The Days at AlliedSignal
After ABB, the next evolutionary milestone was when AlliedSignal CEO Larry Bossidy
took up Six Sigma with a clear and undisputable economic focus in 1994. By then, Rich Schroeder had gone to work for AlliedSignal as a high-level operations executive, and in that role he was forced to consider drastic ways of saving the company, which was teetering on the brink of financial disaster. It was clearly a time of naked truth for the diversified industrial conglomerate.
Bossidy and Schroeder had several discussions, after which they approached Dr. Harry to discuss the possibilities of leveraging Six Sigma to make AlliedSignal a strong, competitive company. Together they decided there was ample opportunity for turning around the company's operations in a new direction, and to fix it firmly on the path of profitability. They had drawn out the financial power of Six Sigma at ABB, and couldn't think of a reason it wouldn't contribute greatly to Bossidy's need for a turnaround.
With a few modifications, Mr. Schroeder and Dr. Harry believed the marriage of AlliedSignal's desperate condition and Six Sigma was a match made in heaven. Six Sigma is all about discontinuous change and breakthrough. AlliedSignal had a most pressing and urgent need to make a decisive break with its past. Like most companies, AlliedSignal had been plodding along at a fairly unimpressive rate of change.
The Driving Need
Bossidy had taken over the helm of AlliedSignal in 1991, and had initiated a comprehensive and aggressive program of transformation. As written in the historical annuls of the company, Bossidy had instituted new leadership in many key businesses. In addition, bold actions were taken to improve cash flow and operating margins, to increase productivity and to position the company as a global competitive force for the years ahead. (Honeywell, 2003)
Three years later in 1994, the question for Bossidy was one of great practical concern. Did his change program possess the extreme impetus required to set the large mass of his corporation on a markedly steeper performance trajectory? He had made some serious headway since taking on the CEO job, and apparently he wasn't ready to give up. On Schroeder's recommendation, he decided to continue on the turnaround course with the help of Dr. Harry and Six Sigma. Maybe Six Sigma was the additional impetus and turbo-charge Bossidy needed to complete his transformation.
When we look at the world of physics, we see that the force required to set a body in motion, or disturb its inertia, is much stronger than the force required to keep it in motion. For those who know how the universe works, it is pretty clear that real, sustainable change cannot be coaxed and nudged along. True transformational change is a function of revolution and reform; it is a function of destroying old systems and beliefs, and of building up new ones in their place.
This is not something you do under the auspices of the words "continuous improvement." It is something you empower with stretch goals, with correlated metrics, with powerful, understandable and replicable knowledge, methods and tools. It is something you staff with your very, very best people. It is structured and comprehensive; it is deployed in military fashion; it is full-time, focused and pervasive. It is strategic as well as tactical, and it requires an unusual level of commitment, willpower and discipline.
Dr. Harry and Mr. Schroeder were convinced that Six Sigma could provide the impetus Bossidy and other corporate executives were seeking. There was force that could be applied to move the mass called AlliedSignal. But it was a large mass, and that fact spurred Dr. Harry and Mr. Schroeder to make some important changes to Six Sigma itself.
For one, they formed the Six Sigma Academy, a consulting firm that would specialize in initializing, deploying and implementing Six Sigma. Recognizing the need for profound intervention, Dr. Harry and Schroeder configured a Six Sigma change program that possessed the initial impetus required to set a corporation on a new performance vector.
The Disturbing TQ Way
Once Dr. Harry was in a meeting at AlliedSignal, and one of the directors in the meeting held up his fingers in a little cross configuration. He was aiming his gesture at Dr. Harry, who had just said something disturbing about the company's performance. At the time AlliedSignai had an initiative called total quality leadership, or TQL for short. Many interpreted one of TQL's core values to mean that is was not appropriate to do or say anything that might be controversial or disturbing. Be nice, don't say mean things, be happy, drive out fear - that kind of attitude.
"That's not very TQ of you," the director said with his fingers overlaid to form a cross that looked like a "T." "What are you talking about?" came Dr. Harry's reply. "It means that what you said wasn't very sensitive." Dr, Harry assessed the comment for a couple of seconds, then called for a break, during which time he walked over to the executive that made the comment and said: "You've had several progressive reporting periods of poor performance, your overhead is up 15 percent, your scrap rate is up 10 percent and you're worried about this? Guess what? I want to be sensitive. I'll be sensitive to the shareholders. I'm going to relieve you of your duties. You're fired. Leave."
Dr. Harry was in the meeting as a consultant, so the director told him, "You can't fire me," "Let's test that assumption," said Dr. Harry, He turned to another executive standing nearby and asked him to first call security, then get Rich Schroeder, VP of operations, on the phone. With Schroeder on the squawk box, Dr. Harry explained the circumstances that just transpired, then told the director that he could either leave now and resign or Schroeder will get rid of you. "Your choice," he said, "and you have five seconds to make up your mind." After some discussion with Schroeder the director left, the meeting continued and, ultimately, he resigned.
Once the meeting reconvened, Dr. Harry asked the group if anyone else wanted to hold up their fingers. As you might guess, there was dead silence. Dr. Harry was there for Six Sigma, not for TQL, or TQM, or whatever else. He expected the executives in the room to act like leaders, because that's what the situation and Six Sigma demanded. They weren't there for sensitivity training. They were there for a business meeting concerning the potential loss of a key customer over a poorly handled quality issue.
In fact, one of the reasons their business was failing was because of their over-sensitivity, lack of decisive action and focus on the trivial many issues, all driven by weak leadership hiding behind the symbols of quality. Their turn-the-other-cheek philosophy wasn't working. Their avoidance of tough issues in the name of political continuity was taking its toll. The machines were dead back in the bam, the wheat was rotting in the field and all they could think about was being nice. It was time to fix the machines and harvest the cash, and that's why Dr. Harry took such a seemingly desensitized exception to the status quo. It's just that simple: sometimes people have to be replaced in the larger interest. Consequentially, a good leader must have the strength of will to step forward and do this - not slowly protracted over a long period of time but immediately in real time and space.
Such a mandate runs counter to most corporations' policies and procedures for removing counterproductive people from the organization. Most often, a corporation has guidelines for "building the case" against a given employee who is not performing well or whose personal force runs counter to the aims of his or her larger organization. After many months pass, the company finally gathers enough "evidence" to release the problematic employee without any fear of legal repercussions. In other cases, the problematic employee ends up leaving on his or her own, opting to find another company more congruent with his or her values.
Sometimes, however, anti-leaders only dig their heels in further when they sense they've been targeted for removal from their jobs. They continue to wreak havoc and actively resist change for as long as they possibly can, usually motivated by the desire to retain their power base, or simply to preserve their job. These people require a leader who is willing to expunge them from their jobs as quickly as possible, having calculated that the potential liability involved in keeping them around a little longer is much greater than the liability associated with simply letting them go right away. Such was the case involving the TQ disciple who was immovably wed to the ideals of an outmoded management system.
There was another occasion when a certain executive was working a TQL project that Dr. Harry believed was quite valuable. But when Six Sigma took root, this guy was tagged as a dinosaur, and his bosses were making plans to release him and put someone else in charge of the project. Dr. Harry found out about these plans, even before the executive knew what was happening. Dr. Harry had a deep respect for the guy because "he had the right stuff." He was tough, he was good, but his values were just misaligned with the aims of Six Sigma. Dr. Harry felt he could reach out and move this executive over the fence and, thereby, salvage what he thought to be a very valuable leadership resource for the company.
Therefore, Dr. Harry made it known that he didn't want this guy to be released. In fact, he believed this so strongly that he made this clear: "If this guy goes, I go to. And make no mistake about it." The decision-makers didn't call Dr. Harry's bluff, which wasn't a bluff, and they retained the executive, who eventually turned out to be a great local Six Sigma Champion.
Developing the Infrastructure
While many of the program's technical pieces had already been established, proven and documented, most of the infrastructure and organizational pieces were not. The intricately detailed parts of the puzzle were well formed, but the frame and connecting parts were still hazy and ambiguous. They needed greater substance if Six Sigma was to become a management, as well as a technical, mechanism for change.
Part of that substance was the clear definition and institutionalization of hard financial targets at the process, operations and business levels of a corporation. It was now believed that Black Belts should and could return a certain amount of quantifiable and verifiable financial benefit; each and every Black Belt target should have a cost-savings goal. In turn, these benefits would roll up to make a significant impact on the financial statements of the various operational units. Further, the financial gain of these units would pool to make a noticeable change on the financial dashboard of the corporation.
There were other landmark developments, too, including the institutionalization of systems for attaching executive pay to the achievement of Six Sigma goals. As well, it was time in the life of Six Sigma to develop a robust methodology for selecting projects that would add the greatest dollar returns and customer satisfaction simultaneously. If the years at Motorola can be characterized as the period of invention, then the years at ABB can be characterized as proof of the Six Sigma principle.
At AlliedSignal, Dr. Harry and Mr. Schroeder pushed the envelope of Six Sigma even further to become a fully integrated management system capable of driving quantum change at the process, operations and business levels of a corporation. In other words, the enormity of his challenge at AlliedSignal forced Dr. Harry to realize that the integrity of Six Sigma deployment and implementation was highly correlated with the efficacy of Six Sigma application. Get the frame of the puzzle completed first, and organize the pieces according to a predefined structure — then, and only then, execute to plan.
If that was the theory, then the impact of Six Sigma at AlliedSignal was the reality. During the first few years of its Six Sigma thrust, the company realized record operating margins and a savings of about $2 billion in direct costs. Due to this and other productivity and growth initiatives, Bossidy was able to quintuple the market value of AlliedSignal stock and significantly outperformed the Dow Jones Industrial Average and the S&P 500. (Honeywell, 2003)
An astute observer of TQM, and of Six Sigma, could have looked in on these developments and ascertained that something of import was truly on the near-term horizon of quality and business. As TQM-branded quality was falling down the agenda of most corporations, Six Sigma-branded quality was on the rise — even though, for all practical purposes, 80 percent of what they both espoused was the same. But it was the remaining 20 percent that made all the difference in the world.