Focus on Quality and Productivity Credited with Resurgent Honeywell

Adi Gaskell

American conglomerate Honeywell has had a difficult time since their takeover by GE was quashed in 2001 by the European Union. British magazine, The Economist reports on the resurgence at the company, due in large part to their strong adoption of a culture of continuous improvement.

The change emerged under the leadership of David Cote, himself a protege of Jack Welch whilst working under him at GE. He took his six sigma led focus on quality with him from GE and set about building a culture at Honeywell that was embodied by the 12 behaviours they wanted employees to exhibit as part of their One Honeywell spirit.

A fundamental part of this was the creation of the Honeywell operating system (HOS), which itself was borrowed from the famous Toyota Operating System after several Honeywell managers visited an exceptional Toyota factory. Everyone at the company was expected to contribute at least two implementable ideas for improvement per month. From the boardroom to the shop floor, no one was exempt.

The new system has been some eight years in the making, but results are clear. In 2011 sales were 72% higher than they were in 2002, with profits doubling to $4 billion.

Managers throughout the company credit the HOS with huge improvements in productivity. Without this they say the company would not have survived the financial crash around the world. Things that used to take over a month to build are now completed in 10 days.

To measure improvements, the company has bronze, silver and gold levels. Around 100 of the 250 factories worldwide have achieved the bronze award, with all now striving for silver status. Of course this isn't a sign of poor performance, merely high standards.

Product quality has also improved at the factory. So has safety, which its bosses concede had not been anywhere near good enough. Last month a sign on the wall declared that it was 232 days, and counting, since working time was lost to an accident (apparently a minor one). This may be one reason why surveys of employees report a continuous improvement in job satisfaction, notwithstanding all those meetings.

The factory has experienced a leap in productivity due largely to the successful application of management theories: including Six Sigma, which sanctifies an intense regard to quality, and Japanese "lean manufacturing", which is based on minimising waste, keeping inventories low and doing things "just in time".

The renewed focus on quality and productivity has signalled a change in fortunes for the company, with current problems more to do with how to spend the mounting cash pile they have than how to survive. The companies share price has out performed the S&P 500 over the last 10 years and is currently at an all time high.