General Electric has been wildly successful with Lean Six Sigma. While not suggesting you should copy their approach, the implementation of Lean Six Sigma in GE under the leadership of Jack Welch does provide clues from which we can learn.
EXPERIENCING MASSIVE RETURNS
In the first year of the program (1996), GE invested US$200 million with a return of US $170 million. By spring 1999, 800 champions, 700 Master Black Belts and 4,500 Black Belts had been trained. Reports indicate about 3,000 projects were finished and approximately 30,000 employees received some form of Lean Six Sigma training. By 1998, the operating margin stood at a record level of 16.7 percent. During that year GE invested US $450 million in the initiative with a return of US$1.5 billion.
In GE’s 2000 Annual Report, Welch announced an additional goal for the business improvement initiative, that was the reduction of lead times. Their focus had been on defect reduction, yet time in a process offered incredible opportunities for the business. They recognised that most of the tools of Six Sigma focused on reducing defects so additional tools were required and these came by integrating Six Sigma with Lean Manufacturing methodology.
SUCCESS LEAVES CLUES
What have we learned about the implementation of Lean Six Sigma from companies such as GE as well as the likes of Motorola and Toyota?
– Business leaders must be committed to the initiative. Commitment is only demonstrated through consistent action and engagement.
– Link Lean Six Sigma to performance measures and rewards.
– Link Lean Six Sigma training and competency to promotion criteria.
– Maintain focus on the initiative. You must prevent it from becoming a ‘flavour of the month’ initiative.
– Treat Lean Six Sigma as an investment, not a cost. It will provide massive returns if you choose to make it so.
– Use it as an important piece of your leadership development program and succession planning.
– Challenge business leaders with customer focused goals as well as efficiency goals.
– Utilise and integrate the components of Lean and Six Sigma and other complimentary initiatives that are applicable to the industry in which you work.
WHAT YOU MUST DO AS A BUSINESS LEADER
(1) Generate a broad understanding of the desired outcome
A common view of what it is you intend creating through the implementation of Lean Six Sigma is vital. A leader who exhibits passion about the future state, and takes the time to articulate that vision in such a way that all stakeholders share it, will be a powerful driving force for successful change. A clear vision of where the organisation is headed plays a significant part in aligning efforts and inspiring action by large numbers of people.
(2) Create a compelling reason for people to change
Knowing the reason why any change is necessary comes before knowing how the change will be achieved. When the reasons to change are compelling enough for those involved you have leverage. However, always remember that if you are going to tell people why change is necessary, you must deliver reasons that are meaningful to the audience, not just you.
(3) Create a Business Improvement Operating System
Any implementation of change has risks, regardless of how well it is planned. Recognise those risks and develop an operating system and infrastructure that helps create a control framework that is proactive as well as reactive.
(4) Build a powerful coalition of key players to guide the change
The right coalition of key senior people must be visibly committed to the change. Excuses for not having time are unacceptable. People choose to use their time in any way they want. Knowing that the change is important to the leadership of the organisation will drive an employee’s behaviour.
(5) Keep Continual Improvement on the agenda
Leaders must focus their attention on a handful of key strategies. Mistakingly many try to juggle ten, twenty, or even more ‘important’ items. One of the most important strategies is business improvement. It must be on the informal discussion agenda as well as the formal reporting agenda.
(6) Involve your best people
The best people in your organisation are the people who must be put to work on business improvement. Not only will you enhance the skills and knowledge of the future leaders of your organisation, you also maximise the chance of success for individual projects and the overall initiative.
(7) Anchor changes firmly in the way your organisation does business
The transformation will only ‘stick’ when the old way of doing things can no longer exist. In essence it becomes ‘the way we do things around here’. The alignment of performance systems and the organisational context around business improvement will ensure the old way is just a memory.
(8) Choose projects carefully
Formally recognised projects must ultimately be selected on the basis of their contribution to business objectives. Benefits of such projects can be reflected in bottom line results and / or the business risk profile.
(9) Appoint full time Improvement Practitioners
In reality, project time frames can be reduced in comparison to part time project work, with returns being realised sooner. A full time commitment during initial training contributes to the learning process through early application of skills learnt. A study conducted by one mining company in Australia during 2002, reported that bottom line returns were significantly greater for full time project team leaders than part time team leaders. In fact, the results showed a tenfold increase in reported benefits.
OTHER PRACTICES TO CONSIDER
Reward, Recognise and Celebrate Short Term Successes – The establishment of short-term goals provides a foundation for achievement, recognition, reward and celebration. Whilst the longer-term aspects of a business are critical, leaders must also think about the short term aspects of their business, and the essence of momentum.
Train Members of the Board – By training board members as you would project champions, Lean Six Sigma can continue beyond the tenure of the current CEO. It reduces the risk of Lean Six Sigma disappearing when new business leaders take over and implement new initiatives as a part of their desire to change the organisation.
Establish a System of Mentoring – The ideal mentor is a full time Lean Six Sigma professional at the Master Black Belt level, who focuses on providing coaching for:
– Project team leaders,
– Project Champions, and
– Business leaders.
Involve Finance People – Finance people can be involved in helping team leaders establish baselines and identify improvement benefits in financial terms. They can also take a significant role in validating claimed financial benefits. The upfront involvement of financial people ensures the credibility of claimed financial benefits, and helps establish the credibility of the initiative.
Link Variable Remuneration with Improvement Results – By tying in the variable component of remuneration with improvement results, a much higher level of motivation exists for middle and senior managers to give continual improvement the focus it deserves. Some organisations have linked as much as 40 percent of variable remuneration to the results of Six Sigma or business improvement. These types of incentives can also exist at the workforce level, again a great source of motivation to continually improve.