The History of Six Sigma and General Electric

The Six Sigma Process Improvement Model, as defined by our textbook, is a five step procedure that leads to improvements in process performance.  The following five steps compromise the model: Define, Measure, Analyze, Improve, and Control.  This extremely popular and effective method of process analysis and improvement was first conceived by engineers at Motorola in 1981.  Over 40 years later, the Six Sigma approach has been adopted by about half of all Fortune 500 companies.  Its universal principles can be applied to any business anywhere on the globe.  The company that famously made Six Sigma central to their business strategy and core processes was General Electric.  More specifically, Jack Welch was the man who changed the entire culture of General Electric, starting in 1995, by insisting on a complete overhaul of General Electric’s process analysis techniques as well as fundamental changes to the company’s business operations.

Interview with Jack Welch:

 

Jack Welch became aware of a great deal of defects that had gone unnoticed and/or unreported which were costing the company a lot of money and hindering its productivity.  Drawing inspiration from the process analysis pioneers at Motorola, Jack Welch underwent a five year process of implementing Six Sigma into General Electric’s core business processes.  His monumental efforts saved the company a reported $12 billion in the first five years.  Other companies, such as Samsung, Ford, Boeing, Amazon, and GlaxoSmithKline, took note of General Electric’s sudden culture change and staggering savings and began to implement Six Sigma into their own business models.  Because of General Electric’s widely publicized success, “Six Sigma’s present day success is rooted in that of Jack Welch and General Electric.”

General Electric was so successful in its implementation of Six Sigma because it outlined and focused on four key steps: Training, Mentoring, Leadership, and Focused Implementation.

Starting in 1995, General Electric required its employees to complete a 100 hour course and complete a Six Sigma project by 1999.  Throughout this training process that covered all five steps of Six Sigma, employees learned how to define and identify processes, measure process output, analyze criticality of process inputs, devise improvements through modifying the inputs, and finally, learn how to control processes by controlling the relevant inputs.  Additionally, employees underwent follow-up training to sharpen and ingrain their newly acquired Six Sigma skills.  General Electric also hired Six Sigma experts, known as Master Black Belts, to help implement Six Sigma within the company by training and mentoring employees.  Strong leadership was critical to General Electric’s success in completing this operations overhaul.  CEO Jack Welch made sure that he had full support amongst his fellow senior executives and also his lower-level managers in implementing this strategy.  Lastly, General Electric utilized Focused Implementation, a term that encompassed three slogans: “’Show Me the Money’ meant GE focused on the bottom line, cutting costs to compete in price-sensitive markets.  ‘Everybody Plays’ meant that even outsourced suppliers were expected to participate in the Six Sigma initiative to make sure that the quality was assured from start to finish for each product.  ‘Specific Techniques’ meant GE used process maps and other Six Sigma tools to rank and associate projects to overarching business goals.”

In conclusion, the stories of General Electric’s success and Six Sigma’s rising popularity in the business world are intertwined as a result of the ambition and vision of General Electric CEO Jack Welch.

For more information on General Electric’s approach to Six Sigma, this PDF offers much more detail.

 

Sources:

https://mysixsigmatrainer.com/how-general-electric-used-six-sigma-to-transform-their-company

https://www.6sigma.us/ge/six-sigma-case-study-general-electric/

https://www.ge.com/sixsigma/SixSigma.pdf

4 thoughts on “The History of Six Sigma and General Electric

  • January 31, 2018 at 7:56 pm
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    Jake,
    I like how you presented us an example of Six Sigma at work. The textbook does not give us evidence that this process is successful, rather it just lists the definitions and explains Six Sigma. I really loved the interview with Jack Welch. It gave us a firsthand account of what it means to be a Six Sigma company. Labeling your company as a Six Sigma company does not mean anything unless there are results to be shown. Which is what Jack Welch reiterates. On top of that he states “Six Sigma has a leadership from the top down that understands… and does not tolerate employees that don’t understand it from a fundamental way.” In order for this process to work, everyone must believe in the process (trust the process). Stamping “Six Sigma” on a company does not inherently make it any better. The leadership, the employees, and everyone in the company must live “Six Sigma” which will then transfer into success with customers. A company must basically live and breathe what it believes in. It must be “deep within the organization and broad within the organization” as he states. But with this sentiment, I believe there are some limitations. Jack Welch is a great leader and his ability to lead is what helped the process. One limitation of this process could be leadership. Jake, as you stated, Welch changed the entire culture of General Electric. I would imagine him to be a charismatic leader. As I have learned in Organizational Behavior, a charismatic leader has the ability to gain followers under times of organizational stress. Six Sigma could be a result of the people wanting a charismatic leader. Another question I have is whether the Six Sigma process would work well across all industries. And are there areas in this model that are flawed? The duration in which Six Sigma is implemented is relatively long. Starting in 1995, General Electric had required its employees to complete a 100 hour course and complete a Six Sigma project by 1999.

  • January 31, 2018 at 6:49 pm
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    Jake,

    Thanks for your post. It is certainly very telling that titans of industry like Jack Welch and Jeff Bezos speak so highly of Six Sigma (here’s an interview with Bezos talking about lean processes and Six Sigma: http://www.shmula.com/jeff-bezos-on-lean-and-six-sigma/431/). Something as simple as nurseries’ care of newborns to anything as complex as GE’s immense production landscape can benefit from a process analysis. I’m sure Jack and Jeff would agree that Six Sigma provides a sustainable framework for those analyses.

    GE has a had a rough several years, as the energy industry has been rocked by shifts toward sustainability. Now that John Flannery is in charge, and GE explores creative options to become profitable again, I wonder whether the company will go back to its Six Sigma roots to redesign its processes.

  • January 31, 2018 at 3:37 pm
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    Jake,

    I thought this piece was really well written and insightful into the impacts that six sigma has had on companies over the years. There was one line in your piece regarding a slogan used by Jack Welch during the implementation of their six sigma findings. The “show me the money” slogan regarding cutting costs and focusing on the bottom line makes me wonder about how this slogan might impact quality. While costs are obviously hugely important for every company, especially those in the energy industry, Some of the core supply chain processes include customer relationship and often times cutting costs to the bone can impact the quality of goods and services you can provide a customer and alienate them away from your products. I am just wondering if anybody with a better understanding of Jack Welch’s implementation of six sigma could go deeper into the way that he maintained the quality standards of GE by still cutting costs and focusing on the bottom line?

  • January 31, 2018 at 12:54 pm
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    Jake,

    I really enjoyed the interview you included in your post. It gave good insight into the mind of Jack Welch. The most important part of overhauling a company by implementing Six Sigma and putting a great deal of trust in that system is the dedication by management. For GE, this began with Jack Welch and he was able to pass down the dedication to Six Sigma down through his managers. Next, the biggest hurdle is getting the employees on board. I like the path that Welch went down with a required, intensive course. Getting employees to buy into a company policy is vital to the success of the firm, and this is especially true when the company is undergoing a change, such as implementing Six Sigma.

    After reading about the clear success of GE, I wanted to read more about the success of all firms that underwent this change to see if GE’s improvement was out of the ordinary. However, firms adopting Six Sigma have had astounding success. Some of these figures include tremendous revenue growth from 1987 to 2005: revenues up 450% from $1.9 trillion to $9.1 trillion. Yes this is a large spread of years, but the success is undeniable. Not only are revenues seeing a huge boost, but savings are also noteworthy with Six Sigma companies saving an 2% average savings as a percentage of revenue each year (data collected from https://www.sixsigma.com/why-six-sigma/). After seeing these figures, I reflected on Jack Welsh’s comments about Six Sigma improving the value of the company. He is completely correct that the label of a “Six Sigma company” means nothing alone, but the data reflecting improvements in the revenues and costs savings of Six Sigma speaks for itself. Thanks for sharing!

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