WHO WAS JACK WELCH AND WHY WAS HE IMPORTANT TO SIX SIGMA?
Who Was Jack Welch?
Jack Welch name is fundamental to Six Sigma history.From 1981 through 2001, Jack Welch served as the chairman and CEO of General Electric. (GE). Welch improved GE’s market worth from $14 billion to $410 billion during his tenure as CEO. He was one of history’s most outstanding CEOs of all time. Fortune awarded him “Manager of the Century” in 1999.” When Welch retired, GE gave him a $420 million severance package, the largest ever at the time. At 84, Welch passed away on March 1, 2020.
After completing a PhD in chemical engineering from the University of Illinois at Urbana-Champaign, Welch joined GE as a junior engineer in 1960. Between 1981 and 2001, he progressed through the ranks to become the company’s chair and CEO. 4 During his early years at the company; Welch threatened to resign on several occasions owing to bureaucratic inefficiency. However, as chair and CEO, he worked to reduce bureaucracy and boost revenue.
Welch reorganized GE’s extensive companies during the 1980s. He sacked ineffective managers and shut down entire units. Welch went on to buy other companies and force them to adopt better management techniques for GE to enhance earnings. He shut down factories, laid-off workers, and presented a vision of “expanding quickly in a slow-growth economy,” as he put it in a speech he gave shortly after taking over as chair in 1981. During this period of enormous restructuring, he got dubbed “Neutron Jack” because he killed individuals like a neutron bomb while leaving buildings standing.
Welch pushed the premise that GE and other corporations should either be No. 1 or No. 2 in their respective industries or abandon them entirely. Welch was instrumental in GE’s adoption of Motorola’s Six Sigma programme for enhancing industrial productivity. He devised a “rank and yank” strategy for dealing with underperforming employees and managers. He made unambiguous cutbacks from the workforce based on their rankings versus other employees and divisions.
At the same time, Welch trimmed the fat off what had been a nine-level management structure. Welch also tried to establish a relaxed culture at GE, as if it were a small company (rather than the combined corporation it became during his tenure). Because Welch believed that high-performing managers could turn around practically any business, GE tried everything from television to synthetic diamonds. Ironically, this resulted in an expansionary phase, re-establishing GE as a conglomerate by nature—albeit one that he was more governed aggressively.
The Jack Welch Legacy-Six Sigma
In retirement, Welch remained active as a writer and public speaker, authoring the biography Winning in 2005.
He became a member of a business roundtable founded by former President Donald Trump to provide strategic economic advice.
The company’s destiny has tainted Welch’s legacy since his departure. Welch left GE just as the dot-com bubble crashed, causing some of the company’s developing business lines to suffer. In addition, Jeff Immelt, his successor, was compelled to depart several businesses perceived as detracting from GE’s primary earning sources.
As GE’s financial operations got impacted by the 2007-08 Financial Crisis, Immelt presided over a decrease in GE stock.
The approach that Jack Welch left behind effectively extracted money from large corporations. However, it left GE ill-equipped to withstand external shocks and develop new companies and innovations that would propel the corporation forward. In short, GE’s success was mainly due to exceptional timing, which was challenging to maintain over time.
More crucially, Welch was likely the first CEO whose performance was judged primarily by his company’s stock performance. While this perspective on organisations is typically positive, it has led to managers focusing on short-term results. Unfortunately, when pursued to its logical conclusion, this short-term performance concentration can damage a company’s long-term viability.
Jack Welch Six Sigma-Changes
When Welch took over as CEO of GE, he made significant modifications to the company’s operations. The Welch formula “was a striking change from the management style at large firms until the 1970s, with cadres of middle managers and extensive planning departments” according to the New York Times.
Many of Welch’s business decisions got influenced by Japanese business practices. Early on, he noticed how businesses on the island nation became powerhouses by implementing more efficient and productive methods. Using Lean and Six Sigma approaches proved that continual process improvement has become a guiding principle.
Welch wished for a “business replete with self-assured entrepreneurs who would face reality every day,” according to his book. He began by implementing managerial adjustments such as:
The bureaucracy that isn’t needed is of no use.
The company’s business is becoming more international.
To meet rising client demand, the company is expanding its financial services.
GE is exiting manufacturing businesses where it could no longer compete with the Japanese, such as televisions and small appliances.
According to the New York Times, he was also famed for his one-sentence pieces of advice. For example, “If you don’t take command of your destiny, someone else will”, “Be honest with everyone”, “Bureaucrats must be mocked and dismissed”, and “The world will pass us by if we wait for the perfect response.”
Jack Welch Six Sigma Implementation
Welch’s success attributes to the fast-paced business environment of the 1980s, yet he didn’t embrace Six Sigma until 1995. According to the Financial Post, numerous firms followed General Electric’s lead in instituting Six Sigma quality standards after witnessing its success.
General Electric reported a savings of $12 billion after five years of using Six Sigma.
Welch spearheaded some measures, including Six Sigma training for managers and forcing them to complete a Six Sigma project. DMAIC, a Six Sigma methodology for evaluating a process, identifying areas where it produced the mistakes, and developing long-term solutions, was one of the topics covered throughout the course. Define, measure, analyse, improve, and control are the letters that make up the acronym.
At General Electric, Master Black Belts got introduced to train key employees to become Black Belts.
In His Own Words – Welch
Welch highlighted a “Six Sigma company” characteristic in an interview.
“A Six Sigma firm is one whose management understands that variation is wicked and that delivering when clients want it, exactly what they want it is the winning game,” Welch said.
He claims that Six Sigma organizations prioritize client needs and then streamline services to suit those needs as efficiently as possible. He stated, “Getting outside your internal attention to your outward concentration to entrenched in your bones. And you’ll think about everything you do internally through the lens of “How will this affect a customer?”
Welch also stated that an organisation’s grasp of Six Sigma must be “deep and broad.”
For some, Welch is still a divisive figure. Yet, despite several of Welch’s management concepts outside of Six Sigma having fallen out of favor, they cannot dispute his success. Welch “was the ideal guy for the time,” according to John A. Byrne, who co-authored Welch’s biography. He moved like a tornado. And he adored business – the thrill of a rivalry, the joy of victory, and the drama of it all. So, he focused on his business.”