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  January, 2006
The NEW GE Corporate Culture
by Jim Pinto
 

You've probably heard the story of the 6 blind men and the elephant; everyone touches a part and gives his own description. Well, I couldn't find just one person to describe the General Electric corporate culture. And CEO Jeff Immelt was not available to talk with me - yet. However, I thought you'd enjoy this summary from a recent Business Week article (web link below).

Founded in 1892
General Electric was created with the merger of Edison General Electric Company and Thomson-Houston Electric Company in 1892. Based in Fairfield, Connecticut, GE now has 227,000 employees with $ 260B revenue and market-cap of $ 390B. If GE was a country, it's GDP would rank among the top-30 in the world.

GE operates through 11 segments: Advanced Materials, Commercial Finance, Consumer Finance, Consumer and Industrial, Energy, Equipment and Other Services, Healthcare, Infrastructure, Insurance, NBC Universal, and Transportation. A brief list of GE products would take up another long paragraph, so why bother?


From Jack Welch to Jeff Immelt
Under former CEO Jack Welch (now retired), the skills GE prized most were deal-making, cost-cutting and efficiency. What mattered most was continuous improvement. That mindset helped give GE consistent earnings and growth over several decades.

About 3 years ago CEO Jeff Immelt, then 46, was Jack Welch's anointed 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 like cowards. He worries that the obsession with bottom-line results will make managers shy about taking risks. So he's pushing a cultural revolution. He's on a mission to transform the process-oriented company into a creative machine, driving growth through innovation. He wants to move GE's average organic growth rate (separate from acquisitions) to 8%, from an average of 5% over the past decade.

Transformation
In pushing his new processes, Jeff Immelt is changing many of GE's long cherished traditions and beliefs. Outsiders are being welcomed into the highest ranks - a break with old promote-from-within policies. In sales and marketing alone, GE has hired more than 1,700 new people in the past couple of years, including hundreds of seasoned veterans. And there's a push for a more global workforce to match the areas in which GE operates.

Jeff Immelt is making the need to generate BIG ideas a priority. In true GE style, he's installing a quantifiable and scalable process for coming up with ideas for new businesses. While Jack Welch was best known for his annual planning sessions during which he personally evaluated the performance of GE's top managers, Jeff Immelt's highest-profile new gathering is the Commercial Council. Business leaders must submit at least 3 "Imagination Breakthrough" proposals a year, reviewed by the council and Jeff Immelt himself. The projects must take GE into a new line of business, geographic area, or customer base, and generate incremental growth of at least $100M. The right ideas will get billions in new funding.

For an old company, steeped in the slow ways of Six Sigma, these changes seem scary. Now the demands are for development of strengths in areas that are hard to measure - creativity, strategy, and customer service. Compensation is tied to more than just meeting bottom-line targets; now managers must have the ability to come up with ideas, show improved customer service, generate cash growth, and boost sales. They are being asked to embrace risky ventures, many of which may fail. Risking failure is a badge of honor at GE today.

Re-shaping GE for the Future
While others are worrying about the next quarter, Jeff Immelt is planning years of explosive growth. He's trying to recast GE for decades to come, spending big bucks to create the new infrastructure of innovation, beefing up GE's global research facilities, overhauling the GE research center in Niskayuna, NY, investing in new, cutting-edge R&D centers in Bangalore, India, Shanghai, China and Munich, Germany.

The simple fact is that most of GE's growth will come from outside the US. Jeff Immelt predicts that developing countries will account for 60% of the company's growth in the next 10 years, vs. about 20% for the past decade.

To Jeff Immelt, the best managers are great marketers and not just great operators. Marketing is not just a matter of producing better commercials or catchy slogans - it means getting outside the company to understand markets and customers. Managers must look to lead industries rather than merely follow demand. And they must be leaders who are experts in their business and intensely passionate about what they're doing.

Jeff Immelt wants to shape the new world, drive it, make it his own. For him, reinventing GE is the only way to make his company dominate this century, much as it led the one before. You know what - sure there's the risk that he'll fall flat. But, in the new global environment, I have a strong hunch that this guy's a winner!



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Related Links
www.jimpinto.com
Business Week - The Immelt Revolution
GE chief says company looking to China, Middle East
Read Jack Welch's new book - Winning




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