Why Were GE and Grace Successful?

On the surface, GE and Grace are as different as two companies might be.

GE is a name recognized throughout the world, and its 2001 revenues were about $130 billion. Both the giant conglomerate and its previous CEO, Jack Welch, have been studied and reported on by business schools and journals for 20 years.

Grace is a small company focused in a few niche markets. Many consumers, not to mention business scholars, are likely to be unfamiliar with it.

Yet, both firms achieved remarkable financial results from Six Sigma. In fact, on some metrics Grace might be considered even more successful than GE. What did they have in common that led to such success?

Some Common Misconceptions

We should first note what the two companies do not have in common:

• They are at opposite ends of the size spectrum

• They are not in the same industry

• They did not use the same Six Sigma deployment provider

The myth that Six Sigma works only for large companies like GE ($130 billion in revenue) has likely persisted because business journals, books, and articles tend to focus on large companies like GE or AlliedSignal, so the successes of small companies, like Grace ($2 billion in revenue), are not visible to the general public. In reality, big companies have more layers of middle management, which may make it more difficult to implement Six Sigma effectively. Change is often easier to introduce in smaller companies.

Another misconception is that Six Sigma applies to only certain industries, such as electronics. This theory is also inconsistent with the available evidence. As of this writing, successful implementations have occurred in all major areas of the economy, from electronics to health care to insurance to power generation to consumer credit, and so on.

Six Sigma is a methodology for improving processes, to make them more efficient internally (bottom-line benefits), and more effective at satisfying customers (top-line growth). All businesses need to improve their processes to achieve, maintain, and enhance competitiveness. In fact, nonprofit organizations and government agencies also need to improve their processes to better achieve their objectives. Who would want to invest time or money in an organization that says it has no desire to improve?

GE and Grace also used different Six Sigma providers who recommended slightly different paths to deployment. Providers of Six Sigma training and consulting services often argue over which is the “true” Six Sigma methodology. Trade journals are full of ads from providers claiming that only their unique approach will lead to success. The evidence does not validate these claims. GE and Grace used different providers, but both flourished. Several providers have a long list of successful and very satisfied clients; clearly, no single provider can claim to have a monopoly on winning with Six Sigma.

That said, there are certainly differences between providers, and some are clearly better than others. Tips on selecting a provider are offered in Chapter 4 and in the frequently asked questions at the back of the book. This is an important decision, and needs to be given careful consideration.

Success Starts at the Top

If company size, type of industry, and provider were not the determining success factors at GE and Grace, what were? The most obvious commonality in their cases is that in both companies success started at the top. Just as Jack Welch led GE's Six Sigma charge with relentless energy and passion, CEO Paul Norris had seen what Six Sigma could do at AlliedSignal and was totally committed to making it work at Grace. These CEOs' commitments should not be measured in speeches or quotes from the annual report, but rather in such things as the time, attention, and money they gave to the effort.

In both cases, the senior leaders personally drove Six Sigma implementation:

• They ensured that their leadership team was fully on board, and that there was a well thought out game plan for implementation.

• They provided resources, in terms of people and funding, to properly support the effort.

• They expected, even demanded, results from the effort.

• They were willing to change internal policies and procedures to support implementation.

Beyond the CEOs, leadership was evident in the designation of overall Six Sigma leaders, and from the active participation of the rest of the corporate executive teams. In short, one could argue that getting effective leadership from the top, not just buy-in or support, was the most critical success factor. Many other case studies would help validate this hypothesis (see Harry and Schroeder [2000]).

Six Sigma Requires Top Talent

Another similarity that helps explain GE and Grace's successes is both put top talent into the Six Sigma initiative. One might be able to fool market analysts with an impressive PowerPoint™ presentation, but once the names of individuals going into Six Sigma roles are announced, it is impossible to fool the rank and file employees. Since people generally know their peers well, they can immediately see the level of staffing of the Six Sigma effort: top talent, whoever was available, or people who couldn't do anything else. Many improvement initiatives have failed not because they weren't technically valid, but because they weren't viewed as business critical, and therefore didn't get the organization's top talent.

An Infrastructure to Support the Effort

Both companies developed an appropriate supporting infrastructure—the network of processes, systems, and organizational structure required to support Six Sigma. This network includes designation of a leader, identification of specific roles and responsibilities for those involved, formal systems to obtain and utilize human and financial resources, formal processes for project selection and review, and so on. This support network is often formalized by creating a function called the Six Sigma Organization, but it does not have to be.

Any new initiative is likely to die on the vine if it continues to be extra work for everyone involved. Creating the appropriate infrastructure supports the effort in the long term because the organization has legitimatized it, and ensured that it will be able to obtain the needed resources and attention. Lack of a supporting infrastructure is often pointed to as a key reason for the failure of many TQM initiatives in the late 1980s and early 1990s. Some key actions taken by GE and Grace to create the supporting infrastructure are shown here—

• Designated an overall leader for the effort.

• Developed formal implementation plans, which were reviewed with senior management.

• Designated Champions and full time MBBs and Black Belts.

• Introduced formal project selection and review mechanisms.

• Formally integrated Six Sigma into the budgeting process, both in terms of including the costs as well as the anticipated savings.

• Implemented focused training systems for key roles.

• Modified HR, reward and recognition, business planning, financial, and other business systems to support Six Sigma implementation.

Proper project selection and regular managerial reviews are particularly important. Both GE and Grace avoided the common problem plaguing many improvement initiatives—huge projects that begin with great intentions, spend large amounts of money, but months or even years later have little tangible benefit to show for the effort.

Senior management tends to lose faith in such projects, resulting in disenchantment with the initiative, and eventual failure. Both companies implemented formal processes that ensured selected projects:

• Were strategically important

• Were tied directly to the bottom line or to key customer issues

• Could be completed in a reasonable timeframe (4-6 months)

• Had the resources to succeed

Similarly, project review processes were set up at different organizational levels. These reviews ensured that appropriate progress was being made, and that any barriers to success were identified quickly so they could be addressed by the project Champion. Such project selection and review processes minimize the possibility of projects dragging on indefinitely with no tangible results to show for the effort. These common attributes of the very successful case studies are summarized in Figure 3-1.