Welch believed that efficiencies in business were infinite because there were no bounds to human creativity. «The idea flow from the human spirit is absolutely unlimited,» Welch declared. «All you have to do is tap into that well. I don’t like to use the word efficiency. It’s creativity. It’s a belief that every person counts.»
Not surprisingly, Welch embraced the largest corporate quality initiative ever undertaken. For years, he had been skeptical of the quality programs that were the rage in the 1980s. He felt that they were too heavy on slogans and too light on results. That was before he heard Lawrence Bossidy telling about the benefits he was reaping from a quality initiative he had launched at AlliedSignal. Bossidy had borrowed the Six Sigma program from Motorola and reported that the company was lowering costs, increasing productivity, and generating more profit.
A Six Sigma quality level generates fewer than 3.4 defects per million operations in a manufacturing or service process. GE is running at a Sigma level of three to four. The gap between that and the Six Sigma level is costing the company between $8 billion and $12 billion a year in inefficiencies and lost productivity. To make the ideas take hold throughout GE required the training of so-called master black belts, black belts, and green belts. Welch launched the effort in late 1995 with 200 projects and intensive training programs, moved to 3,000 projects and more training in 1996, and implemented 6,000 projects and still more training in 1997. In 1998, Six Sigma delivered $320 million in productivity gains and profits, more than double Welch’s original goal of $150 million. «Six Sigma has spread like wildfire across the company, and it is transforming everything we do,» boasted Welch.
The success of the program was evident in 1998 at Boca Raton, where Welch kicked off each year with a meeting for the top 500 executives. That year, 29 managers spoke about their Six Sigma projects describing how they used new ideas to squeeze still more profit out of the lean machine that is GE. One after another explained how quality efforts cut costs and mistakes, enhanced productivity, and eliminated the need for investment in new plant and equipment.
William Woodburn, who headed GE’s industrial diamonds business, was one of the 1998 heroes at Boca. In just 4 years, Woodburn had increased the operation’s return on investment fourfold and halved the cost structure.
