Execution as attitude. (Management).

When Lawrence Bossidy took the helm at Honeywell, the company was in the midst of chaos. Today, it's a $24 billion, customer-oriented powerhouse. Here, Bossidy shares some of the strategy and action that made it happen.

There is a lot of talk about organizational change, but talk is one thing -- getting it done is entirely another. In my experience, the only way to implement fundamental change in an organization is to instill an execution discipline.

When I took the helm at Honeywell, then known as AlliedSignal, in the early 1990s, I confronted a variety of challenges, including:

* 51 separate components or fiefdoms, all operating independently and fighting with each other for resources;

* Capital spending running amok among too many projects;

* Declining revenues, escalating expenses, and inadequate resources to fund new product development;

* An overabundance of administrative paper and bureaucracy; and

* Employees concentrating on identifying things that were wrong rather than focusing on corrective measures.

We had a $14 billion company, with plenty of money but no resources -- in other words, all the resources were committed. But I soon discovered AlliedSignal had enormous resources; they were simply nor being applied to our primary mission.

We instilled a sense of urgency from the outset, telling employees the company's very survival depended on everyone changing the ways they thought about the company and how we did business. We all had to become change agents overnight. We had to be comfortable knowing that the full fruits of our labors would not be evident for many years to come. And we insisted that everyone think differently, to question everything they were doing. Most people don't think differently unless encouraged to do so.

It was a difficult mission for us, but one we successfully accomplished. Ten years later, Honeywell is a customer-oriented, $24 billion powerhouse, with the best cost structure in its history and a work force relentlessly dedicated to pursuing growth and productivity.

What contributed to our success? One of the first things we did was set out to transform the company's culture. We focused on executing our plans as flawlessly as possible, instilling accountability at every level of the organization and establishing metrics to measure our progress.

Change can't occur without laser-like accountability and metrics to measure how you are doing. I encourage organizations to measure their financial performance against two-year plans. This facilitates an understanding of what has worked well and what needs improving. And it clarifies those who are delivering against the plan and those who aren't. In my world, if you don't measure it, it doesn't get done.

The key to change on this level is having an execution discipline. Having an execution discipline is about getting the job done, to be sure, but with a broad systematic view -- one that integrates the mission objective with the tools, the metrics, the people, and the processes that will get you there. Quite simply, organizations that can't execute fall by the wayside.

ELEMENTS OF CHANGE

To ensure this approach succeeds, you have to establish operating mechanisms to align behaviors. At Honeywell, we accomplished this by focusing on four elements:

* Prioritizing our spending;

* Approaching goals in terms of entitlements;

* Introducing Six Sigma and digitization as the engines to help create and drive our productivity culture; and

* Linking career development to our productivity mission.

These four elements lead quite logically from one to another. Start with prioritization. Say you've got 20 projects and can't decide which to fund. So you underfund all of them. As a result, everything is delayed and your accomplishments are lessened. That's called the Sprinkle Theory, and it's a colossal drag on American business.

The solution is to prioritize, and to be disciplined about it. You need to get people together and be decisive on funding priorities. Narrow your project lists and then fund the selected ones heavily. It significantly speeds up their completion and more readily ensures their success.

Another important element is to think about goals in terms of entitlements. One thing I've learned in business is that if you tell people what the goal is, they will stretch to reach that target. But goals are merely stepping stones to reaching entitlements, which help to continue to stretch people to the utmost.

Entitlements are what can be attained if everything is executed perfectly. It is a wonderful concept that has elevated and positively impacted the thought processes of our people. A lot of companies are proud of their process improvements, but they fall short because they don't embrace the concept of entitlement.

APPLYING SIX SIGMA

To reach entitlements, you have to apply sophisticated analytical approaches. That takes me to Six Sigma and digitization. At Honeywell, we found that by committing to these approaches, we could significantly increase our productivity across the company. We've generated an estimated $3.5 billion in savings through Six Sigma and digitization methodologies since 1995.

Six Sigma is a measurement that enables us to know how effective we are in eliminating defects and variations from our processes, products, and services. Literally, Six Sigma means 3.1 parts defective per one million. So, if your phone operated at Four Sigma, you would be without phone service more than 54 hours a year. At Six Sigma, you would be without phone service for less than two minutes a year.

Many people mistakenly view Six Sigma as simply a tool or management fad. That's shortsighted. Six Sigma is a discipline that says any process can be continuously improved and made more efficient. And Six Sigma is not just for manufacturing. We pioneered applying Six Sigma to areas outside of manufacturing, like procurement and administrative functions.

Six Sigma is a broad discipline, but it is based on some valuable analytical and quality tools. Some of the basic ones include:

* Process mapping. This uncovers problems and waste in any process, and then compares the ideal workflow with the current processes.

* Another is failure mode and effects analysis. It lets you identify likely process failures, minimize their frequency, and develop better detection of their occurrence.

* Root cause analysis is another. It enables you to develop detailed analysis of the underlying causes of the problems you identified.

* One last tool is design of experiments, which is used to validate your findings and your solutions.

Six Sigma has been successful at Honeywell because we are committed to ensuring it permeates every nook and cranny of the company We make Six Sigma metrics and evaluations part of every business leader's semi-annual management talent reviews. And we require each business and function to make Six Sigma projects part of its annual operating plans and then to report progress. Confirming and institutionalizing or sustaining process improvements is critical to the success of our Six Sigma efforts. We utilize a software package to track project results.

All employees are required to be trained as Six Sigma Green Belts, the first level of Six Sigma proficiency. At the advanced levels, we have more than 100 Master Black Belts and Lean Masters and more than 3,000 Six Sigma Black Belt and Lean Expert resources dispersed throughout the business. All of these require discrete training. We also have programs in place that recognize and reward the accomplishments of Six Sigma leaders and teams from across the company.

WORKING THE WEB

Now let's look at digitization, which also supports our productivity culture. We're working hard to use digitization to eliminate paperwork, streamline our internal services, and become a more Web-based company. We've achieved significant savings by moving more than 90 percent of our employee and retiree service processes to the Web. For example, in less than two years, we moved more than 85 percent of our travel and expense services to a paperless self-service platform on the Web. This has freed up 60 percent of the service staff for redeployment or furlough. In addition, nearly 95 percent of employee 401(k) savings plans transactions are now self-service on the Web. More than 30 percent of employees have access to the savings plan via the Web at home, as well.

When it comes to procurement and supply-chain processes, we are increasingly combining Six Sigma and digitization. We've even created a new Black Belt certification based on advanced proficiency in both.

The key to strategic procurement is information, visibility, and stringent controls. Understanding your purchasing data enables you to identify patterns and commonalities among your supply base. Applying Six Sigma and digitization to this data-intensive analysis makes it exponentially more robust and increases your abilities to consolidate and improve efficiency.

We use Six Sigma and digitization to bring together our customers and supply chains. One of our businesses launched an innovative Web site that enables us to work in real time with our customers and the supply base. The interactive platform integrates materials production planning, just-in-time inventory scheduling, delivery commitments, real-time collaborative design, and the application of Six Sigma tools. It makes the entire customer/supplier process-chain transparent and immediately adaptable.

The last element is linking career development to productivity initiatives. We do this through our commitments to developing people and learning. As I have said many times, at the end of the day, you don't bet on strategies, you bet on people.

When I started with Honeywell, we immediately put into place processes to develop our employees and give them every possible opportunity and tool to learn and grow as professionals. It's a strategy that has earned us many accolades and helped us to increase our retention rates.

We use a company-wide annual process called a Management Resource Review, or MRR, which we align closely with our annual operating and strategic planning processes. Every employee is involved, and the results are integral to each person's individual performance reviews. Remember, leaders should spend 20 percent to 40 percent of their time on people development, including candid appraisals of performance. In order for the MRR process to be successful, leadership needs to conduct the dialogue, lead the decisions, and follow through on agreed-upon actions.

Another key factor in the success of our MRR process is our commitment to being a learning-based organization. We require every employee to have at least 40 hours of learning every year, with participation focused on leading Six Sigma- and digitization-related projects. We insist that individual learning goals be linked to skill gaps uncovered in the appraisal process. And we make sure learning is project-based -- again, typically driven by Six Sigma or digitization. This ensures the employee gets real-world experience that directly affects the company's bottom line and reinforces our productivity culture.

Our commitment to these processes is driven by our belief that employees don't come to work each day to fail. They come to succeed, and they want to succeed. Help your people develop a career path and provide the tools to grow their skills, and you're helping them succeed by creating a positive, rewarding work environment. This has played a vital role in the success of our transformation.

Lawrence A. Bossidy will retire June 30 from his position as chairman and CEO of Honeywell International, Inc. Previously, he helped GE Capital turn itself around. His new book, co-authored with Ram Charan, is Execution: The Discipline of Getting Things Done (Crown Publishers, June 2002). He can be reached at [e-mail].