GE and Jack Welch

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Jack Welch - The Strategist

Analysts felt that Jack Welch was focused and analytical. He restructured GE's portfolio from 350 businesses during 1980s down to two-dozen core activities by late 1990s. During his initial years as CEO, he either expanded internally or made acquisitions to position all GE's businesses as either number one or number two in their fields. The planned acquisition of Honeywell, Inc., which didn't materialize, was expected to redefine GE for the years to come. GE under Jack Welch transformed Six Sigma6, which was originally intended to serve as a quality control for manufacturing, to focus on virtually all service-related transactions. GE learned and developed the complex Six Sigma program through internal and external benchmarking research. Jack Welch said, "The methodologies of Six Sigma were learned from other companies, but the cultural obsessiveness and all-encompassing passion for it is pure GE." The Six Sigma program increased the company's operating profit margins from 13.6% in 1995 to 16.7 % in the third quarter of 1999.

Jack Welch attributed three factors to the success of Six Sigma at GE: aligning employee benefits and promotions with Six Sigma programs; demanding high degree of senior management support to define objectives and facilitate implementation; and working to demonstrate the impact of Six Sigma initiatives to customers.

The employees engaged in the Six Sigma discipline were categorized as Green Belts and Black Belt champions. No employee was considered for a management position unless they had some Green Belt training and completed at least one Six Sigma program. GE took a top-down approach to ensure that the best employees became Black Belts. Jack Welch personally supervised the progress that business units made in their Six Sigma programs. Furthermore, Black Belts and Master Black Belts had a high degree of visibility to the company's senior management team and were responsible for mentoring and coaching Green Belts. GE reinforced the importance of the Six Sigma program by linking it with managerial compensation. About 40 percent of each GE executive's bonus was linked to Six Sigma implementation, which applied to the top 7,000 executives.

Analysts felt that Jack Welch was the primary driver of the Six Sigma program at GE. He constantly defined and adjusted the specific objectives for the program. He spoke frequently to the organization regarding the program's development and continually emphasized its value during conferences, meetings and through publications such as annual reports. Almost every GE division leader combined the Six Sigma methodology with company culture and goals. Each division implemented Six Sigma with project teams overseen by senior management. Analysts felt that the high level of senior management support was one of the vital factors in GE's Six Sigma success.

Jack Welch was determined to turn the Six Sigma company vision "outside in" to make "the customer's profitability the number one priority in any process improvement." In 1998, GE Capital generated over US$300,000 million as net income from Six Sigma quality improvements. This division emphasized that customers needed to experience the productivity improvements the company had enjoyed. It was essential to understand the customer's particular quality demands in order to determine what should be categorized as a 'defect.' Customer satisfaction and loyalty were vital elements of the Six Sigma program at GE at all levels. Technical support was also an important aspect of Six Sigma implementation. Customers had immediate access to GE's vast resources and technical expertise at all times.

Jack Welch's vision of 'the boundaryless corporation' was to make GE into a company without bureaucracy, where people were curious, open, cooperative and always breaking down barriers. Jack Welch said, "It's how open you are about information, how open you are to ideas from other companies...You'll see charts in GE on the 'Wal-Mart Method' or the 'Lopez Three-Step' process (from former General Motors purchasing chief J. Ignacio Lopez de Arriortua). You are not a hero at GE for being a Lone Ranger with only your own ideas." GE adopted many ideas and techniques from other companies. (Refer Box).

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6] The 'Six Sigma' was a sophisticated quality program created by Motorola in the 1980s and was adopted by GE in 1997. By 2001, the process was perfected by GE. Six Sigma was a highly involved measurement device of production defects per one million operations.