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Why is the Six-Sigma Management Model Still Praised When It Led to GE’s Collapse?

A recipe for disaster

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. (In fairness, the Financial Times in the UK did recently run a piece pointing out that Six Sigma really was a disaster at GE. As the FT puts it, "GE says on its website that Six Sigma is now a part of its culture. It is hard to see, then, how a $15-billion liability went unnoticed for so long.")

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.

story | by Dr. Radut