Quality Management
A. BLANTON GODFREY

When a major corporation writes of a quality methodology in its annual report as one of "three big companywide growth initiatives," it gets a lot of attention. When the corporation is General Electric, this attention is intense.

In GE's 1998 annual report, Jack Welch, the company's chairman and CEO, and the three vice chairmen describe the company's remarkable progress. For the first time, GE had more than $100 billion in revenue, an increase of 11 percent over 1997. Earnings increased 13 percent to $9.3 billion, and the operating margin was at a record 16.7 percent. In 1998, Fortune magazine called GE "The Most Admired Company in America," and  the Financial Times dubbed GE "The World's Most Respected Company."

The three big companywide initiatives described are globalization, services and Six Sigma quality. But how GE feels they have implemented these three initiatives is perhaps as interesting as the initiatives themselves. "These initiatives have been rapidly advanced by a General Electric culture that values the contributions of every individual, thrives on learning, thirsts for better ideas, and has the flexibility and speed to put the better idea into action every day," note the company's four leaders.

GE believes it has uncovered one "hidden factory" after another. Joseph M. Juran coined this term years ago to describe how companies should consider their hidden costs of poor quality and realize that quality improvements were the same as uncovering a free hidden factory that could produce salable goods or services rather than junk and rework. Putting these hidden factories to work has enabled GE to impressively improve operating margins and working capital turns.

But how does GE view Six Sigma quality-and is it really that different from what others have been doing for years? GE readily admits to borrowing the idea from Motorola and AlliedSignal. The company saw that "this way of life and work" had a transformational effect on the few companies that had actually pursued it.

GE plunged into Six Sigma with a vengeance three years ago. So far, more than $1 billion has been invested in the effort, with a return of more than $750 million over investment in 1998 and an expected $1.5 billion in savings in 1999. In talking with individuals in GE, whether in product divisions, GE Capital or even in internal departments, I have found a consuming passion for the process.

In the 1980s, Motorola coined the term "Six Sigma quality" to denote their efforts to reduce defects to the range of 3.4 parts-per-million. Six Sigma quality described a range of efforts led by Bob Galvin, then chairman and CEO. Motorola passionately classified defects, calculated the sigma levels for all products and work processes, and set aggressive improvement goals.

Motorola focused from the beginning on true breakthroughs. Its first goals were to reduce defects by 10 times in three years. It then set the goal of reducing defects another 100 times in the next three years. The company set similar goals for reducing cycle times and improving other work processes. It realized early on that these types of improvements couldn't possibly come from inspection-based activities but would require fundamental changes in design processes, work-flow design, personnel training, new technologies and close working partnerships with key suppliers.

GE talks about every new product and service being "designed" for Six Sigma. The company first identifies all the critical-to-quality customer performance features the customer wants in the product or service; GE then subjects these features to a rigorous statistical design process. This is one of the major differences between true Six Sigma quality and total quality management.

A second major difference is the amount of employee training. A few years ago, it was common to find companies endorsing total quality management and then providing employees with only one- or two-day sessions of basic awareness training.

GE now has 5,000 full-time Black Belts and Master Black Belts, and has intensively trained nearly all professionals at the Green Belt level. These people also have completed at least one project.

The third major difference between TQM and the new Six Sigma quality programs is unquestionable leadership from the top. For years, all of the quality gurus have stressed the critical importance of senior management leadership. But only in a few cases have presidents and CEOs actually changed the executive scorecards, performance measurement systems and reward systems. Only a few companies have changed their management styles and invested the time and resources in educating employees in new methods, concepts and tools.

These companies are becoming the new industry, national and world leaders. We have much to learn from them.

About the author

A. Blanton Godfrey is chairman and CEO of Juran Institute Inc. at 11 River Road, Wilton, CT 06897. He is co-editor of Juran's Quality Handbook, Fifth Edition, published this March. Special copies signed by both Godfrey and Joseph M. Juran are available from Juran Institute at www.juran.com.

© 1999 Juran Institute. For permission to reprint, fax Godfrey at (203) 834-9891 or e-mail agodfrey@qualitydigest.com .