processes within your organization. This, in return, will decrease your capital costs and increase your market share value and thus, your SVA.