FacebookTwitterGoogle+RedditEmail

A Recipe for Disaster

Over a generation ago, engineer Bill Smith, working at Motorola, developed a management system called Six-Sigma, designed to help companies avoid quality problems in their products and business processes. His system caught morphed into a general theory of management, and became a catch-word and marketing goldmine at business schools as well as requirement for promotion at large corporations.

In 1995, Jack Welsh, CEO of GE, made Six Sigma central to his company’s whole management approach. If you wanted to be promoted at that leading Fortune 100 industrial firm, you needed to be certified in Six Sigma. Other companies followed suit and today most large US corporations and many abroad, as well as some public organizations (including the US military), claim to adhere to the model, and to promote management personnel based upon their having achieved so-called “black belt” or “green belt” status in understanding its precepts.

Indeed, GE’s success in growing rapidly and achieving record profits year after year made Welsh and Six Sigma (a trademarked term owned by Motorola) a leading model for top-level managers everywhere.

Jump forward, though, and GE is now being called an epic management disaster by analysts. The company, with Welsh at the helm, famously expanded into banking and financial services, got caught with its corporate pants down in the Fiscal Crisis and Great Recession that hit in 2007, and is now going through a wrenching divestment and break-up process that has seen its stock price fall from a high of $87 a share in August of 2000, when everything seemed to be humming along nicely, to today’s low of $12.88, a level that valued the company at 50% of what it had been worth just a year ago. Last week, in a final indignity, the company, which had been one of the original Dow Industrial Average listings when that index was created back in 1896, was kicked off that widely followed list of Wall Street’s largest and most important firms, embarrassingly replaced by the pharmacy chain Walgreens.

Welsh is long gone at this point, and GE is several CEOs removed from his long tenure, but he and his Six Sigma team remains the ones who made the disastrous decision to move the company heavily into financial services, de-emphasizing the storied company’s historical industrial focus — a move that was central to the company’s later troubles. Significantly, in retiring from the company, Welsh noted that his performance as a manager would be judged not by what happened to the company under his watch, but by how it did in the decades after his departure.

The answer is now in: disastrously.

The same actually can be said about many of the US companies that adopted Welsh’s vaunted Six Sigma model for strategic management.

The question then, is why nobody in business journalism is questioning Six Sigma.

Clearly to the extent the GE has been a Six Sigma pioneer, a key example of its supposedly wondrous ability to deliver profitability and growth (and avoid mistakes), and its main promoter as a management methodology, the company has become an object lesson in why both Six Sigma and GE’s approach to growth by acquisition and diversification should be viewed with great suspicion.

And yet instead there is just silence.

Welsh is still considered a management icon. The Jack Welsh Management Institute at for-profit Strayer University — a popular destination for wannabe managers seeing an MBA featuring Six Sigma certification — boasts of being one of the top 25 online MBA programs in he country, and B-schools across America still offer the Six-Sigma program.

It makes you wonder.

US politicians of both major parties, and especially Republicans, are quick to say that government agencies should be run more “like a business.” The Trump administration has taken that even further, putting actual businesspeople in charge of many of the government’s key departments and agencies. Are these department secretaries and agency heads going to be applying the discredited GE Six-Sigma model to the government operations they direct?

Let’s hope not.

Then again, looking at the withered husk of GE, perhaps, for those who would like to see government, or at least parts of it, shrink, it might be a good thing.

It sure would be great if the Department of Defense, the National Security Agency, the CIA, the DEA, the FBI, the Department of Homeland Security, the Bureau of Land Mangement and the Commerce Department, at least, could get the GE treatment.

More articles by:

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

Weekend Edition
November 16, 2018
Friday - Sunday
Jonah Raskin
A California Jew in a Time of Anti-Semitism
Andrew Levine
Whither the Melting Pot?
Joshua Frank
Climate Change and Wildfires: The New Western Travesty
Nick Pemberton
The Revolution’s Here, Please Excuse Me While I Laugh
T.J. Coles
Israel Cannot Use Violent Self-Defense While Occupying Gaza
Rob Urie
Nuclear Weapons are a Nightmare Made in America
Paul Street
Barack von Obamenburg, Herr Donald, and Big Capitalist Hypocrisy: On How Fascism Happens
Jeffrey St. Clair
Roaming Charges: Fire is Sweeping Our Very Streets Today
Aidan O'Brien
Ireland’s New President, Other European Fools and the Abyss 
Pete Dolack
“Winners” in Amazon Sweepstakes Sure to be the Losers
Richard Eskow
Amazon, Go Home! Billions for Working People, But Not One Cent For Tribute
Ramzy Baroud
In Breach of Human Rights, Netanyahu Supports the Death Penalty against Palestinians
Brian Terrell
Ending the War in Yemen- Congressional Resolution is Not Enough!
John Laforge
Woolsey Fire Burns Toxic Santa Susana Reactor Site
Ralph Nader
The War Over Words: Republicans Easily Defeat the Democrats
M. G. Piety
Reading Plato in the Time of the Oligarchs
Rafael Correa
Ecuador’s Soft Coup and Political Persecution
Brian Cloughley
Aid Projects Can Work, But Not “Head-Smacking Stupid Ones”
David Swanson
A Tale of Two Marines
Robert Fantina
Democrats and the Mid-Term Elections
Joseph Flatley
The Fascist Creep: How Conspiracy Theories and an Unhinged President Created an Anti-Semitic Terrorist
Joseph Natoli
Twitter: Fast Track to the Id
William Hawes
Baselines for Activism: Brecht’s Stance, the New Science, and Planting Seeds
Bob Wing
Toward Racial Justice and a Third Reconstruction
Ron Jacobs
Hunter S. Thompson: Chronicling the Republic’s Fall
Oscar Gonzalez
Stan Lee and a Barrio Kid
Jack Rasmus
Election 2018 and the Unraveling of America
Sam Pizzigati
The Democrats Won Big, But Will They Go Bold?
Yves Engler
Canada and Saudi Arabia: Friends or Enemies?
Cesar Chelala
Can El Paso be a Model for Healing?
Mike Ferner
The Tragically Misnamed Paris Peace Conference
Barry Lando
Trump’s Enablers: Appalling Parallels
Ariel Dorfman
The Boy Who Taught Me About War and Peace
Binoy Kampmark
The Disgruntled Former Prime Minister
Faisal Khan
Is Dubai Really a Destination of Choice?
Arnold August
The Importance of Néstor García Iturbe, Cuban Intellectual
James Munson
An Indecisive War To End All Wars, I Mean the Midterm Elections
Nyla Ali Khan
Women as Repositories of Communal Values and Cultural Traditions
Dan Bacher
Judge Orders Moratorium on Offshore Fracking in Federal Waters off California
Christopher Brauchli
When Depravity Wins
Robby Sherwin
Here’s an Idea
Susan Block
Cucks, Cuckolding and Campaign Management
Louis Proyect
The Mafia and the Class Struggle (Part Two)
David Yearsley
Smoke on the Water: Jazz in San Francisco
Elliot Sperber
All of Those Bezos
FacebookTwitterGoogle+RedditEmail