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Everyone loves GE April 2, 2007

Posted by Brian Mulligan in Consumers, Decline and Death, Growth.
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I remember us talking in class about GE and the numerous business sectors that they’re involved in, so i decided to do a little research about the company. It just intrigued me that the company could still function in some many different industries. I came across this article from CNN Money. It’s named “What makes GE great?” and it explains why GE has been the most admired company for the sixth time in the past decade.

GE has been not a specialist in each sector, but has been the best at creating the best management and strongest organization in the world. Since it’s inception over a 100 years ago, it hasn’t focused on a certain product such as insurance or light bulbs, but fosters strong managerial talent. As time passed the company was at the forefront of corporate policy making, this can been seen with the first corporate R&D lab established and groundbreaking work with labor relations. They battled the creation of labor unions by creating pension plans and profit based bonuses.

They also made the famous “blue books”, which contain detailed guidelines for managers at GE. As the company neared the end of the 20th century they focused on leadership development and strategic planning. It almost makes sense to development strong management when you’re involved in so many different fields of business.

Also, the company is ever-changing and always seems to be one step ahead of its competitors. As we read in class, the addition of the emerging product lines and find what is going to be new hot product has become integral part of the business strategy for GE. Additionally, if something doesn’t work, then GE phases it out immediately and business focus changes with each CEO that comes to company.

“Most people inside GE learn from the past but have a healthy disrespect for history,” says CEO Jeff Immelt. “They have an ability to live in the moment and not be burdened by the past, which is extremely important.”

Trying to stay current learning from their mistakes has made a very dynamic company that is ever-changing. Lastly, GE handles their employees very differently from other companies. They develop them, evaluate them and then act on the results and this has created a very demanding environment. GE give the pink-slip to over 10% of the bottom rung employees each year. You may see this a blunt and heartless, but other companies are jealous of GE’s ability to recognize trouble employees and get rid of them.

I think GE has a very strong coporate structure with perfect management and business ethics. They seem to have it right and do what is necessary to keep this behemoth of a company running smoothly, but it does raise some interesting questions.

Does it make sense to invest money in training and developing of employees and then 10% of your work force? What happens when a CEO pursues a dead end business? Can it potentially destroy the company?

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Comments»

1. Jordi - April 3, 2007

I think some poor editing detracts from this post.

The 10% reduction in the workforce is interesting. DO they just hire back that 10% each year? As you point out, how much is spent on recruiting and training those people? What is the overall employment pciture? Stable? Growing? How often is the 10% recnet hires or people with 5,10,15 years’ experience?

An alternative is that they simply cut the middle managers who are expensive (if still valuable) but didn’t rise high enough in hierarchy to make the decisions baout who to cut.

How do you balance the (to me) apparent contradiction of practice of encouraging talent and developing great managers and workers with the ruthless social darwinism of cutting 10% every year? You don’t know who the 10% are going to be at first (or else you wouldn’t hire them in the first place)? At the same time, the apparent strategy is to develop people, including the 10% you know and announce you will drop?

Different questions emerge from their strategy. What are the specific synergies or advantages from making light bulbs and nuclear reactors. I am not convinced its all about “management.”? Is it simply size? How do they handle coordination costs of such disparate activities?

2. silviamocanu07 - April 10, 2007

I believe it is worth it to invest in good training for the employees, despite the fact that 10% are fired each year, particularly because the company is certain that the 90% left are able to perform their jobs properly and are able to meet the required standards.
Investing in employee training is always a gamble, because the company can not truly be sure of the quality of work that they will produce in the future.

3. Jack - April 10, 2007

GE does not “let go” the bottom 10% of their work force every year. They do rate the employees and develop plans for the bottom 10%, as well as reward the top 5-10%. If the bottom 10% can not improve, then they may be let go. I believe the solid middle are just as important as the top. They are the ones who stick around when top managers rotate to another position and work through all the changes.

4. Jack - April 10, 2007

I’ve work for GE for 14 years. GE does not “let go” the bottom 10% but instead encourages workers rated lower than their peers to improve performance, with specific feedback to those areas that need improvement, or to explore other postions within the organization that may fit their individual skill sets more appropriately. Most who leave the company, do so voluntarily. Getting hired is the challenge.

5. Jordi - April 10, 2007

Jack, Thank you for posting here.

Brian, can you source the 10 getting pink slips? I recall our textbook talking about Welch and personnel policies, ut the details are nto in front of me.


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