HOW GENERAL ELECTRIC SAVED BILLIONS USING SIX SIGMA METHODOLOGY

Today’s consumers have access to instant information, meaning there’s little room for error. To compete with the rest of the world, innovators at General Electric knew they needed to be more than average. They needed to be exceptional so in the late 1980s, the company began focusing solely on quality control. In 1995, CEO Jack Welch made a goal for General Electric to become a Six Sigma company within five years by adopting the “Six Sigma Quality” as a part of the company’s culture. What is Six Sigma? Six Sigma is a term used to define various techniques and management tools designed to make business processes more efficient and effective. It provides statistical tools to eliminate defects, identify the cause of the error, and reduce the possibilities of error.

According to?Bright Hub PM, Welch applied?Six Sigma?in four key ways that ultimately translated to a formula for success:

?1. Training:?Training in GE was given priority and thousands of teams trained in large sessions. GE required almost all employees to take a two week, 100-hour Six Sigma Training Program. Afterward, employees were asked to complete a project implementing those methodologies.?

2. Mentoring:?Mentoring was key to GE’s success. Full-time, Master Black Belt Six Sigma professionals were hired to train and mentor employees whose jobs were vital to key processes. After those employees were trained and mentored to become?Black Belts?as well, GE Black Belt teams carried out different Six Sigma projects within the company.?Green Belts?were also able to join projects teams to a certain capacity.

?3. Leadership:?Welch also asked for a commitment to their Six Sigma goals from both executives and the GE workforce, linking promotions and bonuses to improvement in quality. A Green Belt certification became a minimum requirement for promotion at GE and almost half of each area of bonuses depended on the successful implementation of a Six Sigma project. Even the CEO and President attended training sessions.

?4. Focused Implementation:?GE used three key implementation approaches.

• ?“Show Me the Money” meant GE focused on the bottom line, cutting costs to compete in price-sensitive markets.
• “Everybody Plays” meant that even outsourced suppliers were expected to participate in the Six Sigma initiative to make sure that the quality was assured from start to finish for each product.
• “Specific Techniques” meant GE used process maps and other Six Sigma tools to rank and associate projects with overarching business goals.

When Six Sigma was officially implemented at GE in 1996, there were no savings: the company invested $200 million, and only saw a cost savings of $170 million. This would change in 1997, when CEO Jack Welch made the choice to tie in leadership bonuses to Six Sigma results. It proved to work: that year, $400 million was invested in Six Sigma.GE gained $700 million in corporate benefits and over $2.5 billion by the year 2000. Increasing product reliability and improving production efficiency lead to enhanced customer relations and thus, greater revenue generation. Without the strict, disciplined integration executed by Welch, General Electric would not be the successful Six Sigma Corporation it is today!

The unprecedented success of Six Sigma at GE, around the late 90s made other companies to begin adopting Six Sigma. Some of the largest include Amazon, Boeing, Ford, GlaxoSmithKline and Samsung. With the adoption of Six Sigma by such a huge number of multi-nationals, many of whom saw immediate and sustained success with its implementation. Thanks to ex-CEO of General Electric Jack Welch, more than half of all Fortune 500 companies use Six Sigma to improve and streamline their own processes.