The Case Of General Electric

Published Date: 02 Nov 2017

The way of doing business has changed, because of globalization and instant access to service products and services. The competitive business environment makes there is no room for errors (GE, n.d.). In the 1980s, General Electric (GE) started to pay attention to quality management. In 1988, GE launched the program "workout", in order to lay the foundation for implementing Six Sigma (see figure 1). Welch (1996) had set a goal for GE to reach the Six Sigma standard in all processes by 2000. The "workout" program guided GE in quality management in 1980s. But now Six Sigma has been defining how GE works (GE, n.d).

Figure 1: GE’s Evolution Towards Quality (Source: GE, n.d.)

According to Paul (1999), Six Sigma is a comprehensive statistics-based methodology aiming to achieve perfection in single process and product. Sigma is an alphabet letter from Greek, used in statistics to measure the variability of a process. Therefore, the sigma levels of business processes are used for measuring a company’s performance. Normally, companies can accept three or four sigma levels of performance, meaning the processes of the company created between 6,200 and 67,000 problems per million opportunities (Lucier and Seshadri, 2001). However, the Six Sigma standard means 3.4 defects per million opportunities (see figure 2), which is a quite high quality standard. The enhancing complexity of modern products and processes made the Six Sigma standard increasingly important in today’s business world. The main concept of Six Sigma is that if all the defects can be measured in the processes, you can find solutions about how to eliminate these defects and try to research the goal of zero defects as close as possible (GE, n.d.).

Figure 2: Sigma Quality Levels (Source: Harry and Schroeder, 2005)

GE applies Six Sigma in dealing with measuring and improving the processes. Since Six Sigma has provided an approach for improving processes, GE can produce products and services more efficiently and predictably, while achieving superior quality. Paul (1999) pointed out that a five-phased methodology has been applied by a Six Sigma team to deal with particular problems (See figure 3). In the first phase a Six Sigma project team identifies a project suitable for Six Sigma efforts based on business objectives as well as customer needs and feedbacks, while also identifying attributes called CTQs (Critical To Quality characteristics). In the second phase, the team measures the defects currently generated and identifies critical internal processes that influence CTQs. Consequently, in the third phase, the team has to discover why defects are generated by identifying the key variables that are most likely to create process variation. In the fourth phase, the team identifies the maximum acceptable ranges of the key variable, while validating a system for measuring deviations of the variables and ensuring the process stays within the acceptable range. In the fifth and final phase, tools are put into place to ensure that under the modified process, the key variables remain within the maximum acceptable ranges over time (Hendricks and Kelbaugh, 1998).

Figure 3: DMAIC – The Six Sigma Process (Source: GE, n.d.)

There are many key elements for successfully implementing Six Sigma approaches. The focused approach towards implementation is one of the most important reasons of successfully implementing Six Sigma at GE. For instance, there are three approaches which have been used for a long time, "Show Me the Money," "Everybody plays," and "Specific Techniques" (Hendricks and Kelbaugh, 1998). Both Welch and GE realized that reaching Six Sigma quality would require their staff to think and act like engineers, resulting in great benefits. Training was one of the most important parts of the six sigma implementation at GE. Training GE employees will require approximately 10 classroom days, spread over four sessions and 90 calendar days (Lucier and Seshadri, 2001). There is progression of competency levels and all employees are required to reach the Green Belt level to become fully function able, while Black Belt level employees act as cultural and technical change agents to improve quality. They are leading the small teams for implementing the Six Sigma approach in business projects, fulfilling the role of full time teachers of the Six Sigma process. Apart from those functions, they are also mentor and develop Six Sigma tools. What the Champions do is to back and promote the six sigma initiatives, work with executives to initiative into daily operations and business metrics. Lucier and Seshadri (2001) stated that the mentoring structure with Six Sigma training and the full-time dedication of the Black Belts and Master Black Belts have provided the impetus to complete thousands of project at GE.

Converse to a Six Sigma culture would require a lot of energy and participation in organization. Hendricks and Kelbaugh (1998) pointed out that in order to implement Six Sigma into the organization; lots of people must directly be involved into the activity. In the meantime, support systems have to make them all work smoothly (Hendricks and Kelbaugh, 1998). Reaching Six Sigma level quality requires full commitment from every department and active participation of every member in the team. Furthermore, some employees with specific responsibilities in deploying Six Sigma are quite essential.

Henderson and Evan (2000) argued that the effective leadership is one of the most important factors of successfully implementing Six Sigma. GE’s experience of implementing Six Sigma has showed that without effective leadership, Six Sigma cannot be successfully implemented. The following are some methods which were used by Welch are other top management team members (Hendricks and Kelbaugh, 1998):

Monitoring Six Sigma project progress weekly through summary reports from the tracking database ; Monthly reviews with the Master Black Belt team;

Spending time in every Six Sigma training wave, answering questions for students;

Visiting work-floor to make first hand observations on the extent of six sigma implementation at the workplace;

Dropping in six sigma reviews weekly or monthly

Welch has sussefully transformed an old Amrican industrial giant into a competitive and growing company through implementing Six Sigma. Figure 4 shows figures indicating the benefits which successful implementation of Six Sigma has brought to GE. Evidently, the annual productivity has increased by 266% and the operating margin increased form 14.4% to 18.4% during the first five years of program.

Figure 4:GE’s result from Six Sigma (Source: Lucier and Seshadri, 2001)

Henderson and Evan (2000) stated that one of the prime benefits of Six Sigma is that it engages employees and customers in dialogues that unites the company. For instance, in 1996, Harris Energy Control Systems LLC had planned to ship six energy management systems in a yearbut were unable to achieve the goal. After implementing Six Sigma, their efficiency greatly improved. In 1997, they set a very ambitious goal to ship 20 systems and 100 percent on targeted date . Ultimately, they successfully reached their goal and customers were really statisfied with their performance (Bolze,1998). Additionaly, GE Harris Energy Control Systems LLC’s product development cycle have also impoved because of using Six Sigma. For example, it usually took more than a year to develop an energy management system. However, since implemening Six Sigma processes, they were capable of developing and introducing two new information management systems in three months ( Bolze,1998).

"If quality is the number –one priority at your company, Six Sigma will be appropriate as long as you also have management commitment and lots of cash for training"(Paul, 1999). It will be very expensive to implement Six Sigma and it will also take a long time. Nevertheless, the Six Sigma concept has already changed the quality management. Furthermore, it has been quite rewarding to implement Six Sigma. It became more popular than the conventional quality programs, as its scope was much broader. Six Sigma offered some specific approaches to redesign processes, meaning that defects will not occur in the first place. Conversely, the traditional quality control programs only focused on detecting and correcting defects form the process of commercial, industrial and design. Some studies have claimed that when managers and companies understand how Six Sigma works, they realise that the traditional quality management methods were not good enough. The Six Sigma concept emerged as an initiative that at first concentrated on improving the quality by using exact measurements, the problem areas, and not just react to them. Therefore, it has enabled companies to become proactive rather than reactive to quality issues.