Report Summary: Building Six Sigma Excellence

Building Six Sigma

Excellence: A Case Study of
GE
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Report at-a-Glance
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• General Electric
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EXECUTIVE SUMMARY • 1 Company Studied
Building Six Sigma Excellence: A Case Study of GE (OP-72) profiles General
Information Types
Electric’s (GE) strategies and practices for Six Sigma implementation. The report’s
best practices are based on the experiences of GE’s various business units as well as • Practices, Metrics and
Graphics
featured companies Motorola and Honeywell. By studying these organizations’ Six
Sigma programs, your company can better prepare itself to identify and prioritize its
Report Length
quality program needs, implement a successful Six Sigma program, assign steps and
• 64 pages
responsibilities for implementation, gain greater employee buy-in at all levels, and
ultimately develop a program that yields tremendous financial payoffs in a short
period of time.

After reading this report, you will understand how GE developed and implemented a Six Sigma program
that enables extraordinary productivity gains. Successful Six Sigma execution directly drives increased
operating profit margins, reduced cycle time, increased employee productivity, improved customer
satisfaction, and minimized production defects.
Report Summary: Building Six Sigma Excellence

This online report summary includes the report structure, sample best practices, a process map that
illustrates the study’s focus, a table of contents, and an order form to facilitate purchase.

REPORT STRUCTURE
After reading this report, you will know how GE, a world-class company, implemented its renowned Six
Sigma program and used it to strengthen its competitive advantage.

• The report’s Executive Summary introduces GE’s top implementation processes, presents a
history of the Six Sigma concept and discusses its impact on process and productivity
management. The summary also outlines the report’s research objectives and delineates key
topics for Six Sigma development, as illustrated in the box below.

Key Research Topics and Objectives

Six Sigma Program Implementation:

• How was implementation organized (projects, councils, etc.)?

• Which people in the organization were responsible for implementation (content and number of
projects, both company wide and per division)?

• What was the roll-out schedule?

• Which employees were involved in roll-out?

• Was there a key pilot project?

Six Sigma Program Training:

• What is the training content for the different levels of experts?

• How is the training organized?

• How many hours of training are required for different expert levels?

• Which levels of employees are selected to be trained as experts?

• What is the role of these employees after training?

• How many employees are trained company-wide per year?

• Which positions/levels are trained?

• How do employees benefit from their training?

Six Sigma Program Metrics:

• How is the program linked with compensation?

• How is the program controlled and who is responsible for it both company-wide and per division?

• How will the program be affected by future transitions in leadership?

Report Summary: Building Six Sigma Excellence

• The second section, Best Practices in Six Sigma Implementation, contains seven subsections that
discuss how the benchmarked companies put their Six Sigma programs into operation. This section
will allow you to define your Six Sigma objectives, develop critical processes, gain leadership buy-in,
and align personnel with the quality programs.

Perhaps the single biggest reason for GE’s success in implementing Six Sigma is its emphasis on
integrating the program with its corporate culture. For example, high-level training programs are
essential to integrating Six Sigma into the culture. To reach a superior level of quality improvement,
General Electric must achieve enormous reductions in end-of-the-line waste, re-manufacturing, and
paperwork. GE is investing heavily in Six Sigma training to achieve this goal. Training is available to
virtually every GE employee and is offered throughout the year. CEO Jack Welch has stated to young
managers that Black Belt training is critical to promotion opportunities. In 1997, GE spent nearly $400
million in overall training. In the middle of 1997, GE had trained over 20,000 employees in statistical
and other quality-enhancing measures and increased that number to 40,000 by the end of 1997 and
100,000 by the year 2000.

Complete sample practices from this section follow on the next page.
Report Summary: Building Six Sigma Excellence

SAMPLE PRACTICES

Create an organizational structure that emphasizes employee empowerment and senior

management accountability.

In addition to the mandate from Jack Welch, GE is driving the Six Sigma program forward with high-
level oversight in all operating divisions. Welch is in frequent contact with the CEOs of each division,
who then have a main "point" person in charge of Six Sigma. This individual is a member of the senior
management team and is often the CIO or Chief Quality Officer. Each division is implementing Six
Sigma with project teams, overseen by senior management. These teams consist of Green Belts, Black
Belts, Senior Black Belts, and often Champions and project managers.

In addition to this organizational structure, GE originally implemented Six Sigma with a roving audit
staff of 230 employees. These professionals spend half the year doing actual financial audits and the
other half as internal management consultants. They cross-fertilize best practices in GE's businesses.
According to an analyst with Morgan Stanley, GE does this best among the multi-industry companies. In
addition, there has been a great commitment to resource allocation in GE's other business divisions. For
example, GE Lighting Division has dedicated more than 200 of its top people, on a full-time basis, to
drive improvements in their key customer and business processes.

Develop processes to link Six Sigma initiatives with customer satisfaction.

GE's customer satisfaction measurement process is a key Six Sigma tool. Customer satisfaction is
measured on a scale of 1 to 5 through interviews that focus on the CTQs (critical to quality criteria).
Other measures of the program include:

• Cost of Quality - the cost of testing, rework, scrapping, guarantee and concessions.

• Internal Performance - calculation of all defects generated by the company's processes — both
production and transaction.

• Quality of Suppliers - compliance with technical specifications and respect for delivery dates.

• Design for Six Sigma - ensures that all new product designs are intrinsically oriented to fulfill Six
Sigma requirements.

CTQ is a vital aspect of Six Sigma. It determines, from the customer's standpoint, which characteristics
are critical to improving quality. CTQ tackles this problem by giving priority to the customer's main
points of dissatisfaction. Once the CTQ is identified, the project team starts the four phases of the Six
Sigma cycle — Measure, Analyze, Improve, and Control.
Report Summary: Building Six Sigma Excellence

To achieve effective, constant reduction in defects, the Six Sigma method is based on a progressive and
systematic revision of the company's main processes, acting according to proactive criteria focused on
root causes rather than problem effects. The starting point is the objective identification of CTQ through
direct interviews carried out with customers. This ensures the direct link to a most important measure —
customer satisfaction. These interviews have shown that CTQ relates to both the physical characteristics
of the product and key customer interfaces with the company, such as level of service, invoicing, mailing
of documentation, and the like. GE has divided these elements into two parts, production quality and
transactional quality.

Employee Training: A Key Step towards Job Promotion

“Six Sigma is a major component of annual employee reviews,” notes a Quality Leader at GE Capital.
“Senior executives and quality leaders are determined to understand how supportive individuals were of
Six Sigma and how successful their implementation of the program was.”

According to GE’s 2000 annual report, the company has never had a truly early-career generic program
that would develop leaders for all its functions. In its letter to shareholders, GE said, “Six Sigma has now
become the language of leadership. It is a reasonable guess that the next CEO of this Company, decades
down the road, is probably a Six Sigma Black Belt or Master Black Belt somewhere in GE right now, or
on the verge of being offered—as all our early-career (3-5 years) top 20% performers will be—a two-to-
three-year Black Belt assignment. The generic nature of a Black Belt assignment, in addition to its
rigorous process discipline and relentless customer focus, makes Six Sigma the perfect training for
growing 21st century GE leadership.”

True to his word, late in 2000, Jack Welch announced he would be stepping down as CEO of GE at the
end of 2001. His successor, Jeffrey Immelt, most recently served as president and CEO of GE Medical
Systems, a $7 billion unit that develops medical diagnostic and information systems. Mr. Immelt's
succession may have been sealed in the fall of 1998 when his division introduced a fast CATscan
machine that diagnoses critically injured patients in seconds instead of minutes. It had $60 million in
orders by year's end. In his annual shareholders letter, Mr. Welch singled it out as the first major product
designed for Six Sigma.

Immelt’s succession to CEO is not atypical of managers who are well trained in Six Sigma. The chart
below depicts a job analysis of three of GE’s major units and shows how well ingrained Six Sigma has
become in those businesses. Three top level executives from those unit have gone on to lead other
companies as CEOs.
Report Summary: Building Six Sigma Excellence

Practices are supported by graphics that illustrate key points in Six Sigma Implementation:

CEO Boot Camp

Three of the major business units of GE that fully deployed Six Sigma had
senior executives move on to CEO positions at other prestigious
companies and began implementing Six Sigma initiatives.
GE Medical Systems GE Aircraft Engines GE Capital
Other 6
Green Belt Sigma Jobs
Other 6 Either
Sigma Jobs Other 6 Training
Sigma Jobs
Either Black Belt 2%
4% Training 3%
9% 18% 3%
3%
Green Belt
18% Either
Training 7%

58% 9% 60%
Green Belt
12% Training
5%
Black Belt
Black Belt 90%
Training
Training
Other Jobs Other Jobs Other Jobs

Jeffrey Immelt W. James McNerney, Jr. Robert Nardelli

Chairman Elect and President, GE Chairman & CEO, 3M President & CEO, Home Depot
Report Summary: Building Six Sigma Excellence

PROCESS MAPS
Our Best Practice Process Maps are graphical representations of key business processes. Study findings are
synthesized with diagrams like the one below:

There are a range of Six Sigma structures that are employed, based on the nature
of the company and division being analyzed. It is critical to establish a program
structure that empowers employees while providing Six Sigma experts with
ultimate accountability. The figure below indicates a typical Six Sigma reporting
structure at GE:
CEO
Legend:
: Direct Report
CIO
: Indirect Report Division CEO

Quality Team Champion Division CIO/VP

Quality

Director, Six Sigma

Manager, Six Sigma

Master Black Belt

Project Team Leader Black Belt

Project Team
Green Belt
Member

METHODOLOGY
A team of quality management experts conducted this study using a wide range of resources, including Best
Practices, LLC’s own proprietary databases, public and private databases, executive interviews, literature
reviews, on-line data searches, conference proceedings, professional journals and books, academic
research, and analysis of past Best Practices, LLC consulting assignments. Research included an in-depth
overview of Six Sigma practices specifically employed by General Electric. This report has dissected and
crystallized those recommended practices.
Report Summary: Building Six Sigma Excellence

Table of Contents
Executive Summary
Project Background......................................................................................................................................3

Benefits of GE’s Implementation.................................................................................................................4

Six Sigma History: The Marriage of Process and Productivity Management ..............................................6

Report Structure and Organization.............................................................................................................10

Best Practices in Six Sigma Implementation

Six Sigma Implementation: Best Practice Index ........................................................................................11

Step One: Wining Leadership Support.......................................................................................................13

Step Two: Defining Six Sigma Objectives and Criteria.............................................................................18

Step Three: Developing Critical Processes and Tools................................................................................27

Step Four: Aligning Six Sigma with Career Paths .....................................................................................34

Step Five: Establishing Training Programs and Job Positions ...................................................................45

Step Six: Maximizing Job Deployment......................................................................................................49

Six Sigma Projects and Results ..................................................................................................................53

The GE Way...............................................................................................................................................58

Common Six Sigma Terminology..............................................................................................................59

Six Sigma Metrics ......................................................................................................................................61

Report Summary: Building Six Sigma Excellence

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