Faculty of Engineering The Wolfson School of Mechanical and Manufacturing Engineering

MSc Engineering Design and Manufacture

Quality Management
Version 1.0 Rev 01

The Six Sigma Plus Quality Initiative at Honeywell

Jan 19th 2011

Author
Graham Langford Word Count 2998

Graham Langford Quality Management

19/01/2011

Contents Title
Summary Introduction
Background

Page
3 4
4

Six Sigma vs HQV

Six Sigma HQV

5
5 6

The Similarities between HQV and Six Sigma The Birth of Six Sigma Plus at Honeywell The Implementation of Six Sigma Plus at Honeywell Conclusions References

7 8 9 11 13

2|Page MMP256A

Graham Langford Quality Management

19/01/2011

Summary
The Six Sigma Plus quality initiative at Honeywell International Inc (Honeywell) was born out of a merger between the two technologies giants Honeywell and AlliedSignal in 1999. The newly formed Honeywell International Inc. experienced an initial loss of direction of its Six Sigma Plus program. This was attributed to a failed merger with GE and the top management s failure to address the issue of cultural differences between the two company s employees from Honeywell and AlliedSignal. Honeywell addressed this loss of direction by reappointing a retired chairman named Lawrence Bossidy. Bossidy was responsible for the success of the previous Six Sigma process at AlliedSignal. He re-invigorated Honeywell s Six Sigma Plus methodology by setting over 3000 Six Sigma Plus trained personnel the task of priority projects where they could improve processes, reduce redundancies and cut costs. Six Sigma Plus had become a massive success and by 2002, Honeywell had saved approximately $3.5 billion in costs on account of their Six Sigma Plus initiative since 1995, with about $1.5 billion since the year 2000. In 2002, the company did see a decline of 5.8% in its revenues as compared to 2001, but this was attributed to the recession in the aerospace industry post September 11. Apart from introducing Six Sigma Plus internally, in 2003, Honeywell began to train other companies in the art of Six Sigma Plus and became a consultancy in the many aspects of Six Sigma Plus .

3|Page MMP256A

Graham Langford Quality Management

19/01/2011

Introduction
This report will analyse the case study The Six Sigma Plus Quality Initiative at Honeywell . This analysis will aim to highlight the background driving factors and key decisions that helped form the Six Sigma Plus initiative and the success that Honeywell achieved once their Six Sigma Plus initiative had been implemented. It will also explain the concept of Six Sigma and its links with the Malcolm Baldrige and European Foundation for Quality Management (EFQM) Quality models and explain the strategic importance of Six Sigma and the Honeywell Quality Value (HQV) at AlliedSignal and Honeywell. Background The Six Sigma Plus quality initiative at Honeywell International Inc (Honeywell) was born out of a merger between the two technologies giants Honeywell and AlliedSignal back in 1999. Both of these US based companies main business area at that time was in the aerospace industry and the supply of industrial controls. They both had a long standing history of applying modern quality methodologies to meeting their customer needs. AlliedSignal had adopted the Six Sigma methodology, whilst Honeywell used the Honeywell Quality Value (HQV). Six Sigma Plus was an amalgamation of the two companies individual quality systems as a result of this merger in 1999.

4|Page MMP256A

Graham Langford Quality Management

19/01/2011

Six Sigma vs HQV.

Six Sigma Six Sigma is a relatively new concept. It was originally developed by Motorola in 1986. Its name is derived from the Greek letter sigma which represents the standard deviation of a process about its mean for a normally distributed population. Six Sigma signifies a process of six standard deviations normally distributed about the mean. It is a disciplined methodology that utilises a set of tools for continually improving the operational performance of an organisation. It does this by minimising the variability and waste within any of organisations processes. The goals of a Six Sigma process are to produce no more than 3.4 defects per one million opportunities (DPMO). A theoretical Six Sigma process would only make 0.002 DPMO, but Six Sigma takes into account realistic process behaviour and includes a plus or minus one and a half sigma process shift about the mean for a normally distributed process. This one and a half sigma shift then equates to 3.4 DPMO. This can still be classed as a zero defect process or close to near perfection. Six Sigma utilises its toolset which include statistical methods to improve the quality of process outputs by identifying and removing the causes of defects, The Six Sigma tool set can also be used at the design and innovation stage to create designs that are robust to process variation and prevent defects before they actually occur. Organisations that adopt the Six Sigma initiative have to train their personnel to varying levels of knowledge. These employees are then certified to that level after successful examination and projects. Typical Six Sigma levels of certification are Blue belt, Green belt, Black belts & Lean expert. Master Black belts are created to train and mentor new Six Sigma employees. Six Sigma champions are trained who are usually from senior management in organisations. The champion s role is to form Six Sigma teams capable of defining the processes that require improvement within the organisation. These teams are usually created from cross-departmental personnel including, design, production, purchasing, quality and finance. These teams are given projects that follow a defined sequence of steps with clear cost cutting objectives which are usually cost reduction or profit increase.

5|Page MMP256A

Graham Langford Quality Management

19/01/2011

In almost all Six Sigma projects some type of re-design is necessary to create a more robust process capable of Six Sigma outputs. The decisions made within a Six Sigma project are based on actual calculated data and statistical methods. HQV The Honeywell Quality Value (HQV) was based upon two different business excellence models, which are the Malcolm Baldrige Quality Model and the European Foundation for Quality Management (EFQM). They include leading edge management practices against which an organisation can measure itself. The Honeywell Quality Value provides the framework for how a business should be run as a whole. It is a way of measuring the effectiveness of an organisations quality system and its business results. The main criteria of the Malcolm Baldrige Model are: y y y y y y y Leadership Strategic planning Customer focus Measurement, analysis, and knowledge management Workforce focus Operations focus Results

These criteria help organisations assess their improvement capabilities, define their overall performance management system, and identify their strengths and opportunities for improvement. The main criteria for the EFQM Model are: y y y y y Leadership People Strategy Partnerships & Resources Processes, Products and Services

The EFQM Excellence Model is being implemented by over 30 000 organisations across the world. It is a self assessment framework that can be used to gain a holistic overview of any organisation regardless of size, sector or maturity. Both these excellence models are very similar in the way they are structured. The Malcolm Baldrige Model was developed in the US and the EFQM is the European equivalent model. Honeywell took the meaningful parts
6|Page MMP256A

Graham Langford Quality Management

19/01/2011

that suited their specific business needs from both of these excellence models and merged them to form the HQV. The Similarities between HQV and Six Sigma The only really similarities between the Honeywell Quality Value and the Six Sigma methodology are that they are both based on continual improvement methodologies. They are both customer orientated methodologies that ensure that the customer receives what they expect to receive. The Honeywell Quality Value provides the framework for how a business should be run as a whole and is a way of measuring the effectiveness of an organisations quality system and its business results. The HQV is a very balanced quality system in that it is focused on the organisations internal and external customers. It ensures that the customer will receive the quality product that they were expecting to receive. Six Sigma is used as a way of increasing the effectiveness of an organisations quality system with a result of improving an organisations business results. Six Sigma gives the organisation the quantitative specifics of what and how to improve. It aims at streamlining the organisations processes and leaning out non value added processes. Six Sigma is mainly aimed at organisations internal customers rather than their external ones. Nevertheless the overall outcome is the same as the HQV in delivering to the customer the quality product that they were expecting to receive, but at a significantly reduced cost to the organisation. Six Sigma looks at the cost of quality to the organisation and its impact on the organisations business outputs. The Six Sigma approach is to eliminate errors and defects at the root cause or design them out in the first place. This is a far better approach than eliminating defective products via monitoring and inspection methods.

7|Page MMP256A

Graham Langford Quality Management

19/01/2011

The Birth of Six Sigma Plus at Honeywell

As mentioned previously, Honeywell s Six Sigma Plus was an amalgamation of AlliedSignal s Six Sigma methodology with Honeywell s HQV model after their merger in 1999. Prior to the merger, AlliedSignal had adopted the Six Sigma methodology in 1994 to increase their operational efficiency and was very successful with its implementation. AlliedSignal aimed at increasing its productivity by 6% each year within its industrial sectors by the use of Six Sigma. After its successful Implementation, AlliedSignal soon realised that they could utilise Six Sigma in other areas of their business, with examples in development and innovation. Honeywell had developed and was using a bespoke quality assessment model called Honeywell Quality Value (HQV). HQV was based upon two different business excellence models, which are the Malcolm Baldrige Quality Model and the European Foundation for Quality Management (EFQM). The main constituents of the HQV where based from the Malcolm Baldrige Quality Model, whilst the remainder where based from the EFQM model. The Baldrige and the EFQM are similar models in that are balanced both internally and externally and give a holistic view of how to operate a business. These balanced models used by the HQV include strong customer orientation as well as being internally process focused. This allowed Honeywell to be highly responsive to their customer needs, thus enhancing the company s competitiveness within the marketplace. After the merger of AlliedSignal with Honeywell in 1999, Honeywell integrated the quality initiatives from the two companies, taking the best bits from both systems and forming a new and improved quality initiative. This newly born quality initiative was call Six Sigma Plus .

8|Page MMP256A

Graham Langford Quality Management

19/01/2011

The Implementation of Six Sigma Plus at Honeywell

After the merger of the two companies quality systems in 1999, their new strategy was aimed at measuring quality, improving growth and productivity and achieving performance breakthroughs. This strategy was aimed at all functional areas of their business, including finance, product development, engineering, marketing, sales, E-business and administration. The new initiative was customer focused in that it identified the customer requirements and enabled them to meet them. The company set itself Six Sigma level goals for the processes that where critical to meet these customer requirements. They adopted the DMAIC (Define, Measure, Analyse, Improve and Control) methodology that was installed previously in the AlliedSignal quality system in an attempt to achieve the Six Sigma level goals previously installed. This DMAIC approach helped them identify, understand and solve the problems already existing in their current processes. It helped them identify the areas of cost, quality or service where they were failing to meet their customer requirements. It also enabled them to reduce waste and identify the areas which needed more focus. All employees were required to have some degree of knowledge of the Six Sigma Plus concept and they were all offered training in it. All managers, supervisors and process supervisors were encouraged to become proficient in the Six Sigma Plus initiative. Six Sigma Plus teams were setup from cross functional areas of the business to tackle the problems once they had been identified. The company even brought their key suppliers into their Six Sigma Plus initiative to help them understand their performance on the company. Honeywell set itself annual Six Sigma Plus targets that where communicated to all employees and the key suppliers. As an initial result of the implementation of the Six Sigma Plus initiative the most significant benefit was that it enabled Honeywell to understand the needs and requirements of its customers by using the Six Sigma tool called Voice of Customer , which helped gain feedback from its customers. Using Six Sigma Plus , Honeywell was able to eliminate waste from key processes across various divisions. Millions of dollars of savings in inspection cost where achieved by ensuring that the required quality procedures were built into processes rather than inspected out at the end. Honeywell did see some problems though soon after the implementation of their Six Sigma Plus initiative. Honeywell s top management failed to address
9|Page MMP256A

Graham Langford Quality Management

19/01/2011

the cultural differences of their employees from the two companies after the merger. With these cultural differences of their employees, a failed merger between Honeywell & GE and the September 11 terrorist attacks, Honeywell failed to achieve its full expectations from Six Sigma Plus and it s Six Sigma Plus initiative began to lose its direction in mid 2000. Honeywell brought back their previously retired chairman named Lawrence Bossidy who was responsible for success of the Six Sigma program at AlliedSignal before the merger with a task of putting the company back on track. Bossidy restructured the business plan of Honeywell which focused on Growth, Productivity, Cash, People and Enablers. Six Sigma Plus was classed as one of these enablers. Honeywell re-invigorated its Six Sigma Plus exercise in 2001 by putting over 3000 Six Sigma Plus trained personnel on priority projects where they could improve processes, reduce redundancies and cut costs. By 2002, Honeywell had saved approximately $3.5 billion in costs on account of their Six Sigma Plus initiative since 1995, with about $1.5 billion since the year 2000. In 2002, the company did see a decline of 5.8% in its revenues as compared to 2001, but this was attributed to the recession in the aerospace industry post September 11. Apart from introducing Six Sigma Plus internally in 2003, Honeywell began to train other companies in the art of Six Sigma Plus and became a consultancy in the many aspects of Six Sigma Plus .

10 | P a g e MMP256A

Graham Langford Quality Management

19/01/2011

Conclusions
Honeywell s merger with AlliedSignal in 1999 set in motion the coming together of two well established quality systems employed at the two companies. These where the Honeywell Quality Value (HQV) and Six Sigma. Senior management had the mammoth task of deciding what quality system to introduce into the newly formed company. Although both of the quality systems previously employed where successful in their own right, the decision to keep one and not the other would be a very hard one to make. The Honeywell Quality Value initiative was a well balanced quality system that was concerned with the external and internal customers of its business. As HQV was based on the Malcolm Baldrige and EFQM models, this made it a framework for how a business should be run as a whole and a way of measuring the effectiveness of the business. In my opinion this approach to quality seems to be a less dynamic method than the AlliedSignal Six Sigma methodology. The HQV Process improvements seem suggestive and reactive to problems. The Six Sigma approach at AlliedSignal on the other hand is proactive and dynamic in its nature. The down side to the Six Sigma approach at AlliedSignal was its attention mainly to internal processes and lacked the strong customer focus that the HQV had installed. In my opinion Honeywell made a very good decision in merging the two quality system in the way that they did. It gave them a well balanced quality system that controlled the business as a whole, maintaining its strong customer focus. It also gave them a more dynamic proactive approach that started from the bottom up and helped them lean their business practises and improve upon all of their current processes. The Six Sigma Plus approach helped them identify their current issues with their processes and helped determine and prioritise the order with which to tackle them. Honeywell s loss of direction in the early stages supports the opinion that a Six Sigma Plus attitude must be fully supported by top management and the enthusiasm must be pushed out to all employees to keep the momentum. Honeywell s top management essentially dropped the ball by turning their attention to other things like the merger with GE. They missed the fact that there were obvious cultural differences between the merging employees. Nevertheless, Honeywell restructured their top management and reinvigorated their SixSigma Plus initiative to great effect. Although post September 11 revenues were down 5.8% on the previous year, this seemed to because of the dip in the aerospace industry as a result of the terrorist attacks.
11 | P a g e MMP256A

Graham Langford Quality Management

19/01/2011

If it wasn t for the Six Sigma Plus initiative at Honeywell, the 5.8% drop in revenue probably would have been far greater and the Six Sigma Plus initiative acted more as damage limitations as the aerospace industry declined. The Six Sigma Plus initiative at Honeywell inevitably saved jobs and perhaps even prevented parts of Honeywell from closing down altogether. Now that Honeywell are consultants at Six Sigma Plus shows how well it must have worked and how many other businesses have seen the success that has come out of Honeywell and are keen to enjoy that success themselves. As a Six Sigma Black Belt myself, I know how powerful Six Sigma can be in a business if it is used correctly. As part of Tyco I have seen the same loss of direction and re-invigoration of the Six Sigma process and understand that top management must keep the momentum going for it to succeed.

12 | P a g e MMP256A

Graham Langford Quality Management

19/01/2011

References:
Baldrige Program Name Change Emphasizes Performance Excellence http://www.nist.gov/baldrige/baldrige_100510.cfm Accessed 25 January 2011

Malcolm Baldrige National Quality Award. 2009 Award Recipient, Manufacturing Category http://www.nist.gov/baldrige/award_recipients/honeywell_profile.cfm Accessed 24 January 2011

Six Sigma vs. Total Quality Management http://www.pmhut.com/six-sigma-vs-total-quality-management Accessed 26 January 2011

Honeywell Faces Identity Crisis http://www.forbes.com/2001/07/23/0723honeywell.html Accessed 26 January 2011

Meaningful innovation http://www.baldrige.com/criteria_customerfocus/meaningful-innovation/ Accessed 25 January 2011

13 | P a g e MMP256A