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H. James Harrington

Six Sigma

Are Quality Methodologies All Smoke and Mirrors? Part One

Can we blame quality programs for GM’s demise?

Published: Monday, August 3, 2009 - 02:00

World War III has begun. This time it’s not a war of battleships, bullets and bombs—this is an economic war. The weapons are televisions, steel, cars, and clothes. This is a war where we have no allies. Every nation is out to capture more of its share of the U.S. and world’s market. We are being attacked with tires from Brazil, cars from Japan, radios from Taiwan, clothes from China, cosmetics from France, shoes from Italy, and beef from Argentina and Australia.

Businesses in the United States entered the 1980s with a deep-seated resolution to stop the flood of import products and as a result, a group of “new admirals and generals” took over to reestablish our industrial leadership. These were people such as John Akers of IBM, F. James McDonald of General Motors Corp. (GM), Jim Olson of AT&T, and John Young of Hewlett-Packard. Industrial leaders like these laid out strategies to thrust the United States back to the prominence it once had. But it takes years to reestablish a reputation once it has been destroyed or at least tarnished.

General Motors—one of the most powerful and respected organizations—is now in bankruptcy. Why did this happen? What did they try to do that didn’t work? To help understand this, I will report on an interview I had in 1988 with GM’s corporate president, F. James McDonald, which was documented in my book, The Quality/Profit Connection (American Society for Quality Control, 1989).

General Motors celebrated its 100th anniversary on September 16, 2008. It was on this date in 1909 that William C. Durant founded. General Motors Co, predecessor of the current GM. The first motor company acquired by Durant was the Buick Motor Co.

In 1988, GM had 151 facilities operating throughout the United States, in 26 states and 90 cities; in Canada, there were 13 GM plants. It had assembly, manufacturing, distribution, sales, or warehousing operations in 37 other countries. GM also had equity interest in associated companies, which conducted assembly, manufacturing, or distribution in several countries. The average worldwide employment totaled approximately 748,000 men and women in 1984.

Following is an excerpt from my interview with F. James McDonald, president of GM from 1981 to 1987.

H. James Harrington: What were the circumstances leading to the current focus of GM on quality improvement?

F. James McDonald: Efficient, small, high-quality vehicles from Japan, and the availability of these vehicles at just the right time in history were watershed events in the U.S. auto industry. Their perceived quality became the benchmark for all cars—in effect, customer standards changed dramatically. And that change swept through the entire line of products.

HJH: Do you have an official quality policy?

McDonald: Actually, the new quality consciousness at GM began with the development of a quality ethic for all GM units and operations. The essence of this ethic boils down to this: Quality is the number one operating priority at GM today.

 HJH: To what sections of the business is it being applied?

 McDonald: Quality improvement is being applied to all areas of our business. Specific quality objectives and strategies must be included within each unit’s five-year business plan. All departments within a business, and of course, each employee, contribute to meeting those quality objectives.

On new product programs, resources are allocated very early when our ability to influence the outcome is greatest. This includes the front-loading of people from all disciplines including marketing, product engineering, manufacturing, assembly, quality assurance, financial, and materials management. This includes early sourcing decisions so our suppliers can work with product development teams on potential problems and improvement.

HJH: What activities were undertaken to start the quality improvement process and when did it start?

McDonald: At GM today, we have this kind of strategic vision, and that vision is simply to offer world-class quality in every market segment. By world-class, we mean parity with, or superiority to, the best in the field—product for product.

To assist the operating units in this effort, the corporation has issued four key success factors for quality, which help focus the GM quality ethic and its six mandates. Research has shown that these key success factors must be addressed in business planning and implementation strategies if meaningful quality improvement is to occur.

Let’s take a look at what the key success factors and the associated objectives are.

  • Management commitment. Managers at all levels must be committed to continuous quality improvement and demonstrate their commitment by word or action.
  • People development process. Every employee, regardless of function or level, must have the encouragement, support, and opportunity to be a contributing member of the quality improvement effort.
  • Quality performance processes. Each task and activity must have processes and tools to ensure conformance to specifications and to provide for continuous quality improvement.
  • Customer satisfaction. General Motors must be the world leader in quality, reliability, durability, performance, service, and value, as confirmed by customer-defined measures and marketplace response.

     
We have also identified the major steps to carry out improvements on any given project and have found that they work quite well.

HJH: What is the role of top management in the improvement process?
McDonald: Achieving true quality maturity is totally the responsibility of top management in our company. Others may carry it out to one degree or another, but those at the top must be willing to go the whole route.

We believe that the whole top management team must be aboard. Even the most inspiring leader can’t hope to reach the organization without total commitment from everyone at the top.

HJH: What is the role of the employees and the union in the improvement process?

McDonald: We are absolutely convinced that eventual success depends heavily on the employees. As we discussed, one of our key success factors for quality improvement concerns people-development processes.

For instance, we’ve trained more than 30,000 GM workers in statistical process control techniques. And I must say, to see these tools put to work right on the line is one of the most rewarding experiences I’ve had at GM. So, I think we’re on the right track on the employee side—even though we still have a ways to go.

HJH: What problems did you have in implementing the improvement process?
McDonald: Prevention within manufacturing can take you only so far along the journey. Greater success must come from moving the focus upstream, to design and engineering, for example, by combining the talents of design engineering, processing, and manufacturing, and having them work together as a team instead of individually. That’s the place to start if you’re serious about doing everything right the first time. Our product development teams on new products that we have previously mentioned are addressing this in a fine manner. We are also initiating this concept in our daily operations.

General Motor’s reorganization of its North American passenger cars and its worldwide truck and bus operations addressed changes necessary to ensure quality improvement, accountability for results, and effective allocation of resources. The reorganization was quality-driven from the beginning.

On reviewing McDonald’s comments, I see he was saying all the right things and doing all the right things, but the results have been disastrous for GM investors, employees, suppliers, and the United States.

What do you think went wrong? Are we telling management the wrong things? Is the quality message one that leads an organization into bankruptcy? Give me your thoughts on what went wrong over the past 20 years at GM. You can use the Comments area beneath this article or click the Feedback button.

Next month I will share my conclusions with you in this column with the second part of this article, “Are Quality Methodologies all Smoke and Mirrors? Part 2.”

Discuss

About The Author

H. James Harrington’s picture

H. James Harrington

H. James Harrington is CEO of Harrington Management Systems, which specializes in total quality management (TQM), Six Sigma, lean, strategic planning, business process improvement, design of experiments, executive management mentoring, preparing complete operating manuals, organizational change management, ISO 9000, ISO 14000, and TRIZ. Harrington is a prolific author, having written hundreds of technical reports, magazine articles, and more than 35 books. He has more than 55 years of experience as a quality professional. Harrington is a past president of the American Society for Quality (ASQ) and the International Academy for Quality (IAQ).

Comments

GM, et al

go to: http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2009&month=02 and read the article/commentary by Joseph B. White of the Wall Street Journal, in Hillsdale University's Imprimis newsletter, it gives several reasons on why the automotive industry is in trouble, and some specific reasons as to what went wrong at GM.
As several commenters above have said, they spent more than they earned, which, to any of us means either earn more money or cut expenses (if only Congress would heed that--except they want to increase the income by raising taxes--which in turn means more expenditures, not necesarily balancing inflow and out go).

GM's Pandora's Box

Wow! Reading through all the comments left me wondering how GM remained afloat as long as it did! We might as well throw a few more evils into the box - the Sloan Method of Accounting and Communication. A consulting friend used to go into companies, walk around and then meet back with the excutives. Many times he'd tell them, "What you have is a failure to communicate" and everyone would say "You're right" how did you know that? I suspect he would have used the same line with GM.

All Smoke & Mirrors

One has agree with those people who said bankruptcy is caused by spending more money than you make. That, gentlemen, is clearly obvious but the big question is why did GM spend more money than it made?
Perhaps they did have quality issues which caused people in the US to buy Japanese instead but I wouldn't know about that. In South Africa we don't get many American cars from GM but those from Germany (Opel), Australia (Holden but called Chevrolet) and Korea (Daewoo but called Chevrolet) are available.
These cars are all good and have been very popular here.
My opinion regarding the quality commitment at GM is that they spent too much money on their quality systems. Instead of just working with ISO/TS 16949 they insisted that suppliers also gain accreditation to QSB. This costs suppliers money and, guess who pays that bill!
They also have a huge department to administer their quality system which must cost them a fortune. Toyota on the other hand simply asks supliers to provide a quality product and doesn't hassle about QSB, Q1 or any other standard. If you're accredited to ISO 9001 or TS 16949 they're happy. Put simply, quality doesn't depend on how much money you spend on fancy systems and standards but rather how much commitment you have to getting it right the first time and every time.
Syd, South Africa

Bankruptcy is really about money management not quality!

Greg Watson, Espoo, Finland
I remember reading some time ago that in the decade of the 1980s GM had invested $80 Billion in advanced manufacturing and automation systems in order to improve its productivity. As Jim's interview shows, they also were doing quality. How effectively were they working? It's hard to say as at the end ofthe decade, they hadn't improved their productivity so the "Return on Capital Employed" was "zero!" Quality of management was not the focus at GM - notice the comments about how proud the CEO was that the "workers" were doing SPC! A better question would be what was the quality of management? Not very good is my opinion based on the observation about ROCE for automated manufacturing investments. Quality could correct that problem also, if only management would define quality as something that they must do themselves, not an action that is just to be delegated to the workers. That form of quality is not really TOTAL quality! Thanks for the thought-provoking article! Looking forward to the next installment in this series!

Smoke & Mirrors

The problems that faced/face GM are really two-fold and they stem from the growth of the organization and how the pattern of that growth kept GM from correcting issues along the way.

The first issue was/is with product quality. While the design standards of the vehicles/products was always rigorous, the implementation of those "dreams" for lack of a better term was often short-circuited. It didn't matter if the design of a vehicle should take it to 250,000 miles in terms of life cycle, if you had one poorly executed component that failed every 20,000 miles. The idea that small variations within the product build would be smoothed over in the process became a way of life within the system that was built in GM. The thought that every contribution to a vehicle impacted it's overall performance...was lost. When the turn in terms of quality came for the American auto industry...the approach that had allowed sub-par products to come to market was still rooted not only in the production system, but also in the memory of the consumer.

The second area was in the cost of the dealer and servicing structure that was built. We have seen a very dramatic approach to this recently. Multiple dealers in large metropolitan areas are being eliminated, while small rural dealerships are staying. Why? When many of the urban dealers were established, our infrastructure forced us to deal with very local groups. Today, it makes sense to have larger single-point dealerships serve a single metro area and be able to provide a higher level of technician/parts/service, the ability to get there is available and the vehicle quality is such that you do not need service on "every corner". GM's Dealer franchising agreements made it almost impossible to consoldate. We can't judge what was passed on from an earlier time...we just have to deal with it.

Did GM do all the right things?

Yes, I read Part 1 today. Well done. Of course, I like the reference to John Akers and our other "elders".

You hint about the upstream design considerations in Part 1 before you promise to give us the answers in Part 2. Certain Voice of the Customer beyond "big and impressive" probably would have helped. I am curious that there appears to be more than one way to cut the customer segments for vehicles. Japan builds small cars and they sell. GM and Ford build small cars (with the exception of Focus) and they do not sell. I seriously question that GM and Ford have significantly inferior service records. Some of the best selling Japanese cars are built in the US.

My bias looks at cost per vehicle and what the "profit" is used for within the organization. What percentage of the price of a car goes into new design and research? What percentage goes into infrastructure and technology? What percentage into labor, general benefits, pension, executive salaries versus employee salaries, what percentage goes into the overhead of labor relations? I have not done these comparisons. I am certain they have been looked at ad nauseum by others in the industry.

Your intelligence and discipline will ferret out the root cause. I have no doubt. My concern comes with knowing that many who could make a difference in the industry and in the government may not be interested in hearing the global systems view you have to offer.

Of Quality Methodologies' True Smoke & Mirrors: Implementation

Most Schools don't have a "Quality" degree program. You have electrical, mechanical, industrial, etc...
Every quality engineer or supervisor "moved" in to quality from some other area. This "quality afterthought" is persistent through out every company I've worked for, including General Motors. General Motors was great as a new college grad for me, until I began to realize that there was no long-term commitment to really improve, mainly because the acknowledgement of competition in the marketplace was slow, and the internal divisions between the management, employees and union are too wide. As Quality Methodologies are a tool to become competitive and to resolve these divisions, GM's downfall is simply implementation. Everyone knows there is a certain period before any initiative loses steam; most people just wait them out. Union workers, supervisors, mid-level managers, all place side-bets on when this one--"the next big idea"-- will go by the wayside. Even those who understand the tools, who know what benefit these tools could bring, must internalize their passion or fall prey to the condemnation of their peers. These are the most valiant of the quality professionals: My friend Sal, a 20 year veteran, when I had only 2, would pull his id badge which was attached to a retractable lanyard similar to the pull string of an old talking doll and say " I love my job" with all the hollowness that told me I would not last. I quit within the next couple of years.

GM article

While poor quality was a significant factor to GM's decline, the actual death blow was management's agreement with the UAW on contractual obligations.
Some blame the UAW for GM's demise, but GM management signed off on every single benefit the UAW rec'd. The management had a fear of a strike's consequences.
Had GM allowed UAW to strike and stay out until the resulting contract was sustainable, GM would still be viable.
In a strike management always has the upper hand, but GM would not play the hand they held. And now it's too late.
The new Gen.Motors Company will be managed by the same batch of insiders that managed the now defunct corp. Why would we expect different results?

GM situation...

It seems to me that every opinion has part of the truth, or at least is the effect of the root cause. I have read the articles of both, David Schwinn and Mike Micklewright, on their GM experience, as well as the experience of some other insiders, and I have concluded what is obvious to me, human nature is present at GM as it is present in every company that struggles and starts a quality program: they had to move out of their comfort zone, and they didn't.

In spite of the words of former or current CEO's, the way of doing business at GM is the only way they know and they don't have the leader to motivate and make execute the necessary changes. That is exactly what happens on every company that sets about a new quality strategy. I have seen some companies that begins their quality program with their certificate in mind, and that is the only purpose behind their effort. Other companies seriously try to improve their operation, but their management expects that the strategy "works the miracle" alone, and they move everything wishing the status remains. Of course, the results also remain.

I followed closely the Ross Perot affair at GM, starting with the acquisition of EDS by GM. What surprised me was the decision of Roger Smith to bring Ross Perot into the Board Room. It was an announced crash with the only possible finale, the removal of Perot, after his big mouth declarations critizising the GM way of doing things. Originally, inside the board room, later, outside the board room and, finally, outside GM. Since then, I have been waiting for what already happened to this glorious automotive company.

GM - Those were the days....

It appears that Major Leage Baseball purchased the GM book on how to operate a business.

1) Submit to a Out of Control Bargaining Unit

2) Use Antiquated Management Practices

3) Have a Work Force who feels they walk on water

4) Supply a crap product and

5) Force your customer to look else where

Are Quality Methodologies All Smoke & Mirrors?

I worked at GM in the 1980s and I have since worked for several automotive suppliers. I saw no and still see no quality practiced in the facilities. They make numbers (fraud) to present to customers and the customers do not check the veracity of those numbers. I have not met a quality manager or so-called quality engineers who understand the theory behind the numbers. Many cannot even tell you what a standard deviation means. The companies MUST get an educated workforce if they want to use statistical methods effectively and successfully.

Quality at GM

I see nothing wrong with the current quality of most GM models myself. Yes Toyota and Honda are dependable cars, but so are GM's cars. Any of auto maker can always stand to improve, but that is beside the point. If you say quality bankrupted GM, I'd say it had nothing to do with it. Chrysler and probably Ford would have gone years before GM if this was the case.

Bottom line #1 for bankruptcy, you spent more than you earned. Once again, you spent MORE than you EARNED. You see this all the time. Good quality brand names go out of business all the time, while the lesser quality name stays in business. What is in common with all of these? Value? Market? Quality? Safety? They all played a role, but the dominant factor is a net loss in profit.

The problem is not the

The problem is not the message it is the fact that manufacturing no longer matters in this country. While the folks at GM said all the right things (I was there at the time, GMAD Tarrytown) they did not walk the walk, and most manufacturers still don't. Why concentrate on cheaper, better, faster here when I can get it overseas now and satisfy the god of the next quarter. The corporate talking heads have no love for manufacturing, it is a means to an end, money. If that means can be found somewhere else, China, Vietnam, whereever, so be it.

Smoke, no mirrors necessary

I have a couple of observations. The first relates to the overall approach to quality and how the financial piece may not be a part of the equation, unless an organization is working toward Baldrige criteria or something similar. All the right ingredients might be there, but if profits are mis-managed or poor resource decision continue to be made, all the quality in the world can't pull the organization up from this type of nose dive. Secondly, one thing stood out as I read the management commitment portion of the interview. It appears an option was extended to managers at all levels of demonstrating commitment by "word or action". Is it possible that by replacing single a word ("or" with "and") we could have seen a different outcome?

General Motors

Hi Jim,

It is nice to see that you are still active. We moved to our lake home three years ago and most of my work is volunteer activity although I am doing a seminar this week in the Twin Cities.

You asked for comments on the demise of General Motors. I have done work with auto manufacturers on three continents. The best one is the Fiat plant in Poland. They not only are the largest Fiat plant but also produce cars for Ford and do work for GM's power train division. As a user, I would say the biggest problem of GM is the image they developed over the years of poor quality and reliability. I used to keep an index card in new US cars that I bought so I would not forget any problems when I took it back to the dealer. Then when I switched to foreign cars I found I did not have to keep such a list because I experience no problems.

But my observations as a consultant revealed a larger problem and that is redundancy in management positions that made it difficult to execute direction or communicate both up and down. At the time I was working with both, Wal-Mart and GM had about the same number of employees. Wal-Mart had four levels of management and GM had eighteen. Wal-Mart could and did make decisions in real time because they were not shielded from the work by layers of management.

As always, I am full of opinions.

Lou

Layered Management

Great observation Mr. Schultz. I have a question for you. Do you foresee this problem getting better or worse? I have been with the same company for over 15 years and have seen my share of top management come and go. Each with their own management style. To often I've experienced mixed messages coming from management because ones style conflicts with the other. (Not that the management is bad, in fact it's quite opposite.)
Have you ever experienced "TQM" (Total Quality Management)? The company I'm with now implemented this philosophy and it seems to stress the distribution of responsibility from top management down to the employee doing the grunt work. I wonder if this approach will help. I guess time will tell.
Paul

Why GM failed

As you said, they were doing the right things, I think two things doomed them to failure. One, they were just too late in making changes. Japanese companies had been making improvements for a long time and GM, while improving, was just too far behind to keep up. The other is the entrenched culture they had to overcome. They were trying to turn a battleship and just couldn't get it done before running it aground.

Why did GM Fail

Loved the article and will look for the book.
Why did GM fail, I can look back at the time when the big push for ISO was started. This was the best idea that could have happened, however focus in my opinion was placed to heavily on the Suppliers to the big three and not on their own facilities. From my perspective, however valid or invalid it may be, the ISO push should have been more focused on first qualifying the big three facilities and ensuring that there was more standardization and less consessions. Then emphisis could have been placed on the suppliers with a lot less confusion then was experienced before TS 16949 (not that this suppliment cured all). I still see huge inconsistancies throughout the Automotive Industries approach on ISO and its numerous spin-offs. These inconsistancies are the hidden gremlins in any quality system that can silently cause abnormalities leading to increased cost of doing business for themselves and for their many tiered suppliers. I guess I'm preaching the keep everyone on the same page approach becuse I feel that our industry has lost it's book mark, not just GM.
Paul

Bankruptcy of GM

It seems to me that the root cause of the failure of GM is the lack of teamwork between Union and Management. Look to the Japanese for examples of success. Their culture prefers that competing teams end their games in a tie. They want the same for all. We in America compete to beat the other guy even if they are on the same team (company). Selfishness is at the core. It is a cultural thing.
Also, the Japanese quality revolution came from the floor of the factories. Are our managers really listening to what is said from the factory floor? Are they asking for advice and valuing it? Why do the workers not feel empowered to question the wisdom of the management? Because the management does not value or trust the workers. Quality is a culture! If we are not converted to believing in quality and empowered to contribute to our companies we will not succeed. Our culture of self is our biggest enemy. Evidence of this is the number of lawyers we have (suing to get our way or to take advantage of others) and the large difference in pay - worker to executive. This divides us. It does not unite us. This must change (as it I'm sure has in many industries).

What went wrong with GM.

What went wrong with GM is the exact same thing that went wrong with every other business that has failed. They spent more money than they were making! When the economy was good, GM built new factories to keep up with the market. This investment costed them money. Perhaps they borrowed money to invest in the business for it. At any rate, when the economy sank, and the sales dropped, GM had too many factories for the income that was made on the sales they had. Not quality. Market.

Quality plays some effect in the success of a busineesm, however the bottom line is proift equals income minus expense. It doesn't matter what the quality of the product is as long as that simple equation is satisfied. You can have the best quality of a product in a world hands down, and if it doesn't have "value" where the consumer can purchase it at a reasonable amount, it's not going to make the profit equation add up. Pure and simple economics. You have to make more than you spend. If not, you are destined to fail as a company, as a nation, and as an individual. It may take some time, but what goes up will come down.

GM - what went wrong

I lived in California and there was no cable, bus, or even decent cab service in my area. If your car went down you were dead in the water. Toyota and Honda came in and established themselves in 1980 with small efficient well implemented cars. A Tercel manual cost about $3900 and and an automatic cost $6100 in 1981. A Honda Civic in 1980 cost $5600. Both vehicles looked good, ran well, were durable and got good mileage.
By 1988 Honda and Toyota were established as the two best carmakers.
When my Tercel after 130,000 miles started to become unreliable I never considered an American car. I went and brought a Camry. Toyota technology was as good as GM's and their cost and implementation was much better.
Had GM technology been superior in 1981 I might have brought a Tercel anyway since I was poor but as soon as I could have afforded American I would have moved up. But by 1988 Toyota had established itself as the superior choice - anyone who brought other than Japanese was either a hotrod enthusiast (Mustang or Camaro), rich (BMW or Mercedes) or stupid.
GM never realized that they were in a hole and had to climb out - they didn't need to match Toyota they had to best them and they needed government help. By the time they got it - the Clinton administration - it was too late - Toyota had the best technology, best implementation, and the best style and performance. They never caught up and passed Toyota in any of the major attractors - technology, performance, mileage, style, price.