What Is Six Sigma? And Will It Save GE's New CEO?
Posted Tuesday, Nov. 28, 2000, at 5:34 PM ETWhen Douglas Ivester took over the chief executive officer job at Coke, following in the footsteps of the celebrated Robert Goizueta, he was pretty much universally praised as the perfect guy for the job. Perhaps bearing in mind how poorly that worked out, observers of yesterday's announcement that Jeffrey Immelt will take over General Electric's top job from the even-more-celebrated Jack Welch are falling all over themselves to deliver cautionary assessments. One business professor quoted by the Times suggested that the successor to a heroic top executive "is destined, if not doomed, to a life of insignificance and insecurity."
Wow. That's pessimism. So is there a positive case to be made for Immelt's future prospects? Of course there is, since the lesson of the Ivester hype really ought to be that there is no way of predicting how a new CEO is going to perform and what factors may affect that performance. Given that, I'm not going to hazard a guess as to how things will work out for Immelt. But it's worth taking a look at the most intriguing component of the Immelt bulls' brief, which is the power of something called Six Sigma.
So what is it? Like a lot of management-related ideas, the goals of Six Sigma are pretty unsurprising: better quality, more efficiency, etc. In this case, you could say the key underlying idea is something like better quality through extreme measurement. At its heart, the Six Sigma theory is all about collecting lots and lots of data and analyzing it in clever ways that yield otherwise elusive efficiency insights.
This is probably not the place to go on about statistical science (and I'm not the person to go on about that, anyway), but Six Sigma programs are rooted in statistics, and if you're curious, sigma, the 18th letter of the Greek alphabet, is used by statisticians to denote deviation from a norm. To cut the chase a bit: Achieving Six Sigma efficiency or quality means producing just 3.4 defective widgets out of every 1 million. The Sigma literature also addresses lower sigmas, which are not as good, but may be steps on the road to greatness: Sigma three, for instance, yields 66,800 bad widgets per million. The further refinement of all this is to look at every single step in the widget-making process: Bringing each step as close to perfection as possible should result in hitherto unimagined efficiencies to the product and process as a whole.
According to Six Sigma lore, the theory was invented around 1985 by a (now deceased) manager at Motorola to improve that company's manufacturing processes. What GE is perhaps most famous for among people who care about this sort of stuff is its success in applying the same ideas to services--and thus improving, for example, response time to customers of the company's financial division, and so on. GE now reportedly employs hundreds of Six Sigma experts--preposterously referred to as "black belts"--who ferret out inefficiency, all on the larger theory that if you are good enough at doing this then the results will more than pay for the efforts. GE says its Six Sigma program saved the company $2 billion in 1999.
I'm oversimplifying, of course, but Welch's enthusiasm has helped create a cottage industry on Six Sigma significance, so you can read lots and lots more in recently published books such as The Six Sigma Way, Six Sigma: The Breakthrough Management Strategy Revolutionizing The World's Top Corporations, Rath & Strong's Six Sigma Pocket Guide, Implementing Six Sigma, Managing Six Sigma, The Six Sigma Handbook, the eight-volume Vision of Six Sigma, and (inevitably) Six Sigma Simplified.
Is any of this really meaningful? Who knows? Six Sigma skeptics complain that this is simply a repackaging of previous ideas with names like statistical process control and multivariate analysis. That said, I suspect that rigorous attention to quality is, on the whole, a good thing, and the key is getting managers and employees to buy in, so repackaging an old idea isn't necessarily bad if it's a good idea. Six Sigma seems to have produced good results at Jack Welch's company and the medical systems division (run by Jeffrey Immelt), which was a Six Sigma pioneer there.
But that doesn't necessarily mean Six Sigma would work as well elsewhere or even that it will continue to have as great an impact on GE when it becomes Immelt's company. The dilemma facing Immelt will remain that heroic CEOs generally earn their reputations by building or improving companies, not by maintaining them, and GE is going to a be a lot harder to improve than it was when Welch took over back in 1981. I don't think that his mastery of Six Sigma notions is gong to make difference on that score. In fact, it may easily turn out that GE has done a lot more for Six Sigma than Six Sigma, going forward, will do for GE.
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Reader Comments from The Fray:
[Notes from the Fray Editor: Most of the replies to this article were from people with direct experience of Six Sigma: what a great Fray, the signal-to-noise ratio was exceptionally high. Read through the bolded items for some real-life stories. Bob Atherton helpfully read them all, and wrote the post below in reply. Paul Decker also discussed the statistical basis of Six Sigma in the full version of his post. And 5Beta also has a reprehensible question about black belts, here.
Oh, and Charlie Heath is hoping for some Six Sigma in the election business.Why was that again, Charlie?]
Why doesn't everyone use Six Sigma? Because it isn't a silver bullet that will solve all problems! One of the disadvantages is that a process that works well may still be the wrong process. See, for example, Motorola's struggles due to its failure to recognize the shift from cellular to digital wireless networks and its misplaced investment into satellite phone systems.
Another disadvantage is that a product or even a company may be placed in jeopardy if a trusted supplier pretends to be following this philosophy but really isn't. See, for example, the result of Firestone's failure to follow Six Sigma on the Ford Explorer. (Ford, by the way, had two advantages that most companies in its position won't have--the ability to prove to consumers that the fault rested with the supplier, and customer awareness of the difference between suppliers. Had the problem part been, say, a sensor, Ford could have screamed until all its executives turned blue and the general public would still have blamed Ford and not a sensor supplier.)
Six Sigma is a worthwhile management tool, but it won't plot GE's direction for the next twenty years. That still remains the major task of CEO leadership, and any new CEO who follows a superstar probably lacks the network of contacts that helped his predecessor stay on top. Would Jack Welch have bought Honeywell without the insights he received from Larry Bossidy? Ultimately, Six Sigma helps a company run better, but it doesn't help a CEO lead better.
--Paul Decker
(To reply, or to read a fuller version of this post, click here.)
Perhaps Six Sigma is a boon to GE as a whole, but it sure seemed silly when Welch and Co. tried to apply it to broadcasting via NBC (my former employer). 3.4 misspelled chyrons (on-screen superimposed text) per million? 3.4 inaccurate news stories per million? We had more than that during the average six o'clock newscast!
Add that to the endless "team meetings" and managers forced to divide their time between actually managing and being "green belts" (along with "black belts," Six Sigma reveals its infatuation with martial-arts terminology), and we wondered why: why Six Sigma, when morale-boosting would be more productive at reducing error.
Welch's earnings and NBC's record profits were always trumpeted in our employee emails--but in 1998 we were banned from ordering staples, paper clips, pens, and other things you need in an office. Camerapersons are being displaced by robots. Even the fluffiest of on-camera news folks are chafing under the no-time-for-news news format, especially as more and more scripts need "lawyering" by the paranoids down at 30 Rock.
--Jed
(To reply, click here.)
After reading the full public responses to the subject article, it is clear that following the introduction of multitudes of "Quality Improvement" programs (i.e. Motorola's Six Sigma) across this great country, the fundamental issues remain solid--and unchanged. For many reasons employees deeply distrust the motivation of any management attempt to change an existing job (process). Both sides share the blame for that inability to change. Management fails to communicate the realistic and obvious reasons--fundamentally competitive survival--while workers fail to realize they are doing a good job today, the very best they can, precisely the way they were trained/taught! It is that trained process that needs new analysis and improvement. Individual performance is not the issue here, never was. Six Sigma and all the other programs provide methods for mapping and validating each and every step of how our job/tasks are performed--eliminating those out-of-date steps, and improving the efficiency of those retained. Efficiency means a lower cost (and probably less time) to produce the resulting products of your individual tasks. Most important though is recognition that the workers (people actually doing the job) are the only experts available for any analysis of their job!
Management has absolutely no way of knowing every job task performed by the individual. The key to any changes begins with the Manager communicating the need, in clear terms each individual worker can personally relate to their job and company. So, the team of Management (show workers how to map and analyze each step of their jobs) and Workers (the job experts to detail real, actual steps performed for each task) develop a new job process for each task. Workers truly design the new more efficient way to perform each job. Management establishes their true task as Facilitators of the processes they manage. Everybody wins (Efficiency, Less Time, Lower Cost) with the resulting Process changes.
I would think your readers would benefit most by realizing that "Process Change" is the true benefit of initiating a "Six Sigma" type of Quality Improvement program: not simply a statistical achievement of limiting errors to a few out of a million repetitious tries. Indeed if the literal objectives are not met, the beneficial achievements of initiating the process will remain.
--Bob Atherton
(To reply, click here.)
Other than quantifying defects through statistical analysis, how does Six Sigma reduce defects and improve product quality? For example, if defects are being caused by a poorly-designed process, low quality purchased part, or simply by a poorly-designed product, does Six Sigma force the company to redesign the job, find a new vendor, or go back to the drawing board? Shouldn't common sense do pretty much the same thing? In reality, product quality issues often occur because American managers have been taught to sell the sizzle rather than the steak. It's much cheaper and easier to sell an image rather than a first class product, and hey, you're doing a bunch of selling--at least until your reputation is destroyed. The U.S. automakers found this out the hard way. Some of them still haven't learned their lesson.
--5Beta
(To reply, click here.)
(11/30)