Overview
Under former General Electric CEO Jack Welch, the quadrants GE awarded most were compete and control: deal-making, cost-cutting and efficiency. They reinforced a culture of continuous improvement. That mindset helped give GE consistent earnings and growth over several decades.
In 2001 CEO Jeff Immelt was announced as Jack Welch's successor. Now in a vastly different business environment, Jeff Immelt is turning GE's culture upside down. He admits to having two fears: that GE will become boring, and the top people might act risk aversive. He worries that the obsession with bottom-line results will make managers shy about taking risks. In order for GE to remain competive in today’s every changing market, Immelt is pushing a cultural revolution. He's on a mission to transform the process-oriented company into a creative machine, driving growth through innovation.
Red (control) Quadrant
The red quadrant emphasizes doing things right. Through GE’s EHS department and Six sigma practice, the company is insuring that the company is compliant and as efficient as possible.
Example 1: Environmental Health & Safety
- Leaders
o GE’s Environmental Health & Safety (EHS) leaders are responsible for ensuring the companies remains compliant with environmental regulations
o Expect 100% EHS compliance wherever GE operates or sells productions
o EHS leaders from each business meet two times each year to discuss programs and priorities and to exchange best practices
- Organization
o EHS leaders are trained in programs to reduced workplace injury and hazard, as well as minimizing GE’s carbon footprint. These tools and processes drive accountability and ensure results.
o EHS has also established global standards to ensure consistency in all GE operations
- Outcomes
o To facilitate compliance with tens of thousands of EHS laws and regulations across the entire range of GE’s operations throughout the world, the company has developed and regularly updates online, web-based modules containing EHS legal requirements in 51 jurisdictions in 13 languages.
o In 2010, GE’s training objectives include focusing, translating, updating and streamlining existing EHS training course content
Example 2: Practice Six Sigma
- Leaders
o Six Sigma is used by all leaders within GE, not simply manufacturing. Francis X. Taylor, CSO, uses applies process improvement methods to minimize security risks.
- Organization
o Six sigma is a philosophy that is part of the GE business culture
o GE practices Six Sigma, which is a process that helps them to achieve near-perfect product and services. The idea behind this process is that is you can measure how many defects you have in a process, you can systematically figure out how to eliminate them.
o Every GE employee is trained in Six Sigma
- Outcomes
o Most employees have at least a Green Belt Certification
o In 1998 GE had $350 million in Six Sigma related savings, this then later grew to over $1 billion in savings
Blue (compete) Quadrant
GE has always been a very blue company, and they have continued this trend. They aim to service their customers while increasing market share and improving the economic value of the company.
Example #1: Mergers & Acquisitions
- Leaders
o Jeffrey Immelt stated, “Two years ago, in the depths of the global economic collapse, I promised that GE would emerge from the recession a better company. We have. Our financial performance is accelerating. We have extended our competitive advantage, while investing in growth.”
- Organization
o GE is the world’s oldest conglomerate
o GE competitive strategy aims expand their portfolio while acquiring other companies in order to grow.
- Outcomes
o GE energy recently announced in March 2011 that it will be acquiring Converteam, a leading provider of electrification and automation equipment and systems
o In the last six months, GE Energy has announced the acquisition of 5 high-tech companies to compliment their business
Example #2: Maximize Shareholder Value
- Leaders
o GE leaders have built shareholder value throughout the years by continuously driving profit and delivering results. In the 2010 annual report, GE’s leadership team confidently states, “Our aim in 2011 and beyond is to continue the progress.”
- Organization
o GE as an organization has financial strength, especially noted in their available capital, which allows them to make the investments to drive the business forward. For example, since they are drastically diversified, when GE capital was performing poorly due to the recession, the company overall did not suffer.
o GE is the industry leaders in numerous businesses
- Outcomes
o Achieved a 15% return on growth in 2010
o 24% shareholder return in 2010
o In 2009, when many other companies were weathering the global recession, GE was able to achieve earnings of $11.2 billion.
o Business week named GE “Best Global Brand” (#4) in 2008 and 2009.
Yellow (Collaborate) Quadrant
GE is heavily yellow in the sense that they believe the investment in human capital will yield organizational success. They are committed to developing their employees, while providing them opportunities to grow within the company.
Example #1: Learning & Development
- Leaders
o Susan Smith, Chief Learning Officer – “If you think about education, it is a fundamental and very deeply rooted part of our corporate culture. We spend about $1 billion a year in training at GE.”
- Organization
o GE has a culture of continuous learning, thoughtfully designed to enable employees to grow their personal capabilities and reach their full potential. They invest in employee education, provide access to experienced colleagues and give opportunities to work with intelligent people.
§ Crotonville Leadership — named after the original location of the executive education center — fosters forward-thinking skills in leaders at all levels.
§ The Functional Skills program provides tools for leading specific functions, from finance and human resources to operations and engineering.
§ Business Knowledge courses enhance employees’ business acumen and their knowledge of GE products and services.
- Outcomes
o GE invests about $1 billion every year on training and education programs for people of GE.
o The results can be measured in the increased leadership capabilities of their employees and ultimately in the value and opportunity generated for their customers and communities.
Example #2: Human Capital Cultivation
- Leaders
o Steve Bertamini, CEO for GE’s Australian & New Zealand Operations – “If a person is promoted or is not performing, we know who the right person is to put in their place. We also track who is ready to move to a different business in order to accelerate their career development. We also drive diversity to ensure we have a strong diverse pipeline of future leaders we are developing at every stage of their career.”
- Organization
o Session C Planning:
§ Talent discussed at all levels, from up and coming executive talent, through to promising new hires.
§ Identify those with the potential to assume greater responsibility in the organization
§ Provide critical development experiences to those that can move into key roles
§ Engage the leadership in supporting the development of high-potential leaders
§ Build a data base that can be used to make better staffing decisions for key jobs
o With a strong focus on leadership, the succession planning process within GE has been developed and refined to an extent probably unmatched by any other organization. At the heart of its succession planning process are its annual “Session C” leadership and organizational talent reviews.
- Outcomes
o 90% of GE’s top 600 leaders are promoted from within
Green (Create) Quadrant
The green quadrant is the one GE is most focused on present day. Their current motto is “Imagination at work”. In the recent years GE has focused primarily on R&D and emerging opportunities outside of the United States.
Example #1: Investment in Research and Development
- Leaders
o Mark Little, Senior Vice President and Director, GE Global Research – “GE Global Research is the hub of technology development for all of GE's businesses. Our scientists and engineers redefine what’s possible, drive growth for our businesses, and find answers to some of the world’s toughest problems.”
- Organization
o GE is committed to investing heavily in technology development. GE-funded research spending was $3.3 billion, $3.1 billion and $3.0 billion in 2009, 2008 and 2007, respectively.
§ GE also has made capital investments totaling more than $335 million since 2001 to expand four global research centers in Niskayuna, New York; Bangalore, India; Shanghai, China; and Munich, Germany.
§ Recently announced a new $100 million Advanced Manufacturing and Software Center in Michigan that will employ some 1,200 employees.
- Outcomes
o Increasing GE’s R&D presence has greatly enhanced the company’s ability to accelerate their growth in the United States and emerging markets around the world.
o With over 20,000 patents filed over the last decade alone, BusinessWeek ranks GE among the world's top 25 inventive companies.
Example #2: Product Innovation in Emerging Markets
- Leaders
o Jeff Immelt, CEO – “The global economy is getting better, but in the near term, consumers in the United States and Europe will be more focused on saving, and the emerging market will be the real engine of growth. As a result, we are poised to launch more new products at more prices than at any time in our history — and we plan to sell these products in every corner of the world.
- Organization
o Geographic regions are part of organization matrix (Business Unit, Function, Region)
o Major businesses headquartered outside of the US (GE Global Operations, GE Healthcare, GE Oil & Gas)
- Outcomes
o In 2010, non-US revenue totaled $80 billion, US revenue totaled $70 billion
o In 2009, US employees totaled 47% while non-US employees totaled 53%
For Mergers and Acquisitions (Blue Quadrant), it seems that GE has slowed down in the number of acquisitions it has made for a company of its size (2011: 11; 2010: 15; 2009: 8). These have been the lowest number of acquisitions in a single year since 1991. Would you attribute this due to the economy, or to the fact that GE simply believes that there are not as many companies out there that would be a good fit for GE?
ReplyDeleteAlso, what is your take on GE selling NBC? Do you think this was a good move, or will GE realize that it was a mistake to sell NBC in the long run?
What's the average tenure of a GE leader? I'd be interested in this, since they spend so much on training. I'm wondering if it's a worthwhile investment based on turnover.
ReplyDeleteNice presentation! It doesn't surprise me that GE used to be very heavily focused on the blue and red quadrants. I think it is smart that now they are transitioning to focus on the green quadrant. As competition is intensifying, bringing new products to the market will help them compete and remain one of the top brands.
ReplyDeleteI was a surprised to learn that they have quite a bit of yellow. I never thought of them for being a company that 'cared' about their people except in the sense of training them for six sigma, etc. I think focusing on their people will help them stay competitive in the future.
How is GE expanding into more environmentally friendly forms of energy? I know that they make windmills, but what other types of alternative energy is the company expanding into and how much of an emphasis is placed upon these forms in their current R&D initiatives?
ReplyDeleteAlso, how is the company doing in emerging markets and is it making a concerted effort to provide affordable/applicable alternatives to the coal and gas centric mindsets that seem so common to these areas? Is it following any government/international mandates in the process?
I wonder if GE's size has anything to do with it struggling and increased effort to be green. It seems as though communication channels would be extremely cluttered and it would be difficult for fresh ideas to reach the leaders who are able to take action. What kind of processes does the company have to encourage and expedite the sharing of new ideas?
ReplyDeleteGE definitely has one of the premier employee development/ training cultures. I would argue that this characteristic of GE would fit between the yellow and blue quadrant. They want to improve employee competencies and skills in order to become more competitive and not to make employees feel good about the organization. From my limited experience interacting with GE, the culture seemed quite serious. Josh, I was wondering what your experience was within your work group for your internship?
ReplyDelete@Adam
ReplyDeleteI think GE is trying to focus on their key industrial businesses because that’s where they see future growth. Over the past 10 years GE went from 13 business units to 5 (6 if you include Corporate) by bringing similar businesses together in an effort to increase sales and cut costs. This was also a move to help shrink the Capital business. If you look at profits 10 years ago, GE was really a manufacturing company masked as a financial services company because the Capital business was so large. The sale of NBC also supports the effort to invest in their core industrial businesses.
@Julie
I think this is a very interesting question, and I do not know the answer. I do know that they are working on initiatives to increase the retention rate of recent leadership program grads because they are often poached by other companies.
@Dave F
Take a look at the link below for all of the juicy details!
http://files.gecompany.com/gecom/citizenship/pdfs/ge_2009_citizenship_report.pdf
@Ben
At the end of my rotation I met with an HR Executive and she asked me what surprised me during my internship. I told her that everyone that I worked with was very nice and willing to help out...a jerk-free atmosphere. She laughed and said that is what everyone says. I think GE employees all have a passion for winning. And because the company is so large you are always working on teams to accomplish tasks. So if you can’t get along with others and play nice in the sandbox then you will not win at GE.
I think Dave Haspas has an interesting point. I would be interested to know how such a mammoth organization can move quickly. I suppose because they are so many diverse markets, they can stay stable in some while trying to innovate in others. I think they may be excessively blue in focus also. They've gotten a lot of bad press lately with their methods of achieving tax breaks.
ReplyDelete@Allison
ReplyDeleteTrying to lower the annual tax bill is as American as apple pie :)I don't know why everyone is so surprised at GE trying to minimize their tax liability. I know I search and justify every last deduction on my 1040. Why should GE or any other company act differently? The executives who run America’s corporations have a fiduciary duty to maximize profit for their shareholders. Lowering the tax liability supports this effort. Check out the article below from the New York Times:
http://www.nytimes.com/2011/04/05/opinion/05nocera.html?_r=1&hp