Evolution of Six Sigma & Impact on General Electric
Introduction
Six sigma is one of the widely used techniques by businesses in order for them to be more productive and responsive to clients needs. The paper discusses the concept of six sigma and its impact on General Electric. Basically, general Electric was considered as one of the successful business in line with multinational American technology and services conglomerate. The paper will also include steps that should be undertaken by businesses so that Six Sigma will prove to be an effective technique to bring customer satisfaction.
BRIEF background: General Electric Company[1]
The General Electric Company (GE) is a multinational American technology and services conglomerate incorporated in the State of New York. Actually, the General Electric Company was considered as rank 3 in terms of market capitalization in the world as of 30th September 2008. GE was divided into several divisions. This includes GE Capital, GE Technology Infrastructure, GE Energy Infrastructure, and NBC Universal, which is known as an entertainment company.
With respect to these businesses, GE joins in a wide range of markets including the transmission, generation and distribution of electricity, industrial automation, lighting, motors, medical imaging equipment, aircraft jet engines, railway locomotives, and other aviation services. Aside from this, the company also offers wide range of financial services. It has a presence in over 100 countries. It was publicized in May 2008 that General Electric would sale off its appliances business for an expected sale of $5-8 billion.
Six Sigma in Action
Six Sigma, at its basic level, is attempting to improve both effectiveness and efficiency at the same time. Six Sigma is a measure of customer satisfaction that is near perfection (‘Six Sigma – What is Six Sigma?’ 2008). Most companies are at the two to three sigma level of performance that means between 308,538 and 66,807 customer dissatisfaction occurrences per million customer contacts. Companies that have a two to three sigma level of performance experience business problems (Maromonte, 1998). They don't make as much money as they should for their shareholders. Shareholders get mad and begin to take their money elsewhere. Management wants to increase profitability. They fear for their jobs and want to improve the bottom line. Often, they think too much in the short term and begin to lay off employees. In the short term, the bottom line looks improved. Of course, the emphasis here is on the short term. With less people in the organization, there is more work for those who remain. What management forgets by downsizing is that if they run a business that is neither effective nor efficient, things will only get worse with less people expected to work harder. Eckes, (2003) believes that businesses that operate by focusing on short-term profitability will result in long-term un-profitability.
Six Sigma as a management philosophy instructs management to begin identifying the 20 or 30 most important processes in business (‘Six Sigma – What is Six Sigma?’ 2008). Next management measures the current sigma performance of each of these processes. Many, if not all, of the processes will be operating at two to three sigma performance. Some processes may even be lower than two sigma. Once management has identified their processes and personally been involved in measurement of their current performance, they then identify the lowest performing processes that have the most direct impact on the company's business objectives.
Business objectives are the five to seven most important goals a company establishes each year. Sometimes they are financially stated but there are others like customer satisfaction or employee satisfaction. Once the processes having the worst performance with the greatest impact to the business objectives are identified, project teams are formed. That's where the individual worker comes in. They will become part of a five to seven person team that will have the responsibility of improving the performance of the worst performing processes. These teams usually exist for four to six months. They are taught a series of tools and concepts to help them use their skills to improve sigma performance to achieve greater effectiveness and efficiency (Eckes, 2003).
In the past five years, literally hundreds of organizations have indicated their interest in making Six Sigma their management philosophy of choice. Of course, when anything becomes as popular as Six Sigma has become, problems can occur. Executives in many organizations who have a slash-and-burn mentality may now be trying to use Six Sigma in the same way (Maromonte, 1998). While many of the businesses attempting to implement Six Sigma are well intentioned and want to implement Six Sigma properly just as General Electric did, there are also those impatient executives who now look on Six Sigma in the same way as they look on downsizing. This quick-fix approach to Six Sigma is a sure path to the same short-term results that hamper the organization in the long term (Eckes, 2003).
Six Sigma helps in improving the operations of a business by making the processes effective and efficient. Through the use of six sigma processes can be changed for the better in turn clients are given total satisfaction. Six sigma draws attention due to it creating huge kind of changes to business and management. Six sigma creates needed and one of a kind change to businesses. People are attracted to make use of such strategy because it is effective and lesser problems come out of using it. People can relate to it more and they can have more ease of using it.
Impact of Six Sigma to general Electric
In the strategic business unit (SBU) organizational structure of General Electric Company, the levels of quality, delivery performance, cost competitiveness, customer service, and product advancements being achieved are more easily monitored and strengthened (Kanji, 2002). As a result of this, the competitiveness and profitability of the General Electric are maximized. Just as the General Electric helps support improving performance in these criteria for the various product and service lines within the corporation, the same concept can be applied to optimize the sources performing functions within each business unit of General Electric Company. By viewing the sources for the key functions performed for the General Electric Company, its performance can be easily monitored in the five criteria that impact profitability. Overall corporate performance and competitiveness will be improved as a result, since quality levels, delivery performance, customer service, and product advancements, as well as cost competitiveness, can be enhanced for each of the business unit of GE. Aside from this, the problem of outsourcing not significantly reducing costs to the degree hoped for will be resolved because the focus is being placed on the performance of each source in all important criteria, beyond just the direct costs for their goods and services (Maromonte, 1998).
Actually, the six sigma will enhance both the Strategic Business Unit and Strategic Business Source of a certain company e.g. General Electric Company. The method used to develop a Strategic Business Source is the same used to develop the SBU. Specifically, performance levels for quality, delivery, cost, customer service, and product advancements are determined for the sources available to provide the goods and services needed by the SBU, whether internal departments or external suppliers. The performance levels of the various sources being considered to supply these goods and services are then compared. The best-performing sources become readily apparent, and the optimal source is selected by the company as its Strategic Business Source. On the other hand, if external suppliers can exceed the company’s internal performance levels in these five criteria for any SBU function, outsourcing may be the right choice. However, outsourcing is not the only option. As an alternative, the company may challenge an internal production department to improve performance, using the levels being achieved by external sources as benchmarks for which to strive. This helps improve the morale of the downsized corporate work force by providing employees with the opportunity to meet the challenge of improving performance beyond that of the external source (Maromonte, 1998).
Aside from this development, Six Sigma also enables General Electric Company to give quality in both product development and services they offer. Quality must be incorporated into all activities with a clear customer focus. Customers usually compare perceptions of what they actually received from the organization with their expectations. Customer delight arises when perceptions exceed expectations. External customer satisfaction shows the extent to which the organization uses methods for determining and monitoring external customer's perceived quality and value; it shows the extent to which the organization uses customer feedback to improve product/service quality; it shows that the company handles complaints, resolves them, and uses complaint information for quality improvement and prevention of recurrence of problems; it shows that the company measures performance against customer targets; and it also shows that the company compares its customer satisfaction results with those of main competitors (Kanji, 2002).
Getting the internal relationships working is essential if external customers are to be satisfied. Every single person in the organization has an effect on the external customers. Internal cooperation needs to be stimulated to enhance organizational performance. The most effective leadership style tends to give high importance to teams and employee participation. Internal customer satisfaction shows that extent to which the organization uses methods for improving coordination of interdependent tasks; It shows that the organization makes people aware of the fact that they all have customers and suppliers; It shows that the organization has a strong employee interaction with customers and suppliers; lastly it shows that the organization focuses on external customers when tasks are being performed (Kanji, 2002). Customer satisfaction is one of the goals of a company. Companies want to make sure that they gave outmost satisfaction to their clients. They are willing to make use of anything that will help in providing this cause.
Six Sigma and customer satisfaction
With regards to the implication of Six Sigma to General Electric Company, Six Sigma was actually an important strategy to satisfy customer needs profitably. Six Sigma aims at improving customer loyalty by focusing process improvement on customer requirements. However, many organizations struggle with how to identify customer requirements and how to develop relationships that enable joint Six Sigma efforts. The Six Sigma concept has at its core the idea of measuring processes with the intent to find out how well the process performs relative to customer needs. Customers have Critical-to-Quality requirements (CTQs) that characterize the goods and services they buy and the processes they use to obtain them. For example, when customers of a commercial airline buy a seat on a plane, they are concerned about more than just getting from point A to point B: They care about the safety of the plane, the timeliness of departure and arrival, and whether their luggage will arrive when they do. Often, these requirements go beyond the actual product and include the interaction with the supplier itself (Bertels, 2003).
The fundamental idea behind Six Sigma is that business processes need to perform with high reliability against these CTQs needs to deliver against a number of requirements, such as the effort and time it takes to acquire a ticket, the timeliness of flight departure and arrival, and the like. Failure to listen to and understand the Voice of the Customer can be fatal. Although focusing on internal requirements of the business is important, these requirements address only the efficiency dimension. What is missing is the effectiveness perspective: Does this element really add value to the customer? Companies get in trouble with an exclusive focus on efficiency. Companies sometimes end up with the most efficient manufacturing process and may even become the lowest-cost producer, but they may also end up making products that do not meet customer needs. Six Sigma derives its value not just from its capability to lower cost and increase process yields but, more important, from zeroing in on the specific customer requirements. Internal improvement is necessary but not sufficient for long term success. Focusing on effectiveness and efficiency together gives you a sustainable competitive advantage (Bertels, 2003).
Six Sigma is a good method not only for GE Company but also to other business who aimed to achieve their goal of satisfying clients. It is a better way for the company to know the desires of their clients and it is a good way for the company to have a deeper understanding with the clients. Business should make sure that six sigma would be strictly implemented so that its effects for a company and its clients will be evident. Business should also make sure that everything they learn about the clients need is taken down so that the clients will gain more satisfaction and lessen the complains they have.
Conclusion
Through the use of six sigma processes can be changed for the better in turn clients are given total satisfaction. Six sigma draws attention due to it creating huge kind of changes to business and management. Customer satisfaction is one of the goals of a company. Companies want to make sure that they gave outmost satisfaction to their clients. Six Sigma is a good method for the company to know the desires of their clients and it is a good way for the company to have a deeper understanding with the clients.
References:
Bertels, T. (Eds.). (2003). Rath & Strong's six sigma leadership handbook. Hoboken, NJ: John Wiley & Sons.
Blenkhorn, D.L. & Fleisher, C.S. (Eds.). (2001). Managing frontiers in competitive intelligence. Westport, CT: Quorum Books.
Eckes, G. (2003). Six sigma for everyone. Hoboken, NJ: Wiley.
Kanji, G.K. (2002). Measuring business excellence. London: Routledge.
Maromonte, K.R. (1998).Corporate strategic business sourcing. Westport, CT: Quorum Books.
Six Sigma – What is Six Sigma? (2008). Six Sigma, viewed 17 October, 2008 <http://www.isixsigma.com/sixsigma/six_sigma.asp>.
[1] All information are from http://www.ge.com/company/
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