An Emotional Experience

The Beginning:

An Emotional Experience

Motorola, recalls its retired chairman Robert W. Galvin, woke up to a clarion call from one of its most respected executives, Arthur Sundry, at a meeting of company officers in April, 1979. Sundry announced he had something more important to say than anything on the agenda — which was, as he put it baldly, that Motorola's quality ''stinks.'' ''You can be motivated by all manner of approaches," says Galvin. But the threat from Japan lay under all the other motivations.[i]

Motorola's Lucky Break

Even when there was no direct threat from Japan, American companies heard a strong message from across the Pacific. Motorola may have been awakened by Art Sundry's cry that Motorola's quality "stinks." "That was a lucky break for us, that we had someone who had the guts to do that and caused all the rest of us who were sitting there to say, 'if Art says that, maybe there's something to it,'" Bob Galvin states. "There was no denial or rejection of Art Sundry's message [and] the following Monday morning, everybody came to work and had some, at least subliminal intent, 'I will do it a little better today.'" Motorolans may have been preconditioned to Sundry's words by what had happened to their old Quasar plant in Franklin Park, Illinois. Before Matsushita bought the plant from Motorola in 1974, the TV sets coming off the line had 140 problems per l00 sets. By the end of the decade Matsushita, with the same work force and management, had reduced the problems to 7 per 100 sets. (In justice to Motorola, we should note that it already had decided to quit the television business and was not giving the Quasar plant the resources it needed.)[ii]

The Leaders:

The Wrong Stuff

A Lesson in Perfection: Galvin of Motorola

Bob Galvin has served 52 years in the company founded by his father and uncle in 1928 to make a ''battery eliminator'' that allowed owners of radios to plug right in to the household current. He learned about perfectibility early on. He went to grade school at St. Jerome's in Chicago, where the nuns had high standards. He remembers one in particular, his math teacher, Sister Mary Norbadet, who announced one day that she would not accept any grade less than 100 on a forthcoming test on conversions. "Scared the hell out of me," he says, but his parents supported the teacher and Galvin did score 100. Galvin was at Motorola 40 years before he made perfection the company's quality standard.

Like [Hewlett-Packard CEO John] Young, he set a goal that would make Motorola wake up and stretch itself. Galvin called for a ten-fold improvement in quality in five years, which was extended to become a hundred-fold improvement in ten years. "We spent a lot of time moving an institution to a new culture, some of it pedantic or formal or ceremonial and some informal and subtle, Machiavellian," he says. "You use all kinds of techniques." Determined he may be, but Galvin, hale and cherubic at 70, seems an unlikely Machiavelli. Perhaps he meant that contributions to quality came to count in the compensation of executives. "I suppose that moved some percentage of our people," he says. Galvin believes in personal quality improvement — in returning phone calls on time, in being punctual — and showed his personal commitment to quality. When he demolished Motorola's management school and started an extensive new training program, he took the courses. He didn't just tell people to go and find out what customers were thinking. He took a trip each month to question one customer in detail, and wrote up the report when he got back to his office in Schaumburg, Illinois. But in the end. He says ''What really moved everybody over to the side of quality was they finally realized it's right." Yes, that — and Galvin's firm and constant nudging.[iii]

The People:

How Hard It Is

What Were They Smoking in Schaumburg?:

Motorola's Management Sends a Signal

To get managers turned around, from instinctive opposition to wholehearted support, is one of the more difficult feats a CEO is called on to perform these days. He cannot be heavy-handed — after all, involvement must spring from within — but he has to lead and apply constant pressure.

Ralph Ponce de Leon, son of a Texas railroad man and grandson of a Basque shepherd, knows how the resentment and the pressure felt at the time. He had spent most of his career at Motorola developing new products, but when the company's quality drive began in 1980 he was working at the government electronics group in Scottsdale, helping to provide communications for deep space probes like Voyager. ''The first sign that things were changing,'' he says, ''was the appointment of Jack Germain as the corporate director of quality." Germain was a Motorola heavyweight, a corporate vice president and assistant general manager of the communications business, Motorola's largest. The chairman, Bob Galvin, meant by this appointment to signal the importance of the job. Ponce de Leon did not get that signal. "Reading the memo about his appointment, we figured Jack had done something terribly wrong, or was closer to retirement than we had thought. Quality is like KP in the military."

During this early stage Ponce de Leon was a cynic. "We thought we had all the quality we desired [in the deep space probes]. We absolutely resented the intrusion of headquarters in improving quality. We thought they were smoking funny stuff up there in Schaumburg." When Germain asked him to send his quality people to form a Motorola Corporate Quality Council, Ponce de Leon resisted. "I thought, who is this guy? This failure? I'm damned if I'll spend good money on something so pointless! Jack insisted." Finally, Ponce de Leon allowed one quality manager out of four in four plants to go. The manager reported back that elsewhere the company was getting "meaningful metrics" — that is, measurable good results — and improving on them. "I told him, OK, but don't commit us to anything dumb." Ponce de Leon continues: "Then we got the first mandate: Improve quality by a factor of ten. We came unglued. It was too costly. It was impossible. The payback was too small. We met with the leaders of the defense business in Arizona and they agreed that it was impossible. We had meetings to figure out why we shouldn't do it. It would cost more and the customers [i.e., in the government] wouldn't pay for it. A 10% improvement would be bad enough. I don't know what discussions they had up in Schaumburg, but we stonewalled the process. Linsicomb [James L., the executive vice president for defense] was on the fence, but he decided to play along. Anyhow, the pressure from Chicago was irresistible. They said they weren't asking for improvement, 'We are telling you and you had better shape up and do it.'" Having allowed people like Ponce de Leon time to get over the original trauma, Schaumburg now demanded that ten-fold improvement.

From Bob Galvin's perspective in Schaumburg, this resistance was troublesome and partly his fault because, like other CEOs, he had not paid enough attention to middle management. Motorola increased its training for managers and Galvin and his top executives put a lot of effort into persuading and encouraging their troops. "You know, you use all kinds of techniques," says Galvin. "We made quality much more evident in the compensation plan. That got their attention. I think ultimately what moved everybody over was that they finally realized it was right. One at a time, dozens at a time, hundreds at a time, said, my God, this is right for the customer, and we'll all be better off if we do what is right for the customer."

The Signal Is Received, with Static

"Very reluctantly we began to measure some significant things in 1982 and 1983 and I decided I had better attend some meetings with Germain to protect ourselves," Ponce de Leon continues. "We still really believed it was foolish, but we began to measure and I have to tell you the improvement was almost instantaneous. This would be like switching to driving on the right in England. You have to do it all at once and people see the results immediately. We in the trenches went from cynics to skeptics. We said, 'Let's experiment a little more before we buy in totally.' We went to the Germain meetings mainly defensively, but we began to refine the process."

Rebellion stirred again when Schaumburg told the government division (and the rest of the company) to spend 1.5% of its payroll on training, and 40% of that on quality. "Again the corporation was telling us to do something, but this time it cost money and we got no relief,'' says Ponce de Leon. He was part of a company-wide group of executives who met periodically to review Motorola's training needs. To respond to the new request, and to meet the challenge of the tremendous changes that were overtaking the company, the group decided that Motorola needed new training in manufacturing and management. Ponce de Leon and the others figured it would cost $2 million to establish the training; they went to Galvin to ask for $100,000 to investigate it some more. He gave them the full $2 million on the spot to establish the Motorola Manufacturing Institute, which later became part of Motorola University.

By now, Ponce de Leon's conversion was pretty well complete. "When I saw the value of quality, saw that we were making progress, and when I began to go to Japan and saw that they were always a step ahead of us, I became an absolute zealot." Today he is the Motorola vice president in charge of relations with suppliers.[iv]

The Customers:

Are You Listening?

"In the middle of the 1980s somebody put a bee in my bonnet that I ought to go out and talk to more customers," Bob Galvin recalls. "I remember my reaction. . . . What does that person mean? I talked to two customers last week. I took a trip for Ford at one time." Like most CEOs, Motorola's chief did not really know the customers, certainly not down at the level of the people who used the products. But Galvin, receptive to his people's ideas, accepted the suggestion. He dreamed up a scheme of spending one day a month with one corporate customer, talking to anyone and everyone there who had a relationship with Motorola, but preferably not vice presidents nor the chief executive.

Galvin got an earful. "We're sitting off in the corner of a cafeteria in the Ford Motor Company talking with the people in the payables department. Not any fancy spot; it's wherever this gang of people normally convenes. They pay us for the computers we shipped them and a fine accountant, no fancy title, can't wait to get at the pile of papers he's got. 'Well,' I said to him, 'Tell me what's on your mind, sir.' This guy comes right out and says, 'Galvin, let me show you something. See all these papers? I've been three weeks trying to reconcile our purchase order to your shipment to our inspection report so I can pay your bill. That doesn't add one penny of value to a Ford car and it's all because you had mistakes in your billings and in your [shipment] ticket that became the basis of our receiving ticket. I've been wasting my time reconciling this situation and if I were in charge of this company, I wouldn't buy any goddamned electronic controls from you because you upset the accounting department too much. Of course, Red Poling wouldn't know that...'"

It was the same kind of story wherever Galvin went. The people he saw were very frank, to put it mildly, and after each trip he would write a report of 14 pages or so detailing his findings. Galvin goes on:

''After about the fourth trip, I could have written the fifth, sixth, seventh. . . twelfth. All I had to do was change the name of the product or the name of the person. I discovered we had just about the same problems in every instance regardless of the business. One of the fascinating fundamentals discerned from the experience was that I didn't learn anything … I didn't learn anything … Now I'll continue the sentence … that the [Motorola] account executive hadn't known for two years or nine months or what have you. Nothing. Somebody already knew everything that I learned. But when I came back and wrote this up and sent it out to the relevant people, everybody took each line item and said, 'Oh, Bob, we gotta do something about that.' So now we do what the customer wanted done. Isn't that a shame, because here's the account executive, who's been trying to get it done for two years, nine months, or what have you, and the institution wasn't responding adequately. I advocated that credentialed sales people should have the power of the chief executive officer and that that should become the accepted culture or policy of the organization. We aren't achieving that yet. People are at least paying a lot more attention to salespeople, although they are not acting as if George Fisher [Galvin's successor as CEO] had called and said, 'Fix that and have it by Friday.'"[v]

The Tools:

Uses and Misuses

Six Sigma: Motorola's Standard

At the beginning of the 1980s corporations measured their quality in percentages, or the number of defects per hundred parts. Xerox typically had a 92% quality level, or eight defects per 100 products or processes. By the end of the decade, performance had improved so much that the companies in the vanguard of quality needed a new scale, so they began counting their defects in "parts per million." Xerox got down to a defect level of 300 parts per million, which can also be stated as a quality level of 99.97%. That represented a huge improvement over the 92% level at the beginning of the 1980s, which would translate into 80,000 defects per million parts.

Motorola set the most ambitious goals of all. In 1981, it decided to reduce defects by nine tenths in five years. But through benchmarking Motorola realized that rate of improvement was not fast enough, so it set the new goals of improving tenfold again by 1989, and yet again by 1991. Then Motorola announced what became the most famous quality goal in the United States: Six Sigma by 1992. Statisticians use the Greek letter sigma () as a symbol to denote standard deviation. The higher the sigma number, the lower the rate of defects. By setting a goal of Six Sigma, Motorola said that whatever it did, whether it was making pagers or writing invoices, the rate of defects would not exceed 3.4 per million. By way of comparison, the average large corporation operates today in the vicinity of Four Sigma, or 3,000 defects per million. When your doctor scribbles a prescription or your waiter tots up the bill, they tend to do a bit worse than Four Sigma, which means that about 10,000 out of a million prescriptions or restaurant bills are wrong. In giving tax advice over the phone the IRS is off the sigma chart, with more than 100,000 mistakes per million pieces of advice. As we have already seen, the airlines do very well on safety (better than Six Sigma) but as for baggage handling, they are only a trifle better than Four Sigma.

Motorola failed to reach the Six Sigma target by 1992. Some units did reach it; some units were even better. But the company as a whole got to 150 parts per million, somewhere between Five Sigma and Six Sigma. Never mind; Motorola came close, and without that aggressive goal it might have not have come so close. Motorola still wants to improve tenfold every two years, into the 21st Century. That would put Motorola up to the level of one defect per billion parts. Why would Motorola be so fanatical as to want a defect rate as low as one in a billion? Who would notice? As electronic systems get more complicated, one part per billion does become a significant defect rate. By the end of the decade, semiconductors will contain as many as one billion transistors each.

As the defect rates fall into the range of only a few hundred per million parts, corporations run into a peculiar problem. Sampling is no longer practical when the rate of failure is less than 0.1% of 1%, that is, below 1,000 problems per million. IBM's Steve Schwartz explains that the screen used before to sample and study errors no longer works. You might have asked a sample of 25 branches out of a total of 200 outlets to return defective products to the company to be counted and analyzed. But at the lower failure rate you may find that none of the 25 outlets turn up a single defective product. Now you have to change the system and collect products from all the branches, which is more complicated. Eventually corporations will have to invent defects or simulate them on the computer in order to have something to study.

Measuring the Wrong Things

All the measurements in the world will not help if they are the wrong measurements, and many companies found that indeed they were measuring the wrong things. They were elaborating on the internally developed old measures, rattler than using measures that focused on the customer. Critics say Motorola's Six Sigma is too much of an elaborate internal measure, and does not mean much to the customer. As they understand these measures better, corporations are finding new ones or changing the old ones, looking more outward. The business units at IBM are now judged by seven measurements. Four of the measurements are traditional financial or business measurements: revenue growth, profit growth, return on assets, and free cash flow, but the other three are new: customer satisfaction, employee morale, and quality improvement. At Conrail, CFO Jim Hagen found that the company was keeping a mass of statistics and most of them were "awful." The Conrail people measured the wrong things. For instance, they counted the number of cars per train, and thought that the longer the trains were, the better they were doing. So if a train looked as if it was going to be too short, they would cancel it and add the cars to another train — much as airlines sometimes discover "mechanical problems" with underbooked planes and shift the passengers to another flight. By the internal measures, the long trains were saving money. But when Conrail looked outwards and asked the customer what he thought, it turned out that reliability mattered very much. Long term, it was not cost effective to cancel short trains. Conrail now sends its trains off on schedule, whether they are short or long.[vi]