Six sigma at general electric

Introduction:

– Six sigma is sophisticated quality program developed by Motorola in 1986 that is designed to reduce defect to 3.4 per million ,improving quality ,reduce cost, increase customer satisfaction .

-according to analysts ground work for implementation of six sigma at GE began in 1998 in the form of initiative known as workout program

-IN 1995 JACK WELCH former CEO at GE felt that there was a need for a quality program. Efficiency, customer service and product quality were all not at the desired level.

-Example: according to the company estimates about 7 to 10 billion incurred in the form of scrap that can be avoidable cost.

BENEFIT TO THE COMPANY, STOCKHOLDERS, AND CUSTOMERS:

1- The cost of poor quality: The cost of poor quality is significantly higher than most companies realize. At three sigma levels, poor quality accounts for 25-40% of sales. Once a company achieves Six Sigma levels, this cost drops to less than 1% of sales Because quality has a major impact on a company’s financial performance and is a key determinant of customer satisfaction.

2- world-class Six Sigma levels: By achieving world-class Six Sigma levels, GE improved the quality of products delivered to its customers, which in turn improved financial results, thereby benefiting customers, the company, and stockholder. For example, the GE Fanuc Automotive manufacturing plant creates high-tech automation products such as industrial lasers and programmable logic units. There were 130 active Six Sigma teams at a time led by employees who obtained green, black, and master black belt Six Sigma certifications.

These individuals worked together on cross-functional teams identifying ways to translate customer feedback into higher quality products while reducing costs. “GE was a three sigma company and the cost of failure was estimated at 15% of sales. But achieving Six Sigma represents a $4 billion cost-reduction opportunity.

3-the first five years of Six Sigma implementation, operating margin increased from 14.4% to 18.4 in 2000 alone, quality improvement efforts generated $2.4 billion in savings. GE was seeing positive returns on globalization initiatives and strength in its service oriented businesses.

BENEFITS TO EMPLOYEES:

1-Not only do customers, stockholders and the company benefit from Six Sigma implementation, but employees benefit as well. To ensure all employees had the skills necessary to identify and resolve quality problems, every employee attended Six Sigma training and had a portion of compensation tied to demonstrated use of Six Sigma practices.

2-the advantage for employees included not only training and compensation but also job security, as better products means happier customers, which means more market share for GE and more security for employees.

3-Many Six Sigma experts state that the best way to gain momentum and create a quality culture is through sustained communication, employee engagement, training, rewards, and recognition.

4-developing and improving the skills of GE leaders. Each executive was required to bring a Six Sigma project to the quarterly meeting and explain the project results and level of employee engagement.

LIMITATIONS AND RISKS:

1-not achieve the expected result : The Institute of Industrial Engineers determined that almost 60% of corporate Six Sigma efforts do not achieve the expected results. For example, the implementations of Six Sigma at HomeDepot and 3M failed because they were not implemented as part of a holistic strategy focused on quality improvement.

2-Improper project selection: project selection is one of the most critical and challenging activities faced by Six Sigma companies, companies ensure projects are aligned with company strategy, are of manageable size, and have objectives that are specific, realistic, and measurable. also caution against the propensity for management to drive for quick results versus enabling the team to identify critical to quality customer attributes as the primary driver of the initiative.

HOW TO ENSURE SIX SIGMA AND OTHER QUALITY IMPROVEMENT EFFORTS SUCCEED USING HUMAN RESOURCE?

1-the most critical factors to ensure success are employee participation, training, and recognition.

2-adaptive companies with higher inclinations towards organizational learning are more likely to succeed in implementing Six Sigma because they are able to adapt more quickly, and increase performance at a faster rate.

3-performance improved when employees were aggressively positive towards change whereas even just passive (vs. negative) attitudes significantly “limited work efficiency and effort, possibly leading to organization stagnation or decline.

WHY GE SUCCEEDED IN IMPLEMENTING SIX SIGMA?

1-because it actively addressed these risks, liabilities, and limitations. GE’s implementation of Six Sigma had the enthusiastic support of the most senior person in the organization, the CEO.

2-The company focused on the customer, identifying critical to quality improvements versus simply working on cost reduction initiatives.

3-It expanded the quality program to address environmental impact and launched the effort to build on the innovative potential of its employees and customers.

4-The company engaged employees on every level and communicated the “what’s in it for me” message directly to the employees.

5-It implemented the human resource management systems necessary to ensure employees remained engaged at every level.

CONCLUSION: In today’s world where globalization, competition, environmental regulation, and increasing customer demands drive companies to pursue error-free products and services, GE is a role model for the successful implementation of quality improvement techniques such as Six Sigma and Lean manufacturing, while maintaining innovation and creativity GE has succeeded in this endeavor through the vision of its past and current CEOs, who recognized the economic, social, and environmental value of Six Sigma and Lean manufacturing.

References:

Chen, C. (2007). The effect of organizational change readiness on organizational learning and business management performance. _The Business Review, Cambridge, 8_(2), 68-74. Retrieved from http://marylhurst.courseobjects.net/items/ae53ca46-2edc-14c2-f75e-4d7c078319d9/1/Organizational%20Change%20Readiness%20on%20Business%20Performanc

General Electric. (2011). What is six sigma? The roadmap to customer impact. Retrieved January 15, 2011, from http://www.ge.com/sixsigma/SixSigma.pdf

General Electric. (2011). _Ecomagination_. Retrieved January 15, 2011, from http://www.ecomagination.com/

General Electric Power & Wind. (2010). _Renewable energy: 2.5 mw wind turbine series._ Retrieved January 15, 2011, fromhttp://www.gepower.com/prod_serv/products/wind_turbines/en/downloads/GEA17007A-Wind25Brochure.pdf

Appendix

Appendix A – GE’s Results from Six Sigma Projects: 1996 to 2000 (Lucier & Seshardi, 2001)