Six Sigma at 3M

Beginning at Motorola in 1986 and later enhanced at General Electric, Six Sigma evolved from a statistical concept to a range of metrics, methods, and management approaches intended to reduce defects and increase quality in products and services (Pande, Neuman, and Cavanagh, 2000). It became the new corporate shibboleth in the 1990s after its successful, widespread use at GE. Essentially the approach has two components, one emphasizing metrics and control and the other emphasizing systems design. It has spawned acronyms like DMAIC (define, measure, analyze, improve, and control) and DFSS (design for Six Sigma—by building quality in from the start). GE executives groomed in the Six Sigma way brought the techniques with them when they moved to other corporations. One example was James McNerney, who missed the chance to succeed Jack Welch as GE's CEO but was snapped up by 3M in 2001 to bring some discipline to a legendary enterprise that seemed to be losing its edge. Profit and sales growth had been erratic, and the stock price had languished.

McNerney got people's attention by slashing eight thousand jobs (11 percent of the workforce), putting teeth in the performance review process, and tightening the free-flowing spending spigot. Thousands of 3M workers trained to earn the Six Sigma title of “Black Belt.” These converts pioneered companywide Six Sigma initiatives such as boosting production by reducing variation and eliminating pointless steps in manufacturing. The Black Belts trained rank-and-file employees as “Green Belts,” in charge of local Six Sigma initiatives. The Black Belt elite maintained metrics that tracked both overall and “neighborhood” efforts to systematize and streamline all aspects of work—including research and development.

In the short run, McNerney's strategy paid off. Indicators of productivity improved, costs were trimmed, and the stock price soared. But Six Sigma's standardization began to intrude on 3M's historical emphasis on innovation. Prior to McNerney's arrival, new ideas were accorded almost unlimited time and funding to get started. Fifteen percent of employees' on-the-clock time was devoted to developing groundbreaking products—with little accountability. This approach had given birth to legendary products like Scotch Tape and Post-it notes.

Six Sigma systematized the research and development process. Sketchy, blue-sky projects gave way to scheduled, incremental development. Funds carried an expiration date, and progress through a planned pipeline was measured and charted. Development of new products began to wane. “The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation,” says Vijay Govindarajan, a management professor at Dartmouth. “The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different.” Art Fry, the inventor of the Post-it, agreed: “We all came to the conclusion that there was no way in the world that anything like a Post-it note would ever emerge from this new system” (Hindo, 2007, p. 9).

With the lethargy ended but the damage done, McNerney left 3M in 2005 to become the new CEO at Boeing. Fry observed, “What's remarkable is how fast a culture can be torn apart. [McNerney] didn't kill it, because he wasn't here long enough. But if he had been here much longer, I think he would have.” George Buckley, McNerney's successor, observed in retrospect, “Perhaps one of the mistakes that we made as a company—it's one of the dangers of Six Sigma—is that when you value sameness more than you value creativity, I think you potentially undermine the heart and soul of a company like 3M” (Hindo, 2007, p. 9).

Benner and Tushman (2015) rely on the 3M case to argue that organizations need the capacity to manage paradox in order to foster both incremental and discontinuous innovation. Process improvements like Six Sigma, along with many other management “panaceas,” may make incremental innovation more efficient and reliable but also tend to block break-the-mold innovations. So organizations may become very good at improving existing products or services but fall to more nimble and creative competitors at times of dramatic changes in markets and technology.

Take another example, JC Penney, an American institution where generations of Americans had shopped for almost everything for more than a century. More than a few remember it as “the place your mom dragged you to buy clothes you hated in 1984” (Morran, 2013). By 2011, the firm was treading water, and CEO Myron Ullman retired after seven years at the helm. Ullman's initial years had gone well, but the recession of 2008 hit Penney's middle-income shoppers hard, and the company had been going downhill since.

The board looked for a savior and found him in Ron Johnson, a wunderkind merchant who had worked his magic at two of the most successful retailers in America. He'd made Target hip and led Apple Stores as they became the most profitable retail outlets on the planet. Johnson moved quickly to create a new, trendier JC Penney. His vision went well beyond changing the system of metrics and measurement or making the company more profitable. He wanted to graft an entirely new vision of retail merchandising onto ailing old root stock: “…to analysts and employees, Johnson was Willy Wonka asking [them] to go with him on a trip through his retail imagination” (Macke, 2013).

Wanting to move fast, Johnson skipped market tests and staged rollouts. “No need,” said Johnson, “we didn't test at Apple” (Heisler, 2013). Creative new floor plans divided stores into boutique shops featuring brands like Martha Stewart, Izod, Joe Fresh, and Dockers. Centralized locations provided places for customers to lounge, share a cup of coffee, have their hair done, or grab a quick lunch. Games and other entertainment kept children occupied while customers visited boutique offerings or just “hung out.”

Johnson quickly did away with Penney's traditional coupons, clearance racks and sales events, part of a model that relied on inflating prices, then marking them down to create the illusion of bargains. Johnson replaced all that with everyday “Fair and Square” prices. To Johnson's rational way of thinking, this move made perfect sense. But shopping is more of a ritual than rational undertaking:

JCP's Ron Johnson was…clueless about what makes shopping meaningful for women. It's the thrill of the hunt, not the buying…women love to shop and deals are what make the game worth playing. Bargain hunting is now like playing a game—and finding deeply discounted goods on sale is part of the game (Phillips, quoted in Denning, 2013).

Johnson replaced much of Penney's leadership with executives from other top retailers. Many, like Johnson, lived in California, far from company headquarters in Plano, Texas. They often looked down on the customers and the JC Penney culture they had inherited. One of Johnson's recruits, COO Michael Kramer, another Apple alum, told the Wall Street Journal, “I hated the JC Penney culture. It was pathetic” (Tuttle, 2013). Inside and outside the company, perceptions grew that Johnson and his crew blamed customers rather than themselves as results went from bad to worse. Traditionally, great merchants, like Costco's Jim Sinegal or Walmart's Sam Walton, have loved spending time in their stores, chatting up staff and customers, asking questions, and studying everything to stay in touch with their business. Johnson, on the contrary, gave the impression that he wouldn't shop in one of his own stores and didn't particularly understand the people who did (Tuttle, 2013).

Johnson substituted broadcasts for store visits. He sent out company-wide video updates every 25 days. Staff gathered in training rooms to hear what the CEO had to say and struggled to make sense of the gap between Johnson's rosy reports and the chaos they were experiencing firsthand in the stores. It didn't help that Johnson liked to broadcast from his home in Palo Alto or from the Ritz-Carlton in Dallas, where he stayed during visits to headquarters. Instead of marking milestones in Johnson's turnaround effort, the broadcasts deepened a perception that he was out of touch and self-absorbed.

Johnson's reign at JC Penney lasted 17 months. Customers left, sales plummeted, and losses piled up. A board with few good options sacked Johnson and reappointed Ullman, the man who had left under a cloud less than two years earlier.

The change initiatives at 3M and Penney's reveal a familiar scenario: New CEO introduces new techniques and scores a short-term victory; political pressures and cultural resistance start to mount; CEO leaves to try again; organization licks its wounds and moves both backward and onward. In short, an optimistic beginning, tumultuous middle, and controversial conclusion.

Ford Motor Company: An Atypical Case

In 2006, the Ford Motor Company was chalking up a $13 billion loss and expected to lose even more the following year. Chairman William Ford III reluctantly concluded that his best efforts were no match for the executive infighting and entrenched mind-sets that were dragging the company down. His search for a tougher successor yielded Alan Mulally, the number two executive at Boeing. Mullaly had been passed over for the top job in favor of James McNerney, who had left 3M with mixed reviews. Ford convinced Mulally that Ford could give him what Boeing wouldn't. Mullaly accepted what he knew would be a formidable challenge.

To begin with, deteriorating political dynamics needed attention. First up was the media, who would give the public its first impression of the new Ford chief. Step one was leaked memos from Bill Ford bemoaning the lack of honesty at the top of the company and calling for immediate and dramatic change. Mullaly and his media staff cultivated key news sources and carefully staged the public announcement of his selection to assure that the new show opened to mostly rave reviews.

A second challenge was to make sure employees came aboard for a new direction. On his second day of work Mullaly and Bill Ford led a joint town hall meeting in Detroit that was broadcast to workers around the world. After Ford introduced him, Mullaly said he was honored to be asked to join such a storied organization. Then he opened the floor to questions and gave upbeat but honest answers. Would he bring in a new executive team? No, he said, his team was right there. When the head of a strategic planning group asked if her unit would have a bigger role, he told her no, strategy is a job for “our team,” not a staff group.

Two weeks later, Mullaly sent a frank e-mail message to everyone at Ford that described his “first impressions.” He was upfront about some bad news: Ford's “gut-wrenching” circumstances meant that “some very good and loyal people are going to leave this company” in the months to come. But, he added, he was excited about the many people who were “bursting with ideas” and wanted to share them in e-mails, hallways, or the cafeteria. He ended on an upbeat note: “Everyone loves a comeback story. Let's work together to write the best one ever.”

Two more key constituencies were the board of directors and the Ford family. Mulally tested the same message with both groups: Ford needed to simplify its product line, produce cars that customers wanted, and develop a clear view of the future. Both groups responded enthusiastically, and many of Henry Ford's descendants happily signed their names on a diagram of the family tree that Mulally had brought with him to their first meeting.

Mulally also understood that Ford needed help from the United Automobile Workers (UAW). Both company and union were in a tough spot. Ford's survival depended on negotiating a lower cost structure in its UAW contracts. The autoworkers' leadership knew that Ford was in deep trouble and feared a disaster for its members if the company failed. Top leadership from both company and union held many meetings, at which Mulally promoted his mantra of “profitable growth for all.” His case centered on the fact that Ford was losing money on every car it made in North America. He argued that Ford had only three options: keep losing money and go out of business, move production offshore, or get a union contract that would let them build cars in the United States. The union reluctantly bought the argument, and after many rounds of bargaining and some last-minute high drama, company and union agreed on a deal that enabled Ford to build more cars in America.

Still another critical political challenge was getting the support of Ford's senior executives, including some who had hoped to become CEO. The proud, intensely competitive group of longtime Ford veterans was initially unimpressed with the new chief. To some, Mulally seemed like a smiling, overgrown Boy Scout who lacked the smarts, toughness, and gravitas to run Ford. He apparently didn't even know how to dress, showing up in a dark-suit culture wearing a sport coat and olive pants. Many in the room felt that the auto industry was too tough for Mulally to understand, and Ford's technical officer put it to him directly: “We appreciate you coming here from a company like Boeing, but you've got to realize that this is a very, very capital-intensive business with long product development lead times. The average car is made up of thousands of different parts, and they all have to work together flawlessly.”

“That's really interesting,” Mulally replied, with his usual genial smile and unflappable aura. “The typical passenger jet has four million parts, and if just one of them fails the whole thing can fall out of the sky. So I feel pretty comfortable with this.” This quieted naysayers for the moment, but Mulally knew that much of his team still wondered if he could do the job. Instead of trying to convince them directly, he turned to structural changes to bring clarity and focus to the top team as well as Ford's global operations.

Mulally quickly concluded that Ford needed a major overhaul of a “convoluted management structure riddled with overlapping responsibilities and tangled chains of command.” He implemented what had worked for him at Boeing, a matrix structure that crisscrossed the strong regional organizations with upgraded global functional units (as described in Chapter 4).

Mulally knew that the structure would work only if the top executives came together as a team. He pulled out another structural device he had developed at Boeing: the Business Plan Review (BPR). He replaced dozens of high-level gatherings with one key meeting—same time, same place, every week. Attendance was required, in person or via video hookup, for everyone who reported to him. He put in new rules. In the old days, no one wanted to admit that anything was going wrong, so executives ritualistically came to meetings with thick binders and a bevy of assistants to help them hide problems under a blizzard of details. Executives now had to make their own 5-minute reports, using a standard format, on progress against plan. Mulally asked lots of questions but told them it was okay if someone didn't know an answer. “Because we'll all be here again next week, and I know you'll know by then.” Every item in each report had to be color coded: green for on track, yellow for needs attention, and red for anything that was off plan or behind schedule. “This is the only way I know to operate,” he told them. “We need to have everybody involved. We need to have a plan. And we need to know where we are on the plans.”

The head of Ford's international operations, Mark Schultz, had hoped to be CEO himself and didn't like the new rules. He dug in his heels. At the first BPR meeting, he said he wanted his chief financial officer to report for him. When Mulally told Schultz to do it himself, he tried, but was obviously unprepared. After a few minutes, Mulally had heard enough and tried to cut him off, but it took four tries before Schultz got the hint. After the meeting an angry Schultz told Mulally that he would not be able to attend all the BPR meetings because he had important work to do in Asia. With his usual smile, Mulally told him he didn't have to come to meetings—but couldn't stay on the team if he didn't. Schultz figured he could play by his own rules because his longtime fishing buddy, Bill Ford, would protect him. That was a misjudgment. When Mulally eliminated his job and offered him a smaller one, Schultz retired rather than accept the demotion.

Other executives got the message: Mulally was in charge, and Bill Ford was solidly behind him. As executives began to fall in line, Mulally was able to turn his attention to two pressing human resource issues: talent at the top and morale throughout the company. He respected Ford's executive talent and felt that the company needed continuity rather than massive turnover in the senior leadership. He asked his HR chief to develop retention plans for all key executives. If Mulally heard that one of them was thinking about leaving, he would drop by his or her office to ask directly, “Are you going to stay?” Usually the executive did.

Mulally's major HR challenge was rebuilding the commitment and morale of Ford's workforce in a time of downsizing and dismal business results. At headquarters, he was a master of leading by wandering around. He often skipped the executive dining room to eat in the company cafeteria, standing in line with his tray and chatting up accountants or sales analysts. He popped into meeting where he wasn't expected, asking, “What are you guys talking about?” Lifers who had waited forever for a CEO who would listen started sending e-mails to Mulally. He answered them all and sometimes followed up with a telephone call. One engineer showed up at Mulally's office with a pile of schematics, including drawings for more than a dozen different hood structures. He wanted to show the new chief just how muddled Ford's design and engineering were. The drawings confirmed what Mulally already suspected. He asked if there was a way to reduce the complexity. When the engineer said yes, Mulally put him in charge of the effort.

To reach the thousands of employees beyond Detroit, Mulally traveled to locations around the world, asking questions and reinforcing the message that Ford was coming back. He issued every employee a wallet card that carried the essence of the plan going forward: “One Ford. One Team. One Plan. One Goal.”

Symbolically, Mulally's biggest challenge was to change the perception that Ford was on a path to oblivion because it had become too bloated, bureaucratic, and self-absorbed to understand or adapt to the realities of the twenty-first century. As he sought a more hopeful story about the future, he followed the lead of wise symbolic leaders such as Lou Gerstner at IBM. He looked to the past. Mulally combed Ford's corporate archives, believing that a key to Ford's future was a return to the principles that had make it great in the first place. He hit pay dirt with an ad that Henry Ford had run in 1925 in the Saturday Evening Post (America's most widely read publication at the time). Under a picture of an American family standing atop a grassy knoll next to their Model T, the caption read, “Opening the highways to all mankind.” In the text, Henry Ford outlined his vison: “A wholehearted belief that riding on the people's highways should be within easy reach of all the people.” That ad gave Mulally the touchstone he was looking for. He wrote stream-of-consciousness notes about what needed to happen: pull stakeholders together, form tight relationships with the board and the Ford family, respect the heritage, implement reliable discipline and a business plan, and include everyone. Then he took another sheet of paper and sketched his “Alan Legacy.” Bottom line: “One Ford,” anchored on a glorious past, moving toward a future that replaced chaos and infighting with simplicity, teamwork, and unity—worldwide.

How Frames Can Improve the Odds

Comparing the stories of change at 3M, JC Penney, and Ford illustrates an iron law: Limited, top-down thinking almost always fails. Changes that are more employee driven and comprehensive have a better chance. Organizations today face a persistent dilemma. Changes in leadership or the environment pressure them to adapt, yet the more they try to change, the more often their reach exceeds their grasp (Nickerson and Silverman, 2003; Barnett and Freeman, 2001). Ormerod (2007) argues that “things usually fail” because decision makers don't understand their circumstances well enough to anticipate the consequences of their actions. They march blindly down their chosen path ignoring warning signs that they are headed in the wrong direction. In studying scores of innovations, we continue to see managers whose strategies are limited because their thinking is employs only one or two cognitive lenses.

Think about the challenges of rebuilding Iraq. The architects of the U.S. invasion foresaw a relatively quick and painless transition to democratic stability. Instead, eliminating the Saddam Hussein regime opened a Pandora's box of political and symbolic issues seething beneath the surface (as happened subsequently in Libya, Egypt, and many other nations that have undergone cataclysmic regime change). It is much better to spot quicksand before rather than after you're mired in it. The frames can help change agents see pitfalls and roadblocks ahead, thereby increasing their odds of success.

Changing an organization is a complex, systemic undertaking. It rarely works to retrain people without revising roles or to revamp roles without retraining. Planning without broad-based participation that gives voice to the opposition almost guarantees stiff resistance later on. Change alters power relationships and undermines existing agreements and pacts. Even more profoundly, it intrudes on deeply rooted symbolic forms, traditional ways, icons, and rituals. Below the surface, an organization's cultural tapestry begins to unravel, threatening time-honored traditions, prevailing cultural values and ways, and shared meaning.

Too many change efforts fail, but there are bright spots that offer hope. Arnold (2015) cites five cases of dramatically successful change. One was Santander, the giant Spanish bank, which entered the U.K. market by buying two old-line British banks. The two were very different from one another and neither had much in common with Santander in terms of culture, systems, and practices. Santander needed to establish a common brand and to get both banks to align with its cultural values of “Simple, Personal, and Fair.” Santander's change process emphasized both people and systems, including extensive opportunities for involvement and training. Reading between the lines of such case descriptions, one can detect the importance of the four frames in approaching change. In the remainder of the chapter, we look more closely at the human resource, structural, political, and symbolic aspects of organizational change and integrate them with Kotter's model of the change process. Exhibit 18.1 summarizes the views of major issues in change that each frame offers. The human resource view focuses on needs, skills, and participation; the structural approach, on alignment and clarity; the political lens, on conflict and arenas; and the symbolic frame, on loss of meaning and the importance of creating new symbols and ways. Each mode of thought highlights a distinctive set of barriers and offers some possibilities for making change stick.

Rituals of Loss

Significant change often triggers two conflicting responses. The first is to keep things as they were, to replay the past. The second is to ignore the loss and plunge into the future. Individuals or groups get stuck in denial or bog down vacillating between the two responses.

For much of the twentieth century, AT&T had a near monopoly of telephones in the United States. Then, in 1982, a federal judge forced AT&T to divest its local phone operations. Four years later, an executive commented: “Some mornings I feel like I can set the world on fire. Other mornings I can hardly get out of bed to face another day.” Nurses in a hospital's intensive care unit, caught in a loss cycle for 10 years following their move from an old facility, finally determined the cause of their hard-to-pinpoint anguish. Loss is an unavoidable byproduct of improvement, particularly for those who are the target of someone else's change initiative. As change accelerates, executives and employees become mired in endless cycles of unresolved grief.

In our personal lives, tradition prescribes the pathway from loss to healing. Every culture sets forth a sequence for transition rituals following significant loss: always a collective experience allowing pain to be expressed, felt, and often juxtaposed with humor and hope. Think of Irish actor Malachy McCourt, who, as his mother lay dying, said to her distressed physician, “Don't worry, Doctor, we come from a long line of dead people” (McCourt, 2012).

In many societies, the sequence of ritual steps involves a wake, a funeral, a period of mourning, and some form of commemoration. From a symbolic perspective, ritual is an essential companion to significant change. A naval change-of-command ceremony, for example, is scripted by tradition: After a wake for the outgoing commander, the mantle of command passes to the new one in a full-dress ceremony attended by friends, relatives, officers, and sailors. The climactic moment of transition occurs as the incoming and outgoing skippers face each other at attention. The new commander salutes and says, “I relieve you, sir.” The retiring commander salutes and responds, “I stand relieved.” During the ceremony, sailors post the new commander's name at the unit's entrance. After a time, the old commander's face or name appears in a picture or plaque on a wall honoring previous commanders (personal communication with author, 2006).

Transition rituals initiate a sequence of steps that help people let go of the past, deal with a painful present, and move into a meaningful future. The form of these rites varies widely, but they are essential to the ability to face and transcend loss. Otherwise, people vacillate between clinging to the old and rushing to the future. An effective ritual helps them let go of old ways and embrace a new beginning.

Releasing a Negative Past

Many find it hard to understand how villains, negative stories, and tragedies can hold a culture together, but downbeat symbols hold sway when people have nothing more positive to bond them together. In such cultural voids, griping can become the predominant ritual. Evil heroes emerge as popular icons.

In one example, new owners acquired a newspaper mired in a negative past. Letting go of old tyrants and wounds was essential to a new, more positive beginning. The new owners sensed they needed to create something dramatic to help people let go of their historic attachment to pessimism. They invited all employees to an unusual event. Employees arrived to find a room filled with black balloons. Pictures of reviled managers were affixed to the lid of an open coffin positioned prominently in the front. The startled employees silently took their places. The new CEO opened the ceremony: “We are assembled today to say farewell to the former owners of this newspaper. But it only seems fitting that we should say a few words about them before they leave us forever.”

On cue, without prompting or rehearsal, individuals rose from their seats, came forward, and, one by one, grabbed a picture. Each then briefly described life under the sway of “the bastards,” tore up the person's photograph, and threw it into the coffin. When all the likenesses were gone, a group of New Orleans style jazz musicians filed in playing a mournful dirge. Coffin bearers marched the coffin outside. Employees followed and released the black balloons into the sky. A buffet lunch followed, festooned by balloons with the colors of the new company logo.

The CEO admitted later, “What a risk. I was scared to death. It came off without a hitch and the atmosphere is now completely different. People are talking and laughing together. Circulation has improved. So has morale. Who would have ‘thunk’ it?”