From Chainsaw Al to Six Sigma
by Shel Horowitz
How do you go from "Chainsaw Al" Dunlap as your CEO, standing in the rubble of slashed companies, to a corporate culture that values quality and customer service almost above all else? According to Rob Lindner of Sunbeam, embracing the idea of Six Sigma made all the difference.
Sigma is a measurement of the standard deviation in manufacturing processes: how much variability your organization tolerates. Sigma scores how much your products fall within customer requirements. And each number represents an exponential increase in defect prevention and standardization; going from three sigma to four sigma is an eleven-fold improvement&emdash;from four to five, 27 times, and from five to six, 97 times.
What does this translate to in real numbers? If the entire country was at four sigma, there would be 20,000 lost pieces of mail per month, unsafe drinking water for 15 minutes a day, and power outages for seven hours every month. Six sigma means "3.4 defects in a million opportunities." In some industries, even six sigma isn't enough; in the airline world, deaths per passenger mile are at seven sigma.
In perhaps the most rapid-fire delivery in the history of the Family Business Center, Lindner described the company's evolution.
Al Dunlap rolled up most of the significant small appliance companies in the country, including popular brands like Sunbeam, Mr. Coffee, Oster, and Coleman. "He was firing everyone, made no plans to transition. By the time he got fired in 1998, things were a mess." The company entered Chapter 11 bankruptcy in February 2001, but emerged in December 2002 with $2 billion in revenue, and manageable debt.
Dunlap cut corners in manufacturing, and high warranty claims resulted&emdash;including the need to replace a few countertops after coffeemakers overflowed. Under current CEO Jerry Levin, the company started to "fix the mess."
Six Sigma has delivered 1000% ROI to Sunbeam, and 400% to General Electric. By continuously improving every area&emdash;even the flow of internal memos&emdash;it helped these companies increase customer satisfaction, build employee morale and team skills, decrease warranty claims, and lower waste and associated costs.
Many of the improvements turned out to be surprisingly easy. "Cost of poor quality is the biggest place to improve." And up to 40% of revenues may be saved by trimming hidden waste. GE "took so many defects out of their other plants and created free capacity" that the company saved $400 million it had budgeted for a new plant in their plastics business.
Lindner suggested that companies ask themselves questions that will start them on the road to six sigma defect levels. For example:
- What does a defect in a work process&emdash;or a misrouted phone call, or misinformation given to a client&emdash;cost your company?
- Are some things higher impact than others; do we take the time to do the prioritization?
- Would an approach that drives consistently correct decisions be valuable in the company?
Leadership skills are a big part of the success. Lindner noted the importance of celebrating success. "Create buzz. Run your victories up the flagpole…become a passionate lunatic" who inspires others and empowers them to act without permission. He also talked about "dialing leadership bandwidth up or down," looking at the traits that surfaced during a meeting, and adjusting managers' behavior to encourage an emotionally healthy workplace environment.
And ultimately, people have to make their own decisions, even if you feel they're wrong. With FBC sponsor Rick Giombetti asking questions after his formal presentation, Lindner observed, "We have a plant manager who's way behind on cost savings. If we have to close that plant in a few years, it will be because he didn't follow through on his cost saving commitment."