Appendix: Keynote speech - Tom Johnstone

Tom Johnstone is the president and CEO of SKF.

Born in Scotland in 1955, he is married with 3 children. He has a Master of Arts degree from the University of Glasgow, and an honourary doctorate degree in business administration from the University of South Carolina. Mr Johnstone joined SKF in 1977, and after several management positions was appointed CEO in April ’03. He initiated the global introduction of Six Sigma in the automotive division in 2003, then in the rest of the group in 2004. Mr Johnstone shows continuous personal support to the initiative, and takes a personal interest in the individual improvement projects and their results and implementation.

Mr Johnstone began by talking about who the SKF group are, what they do and what their vision is. Next year, SKF is 100 years old, and has a turnover of €5.3billion, with 40,000 employees and a presence in 130 countries worldwide. The SKF vision is to equip the world with the knowledge accrued by SKF over the course of their history, and help make their customers more successful and profitable through using this knowledge.

First of all, SKF are very experienced at working on a global scale. SKF expanded into other countries very early in their history, going into the UK 1910, North America in 1912, Brazil and Russia in 1914, and China – which many view as having only recently developed - in 1916. By 1932 they were operating in 40 countries worldwide. This expansion gave the group an important knowledge: how to work and operate in each of the different cultures, taking standardised practices and applying them to the different areas. This was very important when they began to implement Six Sigma.
Fig 1: Establishment of companies

The second area of knowledge for SKF is the different industries they are present in. Transportation: aeroplanes, boats, cars, motorbikes; a variety of different SKF products are used in all of these. Add to this other areas like: industrial gearboxes, off-highway equipment, medical industry, food and beverage industry, the paper industry, just to name a few. In total, SKF operates in 40 different segments. They have taken the innovations from each of these industries and applied them where appropriate to the others: eg supplying products for household appliances that were designed for automotive industries.

Customer care is at the core of their business. SKF employ separate managers whose role it is to really understand the needs of the customers today, but also what they will need tomorrow. By starting from the customer, working back through the different technologies and platforms, this enables them to drive innovation.

The modern workplace is ever-changing: the needs of the customer changes in terms of quality, environment (i.e. reducing energy consumption), regional expansion, etc. An important aspect of this is the very rapid speed of change, which creates a need to react quickly, and this is why efficient and effective processes are imperative to the business. Mr Johnstone realised that in order to meet these challenges, SKF needed to do something different, and he identified Six Sigma as the method to help them do that.

Fig 2: Building on Earlier SuccessIt was very important how this new initiative was communicated. It was vital that the message was put across clearly that what had gone before in terms of quality wasn’t wrong: the quality initiatives SKF introduced 20 years ago were an important step, and Six Sigma is another step on the journey. Mr Johnstone believes that there is more beyond Six Sigma, that there will always be something else, and that it is important to say that. Six Sigma itself has evolved in terms of Design for Six Sigma, Lean Six Sigma, etc.

In order to ensure that the message was communicated that this was an SKF initiative, and not a Tom Johnstone initiative, an inordinate amount of time was spent getting the group management fully aligned to Six Sigma. SKF were implementing Six Sigma in order to meet business targets, not because it was some fad or fashion, and he wanted to make sure that management understood this, and were totally committed to it.

Six Sigma was implemented as part of their strategic targets. SKF have 5 targets:

• 10% Operating Margin
• 6% Growth per annum
• 6 sigma
• 4 Z
• Beyond Zero ™

“4 Z” relates to: zero broken promises, zero customer complaints, zero accidents, zero loss making businesses. Beyond Zero ™ works on reducing the negative effects of their energy consumption, and increasing the positive effects of their processes, so that ultimately the positive effects outweigh the negative effects.

The group changed around their measurements to measure failures instead of success. This was especially important in areas like service, where a 98-99% service level could be viewed as successful. Instead, SKF changed their metrics to measure how many actual failures they had.

The programme was rolled out in a step-by-step fashion, with the maxim “quality before quantity”. Management teams were informed first about the Six Sigma initiative, and executives are now given green belt training. It was seen as important to make them knowledgeable about it first, before rolling it out to the rest of the workforce.

Targets were set so that 1% of the workforce to be Black Belts, 2-3 projects should be closed per annum, and each project should result in savings three times the cost of the project. Also, projects should be in line with the strategic goals of the group with a visible benefit for the customer, and help achieve and sustain improvements in performance of all processes. An infrastructure was put in place with Champions on the management teams, a dedicated Six Sigma board to keep the programme on track, a core team, defined rules and policies, two Six Sigma campuses and a project database.

Communication was identified as being key. With support and drive from senior management being vital, part of the regular review meetings between the divisional heads was given over to the monitoring of both the Six Sigma programme and the commitment.

In order to emphasise the importance of the certification programme, Mr Johnstone signs each certificate himself, and wherever possible hands it over in person to the successful Black Belt. He feels this sends a very important and powerful message about his own commitment.

It was also important that they implemented a HR policy that complimented the Six Sigma programme, involving the department in selection, emphasising that Black Belts are the future leaders of the organisation, reviewing salary on day one of training and formalising a re-entry policy. Additionally, a Finance policy was implemented whereby a Financial controller signs off each project, hard and soft savings are clearly identified, and a follow-up dashboard is adhered to.

Fig 3: Six Sigma Status

The savings made due to Six Sigma last year equate to 16% of the profits made.

For Mr Johnstone, Six Sigma is an excellent methodology that fixes a process that was either wrongly designed or wrongly implemented in the first place. Consequently, SKF are now using Design for Six Sigma to ensure they do it right first time.

Mr Johnstone believes that SKF have only just begun down the Six Sigma route. Looking ahead, the big push now is to position Six Sigma solidly on the SKF map: equiping all the group key processes with it, executing projects effectively and efficiently, measuring the cultural change as a result if the implementation of the initiative, and making Six Sigma an attractive career opportunity for employees.

The diagram below outlines the key lessons Mr Johnstone believes SKF have learned:

Fig 4: Key learnings

SKF want to make Six Sigma their way of doing business, to use it to make it easier and more attractive for their customers to do business with them. Mr Johnstone believes they are on their way towards these goals, although they are by no means there yet, and the group will continue developing its programme as well as implementing new initiatives such as DfSS, Lean Six Sigma etc.