There was an article earlier this year with the title, “Whatever Happened to Six Sigma?” It focused on the rise and decline of the fortunes of General Electric—the most famous adopter of the Six Sigma Process Improvement method.
It’s an interesting question, and the answers reveal some underlying truths about the history and future of the Process Improvement movement.
Whatever happened to Six Sigma? It learned to adapt and thrive like the rest of us.
The focus of the article, and others before it, is the arc of General Electric’s meteoric rise in the early 90s under Jack Welch—who championed Six Sigma—and the slow decline once he retired. At its peak in 2000, GE had a market capitalization of roughly $600 billion but that dropped to $60 billion as of last year. First, a refresher on Six Sigma.
The Origins of Six Sigma
Six Sigma was birthed at Motorola in the 80s and bears the hallmarks of previous Quality efforts. There are recognizable elements from multiple sources:
- A strong thread of Statistical Process Control
- Aspects of Total Quality Management (TQM)
- An improvement method—DMAIC (Define, Measure, Analyze, Improve & Control)—resembling Dr. Shewhart’s PDCA Cycle (Plan, Do, Check Act)
PDCA and DMAIC can be laid side by side.
Six Sigma was based on the Scientific Method and included basic Quality Tools. It promoted root cause analysis but added more statistical rigor. It wasn’t exactly new, but it had a more exacting improvement target—less than 3.4 defects per million opportunities. The goal, initially aimed at manufacturing output, was almost zero defects. The question is, what role did Six Sigma play in the rise and subsequent decline of GE?
Is It the Method or Is It Leadership?
As with all Continuous Improvement efforts, much depends on leadership. Six Sigma efforts go wrong and Lean Transformations often fail as do other-named efforts when there’s not appropriate support from the top. Jack Welch didn’t just embrace Six Sigma, he mandated it. He went all in. He trusted his gut. He was the classic “leader-as-hero” with a take-no-prisoners style.
Six Sigma efforts go wrong and Lean Transformations often fail as do other-named efforts when there’s not appropriate support from the top.
There is no dispute over Welch’s support for Six Sigma or the financial bonanza during his tenure. So why did GE decline after he left? What about his successor, Jeffry Immelt? Everyone knows that a change in leadership has a profound impact on a company. Did Jeffry Imelt support Six Sigma? Not really. But something else happened—the corporate landscape had altered.
The Leadership Landscape Diversified
From the 1970’s to the 2000s the business world underwent a dramatic shift and Jack Welch’s tenure—1981 to 2001—spanned much of the transformation. Back in the 70’s, business leaders were 80% white men and any women in the C-Suite were mostly relegated to Human Resources (HR). Almost all leaders went to private schools—Groton, St. Paul’s, St. Mark’s—and they were Ivy-League educated. They were 86% Protestant and 91% Episcopalian.
According to the U.S. Census, by 2012, out of 27 million businesses, 36% were female-owned and 29% were minority-owned. Cultural expectations changed as well. If people had 2 or more jobs they were considered “job hoppers” and viewed as unreliable. Employees used to expect lifetime employment. Now, if a hiring manager sees only one job on a resume, the concern becomes, “are they flexible?” These days, if we don’t like a job, we leave, and everybody can expect to get fired at least once.
Technology Hurtled Into the Future
Technology’s impact on business has been equally dramatic. The iPhone debuted in 2007 and now we carry these mini computers around in our pockets. The rate of technological change has accelerated such that disruptors have become the norm and consumer channels change every minute. What does that mean for leadership?
The rate of technological change has accelerated such that disruptors have become the norm and consumer channels change every minute.
The Impact on Leadership
The traditional patriarchal leader can’t keep up. Old forms of leadership may have worked when technology was nascent and leaders held power over vital information, but our current age is characterized by technological change at warp speeds and the need to continuously solve messy, complex problems. No one person has all the information needed to make good, timely decisions.
If decision making is confined to the top of the hierarchy, the organization can’t pivot to daily challenges. The speed of change, complexity of tasks and constant disruption requires organizations be nimble and flexible. To do that employees have to be as networked and facile as the technology they rely on. And if you don’t empower your workforce, they’ll leave—taking all their experience with them.
What is Good Leadership?
The most successful companies today are those with interactive leaders. The kind of leaders who delegate, trust their people, talk to—and listen to—everyone. Toyota is the birthplace and paragon of successful Lean Manufacturing, but even they seek to do better.
They routinely send leadership teams to tour and study the management style fostered by Mr. Tsukakoshi, author of Tree Ring Management and CEO of Ina Foods. The goal of process improvement at Ina Foods is employee comfort. He sees leadership’s role as achieving employee happiness. The choice of improvement method is less important than the culture fostered by leaders.
In Humble Leadership, the award-winning, former professor at MIT Sloan School of Management Edgar Schien, and his son Peter, document case after case of the success of interactive leadership. He includes a U.S. Military story which is striking since it’s a place “in which [openness] seems most out of place.” He recounts how a nuclear submarine with a demoralized culture became a “high-morale, effective, proud organization” through humble leadership.
They describe how Singapore, an authoritarian dictatorship, adopted an open communication style. “Early leaders…and their colleagues took to building a modern city-state out of an economically declining colony.” The authors maintain, “Humble Leadership contributed to Singapore’s economic success!” Classic forms of top-down communication don’t work as well anymore.
Extrinsic vs Intrinsic Motivation
One of the more infamous aspects of Six Sigma at GE, was the requirement that employees be Green Belt Certified in order to be promoted. 40% of the bonuses were tied to Six Sigma. Stock options went exclusively to those who were Black Belt Certified. He classically fired the lowest performing 10% of the workforce each year—regardless of their individual output—earning him the nickname “Neutron Jack.”
Godfather of Quality W. Edwards Deming would never have approved of Neutron Jack’s carrots and sticks. Dr. Deming was a big believer in the PDCA cycle—the precursor to DMAIC—and he introduced Statistical Process Control to his work helping the Japanese rebuild post-WWII, but he would have shaken his head at GE’s reward system. It was driven by dollars, not a passion for excellence.
It was driven by dollars, not a passion for excellence.
The Fate of Financial Reward Systems
There are plenty of modern-day examples of what happens when leaders force employee behavior with quotas and other forms of extrinsic motivation—Enron, Wells Fargo, Volkswagen to name a few. The most recent example is Boeing where one of Jack Welch’s former top leaders—and one-time potential successor—James MacInerney, became CEO in 2005.
Aside from eliminating pensions and cutting wages—as Boeing’s first CEO without a background in aviation—he made the cost-saving decision to upgrade the 737 series to the 737 MAX instead of developing a new model. In a recent story in the New Yorker (“The Case Against Boeing” by Alec MacGillis), an ex-Boeing employee describes a pivotal development when Boeing merged with McDonnel Douglas.
What was once a robust culture emphasizing quality improvement and communication was replaced with one driven by stock performance where the voices of engineers were no longer considered. Having been grounded since March of this year, airlines do not expect to resume 737 MAX flights until March 2020—the disastrous financial impact of a dollar-driven culture.
The fate of a company with myopic devotion to stock-performance should not shock anyone anymore. The outcome of Daniel Pink’s research in his seminal book Drive made the case that what truly drives employees is having a sense of mastery, autonomy and purpose—not money. People need to earn a living and feel the system is fair, but the payoff for pursuing process excellence has to be something beyond a trip to Bermuda with the inner circle. Back to the work of W. Edwards Deming…
Deming’s Words Ring True Decades Later
Six Sigma emerged when Motorola incorporated the teachings of many quality greats, but among them Dr. Deming—rightly—retains the strongest legacy. He championed statistics and process improvement but he also knew that the role of management was integral to success.
Of his 14 Points for the Transformation of Management, it’s helpful to reflect on Points 1, 8, 10 and 11; “Clarify Purpose,” “Don’t Rule by Fear,” “Remove Targets” and “Allow Pride of Workmanship.” Jack Welch and others may have adopted a solid problem-solving method with Six Sigma, but they missed out on the human underpinnings.
What About Lean Six Sigma?
Whenever the term “Lean Six Sigma” appears, there are bound to be—we’ll call them “discussions”—of whether those two terms should be combined. Lean uses PDCA and tools like the 8 Wastes and 5S and Six Sigma uses DMAIC and tools like Control Charts and FMEA. The approaches differ, but they both pursue process improvement and follow the Scientific Method.
Is it Okay for Methods to Evolve?
Jeff Liker, in his book with Karyn Ross, The Toyota Way to Service Excellence, wrote that Taiichi Ohno and the originators of the Toyota Production System (TPS)—what became Lean Manufacturing—did not want it written down. They were against documentation because the methods were constantly evolving. Mr. Liker acknowledged the idea of TPS as a “living method,” but compromised since it was so valuable for the rest of the world to know about—lucky for us.
The history of Continuous Improvement is a fascinating study in adaptation. Methods evolve and reshape as we learn and adapt to the changing demands and new business realities. PDCA evolved into PDSA. Dr. Deming preferred Plan Do Study Act because it reinforces the idea of not simply checking, but studying the outcome of countermeasures.
Some prefer Plan Do Check Adjust—since Act sounds too similar to “Do.” The leader of the famous “7-Minute Miracle”—the Japanese Shinkansen Bullet Train success story—invented his own version of PDCA altogether. Even DMAIC was originally “MAIC” until the need to “Define” the effort before measurement led to the immediate addition of the “D.”
Toyota’s 8 Steps for Practical Problem Solving
Toyota created their own 8-Step Problem-Solving Method that expands on PDCA but Mr. Liker noted that possibly the most popular form of process improvement at Toyota was the Quality Circle—a form of group problem solving that dates back to the 1950s. People gravitate to what works—for them.
Don’t Take Our Word for It
Companies have been adapting and inventing their own 4-Step, 5-Step, 6-Step—you get the idea—Process Improvement Methods for almost a hundred years now. Jerry Wright, President of AME (Association for Manufacturing Excellence), recently published a blog about the evolution of 5S to 7S—the sixth S added for “Safety” and the seventh for “Security.” Maintaining security in modern processes is a ballooning concern so 5S had to evolve.
I reached out to Jerry to get his take on the evolution of process improvement and he had this to say:
“When it comes to Lean and Six Sigma, there has been a fundamental shift in the industry since 2001. In the early 2000s, there were two different camps: Lean or Six Sigma. Six Sigma had been propelled to widespread recognition and use by Jack Welch at GE. Green, Black and Master Black Belts were moving between companies and consulting within the Six Sigma community.
The Lean practitioners were following more of the Toyota Production System philosophy that you should first understand customer value then remove waste before reducing variation. The two camps were at odds—then came the combination of the two into Lean Six Sigma.
I think of them as Peanut Butter (Six Sigma) and Chocolate (Lean)—a Reese’s Peanut Butter Cup of Lean Six Sigma. Voila! While we still have the professionally-sought-after Belt System of Six Sigma, the reality is that the two camps coexist quite nicely. Lean is easier to understand and apply, but Six Sigma gives us more advanced statistical tools and the ability to test hypotheses that Lean or TPS did not. Within the process improvement industry, most people are practicing a combination of Lean and Six Sigma. It is rare that I see Six Sigma tools used by themselves anymore.”
I hadn’t envisioned the combination as a confection—until now—but Jerry makes a great case for how attractive the blend has come to be. The history of quality is a series of modifications both large and small. Each adaptation —born of experience, reflection and growth—leaves us richer with possibilities.
Choose Your Path
We advise anyone learning a new tool or system to start by following the “official” method—although it may take effort to uncover what constitutes “official” since there are no governing bodies in the Continuous Improvement realm. We coach learners to do some off-roading once they become advanced practitioners—it’s okay to take the less-than-beaten path once you have a sense of where you need to go. And that’s true for all of us.
As is evidenced by our name, we support the combination of Lean and Six Sigma. There are differing views on how to characterize the different approaches, but what’s important is the results—reducing lead time, defects and variation, improving process flow, producing stellar products and services for customers and empowering employees to become confident problem solvers.
Six Sigma, Lean, Lean Six Sigma—any Continuous Improvement effort—requires an intentional culture and humble leadership in order to have the best impact. The results when these methods are properly supported? There are so many success stories we’ve got a publishing backlog. We see entities from the Fortune 500 to governments, nonprofits, and universities using Continuous Improvement to delight their constituents, build powerful cultures and thrive financially.
Google Trends shows a rise in popularity for “Lean Six Sigma” since 2004, while “Six Sigma” (without “Lean”) has declined. But at its core, Six Sigma is an effective problem-solving method, and in an interview—by Suzy Welch no less—problem-solving emerges as the top skill sought by today’s most influential hiring managers.