The Days at ABB
After nine years at Motorola, Dr. Harry felt his contribution of ideas and methods had
been well documented, dispersed and applied. Owing to this, he was ready for another challenge. Six Sigma had taken on a life of its own at the giant electronics and communications manufacturer, and there were other territories to conquer. Therefore, with the blessing and continued support of Bob Galvin, he left Motorola in 1993 to take up a position as corporate vice president for quality systems deployment at Asea Brown Boveri (ABB), the European engineering and technology conglomerate.
Although it fluctuates, ABB holds about 1,000 companies in more than 140 countries. Fast moving, with an unusually decentralized matrix management system, the firm is mainly involved in power generation, transmission and distribution; industrial and building-system manufacturing; and rail transport through a 50 percent joint venture with Daimler-Benz. ABB also operates a unit that provides financing, insurance, investment management and other services. The firm invests heavily in emerging countries such as China, where infrastructure and power-plant construction are on the rise.
Making the Transition
In making the move from Motorola to ABB, Dr. Harry teamed up with Mr. Richard Schroeder, now his partner in the Six Sigma Academy. Dr. Harry knew Schroeder from his days at Motorola, as ABB was one of the companies that participated in the Six Sigma Research Institute. The two men had spent hours plotting about how to leverage Six Sigma in their respective companies, and the time was right to combine their respective skills. Dr. Harry was a technical expert, and Schroeder was a highly knowledgeable quality executive. Together, they collated their previous lessons learned, built upon their successes and began to further extend the reach of Six Sigma in terms of business performance through quality improvement.
Their pursuit of excellence was motivated by a very simple belief - if a quality improvement of some practical form is realized, then we should see a direct economic benefit, not far off in the future, but at the close of each business day. This idea was again driven home to Harry by Kjell Magnusson, who was one of ABB's business unit presidents at the time and who later became the company's first Six Sigma Champion. "You know we Swedes are a simple people, but we are not as simple as you think," he said. "We're simpler." Magnusson's point was that the complexity of quality systems made them largely irrelevant in the eyes of high-level executives who were focused only on clear, quantifiable business gains.
Although Motorola positioned its Six Sigma drive as a quality initiative, Dr. Harry was more than impressed with its financial yield. If quality- and defect-focused Six Sigma efforts could significantly reduce operating costs, then why couldn't projects be formalized and focused on improving the total cost structure? (not to mention other forms of business concern, such as capacity and growth). As we know, defective products are only one source of unnecessary cost in a corporation; there are many other sources of fixed and variable costs that can be significantly reduced by applying the Breakthrough Strategy and its associated tools.
For example, there are unnecessary costs associated with faulty or less-than-optimal designs. Excessive costs are incurred when extra time and effort is expended in the delivery of a service. In manufacturing, a Six Sigma project might be focused on improving capacity in a high-demand environment, in which case there is no stubborn problem to solve or pervasive defect to fix. There are many, many opportunities to improve productivity and decrease cost in the context of a Six Sigma initiative.
Dr. Harry recognized that Motorola was focused very much on the business of improving quality, and the company was rewarded for doing so. But as he dialogued with Schroeder and Magnusson, it became crystal clear that Six Sigma should be refocused to highlight its power for driving financial results. Quality is great, but at the end of the day profits are what keep you in business.
The walk-away for Dr. Harry was that money captures the attention of top management. Make that the goal and all else will follow. Therefore, go hammer incessantly on your costs until you get them to a point at which the only way to lower them more is to improve your core quality. This is the business, not the quality, point of view, and it is the thinking that fueled the minds and motivation of Dr. Harry, Schroeder and Magnusson as they installed Six Sigma in ABB's transformer business.
Show me the money. Dr. Harry remembers making his first presentation to a group of senior ABB executives in Europe. He was prepared, with an inch full of overhead slides under his arm, to explain the power of Six Sigma from a quality and a business perspective. As he walked into the meeting, one of the top brass immediately said, "I see you have a lot of slides there. Just show us the one with the money on it and don't bother showing us the rest."
If that didn't reinforce the supremacy of money, then nothing could. The senior ABB executive wasn't saying that quality improvement or cost avoidance is not important, but he was saying that ABB is in business to make money, today and every day. Therefore, everything a corporation thinks and does should be focused on that end, and every dollar spent should directly translate into a dollar of value - for the customer and the provider.
With this new emphasis on bottom line-results, Six Sigma had a sizeable impact at ABB in the order of a 68 percent reduction in defect levels and a 30 percent reduction in product costs, which led to an $898 million savings/cost reduction each year for two years.(Berquist, 1998) Still, as he was implementing Six Sigma in major corporations, Dr. Harry began to see a key flaw in the way quality was practiced in most organizations.
There were organizations that had good leadership at the top, people with vision and judgment. On the lower levels, there were people using powerful tools and trying to follow the precepts of Six Sigma as they understood them. Taken together, most corporations were filled with very smart and motivated people who did their jobs well and consistently. Yet Dr. Harry knew the financial and business impact of Six Sigma was still sub-optimal. It was not yet living up to its potential as a strategy for corporate change and economic prosperity. More was required, and more could be done.
That, in a sentence, was the line of demarcation between the era of TQM and the era of Six Sigma. In many ways, there was nothing wrong with the precepts and practices of quality during the era of TQM. But they were practiced at such a low level in the organization by tool masters that their potential evaded or simply distracted the executive mind. Caught in the negative wake of Baldrige and the rest, in executive suites TQM was simply relegated into the domain of "good tools for use by quality engineers and other process level technicians."
One could argue, even around the time Dr. Harry and Mr. Schroeder were working for ABB, that in many ways Six Sigma looked and smelled like TQM. This is what Harry realized when he approached ABB's top management with his concepts and tools: he was not helping the perception that Six Sigma was tool-based process improvement intervention instead of a strategy for comprehensive corporate change. Thanks to the ABB experience, Dr. Harry realized that perception had to change.
It was right about this time, therefore, that Dr. Harry began to place much more emphasis on the strategic and tactical aspects of Six Sigma versus its tool aspects. Once he and Schroeder realized the importance of this thrust, they turned their attention to further developing the Black Belt concept and role - with the view that these people would be business quality leaders, not quality professionals or technicians.
While Black Belts had been employed at Motorola to work defect issues, the next evolutionary step for Six Sigma was to build a hierarchy of skills and positions as extensions of the Black Belt concept. Black Belts would still be the pivotal figures in driving improvements, but now they would be focused on monetary-based projects as well. There would also be master Black Belts (full-time Six Sigma teachers) and Champions (senior managers) who would define financially driven projects and provide the support necessary to realize their aims.
It was clearly a time period in which Six Sigma turned the corner from a process intervention to a corporate strategy. It was also a time when Six Sigma became perceptually and practically disconnected from the business of quality. At this point in his life and career, Dr. Harry began to more clearly see the full implications of what Six Sigma could become. He simply poured his heart and soul into making it as valuable as it could be to the world's top corporations.
Crashing the Board Meeting
Perhaps the tide turned for ABB when Dr. Harry was regional quality VP for the company's hemispheric region called the Americas (North and South America). This particular business region encompassed about one third of the conglomerate's business. While the company had committed itself to Six Sigma in spirit, it was not progressing very well or very quickly, and Dr. Harry knew much more was possible. Besides, he had left Motorola to go on to "bigger and better things" when he took the job at ABB, and he wasn't about to watch his career go backwards. Nor was he willing to allow the idea of Six Sigma to contract rather than expand in value.
With a great sense of urgency, Dr. Harry began to discuss this problem with his friend and colleague, Mr. Rich Schroeder, who was VP of operations for the Americas at the time. It was clear that the executive team was largely giving Six Sigma lip service and secondary status at most in terms of priorities. The big question that Harry and Schroeder discussed was what to do about this problem. Together they decided only something drastic would have the necessary power for moving the leadership team off its padded chair when it came to Six Sigma.
At the time, a man by the name of Gerhard Schulmeyer, formerly a Motorola executive, was running the Americas for ABB, and he had a board meeting planned in the near future. Dr. Harry and Mr. Schroeder decided that would be a good time and place to make their concerns and agenda known, even though they were not board members and were consequentially not invited to the meeting. But that didn't matter, because the board members were in need of a rude awakening, and Dr. Harry and Schroeder were intent on providing it.
They recruited three other director-level Six Sigma players to go crash the board meeting, which would be held somewhere in the Eastern United States. Dr. Harry doesn't remember exactly where the meeting was held, but he does remember what happened the day he showed up. It was himself, Schroeder and only one of the three others they had recruited, as two of the three never made it as agreed. They had lost their bravado at the last minute and decided it would be better if they didn't go, politically speaking.
As it was, the three vigilantes gathered at the doorway of meeting room, which was manned by a security guard. Dr. Harry and Mr. Schroeder approached the guard, showed him their ABB credentials, and let him know that the two of them and one other colleague would be entering the room. "There are two ways we can do this," Dr. Harry said to the guard. "It can get ugly but eventually we will get in, or you can go to the bathroom." The guard opted for the bathroom, and they all marched into the meeting, Schroeder leading the pack.
They went directly to the front of the room, Mr. Schroeder shut off the overhead projector and he announced that they were commandeering the meeting for 30 minutes. He said that, if at the end of 30 minutes the officers didn't like what they heard, and didn't find it to be significantly beneficial for the company, the three would resign. To let them know they were serious, they placed their respective letters of resignation on the meeting table. Schulmeyer was sitting in the back of the room, and he had developed a little smile while Dr. Harry and the rest pulled their little stunt. That was a cue to the other officers that they would indeed allow the 30 minutes. The moment of truth had been designed, and now it was time to deliver it.
Schroeder started by setting the stage, telling them they were there to explain how bad the cost of quality was in the Americas region. He then turned to Dr. Harry and asked him to provide a briefing on the specifics of the situation. That's when Dr. Harry began reciting the facts and benchmarking data from the various plants, and asked how many of the officers present had been to a plant lately. Apparently none had been on a factory floor for years. "Interesting," he said, and proceeded to fill them in on how Six Sigma could make them a heck of a lot of money.
The third person along was a woman who followed Dr. Harry by explaining the state of affairs in the supplier base. Her name evades Dr. Harry, as does the exact details of what she said. He does remember, however, that the three kept hammering on the cost of poor quality and the role of Six Sigma in removing that cost. By the time they were finished, two hours had passed, and each one of the board members had agreed to become personally involved in Six Sigma by agreeing to do a Black Belt project. In this manner, they would experience the power of Six Sigma themselves.
The whole ordeal was a daring, bold and calculated move that promised dramatic consequences, whether that meant supercharging Six Sigma or getting fired. As it turned out, that day marked the turning point for ABB, as well as for the future of Six Sigma. From then on, it was deployed across the whole company, not just in the Americas but worldwide, with a particular focus on the transformer business. Dr. Harry was promoted to corporate VP of quality deployment, while Schroeder eventually left ABB to become corporate VP of operations for AlliedSignal.
To this day, Dr. Harry refers to such leadership as the "shock effect," saying that sometimes you have to take a bold risk and do something radical to make a point, accomplish an agenda or simply keep Six Sigma alive and well.
Commitment, Antics and Tactics
Another leadership role model was ABB's senior Champion, Kjell Magnusson. Soon after ABB began its Six Sigma initiative, Dr. Harry received a phone call from Mr. Magnusson, who said in his Swedish accent "Hello, my name is Kjell Magnusson." A short time before the call, Dr. Harry had requested that the ABB leadership team come up with a very strong executive type to lead the Six Sigma charge. He wanted the very best and would have nothing less. Mr. Magnusson was among the very best at ABB, and he became the chosen one to lead Six Sigma.
Dr. Harry told Mr. Magnusson on the call that it was very nice to meet him, and asked him what his role was in the company. Mr. Magnusson replied, "Yesterday I was a company president and today I am a Six Sigma Champion." From that point forward, Magnusson immersed himself in the Six Sigma methods and tools, learning not just their capabilities but how to use them. He knew he wouldn't be an expert Six Sigma marksman, but he wanted to know how to shoot enough to be dangerous. So he did that, and he became the type who worked side by side with his Black Belts helping them aim and fire at their targets.
Mr. Magnusson and Dr. Harry not only spent countless hours, days, weeks and months together shaping and molding Six Sigma, but they spent time with their Black Belts after training, after hours, even on weekends traveling to their factories with the mission of making them as effective as possible. Mr. Magnusson passionately believed that ABB's transformer business, where Six Sigma began, would become a glowing success. And what do you know, it did. He extracted eight percent from the cost structure in the first year of deployment. And he kept the idea of Six Sigma alive, so much so that he wrote a book on the subject. Dr. Harry says that's the kind of guy he'd like to be back-to-back with in a foxhole - if he had to be in a foxhole. That's the trust and belief a leader engenders among those who cross his path.
Still at ABB, once Dr. Harry saw an ISO 9000 certificate hanging on the wall in the entryway to a factory manager's office in Germany. The benchmarking data at the time showed that this factory was about three sigma, and here was the plant manager proudly displaying the ISO certificate despite his below-average quality. When he spoke with Dr. Harry, it was clear that he was a little defensive about his quality and resistance to Six Sigma.
The manager told Dr. Harry his plant was so good that is was ISO certified, referencing the certificate on the wall outside his office. If my plant is ISO certified, then it must be a quality business, reasoned the manager. The certificate on the wall is a testament to this fact, and to why I don't need to listen to Dr. Harry. About this time, Dr. Harry felt he needed to create a significant emotional event (SEE) that might possess the force to unfreeze the manager's very fixed values and open his mind to a better way.
Dr. Harry said, "Excuse me, I'll be back in a minute." He went outside the man's office where his secretary was sitting and pulled the ISO certificate off the wall, all the while the secretary scolding Dr. Harry in German for what he was doing. Then he walked into the manager's private bathroom and threw the certificate in the toilet, frame and all. That was the end of the meeting and Dr. Harry went to lunch.
Some time later, Dr. Harry was in the same area, and he noticed the nice certificate back where it once was, not even looking tarnished from its recent plunge. Apparently someone had pulled it out of the toilet, cleaned it up and displayed it back on the wall. Instantly, upon seeing it again, Dr. Harry walked over, pulled the certificate off the wall and put it back in the toilet.
This only enraged the plant manager further, and the event, both events, festered in his mind for some time. Surely there was some explanation for Dr. Harry's behavior, as a rational, mature executive doesn't do what Dr. Harry did out of just sheer stupidity. After pondering some time, and getting over his initial anger, the manufacturing manager called Dr. Harry and said he couldn't get the whole event out of his mind. His main question to Dr. Harry was: "What was the point of all your antics?"
You can't use rational thinking to change irrational behavior. That's what was going through Dr. Harry's mind when he sprang into demonstrative mode. He saw the need to unlock the manager's stagnant, fixed perspective about product quality. He saw an opportunity to enact a significant emotional event, deciding it would be best to operate on the emotional side of the fence, not the rational side, with a shocking gesture far removed from the ordinary. The principle is simple: you can apply rational reasoning to reverse a rational action, but you can't apply rational action to reverse an irrational belief. Therefore, fight fire with fire.
We recognize that, while most circumstances don't call for radical action, some do. It is at these times when an effective leader engages in carefully designed confrontation - as that is what the situation requires. In certain circumstances, particularly in those that are dominated by irrational thinking and behavior, a leader has to act swiftly and demonstrably to bring the irrational resistance to Six Sigma to its knees. While the end doesn't justify any means, surely a leader has more latitude in dealing with anti-leaders who close their minds to embracing a better way, especially when the bases for a closed mind is predicated on irrational thinking.
At other times, the leader uses more complicit tactics, such as the time when Dr. Harry met with the head of ABB's union. Like the plant manager, this guy also resisted Six Sigma, but he did so from a union standpoint. Dr. Harry sensed that he was a fair man, and a man who sought to do the best thing no matter what. All he needed, Dr. Harry thought, was some knowledge and some coaching. So he went out of his way to develop a personal relationship with this man out of which grew a pact that Six Sigma would help his constituency of workers.
The deal was this: Six Sigma would produce benefits and rewards for union members, and for the union boss. Jobs would be more secure, even though some would be lost. As it was, the workers were in jeopardy of losing their jobs anyway due to the company's poor performance. What did they have to lose? It was a win-win situation. And after Six Sigma paid off for all involved, Dr. Harry and the union boss would take a Harley Davidson road trip together.
Sometimes you have to exterminate bees with a big bug bomb, and other times you have to attract them with honey. A good leader knows when to flush the certificate down the toilet, and when to form a personal bond with someone who can help him with his cause.
The Technical Face of Leadership
Another aspect of leadership that goes a long way is the ability to drive certain technical insights, especially those that relate to the health of a business or operation. Naturally, we leave process-level leadership to Black Belts, who get help with technical details from statisticians and engineers. But Champions should be capable of leveraging a basic technical skill for better facilitating the identification and selection of improvement opportunities at all organizational levels.
Project Champions surface opportunities at the process level, deployment Champions do so at the operations level and the senior Champion surfaces opportunity at the corporate level.
Also while assisting ABB, Dr. Harry worked with the management team at a transformer plant in Athens, Georgia, USA. The first step he took was to have each of the functional heads at the plant make a presentation on their state of affairs. What do you suppose he heard? Everything was great. In manufacturing, in engineering, in shipping, in accounting - all across the board the business was getting better. Well that begged the question of why business was down. Was there some new type of unknown micro-economic force at play? What was it?
Dr. Harry remained aloof during all the presentations, which were over by lunchtime. Then he asked the comptroller to report the labor variance each week for the past three years. He also asked the quality director to find the defect-per-unit (DMP) data for each week for the past three years. Once he had his data, in real time, he formed a scatter diagram for all to see. The R-squared coefficient was right about -.85, a pretty strong negative correlation. This is to say that 85 percent of the variation in labor variance can be explained by the variation in DPU. In other words, as defects went down, labor variance went up and vice versa (in a highly correlated way).
All the department heads looked at the simple correlation chart (scatter plot) and had a simultaneous epiphany. Their quality was best when they had labor cost overruns. While plant management thought it was steadily improving quality, it was really steadily increasing the number of work hours spent in the hidden factory detecting and fixing defects. They had even promoted the quality manager after having noticed the trend toward better quality over time. Dr. Harry's comment was this: "Great, why don't you promote the quality director again so you can bankrupt what's left of your operation." Following this epiphany, Dr. Harry began to work with the executive staff in a very assertive but positive way so as to get the situation turned around.
One last ABB story was when Dr. Harry and Kjell Magnusson called all the transformer factory managers together from around the world. They conducted a simple statistical study that isolated the impact of certain demographic variables related to factory profitability. Much to their surprise, they discovered that there was an optimal size for a factory, and that bigger wasn't necessarily better.
It just so happens that the climate at ABB at the time was to build mega-factories with the belief that bigger was better. The bigger your factory, the lower your unit cost. But the data showed them something different - something they otherwise couldn't see. And from that point forward, the climate changed. The data did the talking, the leaders did the leading and synergy built between the two.
The leadership moral is that Champions don't necessarily solve problems, but they do root them out and bring them to the surface. They are like problem and opportunity miners. They bring the smelly trash to the surface and force people to realize they are living on a landfill. They knock people off dead center and get them thinking in a new direction, asking a new set of questions. In this sense leaders don't have to be, nor should be, master technicians. They just have to know where to look, how deep to dig and how to make the garbage visible.