Why is the PRESS trying to DESTROY GE?

Why is there a current desire to DESTROY GE?

Before the 'WALL STREET MELTDOWN and the uprising against those who required and begged for Federal Government bailouts and survival packages, General Electric was a global ICON...

GE's GREAT ICON image was a combination of a strong, well managed company with predicable earnings, the largest capitalization, the WELCH deification and a diversified portfolio. I described in one ONE WORD...LATIN.

LATIN summarized the reason that the company not only prospered, but excelled, while its other peer DOW JONES companies disappeared or suffered. LATIN stands for Leadership (no cookie cutters) Adaptability (nothing is sacred) Talent (grow your own) Influencing (Being politically unacceptable) and Networks (meeting realistic expectations).

However since the Wall Street meltdown...GE has been placed in the "Financial services... you can't believe them" category and its stock has dropped to all time lows...

BUT the good news is that the GE management has Adapted...(consistent with the GE tradition) and admitted it made mistakes and is moving in the right direction...

• Jeff Immelt had vowed to reduce its dependence on GE Capital and return it to what is supposed to me...A means to grow the Industrial businesses and not be an END.
• Recognition that GE is a US company with a global presence... he said in the most recent annual report to invest globally, but keep the US operations a center of the global growth.
• A return to the disciplines of sound strategic thinking and decision making and include all of the input, both positive and negative and avoid being SURPRISED.

Jeff Immelt also made a personal commitment. He gave up over $12 million of personal wealth, because it was RIGHT and, even though his personal commitment deserved the incentives, the company stock did not...this is truly unique.

OVERALL.. I personally have a vested interest in GE, since I own GE stock and am a loyal GE alumnus...but I am and have been a strong opponent to the Immelt strategic vision of GO BIG and GO GLOBAL... My book: THE SECRET TO GE's SUCCESS and my continuing blog" GEWATCHER.. have continually challenged the IMMELT strategy and have described, in depth, GE's failures...

BUT.. GE is still the most successful US company and has demonstrated, over 127 years, that it is a winner and able to adapt and conquer change. One of the key elements is STRONG, DEDICATED, COMMITTED LEADERS...and based on what Jeff IMMELT has done and continues to do..I PERSONALLY am committed to continue my personal WEALTH to his leadership...however if I see evidence this is not correct, I will be the first to let you know.

Bill Rothschild, CEO Rothschild Strategies Unlimited LLC.. a personal, boutique that will let you know what is real and what you need to do to win...

GE wants "naysayers"!!!

In his "letter to shareholders" in the 2008 Annual Report: Jeff Immelt states:

"For 2009, we have sharpened our strategic processes and scenario planning. We have increased the frequency and changed the agendas of our operating meetings. Each of our businesses has set up a process to identify the "naysayers" in each of our industries to make sure their voices are heard inside GE. From the top to the bottom and across GE, we must and will listen more critically and respectfully to each other".

I would not use the word "naysayer" to describe what it takes to be a strong, skilled strategy reviewer, but it is clear that GE now recognizes that it is impossible to develop sound, realistic strategies and expectations, without having many points of view.

This is not a new GE situation. In the mid 1970s, Fred Borch, GE's CEO, recognized that his ambitious "go big/ venture" program was failing to provide "profitable earnings" and so he instituted the disciplined strategic thinking and decision making process that helped turn the company around.

Borch conducted a study and found: "In many cases, the operating businesses didn’t do an adequate job of evaluating their markets, customers, and competitors, and they often failed to identify technological and sociopolitical trends and forces that could negatively impact their businesses. The result was that there were too many omissions, miscalculations, and surprises." (excerpt from my book:" The Secret to GE's Success")

GE Instituted Annual Review Systems that included multi-functional professionals, from inside GE, consulting firms and academics. The propose was to challenge the underpinning assumptions and be sure that the best insights and intelligence sources were used in constructing the strategic priorities and execution strategies.

There was a continuing review and monitoring of the key underpinning assumptions to assure that they were wrong, actions could be taken to minimize any negative impacts. The key was to avoid "surprising yourself" and minimize the impact of surprises, if and when they occurred.

Another key element of this system was Admitting Mistakes. "The overriding objective was to ensure that the business units had realistic expectations and weren’t kidding themselves or senior manage­ment. Management had been surprised by all of the ventures, in one way or another, and this had negatively impacted its credibility on Wall Street. The new process was designed to ensure that these surprises were minimized and that promises were met. Once this process was in place, the worst thing that business unit managers could do was surprise senior management. If they did, they were often demoted or even fired" (excerpt from my book: The Secret to GE's Success")

I was fortunate to head up this strategy review and integration process for several years and it is one of my consulting firms most successful services.

I am pleased that GE plans to reinstate this type of review process, so that it will not suffer the consequences of "surprising itself".

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC

Immelt asserts: "GE will always invest to win globally, but this should include a preeminent position in a STRONG U.S."

Jeff Immelt made a strong statement in his 2009 "shareholder letter" which clearly demonstrates that he is in the GE leadership tradition. In my book: THE SECRET TO GE'S SUCCESS and my GEWATCHER blog, I have continually asserted that one of the key reasons that GE is still a strong and vibrant 127 year old company, is that its leaders were willing to admit mistakes and adapt. Jeff continues to adapt, admit mistakes and move on...he calls it "resetting". This is another example of adapting.

This is what Jeff wrote in his shareholder letter:

I have also learned something about my country. I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation.

To this end, we need an educational system that inspires hard work, discipline, and creative thinking. The ability to innovate must be valued again. We must discover new technologies and develop a productive manufacturing base. Our trade deficit is a sign of real weakness and we must reduce our debt to the world. GE will always invest to win globally, but this should include a preeminent position in a strong U.S.

There is no question that some of most talented smartest people became enamored with the "get rich/quickly" opportunities in financial services and haven't used their talents to create new products and services. Hopefully the "Wall Street meltdown" will change this and more students will go to engineering and scientific universities and not business schools. I agree with Jeff that we need to reward real innovation and creativity and not just "creative book keeping".

Bill Rothschild, author of THE SECRET TO GE's SUCCESS and other global best selling books and articles..visit http://www.strategyleader.com/ to learn more.

WINNERS...Set Realistic (even low) Expectations and EXCEED THEM

GE has the ability to do what I tell my clients "create realistic/ even lower" expectations and exceed them.

For the past few years, I believe that GE has created unusually high expectations and has not achieved them. This has contributed to the stock decline and loss of credibility. Now, the company can do the opposite. The "street" doesn't believe that GE can achieve the earnings it promises, but GE asserts it can,

SO...GE can do what it promised and be a perceived as an OVERACHIEVER...if it does, I believe the stock will surge and the GE management will regain the confidence it learns... and the investors will be happy.

A WIN/ WIN/ WIN opportunity...so I hope that Immelt and his team will use this unusual opportunity and be heroes.

Bill Rothschild, author of the only comprehensive, objective and insightful assessment of GE's successes and failures from Edison to Immelt... THE SECRET TO GE's SUCCESS and GE Watcher blog...

Economist's Magazines GE assessment is fair and balanced..but their conclusion is wrong!

My favorite magazine is the ECONOMIST, which calls itself a newspaper. It is my favorite because, unlike other magazines who think that brevity is the key to success, the Economist provides in-depth, comprehensive and in most cases, fair and balanced news, columns and special reports. Its GE analysis in March 21, 2009 edition, entitled: Losing its magic touch demonstrates what I am asserting. The Economist, unlike other publications, gave a good analysis of GE and its problems. Lets review some of the key points the article made about GE:

• "How did GE get itself into a mess that has seen $269 billion wiped off its stock market value since the beginning of 2008? The main reason is that the strategy which helped GE gain its reputation for consistently producing bumper profits, year in and year out, has backfired. At its core was GE Capital. Founded in 1932 as General Electric Contracts Corporation to provide financing that supported the group’s industrial businesses, the operation gradually expanded into other areas of lending unrelated to GE. Under Jack Welch, GE’s chief executive from 1981 to 2001, GE Capital grew rapidly." This is true GE Capital was established as GE Credit Corporation during the great depression to finance dealers inventories and consumer purchases (note this is different than the Economist "facts", but mine are correct).
• "If GE Capital were a bank, it would rank as one of the biggest in America (see chart 1). Its growth has made the division more and more important to its parent’s overall revenues and performance (see chart 2). In 2007 GE Capital’s profit made up 55% of the company’s total. "This is true and even though Jeff Immelt promised to reduce the dependence on GE Capital it didn't happen and the company became addicted to the ability to use GECC earnings to fill the gap and make the numbers.
• "Given the unit’s difficulties, it would be understandable if Mr Immelt wanted to jettison GE Capital as soon as it has been nursed back to health—which may take a while. But he insists he is committed to the business, which he says has strong franchises in areas such as aviation and energy finance, thanks to its close association with GE’s industrial activities." This is also insightful GE's success in aircraft engines was partially a result of GE's financing of the engines and providing operating leases to airlines. This was a successful strategy and should continue, but it doesn't require all of the consumer and commodity type of financing GECC does. These could be separated out and spun off. Possibly using a " tracking stock approach".
• "Mr Immelt, recognising that the world has changed, has placed more emphasis on organic growth since taking office. He has built up the company’s marketing expertise, whereas in Mr Welch’s GE engineers and spreadsheet jockeys were the masters. And he has focused on innovation. Since 2001 GE has invested $330m to expand its research facilities around the world. It spent $4.3 billion on R&D in 2008, up from $2.3 billion in 2002." This is a significant point. Welch focused on short term and not the long term and the company's ability to innovate declined during his tenure. Immelt needed to change the strategy and focus on innovation. In my book: The Secret to GE's SUCCESS" In my book, I entitled this "back to the future" since Immelt has tried to restore what GE once was, namely: innovative. However Jeff combined it with GO BIG (also discussed in the book") and this has become a major problem.
• "So does this mean that GE should be broken up? Assuming the company can revive GE Capital, there might be a case for hanging on to that business even if its margins are squeezed. By refocusing on its original mission, a stripped-down finance unit could help drive sales at GE’s industrial operations by providing finance for large infrastructure projects and other activities." This is key to GE's future success, namely to become more focused, more selective, use the financial arm as a MEANS to grow the other businesses and not an END in itself.
• "Some critics claim that GE’s boss has dented his credibility by making several optimistic predictions that have been quickly proved wrong. For instance, barely a couple of weeks before the company revealed that it had missed its earnings in the first quarter of 2008, Mr Immelt declared that he expected GE to hit its target. In September he denied that the company needed a fresh capital injection. But soon afterwards it announced that it had raised $15 billion from Mr Buffett and others." I totally agree that GE has created unrealistic expectations and has not been able to meet them. In my book, I challenged the company's assertion that it could grow at a 8% organic compounded growth rate, especially if the assumption that it could also grow earnings at the same rate, which had been the case under Welch.
• "Nevertheless the suspicion lingers that GE’s boss has a habit of promising too much. The best way for him to rebuild confidence in his leadership will be to demonstrate that GE can bounce back quickly from its woes. It will require a prodigious feat of managerial wizardry to pull that off." I agree that there has been a tendency to over promise and not deliver...however, it Immelt follows his predecessors he will lead through adversity, admit mistakes and adapt thus making the company even stronger. A review of GE's past (in my book) shows that GE leaders, of which there have only been 10) all faced adversities.
• -Edison picked the wrong technologies but adapted.
• -Swope and Young saw GE revenues drop 75% during the Great Depression,
• -Borch got the company growing again after the Great Electrical Conspiracy
• -Jones managed to overcome hyper inflation and
• -Immelt grew the company successfully and profitably after 9/11.

GE's success has been because of its LEADERSHIP, ADAPTABILITY, TALENT, INFLUENCING PUBLIC ISSUES and CREATING STRONG MANAGEMENT SYSTEMS and NETWORKS...I call this LATIN in my book.

In closing, I believe that the ECONOMIST has done a great job in summarizing what GE is and the key challenges it faces, however I DON'T THINK IT WILL REQUIRE A WIZARD, BUT A RETURN TO SOUND STRATEGIC THINKING AND DECISION MAKING that made the company stronger even in adversity.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS and GE WATCH blog (www.strategyleader.com)

Shareholder versus Stakeholder Value

In a recent FINANCIAL TIMES front page article the issue was raised about who created the Shareholder value concept and its negative impact on US businesses. The author asserted that the concept can be traced to Jack Welch's speech in 1981. Welch asserts that maximizing SHORT TERM profits to enhance Shareholder value, which really means increasing the share price is not a strategy and is not a good thing to do.
I totally agree with JACK that maximizing short term profits to increase the STOCK price is poor management. But in fact, this is what he did and it enhanced the share price.
But this concept of CREATING and MEETING Wall STREET EXPECTATIONS didn't start with JACK, it really started with Fred Borch and enhanced by Reg Jones... Jack two previous predecessors.
It started when GE was involved in PRICE FIXING. Borch took over because GE stock had stopped and Fred recognized it need a jump start. He and Reg, his CFO, decided to create and meet realistic expectations on Wall Street and it was GE that established the now accepted approach of guiding the Street.
GE under Jones mastered this approach and GE stock started to move upward, however Jones also recognized the need to balance all STAKEHOLDER (investors, stockholders, governments, employees, management, unions, communities and others) results, but clearly recognized that it was impossible to satisfy all stakeholders.
Welch elected to focus on shareholders, employees and management and he was successful..but times have changed and these stakeholders are under attack.
The issue facing Immelt and other current CEO's is how to balance the conflicting needs and expectations of all stakeholders and determine which is the right mix and emphasis.

Bill Rothschild, author to the most comprehensive, objective and insightful evaluation of GE's 127 years of successes and failures...THE SECRET TO GE's SUCCESS..

GE should show the world its total portfolio...to regain confidence!

My son, Steve, and I were chatting about the GE situation yesterday and he made a great recommendation. Steve, who is a marketing expert and CEO of a new healthcare information venture, said that people really doesn't know what GE really is and the company needs to have extensive marketing and public relations campaign to explain what the company is and what it's opportunities are.

I believe that Steve is right. GE has become so complex and global that it is unclear what it is. In simple terms, GE is a strategic portfolio led company, with strong positions, globally in energy, health care and many other infrastructure markets that are very likely to benefit from the massive stimulus plans in the United States and China. It has had a strong leadership team and it is not just another financial services company.

In my book, THE SECRET TO GE's SUCCESS, I use the word LATIN to summarize GE's successes. It stands for Leadership, Adaptability, Talent, Influencing and Networks. These five characteristics explain why GE has been able to be successful for over 127 years, and overcome failures and adversity. I believe that GE still has strengths in each of these areas, but the company must be more aggressive in communicating what it is, why it is positioned to be successful for another 100 years.

In short, GE needs to give the world the BIG PICTURE and explain why they should have renewed confidence that the company will be able to overcome its current adversities and be successful for another 127 years.

Bill Rothschild, Rothschild Strategies Unlimited, LLC

Admitting Mistakes is a key to GE's Past success!

Jeff Immelt is truly in the GE Leadership tradition. He has been willing to adapt to reality, rethink his game plan and most of all today...admitted he was responsible for the company's tarnished image. This is in the GE tradition.

In my book, THE SECRET TO GE's SUCCESS, I enumerate a number of situations where the GE leaders were wrong, recognized their mistake and moved on. In fact, the first GE CEO to do this was Edison, who picked the wrong technology, but was willing to admit it and move the company into the winning technology.

I still believe that one of the reasons that GE is in the current situation is that it's GO BIG/ GO GLOBAL strategies were wrong. I strongly believe that GE's strengths have been and will be being selective and focused on markets that they can lead. Unfortunately, this is not possible when you just want to get bigger.

However, the good news is that this may change and the company will again target and win.

I admire Immelt's leadership, dedication and even willingness to invest his own money in GE stock, when others are not and giving up his incentive bonuses ($12 million) when others have not been willing to do so. He is clearly dedicated to GE and hopefully the current crisis will be a positive and not a negative. He believes that the crisis provides opportunities and I agree, but it will require both taking risks and doing the required surgery.

I believe that the GE stock has been unfairly hammered because the company has been equated with many mismanaged banks and financial services company. GE is well managed and still has over 55% of its revenues and even more of its profits in businesses that will benefit from the current "stimulus plans" and the desire to invest in infrastructure, electrical generation, healthcare and many other key industries.

Investors and analysts should look at the total picture and give GE its just stock value. It should be trading at 15 times earnings and not 5. It credit rating should be retained since it is still profitable and doing what is necessary to assure it is liquid. Overall, GE should be viewed objectively and not emotionally.

Bill Rothschild, author of five strategic leadership books, many articles and blogs...visit http://www.strategyleader.com/

IT AMAZES ME...that current LEADERS don't meet promised EXPECTATIONS...

In my entire career as a senior executive at GE and my 25 years plus years as strategic consultant, I always told my clients that it is critical to NEVER PROMISE what you can't deliver.
Unfortunately, this message has been lost on the current generation of "leader?", in business, in the government and in even in religion.
Surely, the BUSH administration didn't do what they promised and it helped create the MESS we are now in.
But my most disappointing, even amazed, situation is in General Electric. A review of GE's past showed that the company failed to meet the PROMISED EXPECTATION, but learned from its mistakes and since the latter years of BORCH, and the JONES and WELCH eras... GE could be counted on to do "what it said".
IMMELT has now violated this THREE TIMES in the past year.
Last January... he asserted, without hestitation... that GE would make its promised numbers.. but a month later GE failed to meet the promises.
Just a few months ago IMMELT promised that GE would continue to provide the dividends for 2009 and that it would maintain its AAA rating.
Today.. it reduced its dividend 68%... and it is clear that its AAA rating will be reduced.

I am not sure what the CURRENT GENERATION of SO CALLED LEADERS... didn't learn that it vital to DO WHAT YOU SAY and ALWAYS MEET THE EXPECTATIONS THEY CREATED.

WHY HAS THIS HAPPENED?

I am disappointed and amazed and hope that at some point in time that the CURRENT LEADERS??? will recognize that REAL LEADERS CREATE AND MEET REALISTIC EXPECTATIONS...

Bill Rothschild, author of the only comprehensive, objective review of GE's 127 years and the author GEWatcher and StrategyReview blogs...both on www.strategyleader.com

IT AMAZES ME...

In the GE SUCCESS TRADITION...

I was privilege to attend a meeting at which GE's CEO, JEFF IMMELT talked about the challenges facing the world and GE today and I was impressed by his insights and sense of reality. Jeff described the challenges we all know about the economy and added a few personal insights, as well as the issues he has had to deal with.

I listened to his insights and decisions and came a way with a strong feeling that Jeff is a TRUE LEADER in the GE TRADITION and is trying to ADAPT to the dynamics and complexity facing us all, but most of a $ 187 Billion, global conglomerate.

As a GE investor, though I am shocked and discouraged with the low GE price and EPS, I am willing to accept that Jeff and his team are in control, know what is happening and convinced that the company is 'SECURE", a word he used several times.

I still have concerns about many of the elements of Jeff's strategies and vision, but not about his dedication, abilities and willingness to face reality and make the best decisions possible. I wish I could say the same about those making decisions in Washington about spending the biggest "money throwing" event in the history of the world.

If I made investment decisions, I would bet on the IMMELT team to keep the ship on course and viable...

Bill Rothschild..author of the best case history on what makes a company successful, THE SECRET TO GE's SUCCESS.... now in six languages and on Kindle...

ADAPTING AND REINVENTING GE- A Secret to GE's Success.

In a recent speech Jeff Immelt, current GE CEO, explained that the key to surviving and even prospering in a Crisis situation is ADAPTING.. This is consistent with GE's remarkable ability to reinvent itself over its 127 years.

Each of the GE's leaders was challenged in different ways, but learned from their challenges and moved the company in a new and exciting direction.

In my latest book “The Secret of GE’s Success” I describe how GE has resisted what I call: cookie cutter succession planning.

GE has had only ten CEOs in its 126 years, with a range of six to twenty year reigns. Remarkably each have been different and have leaders who were very different and were able and willing to ADAPT to change.

Charles Coffin succeeded Thomas Edison when Edison GE merged with Thomson Houston. Coffin was a very gentlemanly executive who was able to integrate these two different companies and their cultures, while developing highly positive relations with customers. He was faced with leading the company out of the Panic of 1893, a major depression. He negotiated with JP Morgan to take over the company’s equity position in the emerging electric utilities and installed the GE conservative financial systems.

Swope and Young had to lead the company both during the highly prosperous periods of the roaring twenties and the great depression. These unique individuals also played a major role in influencing social and economic policies and encouraging the unionization of the company at a period of major labor unrest and violence. Further they instituted a consultative management approach to the company that was highly unique at the time.

Cordiner institutionalized management and took strong stands against Big Government and Big Labor, as well as contributing to political conversion of Ronald Reagan. Unfortunately his achievements were darkened by the great electrical conspiracy and his inability to select his personal choice as successor.

Borch was faced with the challenge of moving the company ahead after the price fixing scandal and instituted one of the most risky and challenging new venture program ever. He moved the company in services, including financial services as well as several high tech ventures. To his credit, Borch recognized he had miscalculated the ability of the company to undertake and lead all of these ventures simultaneously and instituted the portfolio leadership systems that have enabled the company to continue deal with diversity and change.

Jones was a financial leader that used the portfolio management approaches to grow both revenues and earnings in a predictable way that calmed the concerns of Wall Street and positioned the company to move its stock upward.

Welch was a completely different type of leader than Jones. For over twenty years he was able to grow the company, prune its portfolio and make it a financial services giant, while continuing to grow some of the traditional businesses. He became a celebrity CEO and GE and Welch were viewed as one and the same.

Again when Welch left he selected an individual with different styles and visions. Jeff Immelt was faced with the challenges of succeeding a legend, keeping the company’s stock high, maintaining the triple A rating and initiating changes in a maturing portfolio of businesses. Further he was faced, four days into his tenure, with the aftermath of September 11, and the fact that the company not only lost employees in the World Trade buildings, but one of its leased aircraft and a stock that feel rapidly and has not regained the levels it had prior to 9/11.

In short, GE has had the unique ability to select CEOs who could lead for long periods, were not inhibited by the past and could adapt to change. I am pleased that Immelt is following his predecessors and wish him success in doing as well as they did.

Bill Rothschild, author of four vital Strategic leadership books.

Strategy is for the HEALTHY...not the sick or dying.

During my career, both as GE's Corporate Strategist and in my more than 26 years as a consultant, I have emphasized the need to do strategic thinking and decision making, when the organization is healthy and has options, and not when it is very sick, in the intensive care ward or dying.

The recent, shocking collapse of the automobile and financial services industries, prove that it is impossible to develop viable options when the patients are in emergency surgery. It amazes me that the so called "leaders" of giant, prestigious companies, like GM, Ford, Citicorp, Merrill...could have been so surprised by the decline and fall of their markets. They fell into the GO BIG/ GO GLOBAL trap and tried to be all things to all people and do "creative packaging and book keeping" to grow market share. Unfortunately this has proven to be a global phenomena and not just an American problem.

I became involved in learning and practicing the art of strategic thinking in the early 1970s when GE's CEO Fred Borch recognized, that he had tried to do too much too soon and it negatively impacted GE's profitability and threatened its future.

Mr. Borch admitted he made a mistake and became the advocate of the principles of strategic portfolio leadership and management. GE was willing to challenge everything and everyone and focus on areas where GE could win.This enabled the company to prosper. Unfortunately, even GE, has become a victim of the GO BIG and GO GLOBAL mystique...but at least the company still has a strong portfolio and has options. It still makes money and hasn't lost billions and forced to ask for government handouts.

Hopefully it will turnaround its stock and credibility decline, learn from the past and re institute the sound strategic thinking and decision making skills that it had in the past.In summary, I hope that we all learn from this current malaise and re institute the disciplines of sound strategic thinking and decision making.

If you want to learn more read Putting It All Together- a guide to strategic thinking decision making..available on http://www.strategyleader.com/.Bill Rothschild, Rothschild Strategies Unlimited LLC

CONVERSION OF RONALD REAGAN...THE GE INFLUENC

Only one company can make the claim that one of their employees became president of the United States, and even more assert that they changed this individual political philosophy. The company is General Electric

In my latest book: The Secret to GE’s Success, I describe how and why Ronald Reagan converted from being a liberal, union loving Democrat to a highly conservative Republican.

Ronald Reagan was hired by GE to host the very popular GE Theater, as well as to become the company spokesman. Reagan toured all of the GE plants and addressed GE employees at all levels. He worked for Lemuel Boulware, who was the architect of an anti-big government / anti- big labor strategy and policy that became known as Boulwarism.

The underpinning of this employee and community relations philosophy and strategy was that Big Government and Big Labor, independently and in an alliance, were dedicated to take away management’s rights and make the company a socialist state. Even though GE had been pro-labor and pro-government in the pre-war years, under Gerard Swope and Owen Young, the GE leadership, under Wilson and then Cordiner took the opposite view.

Under Boulwarism, GE management studied the needs of the employees and communities and balanced them with needs of the company to be competitive and profitable and decided on “fair but balanced” offer prior to the union negotiations. They presented the offer before the union talks and were willing to take a strike, rather than do was not right for all of the major stakeholders. Further they told the communities that if they could not operate effectively and profitably in the current locations they were ready and willing to move their production to more company, non union, locations. Obviously, these practices were not popular with the unions, the government and the traditional GE communities, but GE did what it said and divided and conquered the unions.

Reagan, though he wrote his own speeches, became a missionary for Boulwarism and he ultimately concluded that the message was right and so he changed his own socio/political philosophies. This conversion led to his running and winning the office of Governor of California and then the US Presidency.

Bill Rothschild...author of "the Strategic LEADERSHIP Library"

SHARING THE DEPRESSION BURDEN---GE STYLE

One of the reasons that GE was so successful was the LEADERSHIP of Gerard Swope and Owen Young during the depression... this is an excerpt from my latest book: THE SECRET TO GE's SUCCESS...
"In 1929, the stock market collapsed and the world suffered the greatest economic depression in modern times. As noted, GE's revenues dropped more than 75% during the period. In comparison to many of its peers, who instituted sweeping layoffs---and in many cases put skilled and loyal employees out on the street--Swope and Yound were both more compassionate and more pragmatic. They recognized that if they wanted to keep talented people, they would have to take steps to minimize the Depression's impact on them.
Three programs were introduced:

1. Unemployment benefits. GE provided loans and relief to those workers the company could not continue to employ.


2. Guaranteed work program. GE's electric lamp business allowed workers to share the pain. Instead of just laying off 20% of the workforce, it instituted a program to allow employees to reduce their work hours from five to four days. Because each worker took a 20% reduction in pay, the program permitted GE to keep everyone employed.


3. Profit sharing in the 1930's. Another important innovation of the Swope/Young era was the introduction, in 1930, of a profit-sharing plan. This was unique in several ways. First it was offered at a time when many companies were having trouble simply surviving. Second, it was offered to all employees, regardless of their position in the company. Again, this plan was consistent with the socialistic philosophies held by Swope and supported by Young."

Read the entire story of the genius of Swope and Young---models of REAL LEADERS from which today's CEOs could learn...especially GE management..

Bill Rothschild, author of COMPLETE STRATEGIC LEADERSHIP LIBRARY...

ADMITTING TO MISTAKES AND MOVE ON...

One of the continuing fatal flaws of many executives in the business, public and religious sectors is that they appear to be incapable of admitting they made a mistake. In fact, many of them make matters worse, sometimes fatal, by trying to cover up the mistakes or looking for scapegoats.

My latest book “ The Secret to GE’s Success” demonstrates how GE leaders from the inception of the company in most cases, have avoided this problem by admitting that they made a mistake, taking responsibility and moving on, hopefully trying to avoid repeating the mistake in the future.

Edison made the first, almost deadly mistake, of selecting the wrong way of generating and distributing electricity. He selected the direct current approach (DC) while his adversary and the rest of the industry selected alternating current (AC). Recognizing his error, he at first tried to discredit the competitive approach, but when it was clear he was wrong, he moved aside and allowed others to merge his company with Thomson Houston, which held second place in the alternating current market. The new company became even stronger and was gifted with innovative and strong management. If Edison didn’t admit he was wrong, GE would never have been able to survive.

But GE management was not always willing to admit its mistakes and resulted in a major set back. GE unfortunately was not as forthcoming in the late1950’s when it was accused of price fixing and instead of admitting the mistake it adopted its own version of “Watergate” which forced the company to abort its planned succession plan, slowed its growth and negated its historically strong relationships with the electric utility executives.

For three years GE’s revenues leveled at $5 billion and it forced the new CEO, Fred Borch to pursue nine major new ventures simultaneously, covering a wide spectrum of product and services growth opportunities. Because of a series of miscalculations and wishful thinking five of the nine ventures failed and even the four successful ventures took longer to yield positive results than anticipated.

To Borch’s credit, he recognized his mistakes and took corrective actions, which led to the installation of a very successful strategic portfolio leadership system and philosophy. The failed ventures were aborted and the limited financial and manpower resources focused on the winners. This lead to a very thorough and continuing assessment of all the key businesses and the ability to anticipate the need to change before it was necessary.

The Welch era continued to practice this “nothing is sacred” leadership style and to take calculated risks, but also willing and able to admit mistakes and move on.

However, the current GE leader and his team appear to be reluctant to admit that their GO BIG/ GO GLOBAL strategy needs to be challenged and adapted to meet the changing world. Immelt is vowed and determined to continue to invest globally and is highly dependent on government business to be successful. This is okay, but it is a challenge to develop and sustain strong relationships with governments, many of who are in a crisis mode.

Bill Rothschild, author of the ONLY comprehensive, objective and insightful assessment of GE's successes and failures, THE SECRET TO GE's SUCCESS.

AN IMMELT OPTION- SPIN OFF GE CAPITAL and ADAPT TO REALITY!

Every day, as a stockholder who has a significant amount of my personal wealth in GE and also a loyal GE alumni, I watch the GE stock decline, that appears to be both a victim of POOR MANAGEMENT and the overall depression of the DOW.

Since I have written my book THE SECRET OF GE's SUCCESS, that provided an objective and insightful view of GE from its beginning to 2007, I am amazed at the decline and fall of the GE stock, the threat of losing its AAA rating (one of the prides of the company) and even the possibility of the decline or loss of the 100 year plus dividend.

I could take pride in "I told you so"..which I did in my book, but I am deeply concerned about the real GE stakeholders, the investors, employees and retirees, who have continued to believe the ability of GE management to their job, first of which to protect these valuable stakeholders., but this is not my message.

GE leadership starting with JEFF and his dream team, must be willing to do what his predecessor did and recognize mistakes and accept reality. This means that they must STOP GOING BIG..and start the necessary SURGERY.

(Note.. I call Immelt's team the dream team because in my book that GE replaced sound strategic thinking education with "dream sessions" which in my day was called creative thinking and later christened "out of the box thinking". Unfortunately I believe that MOST of our problems today is that too many people GOT OUT OF THE BOX and were not objective and face reality"

The first surgery must be done on GETTING RID OF GE CAPITAL... this should be separated from the company and made a separate BANK HOLDING COMPANY. This will allow the investment community to separate GE from the BIG BANK LOSERS.

Next, the company should do a complete and comprehensive STRATEGIC PORTFOLIO evaluation, which was the heart and soul of the REG JONES strategic thinking and decision process... it short, it must do what REG JONES and JACK WELCH did, perform skillful and profitable surgery...but it should establish a time line to assure that GE sells everything at the PEAK of its value, like WELCH did, and not make it a fire sale.

Finally, Immelt must re-establish the critical thinking and evaluations of the FINANCIAL and STRATEGIC AUDIT people.. is short reward and not kill the "messengers with the bad news".

I have many other recommendations to the IMMELT team and the GE board...but this is enough for now... in short, GE must return to the policies and practices that allowed it to, not only survive, but prosper during its 127 years and not be like their competitors (Westinghouse, RCA and so on, who are now only footnotes in business history...

LEARN FROM THE PAST SUCCESSES AND FAILURES..is the message of my book and my recommendation to the IMMELT team

Bill Rothschild, author of the only comprehensive and objective assessment of GE's successes and failure, now in six language and a world best seller...THE SECRET TO GE's SUCCESS..or as I wanted to call it BREAKING THE GE CODE..

Firing IMMELT is not the answer.

No one, even me, would have anticipated, that GE stock would be below 15 and even worse at 11.50. Many are panicking and are calls for the remove of JEFF IMMELT. I don't think this is the answer... it is like believing that OBAMA can do a better job than Bush.

There is no question that IMMELT and HIS DREAM TEAM.. probably selected the WRONG GO BIG/ GO GLOBAL strategy and continued to rely on GE Capital to MAKE THE NUMBERS. But I strongly believe that IMMELT had to change the Welch HARVEST/ GE CAPITAL strategy and try an regain some of the past GE INNOVATION successes.

In my book, I concluded that the IMMELT GO BIG strategy was vulnerable to two major issues.

• First was the fact that he had created UNREALISTIC EXPECTATIONS and had to DELIVER WHAT HE PROMISED EVERY TIME and in January 2008 he didn't and his CREDIBILITY COLLAPSED...then was the FINANCIAL and ECONOMIC meltdown which negatively impacted the WELCH dependence on GE CAPITAL to meet the numbers.
• Second, was the fact that "everything takes longer than expected". Immelt has bet on MAJOR, LONG CYCLE opportunities globally and even if he is right, which I think he is, electric power systems, health care, ecological products, will take time to develop.
  
  If IMMELT and his DREAM TEAM returns to SOUND STRATEGIC THINKING AND DECISION MAKING and MEET THE EXPECTATIONS HE HAS CREATED...the company will move ahead and gradually become a WINNER FOR ALL KEY STAKEHOLDERS...I AM BETTING HE WILL!!
  
  But if he doesn't adapt...admit mistakes... it not clear who will take over and do even as good a job...Bring in an OUTSIDER will make things even worse...
  
  SO LET US ALL HOPE AND PRAY THAT JEFF AND HIS TEAM WILL DO THE JOB..
  
  Bill Rothschild, author of the only objective and comprehensive assessment of GE successes and failures, the MC GRAW-HILL BOOK THE SECRET TO GE SUCCESS.

GO BIG, ONE STOP SHOPPING NEVER WORK..LEARN FROM HISTORY..

It is interesting that many of the BIG companies never learn from history. Over the past six months many of the GO BIG companies who thought that if they had ONE STOP SHOPPING and would satisfy ALL NEEDS have either gone bankrupt or been taken over by others. For instance the Sandy WEIL dream of one stop shopping and being global has failed. This was similar to the fate of Merrill another GO BIG player who is now part of another company BANK OF AMERICA who has merged the COUNTRYWIDE and MERRILL to do the same thing that caused Citi to fail..namely trying to be all things to all people.

Two decades ago, SEARS was the leading retailer in the world...but it decided to become a ONE STOP financial services company, integrating insurance (ALL STATE which it owned) with a real estate and mortgage company AND it not only lost its retail leadership but was forced to sell off the financial service assets.

The story is not just reserved to financial services. General Motors is another failed example of being "all things to all people" and we can find examples in all industries.

So why do companies not learn...why can't they learn that it is STRATEGIC SELECTIVITY AND FOCUS that makes winners and the GO BIG is never the answer.

Bill Rothschild, author of five best selling strategic leadership books..including the most recent THE SECRET TO GE's SUCCESS, which enable leaders to be focused and selective.

CRISIS LEADERSHIP...what the UNITED STATES NEEDS TODAY..and isn't getting it.

Crisis Leadership
Whether we like it or not, the United States in a crisis… and it is just not a financial crisis.
This is good and bad news.
Obviously, the bad news is obvious… the financial markets are in turmoil. Companies and individuals are overly leveraged, companies can’t get credit, individuals are max-ed out on their credit cards and many are losing their homes.
But there is good news….the United States is a CRISIS society and only takes constructive, difficult actions when it is in crisis.
Let me explain
1. Why the crisis is more than what is happening on Wall Street and in housing.
2. How we have responded constructively to past crises and hopeful can respond to this one.
3. What type of strategic leaders we need and some of the actions required.
More than Wall Street and Housing
With the advent of television and cable there have been more coverage of the financial market and so the rise or fall of stock prices has been be the surrogate for the US economy. When the markets are going up, as they have been over the past five years, everyone thinks the economy is good and you should continue to spend. When markets decline, as they have been in the past few months, the "gloom and doomers" appear and everyone begins to worry.
But in recent months, the housing bubble has deflated, sub-prime mortgages have caused most the key financial firms to write off billions, take enormous losses, get funded by “foreign governments, billionaires”merge, change their legal status and even go out of business. Commercial and private foreclosures and deflates have increased and people are often walking away and are unable to pay.

So now there is panic and all of the politicians want to save us by “quick fixes”.
But it is just not these problems that are putting us in a crisis situation.
Our infrastructure has been “harvested” or milked and are not able to sustain their simple needs of people to commute to work, fly and even heat and light their homes. There is grid lock in major cities on its highways, airports are reporting more “near misses”, when it rains the electricity goes out, the railroads are almost non-existent and not a major factor in providing transportation or shipping. We could enumerate more problems in health care, education, water and flood control. In short, we have a “third world infrastructure”.

But it is worse, we have become a debtor nation. Our balance of trade, weak dollar has enabled China, Dubai, Saudi Arabia to make major acquisitions of United States company and technologies. We have exported our manufacturing jobs and have become a service economy. Individuals are max-ed out their credit and can hardly afford to live. We have also decreased our security and ability to respond if attacked.

Students are graduating from our colleges heavily in debt and unable to find jobs that can allow them to pay their loans. The quality and rigidity of the educational system has declined. Some students can’t write, others have no idea of what is happening in the world. Colleges often have no classes on Friday and the students take a minimum work load.

More examples could be furnished but it is fair to say that there is a crisis is all phases of the United States economy and it is not just one problem, but the combination of these problems that put us in crisis.
TOO MANY RISKTAKER/CARETAKES AND NOT ENOUGH SURGEONS.
Risktaking and Caretaking Presidents
Since the end of the Second World War, the United States presidents have been either risk taker or caretakers… none, have been surgeons, and though the country has been harvested and there have not been any undertakers…yet.
Let’s take a look at the situations that each of these president’s faced and their style of leadership.
· Roosevelt--- inherited a country in crisis… the depression required taking major risks to jump start the economy. His first act was to close all of the banks… move the country to a more socialistic than capitalistic situation. He took enormous risks in helping England survive and some even believe the was willing to let the Japanese bomb Pearl Harbor to get the country into the war.
· Truman… the risk taker of all time…he bet on dropping the bomb…even though he had very little insight in how it would work out…
· Eisenhower was the caretaker of all time… he just let the world happen… no waves..
· Kennedy… not in time long enough to really classify… he was a risk taker when he tried to invade Cuba, but lacked the courage to see if it would work… he took a major risk with Russia and they backed down…so he was more of a risk taker than a caretaker.
· Nixon…was a risk taker, but his personality negated what he was able to do.
· Carter…was a true caretaker and a micro manager…
· Reagan was a risk taker.. and was able to create an economic evolution and the creation of a CULT.
· Father George BUSH was a caretaker… really doesn’t do much. His invasion and quick retreat of Iraq demonstrated this.
· Clinton the typical caretaker… was willing to change to fit the popular reaction.
· Bush W.. was a risk taker…but didn’t really understand the risk he was taking and surrounded himself with individuals that supported a “hawkish, foreign policy.
Crisis Leaders… but the United States has had other major crises in the past and has had a few leaders able to rise to the occasion. Let’s review a few.
· Civil War was our greatest crisis. When Lincoln took office, South Carolina split from the union and the Confederacy was formed. The bloodiest, “brother against brother”, family against family war ensued and Lincoln had to take actions that didn’t even have the support of those in the Union. His great talent was to be able to work with both friends and advocates and keep the country afloat.. a remarkable accomplishment, which should be imitated by leaders today.
· Great Depression… In the 1920’s the United States experienced many of the same blessings as it has in the 1980- 1990 period. There was affluence. People lived well and most of them lived over their heads and were speculators. Towards the end of the period there were signs that the “the good life” was in jeopardy…but the “if it isn’t broke…don’t fix it” mentality ruled and even though Hoover proposed programs they were rejected. It took the collapse of Wall Street to force changes and it was very painful. Roosevelt seized control and the government took over. NRA, WPA and other alphabet programs were introduced and people just tried to survive.
· World War II--- again prior to the “bombing of Pearl Harbor” the UNITED STATES wanted to pretend that the aggression of Hitler and Japan were not their problem, but the bombing again changed everything and the country again gave away its individual rights for the national interest. There was rationing, blackouts and a draft…
· Sputnik was another major event that changed the United States. The ability of the Russians to put a man in space and our inability to do so, enabled Kennedy to get people to honor his famous words: ‘ask not what the country can do for you, but what you can do for the country”… the space program has significantly contributed to our stand of living and given us many of the products that we now enjoy, like cellular, micro-electronics, new materials etc.
· The September 11th attack is another example…but this one is still unfolding so it is too early to see if has really changed us.
The message is that when the United States has been forced to make major changes and to focus on what is good for the nation and not their own selfish interests. The country has been ready, able and willing to make these changes and we have had the resources and leadership to pull it off.
But in each and every case, the country has refused to accept the reality of change before it happened and then has been forced to move rapidly.
Fortunately it has worked.
EVERYONE WANTS CHANGE.
We are now in a prolonged primary period in which we have had to listen to hopeful “presidents” tell us that we need to change. Some say “Washington is broken”, others say that we need to Spend MORE…others say we need to spend less…but none of the messages are really significantly different than we have been.
We have now have a “house of lords” called the Senate, consisting of long tenure, complacent individuals, many of whom have been in office for over 20 years. These individuals are more interested giving “pork” to their constituents, so that they can stay in office, than really making major changes and they have no term limits.

The House of Representatives are continually running for office and they appear more interested in “getting their unfair” piece of the government funds to keep their constituents happy and willing to provide them with the funds to get re-elected.
The nation is totally divided. There are racial, ethnic, economic, social advocacy groups that all want their way and the lobbyists, populated by ex-government officials and former elected officials to get represent vested interests.
In short, we have constructed a government that is only viable if the country is infinitely wealthy and has not really deficiencies. It is like the government of the Roman, Greek and other empires that all declined and fell because they lived in a “glass palace”.
SO WHAT?
These are the two words have applied in all of my professional career. Is there a solution?
I think there is a solution but it will be painful and must be executed now.
The first solution is to change the type of leaders we have now. I think that we have a government of too many “caretakers”, who are more concerned with the status quo and their own personal needs and wants. Note: the word…too many… I am not saying that we don’t have some of the right type of leaders, but if we do they are a small minority and not the majority.
Right Leaders for the Right TIME and SITUATION.
In my 1993 book Risktaker. Caretaker, Surgeon, Undertaker- the four faces of strategic leadership, I classify leaders into four types and describe their characteristics. This is a summary of each of the leadership characteristics and its relationship to the life cycle of the organization.

· Risk takers are most appropriate for start up situations. These individuals are missionaries, intuitive, dynamic and excellent communicators. They have a mission and are willing to bet their lives on making them happen. They are revolutionary.
· Caretakers are more cautious, managerial and tied to evolutionary rather than revolutionary changes.
· Surgeons are required when an organization is in trouble and needs restructuring. These leaders are willing to challenge the statusquo and folklore and hold NOTHING SACRED…everything and everyone is challenged and subject to being divested or liquidated.
· Undertakers are those able to take an organization and either wind it down or divest or merge it with another more viable organization.
The names are not critical, but what is critical is that there are NO LEADERS FOR ALL TIMES and that if you put the wrong leader in the wrong situation they will fail.
WANTED—Surgeon Leaders.
The United States now need leaders in the Executive and Legislative branches that are willing to take actions that will set priorities and allocate the resources consistent with the priorities, they are SELECTIVE and not “all things to all people”.
This means that they are willing TO CUT programs, Be POLITICALLY INCORRECT and recognize that they will antagonize some of the their constituents and even other nations.
· “NOTHING and NO ONE is SACRED”- The country leaders, including the President, his administration and Congress must be will to step back and evaluate all of the country needs and requirements and not make anything or anyone sacred.
· Set Priorities and Allocate Resources- Using a clear set of viable criteria the leaders must do an OBJECTIVE evaluation and set priorities and then be willing to communicate what needs to be done and what can’t be done… this means being POLITICALLY INCORRECT is needed.
· DO what they SAY…this is the essence of strategic leadership. Strategy is what you do and not what you say. Unfortunately, this will take a major change in the “political mindset”..where it is common to say one thing and do something else.
· LINE ITEM VETO- The president must be able to cut out the pork and not permit the valuable and needed programs to be surrounded by politically motivated, non-productive waste full pork.
· BALANCED BUDGET. Willingness to live in our means and not just continue to add to the debt… this means that there must be a CONSTITUTIONAL BALANCED BUDGET and no exceptions. If programs are increased in one area, others must be decreased or more revenues must be generated.
· TERM LIMITS FOR EVERYONE- Time limits on all members of government. Roosevelt made it clear that there must be time limits on the Presidency and so we have a two term president. But the Senate have become the House of Lords and a long tenure group of “too comfortable” and too Powerful individuals. If it make sense for two terms for the PRESIDENT, why doesn’t make sense for the Senate. The House members terms should be extended to four years and they two must only be able to serve for two terms.
· STOP FINANCING OUR ENEMIES. Stop all FOREIGN aid and examine where it should go. Don’t give money to our enemies or to those who are wealthier than we are. We can’t buy friendship and these funds should be used to solve real problems and be time limited. No annuities that go on and on and are actually used to undermine their purpose.
· NO MORE POLICEMAN AND MISSIONARY- Moving from the policeman and “democratic” missionaries to willing to allow other countries to manage their own countries and select the best form of government for them and not what may work of us. This also means a reality test on whether democracy is really working here. It is only partially working.
IMPOSSIBLE DREAM??
Reading this list of requirements may make you think that I am totally Nave and it is impossible to get these type of changes. After all, the current systems and policies protect the incumbents in government and allow them to get enough “pork” to keep them in office. There are too many and strong lobbyists who have created one of the only growth industries in the United States. There is a great fear of not giving away money to all nations even to our enemy since the country is already unpopular.
So, on the surface it is impossible and the current policies and practices will continue UNTIL THERE IS A REAL CRISIS. The crisis is likely to take the form of major recession, combined with massive unemployment and even some form of the “bread lines of the Great Depression”.
In conclusion… the United States must recognize its world role is changing and it must focus on being a little more self centered and not try to be the policeman and democracy missionary of the world. If it doesn’t it will just become another “historical” empire who self destructed because it lived in a “fairyland” and not in a real, changing and highly competitive world.

Bill Rothschild, author of THE SECRET TO GE’s SUCCESS and RISKTAKER, CARETAKER, SURGEON, UNDERTAKER- the four faces of strategic leadership.

Everyone must admit that BERNIE MADOFF should receive an award for being the MARKETING GENIUS of the past twenty years.

Everyone must admit that BERNIE MADOFF should receive an award for being the MARKETING GENIUS of the past twenty years.



Of course, we all admit he may have been the biggest crook in all of history...but I would like to discuss what Bernie did that could be put to POSITIVE practices.



First Bernie understood segmentation. He targeted primarily the Jewish wealthy and charities. Based on what is published these were his chosen people. I am a strong believe in targeting and focusing on a specific segment. This might be based on gender, affluence or wealth...Bernie targeted both affluence and religion.



Second, he created a "myth" of exclusivity. He didn't accept anyone and even rejected some of his applicants...this made his myth even strong... it was the "exclusive country club" mentality.



Third, he didn't hire a large sales force, but permitted his sales force to belong and then use their Missionary zeal to convert others. Many of his missionaries lost all they had, but believed in Bernie.



Fourth, the created HIGH EXPECTATIONS and MET THEM. His returns were high and consistent.



Overall BERNIE MADOFF was the living image of the RELATIONSHIP, ENTREPRENEURIAL salesman.



He did a great job... but unfortunately it was ALL A LIE.If we ignore Madoff's dishonesty... he exhibited the essence of a RELATIONSHIP Salesman...



Bill Rothschild... author of THE SECRET TO GE's SUCCESS... a company who was never led by the MADOFF types and has delivered what it promised...for over 127 years (and hopefully will continue to do so for the next 100 years)