The yearly shareholders' letter from the CEO of the company that owns the "must see" television network is a business "must read."
General Electric Co. Chairman and CEO John F. Welch Jr. has used his front-of-the-annual-report platform to discuss boundaryless behavior (1993); the competitive combination of boundarylessness, speed, stretch goals, and simplified processes (1994); a new kind of (big) company (1995); and "a global service company that also sells high-quality products" (1996).
Welch's business vision is legendary. GE's CEO sees things other executives don't see--or at least well before they do. That draws attention. And there's Welch's personality: intense, impatient, a person of few and often tough words. People pay attention.
This year people will be paying attention to the nearly four pages in GE's 1997 annual report that Welch devotes to the seemingly arcane subject of Six Sigma quality. (Six Sigma provides a statistical methodology for improving quality, with the goal of experiencing less than four defects out of 1 million.)
Welch writes with excitement and pride about how GE is suffusing its operating activities with a customer-oriented, disciplined methodology of defining, measuring, analyzing, improving, and controlling process. Welch expects this Six Sigma regimen to move every GE product and service "toward near-perfect quality."
Early results have been impressive. For example, Six Sigma designs have produced a ten-fold increase in the life of CT scanner X-ray tubes. GE's industrial diamond business has quadrupled its return on investment and, through improving yields, has added a decade's worth of capacity without investing in new plants and equipment. GE's operating margin, about 10% pre-Six Sigma, is now approaching 16%. Welch figures that Six Sigma delivered more than $300 million to operating income in 1997.
But if all of this makes for must reading--and it should be for any executive who's serious about the present and future of the company he or she leads--one must ask if Six Sigma at GE could be coming at a price.
Think about this Welch sentence: "As we move toward [the year] 2000 and beyond, with Six Sigma permeating much of what we do all day, it will be likewise unthinkable to hire into the company, promote, or tolerate those who cannot, or will not, commit to this way of work." There's a "must do" quality to this statement--a kind of regimentation and control that seems to be at odds with the restless pursuit of better ideas and best practices that is (or should be) at the heart of Six Sigma. People should want to embrace Six Sigma and through their enthusiasm and accomplishments be constantly redefining it in ways that work for their customers and their company.
Think about some of the projects you've been a part of lately. What has been the better experience: efforts dominated by one person or a rigid and imposed process, or efforts where the interplay of people and ideas has defined goals and defined and redefined the ways of achieving them? Think about the commitment you made--the commitment you made because you were caught up in the unfolding dynamics of the process and not because you were, in effect, commanded to make the commitment. Involvement, it seems to me, includes an important element of self-discovery that cannot be commanded or imposed.
During the past few years, Welch has made much of GE becoming a $100 billion company with the agility, customer focus, and entrepreneurial spirit of a small company. And that is leadership vision that ranks among the very best in business. GE's customers, shareholders, and employees all stand to benefit, even more than they have already.
Six Sigma, at least as Welch sees it, seems destined to play the central role in GE fulfilling its CEO's corporate vision. But to fulfill a leader's vision, the pursuit of better ideas and best practices needs to draw its energy from throughout a company, from the restlessness of the many who are not executives as well as from the few who are its senior leaders. And I have this notion that the energy level is likely to be higher, the places to which it is constructively directed greater, when people want to pursue those better ideas and best practices rather than when they must do so.