Six Sigma Case Study: General ElectricMay 22nd, 2017
Thanks to ex-CEO of General Electric Jack Welch, the companies throughout the business sector know Six Sigma as a staple of good business practice. In fact, more than half of all Fortune 500 companies use Six Sigma to improve and streamline their own processes. However, Six Sigma wasn’t always around. In fact, it took a long time since its earliest inception for companies to start using it effectively.
Manufacturers like Motorola pioneered modern Six Sigma in the 1980s, although earlier versions of the methodology existed as far back as the 1920s. Henry Ford’s business model and manufacturing techniques all reflect some of Six Sigma’s core principles. But Six Sigma’s relationship with General Electric is something special. After Jack Welch brought Six Sigma into the General Electric fold, those same principles would go on to generate enormous interest. And not just in the US, but around the world. Before Six Sigma, there was little else like it, and nothing else more effective.
General Electric’s adoption of Six Sigma methodology marks a turning point in the history of process improvement. Jack Welch is also important for helping to build Six Sigma’s reputation, which carries on into the present day. But what difference did Six Sigma make to General Electric? And when did it first begin? In this article, we look at the history of Six Sigma at General Electric, how they have used it, and how they benefited.
Six Sigma Before General Electric
Before we can answer the above questions, we first need to understand what the conditions were that made it necessary for General Electric to adopt Six Sigma practices. What set them on that course? Motorola pioneered Six Sigma was in 1981. Their lead engineers concluded that their mandatory method for measuring defects per thousands of opportunities did not provide enough fine detail. As such, they decided to switch to measuring in millions, to provide more granular data. One of the most prominent benefits of doing so was the staggering increase in savings the company experienced.
Six Sigma’s early success here led to Six Sigma methodology becoming a permanent fixture of Motorola’s operations during the mid-80s. Furthermore, outside companies had noticed Six Sigma’s successes, which sparked interest in how they could utilize it themselves. While the interest was great during this period, there were still few companies who managed to implement Six Sigma successfully. Least of all on the same scale as Motorola. However, it was only a decade later when General Electric began using Six Sigma. This was the beginning of an exciting new renaissance for process improvement.
Jack Welch and General Electric
In the late 1980s, General Electric turned their focus towards ensuring excellent quality. They did so through their use of the Work-Out program, which exposed GE to a world of new ideas. The groundwork laid here by GE’s Work-Out would be important for the onset of Six Sigma shortly afterward. Jack Welch, the former CEO of GE, is, of course, responsible for Six Sigma’s implementation here. He instigated a new corporate policy for GE that pledged to acquire Six Sigma goals by the millennium. Welch took a lot of inspiration from companies like Motorola, using Six Sigma concepts in much the same way.
Implementing Six Sigma
It was in 1995 when General Electric’s implementation of Six Sigma began. Welch was the driving force behind this implementation, acting as a figurehead for the rest of the company to rally behind. Under his watch, he strove to ensure the company fully integrated Six Sigma into their operations. This change in operations began when Welch became aware of GE’s many setbacks, the company often falling short of its potential. Welch recognized that GE required a complete overhaul of all its fundamental operations.
Working with engineers and consultants, Welch detected a great deal of defect that had previously gone unnoticed. This build-up of waste was holding the company back, losing them money, and slowing down their production. Welch knew what to do. He had seen it in action and knew it could save General Electric from itself. He knew Six Sigma could help streamline the company, make it more efficient and productive, eliminate waste, and change it for the better. It did.
Timeline of Implementation
General Electric’s implantation of Six Sigma took five years, and the end-result was a reported twelve billion dollars in savings. The enormity of Six Sigma’s success here cannot be understated. Welch would go on to become a lifelong advocate of the Six Sigma methodology, championing its effectiveness in businesses, large and small, all over the world. Six Sigma’s present day success is rooted in that of Jack Welch and General Electric. Following its unprecedented achievement at General Electric, many more companies started using Six Sigma. By the late 90s, some of the biggest corporations, such as Samsung, Ford, Boeing, Amazon, and GlaxoSmithKline were all using Six Sigma. Many of these companies, including a huge number of multi-nationals, experienced immediate and continuous success through Six Sigma implementation. This snowball effect cemented Six Sigma’s reputation in the business world, ensuring that it continues to succeed even today.
How Did They Do It? – Training
General Electric began their Six Sigma implementation through a strong emphasis on the importance of training. By training their employees in data-based problem analysis, they overcame many obstacles for which they had previously been unprepared. All GE employees were required to take a training program in using Six Sigma methodologies in the workplace. The course lasted for thirteen days or 100 hours and required them to complete a Six Sigma project before the year 1999. Their training covered a variety of areas, including how to use DMAIC. Employees would learn how to define and identify processes, as well as to measure process output. Additionally, they would analyze criticality of process inputs, while devising improvements through modifying the inputs. Finally, they would learn how to control processes by controlling the relevant inputs. Upon completion of the course, employees would then undergo follow-up training to bolster their new skills and utilize them.
Six Sigma Mentoring
Mentoring was another important aspect of General Electric’s Six Sigma training and implementation. They would hire full-time Master Black Belts (MBB) to help implement Six Sigma, driving process changes, as well as training other staff. Each MBB mentored employees involved with GE’s core processes for Black Belt level training. This involved a four-month training program in which they learned to apply Six Sigma techniques in their work, while mentored by their MBBs. This dedication to training and mentoring allowed GE to quickly generate a team of full-time Black Belts to implement projects. Furthermore, GE also provided part-time project leaders and employees with Six Sigma Green Belt training to support their Black Belts’ work.
Finally, Six Sigma demands effective leadership if it is to be successful. Without a strong leader to direct and support your Six Sigma Belts, any attempts at implementing Six Sigma will likely fail. General Electric, however, is a prime example of the importance and success of strong leadership, training, and mentoring. Without these three key factors, much of what GE did may not have been successful. Furthermore, Jack Welch supported GE’s Six Sigma implementation through ensuring fundamental commitment from both his senior executives and employee population. He linked opportunities for promotion and bonuses with quality improvement, aligning employee incentives with Six Sigma goals.
The idea flow from the human spirit is absolutely unlimited. All you have to do is tap into that well.
Getting great talent, giving them all the support in the world, and letting them run is the whole management philosophy of GE.
My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.
An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.
I've learned that mistakes can often be as good a teacher as success.
Leading a big company means never allowing a company to take itself too seriously.
An overburdened, overstretched executive is the best executive, because he or she doesn't have the time to meddle, to deal in trivia, to bother people.
Change before you have to.
Giving people self-confidence is by far the most important thing that I can do. Because then they will act.
You can't believe how hard it is for people to be simple, how much they fear being simple... Clear tough-minded people are the most simple.
Leading a big company... means never allowing a company to take itself too seriously, and reminding itself constantly... that yesterday's press clippings often wrap today's fish.
Everything we do is aimed at either getting a customer or keeping a customer.
Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital – the world's best talents and greatest ideas.
It's [the internet] like the flu – it just spreads like crazy.
I was afraid of the internet... because I couldn't type.
The Internet is the Viagra of big business.
If GE's strategy of investment in China is wrong, it represents a loss of a billion dollars, perhaps a couple of billion dollars. If it is right, it is the future of this company for the next century.
If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.
Strong managers who make tough decisions to cut jobs provide the only true job security in today's world. Weak managers are the problem. Weak managers destroy jobs.
The 1980s will seem like a walk in the park when compared to new global challenges, where annual productivity increases of 6% may not be enough. A combination of software, brains, and running harder will be needed to bring that percentage up to 8% or 9%.
The world will not belong to 'managers' or those who can make the numbers dance. The world will belong to passionate, driven leaders – people who not only have enormous amounts of energy but who can energize those whom they lead.
The essence of competitiveness is liberated when we make people believe that what they think and do is important – and then get out of their way while they do it.
Again, your challenge is not just to improve. It is to break the service paradigm in your industry or market so that customers aren’t just satisfied, they’re so shocked that they tell strangers on the street how good you are.
We bring together the best ideas – turning the meetings of our top managers into intellectual orgies.
We've only been wealthy in this country for 70 years. Who said we ought to have all this? Is it ordained?
Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while.