HBR and Process Improvement Culture
- November 12, 2010
- 1 Comments
The Harvard Business Review recently covered Process Improvement, and considers the question of why it is so hard for companies to maintain their process improvement culture after a prominent leader departs. The primary example is Allied Signal and Larry Bossidy:
Consider the story of Allied Signal. Under Larry Bossidy, Allied Signal was a “poster child” of process improvement success following the “Six Sigma” approach — enjoying consistent growth in earnings and cash flow from 1991 to 1999, highlighted by 31 consecutive quarters of earnings-per-share growth of 13% or more, and tripled operating margins to almost 15 percent. Bossidy wrote a best-selling book, called Execution, about his approach. Yet when Allied Signal merged with Honeywell in 1999 and Bossidy departed in 2000 and was replaced by Mike Bonsignore, they dropped their Six Sigma attention while focusing on a GE-Honeywell deal. According to market analyst Cliff Ransom, “It took about 18 months for a Six Sigma culture to essentially disappear when the wrong successor to Larry Bossidy took the reins.”
This is a cautionary tale to me about the problem with doing process improvement only as a human endeavor. We need technology to support our process improvement efforts, to sustain the improvements we’ve made when people retire or turnover or move on to other opportunities. As the author states:
As the Allied Signal and Wiremold stories demonstrate, there are significant potential business benefits from adopting a process improvement program, yet despite these apparent benefits, they weren’t enough to build process improvement into Allied Signal’s or Wiremold’s DNA. What are the factors that get in the way of continuous improvement?
I remember reading about Allied Signal and GE in the 90’s, and reading about how much they focused on Six Sigma and process improvement generally. There are clearly benefits – but there are challenges in making these things part of a company’s DNA rather than just a yearly objective or review element. To me, this is a bit like the difference between making customer satisfaction a yearly goal (you know who you are), versus making it a core tenet of the company itself (Zappos). In a bigger organization, obviously a key element of this is to make sure your lieutenants are not just paying lip service to process improvement and customer satisfaction, but actually believe in it. It also means making sure that you have local leadership that believes in process improvement – and will do it even without the support of upper management. Finally, you have to put systems in place to support process improvement efforts – these systems act as a bit of grease on the wheels of process improvement budgeting and planning cycles.