General Electric - Implementation of Quality - Report Example

GE-Implementation of Quality Table of Contents 0 Introduction 1 Company Background.……………………………………………...…………………3 1.2 Mission and Vision ……………………………………………………...…………….3 1.3 Company Strategies……………………………………………………………………4 1.4 Target Customers and Quality…………………………………………………………4 2.0 Literature Review 2.1 Approaches to Quality Management …………………………………………………5 2.2 The Transition Process……………………………………………….……………….8 3.0 Findings and Discussion 3.1 The Approach of Quality Management in GE………………………………………11 3.2 Six Sigma Methodology at GE………………………………………………………11 3.3 Results of the Transition…………………………………………………………….12 3.4 Challenges Faced during Six Sigma Implementation………………………….……14 3.5 Impacts of Learning to Company Stakeholders…………………………….………14 3.0 Conclusion and Recommendations 3.1 Conclusion……………………………………………………………..…..………..15 3.2 Recommendations……………………………………………………….……..……15 4.0 References ……………………………………………………………….……………...17 Introduction Company Background General Electric (GE) is an American corporation headquartered in Fairfield, Connecticut. GE operates through four segments: Technology infrastructure, capital finance, energy, consumer, and industrial products. The Fortune 500 ranked GE as the 26th largest firm based on the United States gross revenue and the 14th most profitable company in the US (Ostadi, Aghdasi & Alibabaei, 2011). The company focuses on integrating leading products and technology to solve consumers’ energy problems. GE serves several industries including transmission, distribution, marine transportation, Oil & Gas, renewable, power generation, mining, metals, data centres, telecommunications, healthcare, and commercials. Upon the merger of Edison General Company with Thomas-Houston Electric in 1892 to form GE, the firm developed and maintained best practice standards in the industry. These included licensing its technologies, automations of operations, developing proper human resource policies and instituting the bets financial controls. Mission and Vision GE is driven by passion to deliver on commitment. The company is dedicated to providing their customers with the highest quality offerings characterized by unparalled customer service and responsiveness (Wiengarten, Fynes, Cheng & Chavez, 2013). The company’s management argues that GE is committed to working through all problems in an open and honest manner while yielding integrity. The primary vision of the company is to drive customer satisfaction with all its products and services in addition to building long-term loyalty; this can be achieved through working with the company’s customers to make their help successful. Company Strategies General Electrics’ growth strategies include external focus, clear thinking, imagination, inclusiveness, and expertise. External focus concentrates on customer-centered production processes and proper monitoring of industry dynamics. Customer focus drive demand and customer loyalty while monitoring dynamics enhances the ability to adjust to global economic changes for sustainability (Wiengarten, Fynes, Cheng & Chavez, 2013). Clear thinking focuses on seeking simple solutions to complex problems and communicating clear and consistent priorities. It is through imagination that GE creates new and creative ideas, courage, and tenacity. Inclusiveness leads to teamwork that respect for others’ ideas and contributions in addition to creating excitement that drives engagement. GE emphasizes expertise as one of its strategies because it leads to credibility built from experience for enhancing effectiveness and efficiency in productions. Target Customers and Quality General Electric targets customers of all class and cohorts. The range of products the company offers are demanded by children, the youth, and the aged. GE understands the requirements of its customers associated with its products and services. Among the elements of quality management in GE is the establishment of channels to enhance the effectiveness of communication of customer requirements and changes occurring throughout the organization (General Electric Company, 2012). The management teams across the three levels in the company are engaged in continuous improvement of processes. The management also reviews the regulatory landscapes, strives to understand technical applicability, perform training, and ensure rigorous adherence to procedures with the ultimate goal of ensuring that goods and services comply with the laws and regulations of the selected market. Literature Review Approaches to Quality Management According to Sokovic, Pavletic and Kern-Pipan (2010), modern companies have recognized that markets are characterized by complexity and dynamism. Both local and cross-border markets are difficult to comprehend and satisfy because they keep on changing from time to time. This could be due to the fact that consumer tastes and preferences are also dynamic. Narasimhan and Schoenherr (2012) argue that in any competitive economy, continuous cost reduction and quality improvements are essential for an organization to stay in operation. Business sustainability is determined by the company’s competitiveness in the market. The primary parameters that measure competitiveness include quantity, price, and delivery (Horațiu-Catalin, Radu, Mihai & Bogdan, 2013). Quality management is a vital process for achieving competitiveness in terms of producing the required quantity at the most economical costs and delivering the products to the customers at the exact time when they need them (Shen & Chou, 2010). One of the best approaches to quality management in the modern business is total quality management. Total quality management is strategy that seeks to integrate all organizational functions to focus on satisfying the needs of the customers and achieve organizational objectives (Ostadi, Aghdasi & Alibabaei, 2011). This strategy views business entities as a collection of processes; therefore, the organization should strive to improve these processes on a continual basis by incorporating the knowledge and experience of the workers. Other approaches critical to quality management include Six Sigma, business process re-engineering and benchmarking. Benchmarking is a process business performance achieved by learning from other companies the best ways of doing things in order to be the best in the industry (Wiengarten, Fynes, Cheng & Chavez, 2013). Benchmarking is continuous systematic process of evaluating companies recognized as industry leaders in order to determine business and work processes that represent best practice, and establish rational performance goals. Business Process Re-engineering (BPR) involves the process of rethinking and radical redesigning of business activities (Shen & Chou, 2010). The objective of these is to make dramatic improvements in measures of performance such as response speed, cost, service, and quality. Re-engineering focuses on eliminating unnecessary activities in the production process. This process also involves finding improved and efficient ways of doing organizational activities (Ostadi, Aghdasi & Alibabaei, 2011). BRP projects are done to create value for consumers through reduced costs, increased quality, and rapid response to customer requirements. Sokovic, Pavletic and Kern-Pipan, (2010) argue that the primary concern of BPR is to critically analyze and radically redesign existing business processes to achieve breakthrough improvements across all measures of performance. Six Sigma approach focuses on implementing a measurement-based strategy that strives to improve processes and reduce variation from standards (Aksoy & Dinçmen, 2011). Companies that achieve Six Sigma produce less than 3.4 defects per million products. Six Sigma is a fundamental set used in manufacturing organizations for statistical modeling, which requires substantial investments in production processes in order to achieve 99.99966% defect-free products (Korenko, Uhrin, Kaplik & Foldesiova, 2013). Executive leadership at all levels of the company commit themselves towards the successful implementation of quality management. The company’s management has deployed the energy to quality policy (Shen & Chou, 2010). The quality policy highlights the critical requirements for ensuring quality productivity and defect-free products. The company has also established measurable quality objectives that are important in enhancing customer satisfaction. Ostadi, Aghdasi and Alibabaei (2011) argue that the primary approach to quality management constitutes communicating to the business the necessity of meeting customer needs and operating within the regulatory requirements. Multinational companies such as GE, Motorola, and IBM have heavily invested in technologies for rapidly conducting management reviews at appropriate levels within the organization (Ostadi, Aghdasi & Alibabaei, 2011). Companies that need to achieve proper quality management must avail resources needed to achieve the goals of quality management. Throughout the production process, companies should ensure management commitment, customer focus, performance of quality audits, monitoring and reviews (Wiengarten, Fynes, Cheng & Chavez, 2013); these will eliminate costs associated with nonconformance and provide counteractive mechanisms for dealing with quality issues whenever the company suspects quality problems. Executives need to develop and communicate quality expectations to guide the organization in defining the desired quality for each activity or service, and set quality standards for all activities that support the fundamental goals of the business. The primary activities include functions such as accounting, finance, engineering, distribution, and administration. Mcfadden, Young, Gowen and Sharp (2014) analyzed various Japanese firms that adopted quality management concepts since 1970s and concluded that firms should make quality customer-oriented and not producer-oriented. This implies that companies need to consider all steps in the business process as the customer. Quality improvement cycle provides the best tool for quality management in modern organizations Horațiu-Catalin, Radu, Mihai & Bogdan, 2013); the cycle presents quality management as an unending process comprising of plan, do, check, act (PDCA). The Transition Process The change process causes a variety of dynamics in the business and people. The organization has the responsibility of determining the readiness of the organizational infrastructure in to accept the desired change and support the upcoming processes (Wiengarten, Fynes, Cheng & Chavez, 2013). For example, adoption of new technology will require technical training facilitated by workforce with different sets of skills. Re-organization may also require new management styles and redefined roles. The transition process needs the input of leaders and a transition team. The role of leaders during the transition process is to help the transition team identify the best practices that will lead to achievement of objectives, support the modes and methods of effective communication, oversee and monitor the dynamics of change and ensure maintenance of relationships vital for change implementation (Narasimhan & Schoenherr, 2012). Leaders of the organization draft the policies and aims of the transition, suggest timeframes for implementation, and provide the necessary resources for the process. The transition process is not a streamlined; there are several challenges that organizations face during transition. Narasimhan and Schoenherr (2012) argue that resources required to implement a change process may sometimes be scarce due to limited resources. Companies require substantial amounts of investments for hiring experts, purchasing software and installing technological infrastructures. Another challenge associated with transition is resistance from organizational publics. The company’s publics include employees, shareholders, and the management. Employees’ resistance primarily stems from the fear that the transition may render them unemployed if it comes with advanced technologies that they are not trained to use (Shen & Chou, 2010). Shareholders fear losing their capital in the event of the transition collapsing. The current managers also fear to lose their positions if qualified experts are required to manage the new systems. According to Shen and Chou (2010), the company should adopt proper strategies for managing the transition in order to avoid further resistance from the stakeholders. Not all changes happen at once, most of the transitions are incremental. The executives are required to help the members of the organization define and understand the meaning of transition. Transition is not meant to cast some people out of the organization; however, it is the best strategy to enhance the quality of productivity in order to rhyme with market dynamics (Ostadi, Aghdasi & Alibabaei, 2011). The effectiveness of transitions is determined by the extent to which the management can motivate all employees to participate in the change process. Workers should be encouraged to give their recommendations concerning the desired new ways of operations (Shen & Chou, 2010). Executives should communicate the new vision through dialogue as opposed to lecturing. This reminds employees that they have a significant contribution to the performance of the organization and not just making a living. The management needs to review and communicate results of the change both initially and then at least quarterly. IBM is one of the American corporations that have undergone a significant transition from a hardware-focused company to a cloud-oriented software and services provider (Shen & Chou, 2010). The transition was done for both pursuit of a vision and execution of strategy. The transition has enabled IBM to take more risks than before, thus, finding itself going up against market leaders such as Amazon Web Services. Starbucks, through the leadership of Chris Bruzzo, came up with new strategies that allow customers at the company’s twelve thousand stores to apply their own technology while drinking coffee. Bruzzo expressed interests in technology and encouraged people to work together in order to achieve greater results than individuals could achieve (Wiengarten, Fynes, Cheng & Chavez, 2013). Starbucks has added chat rooms and music-discussion boards to its website; the company intends to a store locator feature available through a cell phone. The need for transition in organizations cannot be overlooked. Quality implementation in companies requires transition processes for it to be successful. The transition may involve change of processes, facilities, or alternating responsibilities. Transition is important in organizations because it leads to increased efficiency and effectiveness of operations (Wiengarten, Fynes, Cheng & Chavez, 2013). Increased efficiency leads to market share improvements because the companies minimize costs of production while maintaining quality. Transition maintains the inverse relationship between the internal or conformance quality and costs. As quality improves, it results to improved market share, which stimulates profitability and growth (Horațiu-Catalin, Radu, Mihai & Bogdan, 2013). This provides a means for further investment in quality improvements such as research and development. Transitions reduce the penalties associated with poor quality and serve as drivers for growth, market share, and profitability. Findings and Discussion The Approach of Quality Management in GE The quality policy of GE establishes a strategic objective for maintaining the reputation of leadership while continuously striving to meet and exceed customer expectations (General Electric Company, 2012). The company recognizes the necessity of the human factor in obtaining total quality; thus, GE strives to give all the necessary support for them to utilize their full potential. The company also focuses on continuous improvement, constant employee participation, and teamwork as ingredients to quality implementation. Six Sigma Methodology at GE GE provides one of the best success stories in successful implementation of Six Sigma. GE launched Six Sigma in the year 1994 under the leadership of Jack Welch (General Electric Company, 2012). The launch of Six Sigma was characterized by heavy investment in employees training. The primary objective of implementing Six Sigma was to streamline processes in order to improve productivity, quality, speed, and efficiency. Welch also realized that Six Sigma was critical at the business level because it could lead to improved profitability, long-term viability and increased market share (Hilmi & Zülküf, 2013). Six Sigma was actually critical to GE since the approach promised minimized levels of defects and variations from standards. The company sponsored trainings for employees at different levels including Green Belts, Black Belts, and Master Black Belts. GE managed to internalize the benefits of Six Sigma to the entire organization. Jack Welch recognized that the company began to realize the value of Six Sigma after starting focusing on external customers (Barjaktarovic & Jecmenica, 2011). Jack Welch commented that the earlier approaches for quality concentrated on slogans and were not result oriented. The company wanted a quality management approach that aimed at achieving results, and not based on theories and slogans. All business units’ executives championed Six Sigma approach. This implies that the project was sponsored from the top management. Quality management projects require full commitment from the management for them to be practical. GE carried out quarterly review of Six Sigma projects at the executive level. Quarterly reviews were critical since they provided visibility into leadership on critical matters of management. The top talent was assigned the responsibility of leading every initiative (Barjaktarovic & Jecmenica, 2011). The company used to take them out of their jobs in order to make them Black Belts. Exposure through training and experience provided employees with practical skills necessary for achieving the best. The Six Sigma community secured all the rewards and recognition of the company since they achieved excellence in their productivity; this provided further evidence that Six Sigma was the best approach to quality management in the company (Alden, 2014). GE provided training on concepts and tools for solving daily problems at work to thousands of Green Belts. The management emphasized that all business projects had to tie into the strategic objectives and the long-term prospects of GE. This meant that all activities of the company had to contribute to the overall success of the business. The activities that were not relevant were eliminated from the production process. Results of the Transition During the first year of Six Sigma implementation, the management was forced to change the bonus structure to 60% financial success and 40% Six Sigma success (Alden, 2014). By the year 1988, the company had stopped hiring applicants to the management positions unless they had at least Green Belt training. Additionally, the executives screened management level new employees based on Six Sigma qualifications and evidence of commitment to the approach. The reason for emphasizing on this policy of selection was that the company had identified the excellent contribution of Six Sigma to the productivity of the company. The company attributes Six Sigma to driving of above $10 billion of benefits. Sigma implementation also drove up operating margins from 14.8% to 18.9% within the first four years (General Electric Company, 2012). Previously, 24% of the incoming calls in the mortgage division were going to voicemail. A team of Six Sigma realized that one branch had a near perfect percentage of answered calls. The team analyzed the system of the branch, process inflows, staffing, equipment, and physical layout. This branch was duplicated at all branches, leading to meeting customer calls with a live person at the rate of 99.9%. The GE plastics unit was shut out of bidding on contracts to provide Sony CD-ROMs because of quality issues. One of the Black Belts managed the process through the approach of Six Sigma, leading to implementation of a change in the production process. The process rose from 3.8 sigma to 5.8 sigma; GE won the Sony contract (Hilmi & Zülküf, 2013). A 3.8 sigma implies a 1.2% probability of failure, while 5.7 Sigma implies 0.00001% probability of failure. The company was experiencing outages in newly designed gas turbines, in the power systems division. The problem was caused by breaking rotors that caused engineers to remove and replace 37 units; this inflated the costs of production and compromised the quality of power produced. The Six Sigma team investigated the process, eliminating all chances of rotor breakages at the base of approximately 210 units (Alden, 2014). GE was considered the leader in technology in the industry. The team identified faulty processes and activities in the power systems. The primary objective of the Six Sigma was to eliminate all faulty processes and activities to ensure that the systems are streamlined for quality productivity. Challenges Faced during Six Sigma Implementation Six Sigma implementation at GE was a streamlined process. The company faced a problem of insufficient resources. The project required an investment of $2 billion (General Electric Company, 2012). Additionally, it was not easy to convince some employees into adopting Six Sigma because of fear of change. Another challenge involved poor data collection in some aspects of the business because the company was too diversified, which required specialized technology for easy data collection. Welch actively addressed these problems to see the approach succeed. Welch utilized the available funds effectively in order to avoid running out of scarce finances (Alden, 2014). The resistant employees were trained and advised on the necessity of adopting the approach; executives made them understand that quality management was beneficial to both employees and the company itself. Addressing the challenge of data collection involved outsoaring experts from big data management institutions to ensure accuracy in data gathering. Impacts of Learning to Company Stakeholders Learning is a critical requirement for all transition and quality management endeavors at GE. GE has always focused on ensuring proper training to all members. Learning equips human resources with the necessary skills and knowledge for employee supervision. Through education, human resource managers acquire skills and experience necessary for performance of daily duties and handling employees (Alden, 2014). Learning also equips operators with necessary skills for handling equipment, minimizing damage to facilities, effective use of available resources without compromising quality, and identifying faulty operation processes in order to institute change. The finance personnel are trained on critical issues concerning balancing of accounts, allocating resources, capital budgeting and fraud minimization (Shen & Chou, 2010). The primary benefit of learning to external stakeholders is that it enables them to understand the riskiness associated with the business; therefore, they develop a tolerance attitude whenever processes fail. Conclusion and Recommendations Conclusion General Electric successful implemented the Six Sigma quality approach in the organizational processes. The company realized immense improvements in quality, reduced products reworks and reduced costs of production. The main driver for Six Sigma implementation in GE was to drive change for improvement. GE also focused on counteracting the competitive pressure, ensuring quality productivity, and maintaining customer satisfaction. Six Sigma approach to quality management was implemented in GE during the mid 1990s when the company realized that its productivity did not rhyme with customer needs. Commitment and support from the top management constituted the biggest contribution towards Six Sigma success; other factors included leadership and championship, and proper resource allocation. The main problems that were faced in Six Sigma implementation in GE poor data collection, inadequate resources, and unwillingness of some employees to adopt the methodology. The management, under the leadership of Welch, appointed the research experts in the company to collect sufficient from data across all its industries that it serves. Recommendations Companies desiring to implement Six Sigma should realize that top management commitment and support is critical for success of the program. The company’s top executives should be part of Six Sigma in order for to contribute towards its implementation through visible commitment and support. Establishment of Master Black Belts, Champions, and Green Belts provide a background for Six Sigma success. It is advisable for the champions to come from the top management during the implementation of the initiative; this ensures that the initiative has the top management support that can avail the required resources for available projects. Effective communication is vital during transitions if the interested companies want to overcome resistance to Six Sigma implementation and maintain enthusiasm for quality initiatives within the organization. Companies seeking Six Sigma implementation should institute a communication plan addressing the necessity of Six Sigma quality approach. Communication should also aim at enlightening the company publics concerning the workability of the initiative. Six Sigma is a breakthrough quality management approach that requires changes in attitudes of employees and organizational culture. References Aksoy, E, & Dinçmen, M 2011, “Knowledge Focused Six Sigma (KFSS): A methodology to calculate Six Sigma intellectual capital,” Total Quality Management & Business Excellence, 22(3), pp. 275-288. Alden, W 2014, General Electrics industrial segments lift earnings, The New York Times, 2014, Opposing Viewpoints in Context, EBSCOhost, viewed 26 April 2014. 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Narasimhan, R, & Schoenherr, T 2012, “The effects of integrated supply management practices and environmental management practices on relative competitive quality advantage”, International Journal Of Production Research, 50(4), pp. 1185-1201. Ostadi, B, Aghdasi, M, & Alibabaei, A 2011, “An examination of the influences of desired organisational capabilities in the preparation stage of business process re-engineering projects”, International Journal Of Production Research, 49(17), pp. 5333-5354. Shen, C., & Chou, C.-C. 2010, “Business process re-engineering in the logistics industry: a study of implementation, success factors, and performance,” Enterprise Information Systems, 4(1), pp. 61-78. Sokovic, M., Pavletic, D., & Kern-Pipan, K. 2010, “Quality improvement methodologies - PDCA cycle, RADAR matrix, DMAIC and DFSS,” Journal of Achievements in Materials and Manufacturing Engineering, 43, pp. 476-483. Wiengarten, F, Fynes, B, Cheng, E, & Chavez, R 2013, “Taking an innovative approach to quality practices: exploring the importance of a company’s innovativeness on the success of TQM practices”, International Journal Of Production Research, 51(10), pp. 3055-3074. Read More