General Electric's 50year + plus Gas Turbine Commitment to Excellence

The General Electric Energy site reported the following on December 16, 2008

"Government of Iraq Signs Power Generation Agreement with GE Energy Valued at Approximately $3 Billion Iraq Power Initiative Nearly Doubles Electricity Generation Capacity (Baghdad, Iraq - December 16, 2008)

The Iraqi Ministry of Electricity and GE Energy announced today at a ceremony in Baghdad that they have signed an agreement for power generation equipment and services valued at nearly $3 billion to provide much-needed electricity to support Iraq's future economic development. The announcement is a significant milestone as the country seeks to rapidly develop its energy infrastructure and increase its electricity production.

Under the agreement, GE Energy is providing heavy-duty frame 9E multi-fuel gas turbines capable of supplying 7,000 megawatts (MW) of electricity. The Government of Iraq plans to install the units at key sites around the country to provide needed support for the electricity grid. GE's 9E gas turbine technology has proven reliability and performance in more than 400 applications worldwide."

This order demonstrates GE's long term commitment to its core, innovative products and services.

The Gas Turbine business had its roots in the Second World War and made a major venture under the leadership of Ralph Cordiner in the late 1950's. This technologywas used in electrical generation, locomotive and ship propulsion systems. In addition the technology was developed in Evendale's Jet Engine business. Both the Schenectady and Evendale competed aggressively to gain market share in some cases competed against themselves. In my book: The Secret To GE's Success (page 96) I used this internal competition to describe why decentralization had some limitations. "One of the major limitations of decentralization was that in some situations the departments competed against each other. For instance, the jet engine and gas turbine department developed two different versions of the gas turbine and found themselves competing against each other in some markets. This wasn't resolved until much later during the Borch era; meanwhile, the result was customer confusion and the loss of business to competition".

General Electric has long history of product innovation and a willingness to take a long term view, even experiment with organizational systems that provided both external and internal competition. This is a unique characteristic of GE and has contributed to its continuing growth and vitality.

Bill Rothschild, author of the only comprehensive, objective and insightful evaluation of GE's 127 years of successes and failures, THE SECRET TO GE's SUCCESS, now in six languages and a global best seller.

GE the POSITIVES...

Since the economic and credit crisis...GE has suffered...and for many reasons it should...but it is important to step back and look at the entire company and its positives and negatives.
Since the press and so called "investment analysts" have decided to focus on the negatives lets look at the positives of this REMARKABLE company.

First of all it is diversified... which every one asserts is important.

Second it is focused on major growth areas.

• ELECTRICITY... which needs a major overall and upgrade. It provides NUCLEAR, LARGE STEAM TURBINES AND TRANSMISSION SYSTEMS
• GREENING products and services.. which covers the gambit of wind, solar..et
• HEALTH CARE... ranging from diagnostic to information systems and software.
• INFRASTRUCTURE.. which includes a first class locomotive product line.
• LIGHTING which is still a major consumer of electricity and a major opportunity for innovative systems
• INNOVATIVE appliances which can help contribute to the "home of future...which is efficient and energy saving
• Financing...which has been grown too BIG and if restructured and refocued can be a major element to enabling consumers and businesses to afford to innovate and refocus
  

Third.. it is still solvent and makes money.. unfortunately because of the current fiasco in financial systems and demise of the US "big three" automobile... it is being compared with losing companies unfairly.
Fourth.. a leadership team and deep bench... unlike the rest of the world GE has skilled people at all levels and even though I may disagree with their strategies and actions...they are still among the best, (but the rest are just terrible.

In short, GE still is a vibrant company and should not be included with the LOSERS.. however, it is still important that the GE management and leadership learn from its past successes and failures, which includes adapting, admitting mistakes and being realistic...

Bill Rothschild,author of the only objective, comprehensive and insightful analysis of GE's successes and failures and what we can learn from them: THE SECRET TO GE's SUCCESS.. available in all major bookstores and in SIX languages.

BACK TO REALITY--Creating realistic expectations

In my book, THE SECRET TO GE's SUCCESS, I challenged Immelt's assertion that he could grow GE at an 8% compounded growth rate, which translated into added $14 billion plus revenues per year. This challenge was based on my extensive experience, study and evaluations of major companies and especially GE.

This is what I wrote (page 250) : " He (Immelt) is clearly convinced and has the missionary zeal to make it happen. However, based on my experience and study. I am not convinced that he can do it and am concerned that he has created an unrealistic expectation. It is possible that in the long term he will have doubled the revenues every nine years, but it is really impossible to add $14 billion plus revenues year after year?

What happens if he doesn't make it, even for one year? Will this have a negative impact on the stock price and put his reputation in jeopardy?

I think it will!"

Unfortunately, I was right... it is impossible for any organization to growth continually. There are always down cycles and the strong organizations are willing to adapt to these changes, set more realistic expectations and move ahead. I hope that Immelt and his team are re instituting the "strategic thinking and decision making disciplines that enabled Borch and Jones to admit their mistakes and refocus the company's portfolio.

Recent actions and words appear to indicate that this type of strategic thinking and decision making is being used, but only time will tell.


If you want to learn why GE was successful in the past and should be in the future, please read my book THE SECRET TO GE's SUCCESS . It provides an objective, comprehensive and insightful view of the companies successes and failures..and what you can " take away " from this remarkable company. If you have an interest in learning more about strategic thinking and decision making, read Putting It All Together- a guide to Strategic Thinking and decision making...There is a revised and updated edition available on my site: http://www.strategyleader.com/. This book and its companion software StrategyLeader is used in many business and executive programs.

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC.. that provides personalized consulting and workshops on the art and science of strategic thinking and decision making.

Immelt...globalization affirmation

In the Economist's THE WORLD in 2009 edition, Jeff Immelt asserts that globalization is vital and must be RE-EMBRACED. These are some of this key points:

1. "A strong international trade system is fundamental"


2. " Continued economic liberalization enhances growth"


3. "Protectionism must be resisted"


4. "Global trade must be fair"

I challenged this entire theme. If the world was fair and all countries permitted goods and services to flow in an out of them based on real economic and marketing principles then Immelt is right...but the reality is that this has NEVER happened and NEVER WILL HAPPEN.

The first responsibility of ALL governments is to support and enhance their own countries and provide REAL jobs and positive balance of trade. They must PROTECT their own patents and copyrights and skills... The United States lives in a DREAM WORLD... the country had given away its COMPETITIVE ADVANTAGES and KNOW HOW for short term, greed and profitability and has exported GOOD JOBS to countries that are not willing to honor the intellectual properties.

The United States is now in crisis BECAUSE it can't provide high paying jobs to its citizens. All of the major companies, including GE, has given away jobs, opened laboratories in countries that have a reputation of not honoring patents, copyrights and intellectual proprietaries, all in the name of SHAREHOLDER value, but not STAKEHOLDER VALUE..but unfortunately even the shareholders have been devastated.

The United States companies and government must learn to focus on THE UNITED STATES citizens first and then if it can afford it go GLOBAL

LEARN HOW TO THINK STRATEGICALLY...www.strategyleader.com

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

THE GREAT AMERICAN AUTOMOBILE HARVEST

It is amazing to watch the three automobile CEO's sit before Congress and ask for the Federal Government to save them. The American Automobile companies are a classic case of a HARVEST strategy, which in simple terms they have sold off market share over several decades, reaped handsome profits and then collapsed.

Each of these three companies were once led by visionaries and strong leaders.

• Alfred Sloane was the leader in market segmentation and providing unique brands and autos for each segment. He led the idea of market migration...the first buyers purchased a Chevy, then migrated upward to the ultimate a CADDY.
  
• Henry Ford was the low cost, manufacturing genius, introducing the assembly line and offering one color BLACK.


• Chrysler focused on product innovation and differentiation and introduced many new ideas and concepts.
  

Each of the companies prospered until the early 1960s, when they all assumed that there would be FEW automobile companies and they could compete against themselves and ignore the new comers, Japanese automakers. In fact they allowed the Japanese to take control of the small, economy car segment because its margins were lower than the big, gas guzzler segments.They all moved to a manufacturing strategy and ignored the markets and the trends. They sacrificed quality and innovation for lower costs and then gave away the shop to the UNION, providing unreasonable benefits and increasing salaries. They sold the same cars under different brands and downgraded the quality of the high end, prestige brands, like Cadillac, Lincoln and Chrysler.

All of these companies instituted "cookie cutter" manpower and educational systems, so that all of the candidates looked alike and were "automobile" men.

Further all of them divested their non automobile subsidiaries to focus on just automobiles. For instance, General Motors sold its Frigidaire appliance business, its ALLISON division, its locomotive business and so on. All of which were market leaders, but didn't fit the automobile mentality

The reason that it has taken decades to put these companies on the edge of collapse is that they had very large share and were so big. It takes time to harvest giants, but ultimately they meet the same fate of smaller companies, they go out of business. This is the point they are today.

I have mixed emotions about whether to save them or not, but I do think that all of the current leaders, the company's Board of Directors SHOULD RESIGN now... but the problem is that because of their COOKIE CUTTER development systems, it is unlikely they have replacements that can do the surgery and competitive/ market based strategic thinking and development requried and unfortunately it has been demonstrated that bring in outsiders doesn't work either.
Further it is difficult to do creative strategic thinking when you are in the EMERGENCY room and just trying to stay alive. Strategy MUST Be DONE when you are healthy and have options and not when you are trying to survive.Sloane, Ford and Chrysler must be turning over in their graves.

Bill Rothschild, author of the book that shows why GE is different and hopefully will avoid the same mistakes as the Automobile companies...THE SECRET TO GE's SUCCESS and PUTTING IT ALL TOGETHER - a guide to strategic thinking and decision making.

Realistic EXPECTATIONS...

I have advocated realism and establishing REALISTIC, not DREAMING expectations. In my book THE SECRET TO GE's SUCCESS, I described how historically, GE, was able to set realistic expectations and then MEET them.

Unfortunately, the current GE leadership decided to establish... "DREAMING SESSIONS and OUT OF THE BOX" expectations and they failed.

But now reality has forced all, not just GE, to stop dreaming and focus on the current and potential reality and not over promise... the result is clear. Yesterday... Immelt and his dream team, told the world things were BAD...but they had the resources to continue the traditional GE dividends... and even though the results were not desirable ...the GE stock rose 14%...too bad they didn't do this in March and GE would be the safe haven and its stock would be double its current value.

Bill Rothschild, author of the only book that explains the past successes and failures of GE and why General Electric (GE) needs to get back to LATIN...read: THE SECRET TO GE's SUCCESS...

GE explains why they are CONFIDENT and believe that their strategy is still right!

Confidence... is vital in a crisis situation and it continues to be apparent the Immelt and his team are very confident that they have the right strategy and it will yield positive results for all of the stakeholders.

This is summary of what they have communicated on the GE website (http://www.ge.com/) , about the critical issues and how they are addressing them. I would like discuss these points briefly:


GE is a strong and solvent company-- and adapting to change..
My opinion: I am happy that Immelt and his team have recognized that being adaptable is key to the success of the company. This is one of the key points I made in my book.
The Company is safe
• "We have taken actions to keep the Company safe and to maintain a strong balance sheet. These include reducing leverage and long-term debt needs to solidify our Triple-A credit rating and raising an additional $15 billion of cash through an equity offering. This is money in the bank that gives us additional protection and flexibility."
My opinion... unfortunately the actions taken to keep the Triple A rating caused the stock to dive to as low as $12 a share... this was a surprise and it is critical that future surprises be avoided.
Aggressive cost management
My Opinion...GE has always been focused on cost reductions. However, it is very difficult to rely on the Business Units to do this without top down prodding and enforcement. The combination of top down and bottom up cost reduction has worked the best. The key is assure that the most vital businesses don't sacrifice the future to make the short term numbers...
No “bailout” money
My Opinion-- unfortunately "perception is often reality" and the company's moves to get Buffet and Government money made it appear that it was required and not just desired... it is vital that the company review the words and timing of its actions so that it is not just related to sick companies.
Diversified business model
My Opinion... most of the most recent news stories about GE appear to confirm that energy and infrastructure are doing well. It is vital that this continues and if there are changes that the company inform investors early and tell the entire truth... NO SURPRISES...
Global growth
• "More than half of our projected ~$187 billion in revenues will come from outside the U.S. this year. While other economies are experiencing challenges, some areas are growing and our broad diversification will serve us well."
My Opinion: I am still concerned about having Research and Development Labs in China and India, since it puts GE innovative and technological assets and skills in countries where it is not uncommon to have them pirated. China still has a poor track record on patent and copyright protection.

• "Providing service to our customers is a key piece of our business. It is even more important in challenging times as customers want to insure that their equipment is running efficiently and effectively. Services are high margin; they will contribute about $35 billion in revenue in 2008 and make up a significant portion of our backlog. GE Capital is profitable and manages risk prudently"
My Opinion... Services have a been a key to GE's success since the Jones era...however, the best services are based on strong technological based products and systems.
• "GE Capital is expected to make about $9 billion in 2008, more than almost any other financial services company in the world"
My Opinion is that GE Capital plays a vital part of the overall GE strategy, since it enables the company to finance high tech systems and projects...but it has been allowed to take on a life of its own and became all things to all people and highly leveraged and opportunistic... Immelt has promised to reduce the dependence on GECC now he must do it.

"We are a profitable, well run business with a portfolio of high quality assets and hold the highest long and short-term credit ratings from S&P and Moody’s. Notwithstanding this, we continue to diversify our funding sources (including growing deposits), reduce our reliance on commercial paper and strengthen liquidity and capital adequacy to improve our access to funding."
Stock price
My Opinion: GE's stock has been impacted by the financial crisis, but if the company had not missed its first quarter and surprised everyone, including themselves, it would still be in the high 20's or low 30's. It was SURPRISE that caused half the problem.

Overall, I am still a GE fan and investor... I still think the company needs to be more selective and focused and not be focused on GOING BIG and GOING GLOBAL..further they need to slow down, focus on doing what they say and avoiding further surprises... if they do and follow the key factors of past success, which I call LATIN...Leadership, adaptability, talent, influencing and networks, all of the stakeholders will prosper.

Bill Rothschild, author of the only objective, comprehensive and insightful analysis of GE's 127 years of successes and failures and the lessons we can learn from both...THE SECRET TO GE's SUCCESS.

GE's actions and contracts increase confidence!!!

It is both reassuring and confusing that GE is continuing to invest in new projects as though nothing is happening in the world. The latest $850 million investment in a wind farm, in British Columbia is just one in a series of new investments that the company has made. This is confusing since the company just accepted Federal Government money to assure preserved its AAA credit rating.

Hopefully, these actions and the continuing number of large energy and infrastructure contracts worldwide will reassure the investment community that GE is not only going to survive but will do what it did in the past prosper because of its ability to adapt and provide the leadership required to do the job.

Bill Rothschild, author of the only objective, comprehensive and insightful analysis of GE's 127 years of success and admitting and responding to its failures, THE SECRET TO GE's SUCCESS...now in six languages including Chinese, Indonesian, Japanese, Spanish and Korean.
Available on www.Amazon.com .

The GE Capital Story

In 1932, General Electric recognized the need to help its dealers survive the Great Depression and have cash to finance their floor planning and consumer credit, so they created the General Electric Credit Corporation. GECC continued in this role until the 1960's, when Fred Borch created his "growth council" to identify new ways for the company to diversify and get off the $5 billion revenue plateau, that resulted from the Great Electrical Conspiracy...the price fixing scandal.
One of the recommendations of the Growth Council was to focus on FINANCIAL SERVICES, which included moving into other financial sectors. The head of this task force was Ticker Klock, a GE financial executive. Borch selected Klock to expand the scope of GE Credit and he moved the company into other financial services, including commercial financing and "private label" credit cards.
During the Jones era, GE recognized that financial large commercial projects was both a MEANS to enhancing revenues and an END to make more money. For instance, GE was able to sell more jet engines if it financed the the aircraft and then provided operating leases to airlines. The same was true of locomotives and so GE Credit became a key element in GE's marketing strategies.
When Jack Welch became CEO he selected two of his key staff from GECC. One was Dennis Dannerman who became CFO and other Larry Bossidy as his Vice Chairman. Dennis and Larry convinced Jack to increase the size, importance and scope of GE Credit and make it GE Capital. Welch appointed Gary Wendt to head of this organization and gave him a license to grow. Under Wendt, GE Capital increased in size and importance to GE and served as a means of managing earnings. GE Capital had a competitive advantage because it could borrow under its parent's AAA credit rating and have a strong competitive advantage.
This combination of a Financial Services subsidiary and a strong manufacturing portfolio, enabled GE to provide predictable and positive earnings growth.
Unfortunately, nothing lasts forever. Today GE Capital has become a liability and not an asset and so GE has witnessed a loss in confidence and a rapidly declining stock price. Immelt has vowed to reduce the size and importance of GE Capital. He announced he was restructuring the organization and it would become a smaller contributor to GE's bottom line. However, he also announced he would use the same successful JET Enging financing strategy to enable GE to grow its solar and wind generation businesses.
I have always believed that GE Capital should be a "means" to help the manufacturing businesses to grow and not a END of its own, in shore, I think it is appropriate to move back to what its role was in the past and not be a financial services company.

Bill Rothschild, author of the ONLY objective, comprehensive and insightful assessment of GE's 127 years and even predicted the current problem....THE SECRET TO GE's SUCCESS and GE Watcher blog (www.strategyleader.com)

Standing and Fighting- the difference between General Motors and General Electric Labor Relations

Standing and Fighting - one of GE's success policies!!

Many leaders have taken the easy way out. Rather than taking strong stand against adversaries they have been willing to give in to unreasonable and uneconomical demands rather than standing a fighting.

This is painfully obvious today when we witness the problems in the automobile and its supplier industries. General Motors and Ford are almost in bankruptcy and asking the Federal Government to save them and are not able to compete against its non-union foreign competitors. Not only are their wages high, but they are forced to pay for workers who don’t work, fund pensions, and contribute to ever increasing health benefits. In addition, these companies are forced to operate in old, non-competitive factories in locations that have high taxes and worker protection laws.

All of these problems were not caused by the current management but by those who preceded them, especially the leaders in the 1950’s and 1960s. Following World War II, the United States experienced its most prosperous times. There was enormous demand for consumer and industrial products. During the war, the entire US manufacturing effort was focused on winning the war and not on providing consumer and industrial products. Further the US companies stood alone in the ability to provide these products worldwide, since the European and Far East producers had been devastated during the war.

Unlike other major companies in autos, steel, aluminum and transportation, GE was unwilling to “pay off” the unions with overly generous, non-economic wages and benefits. Instead, GE leaders took a strong stand in the mid-1950s against the then strong labor unions dominance and uneconomic demand.

Led by Lemuel Boulware, GE’s refused to participate in industry bargaining and negotiated with the unions on a company basis. They carefully thought though what was in the balanced interest of employees, investors, stockholders and made a “fair offer” prior to the negotiations. Though they were willing to make some concessions, they were firm and were willing to take a strike rather than give away the shop. They christened this approach “Doing Right Voluntarily” and used these policies and practices to assure that the company didn’t mortgage its financial future. In addition, GE made it clear that it was ready willing and able to move its established plants to friendlier, non-union locations, rather than be blackmailed.

This practice became known as “Boulwarism” and though it received a great deal of negative press, it worked for a number of reasons:

• First, GE had a long positive track record from the company’s inception of caring about its employees and their welfare. They instituted a suggestion system in 1906, a pension program in 1912 and insurance in 1920.


• Second, the major GE union, the United Electrical Workers (UE) was a communist led union that appeared to be more concerned with having a people’s revolution than about the conditions faced by the GE workers themselves. This union was highlighted in the McCarthy hearings and was ultimately ejected from the CIO.


• Third, the CIO created a competing non-communist controlled union, under Jim Carey, who aggressively sought to convert the UE members to the IUE. Further other powerful unions were part of the GE bargaining units, including the Teamsters and the IBEW. So Boulware divided and conquered the unions and didn’t have to face one dominate union, as there were in the auto, coal and steel industries.


• Fourth, as we said GE did its homework and was willing to give the workers, both union and non-union, attractive and even innovative benefits before they were required. In most cases, the workers recognized that the benefits and wage increases were fair and balanced and were will to accept them without a strike. This neutralized the unions bargaining power.


• Fifth GE hired the “Great Communicator” and the popular host of GE Theater, Ronald Reagan to tour all of the GE plants and spread the message of evils of Big Unions and Big Government. Reagan claimed to have visited 135 GE research and manufacturing facilities and met with some 250,000 individuals. It ultimately led to his own conversion and gave him the underpinning of his successful election to President of United States.


• Sixth and probably most important, GE was willing to close plants in unattractive union locations and move them to non-union cities. This was very powerful, since it gave the company power that the auto, steel and coal companies didn’t have. GE was an early proponent of moving to the southern US and overseas.

Overall the GE Boulwarism approach enabled the company to maintain control over its own destiny and not allow Big Unions and Big Government to dictate to them. GE was unwilling to mortgage the future for short term gain and was willing to take a strike if it was needed. This was sharp contrast to the other industry leaders who accept peace at any price and didn’t appear to care about the long term implications of giving away the shop.

This is just one of the elements that has enable GE to prosper and grow over its 127 years of existence, while other United States giant companies have gone out of business or are one the verge of bankruptcy. The complete story can be found in my latest book “The Secret to GE’s Success”, published by McGraw-Hill and a global best seller...now in six languages, including Simplified Chinese, Japanese, Korean, Indonesian and Spanish, as well as being digital. It is being used in many MBA and Executive programs worldwide. Other strategic leadership books are available on www.strategyleader.com

India's Financial Express highlights and learns from THE SECRET TO GE's SUCCESS !!!

India's Financial Express highlights and learns from THE SECRET TO GE's SUCCESS !!!
7:02 AM PST, November 10, 2008
India's Financial Express Newspapers highlighted a section of my book THE SECRET TO GE's SUCCESS... The Indian press have shown a significant interest in learning what they can from GE's remarkable history, since GE has made India one of its three key growth areas...I thought you would be interested in what they have focused on.
Bill Rothschild, CEO of Rothschild Strategies Unlimited LLC

GE's success secret decoded
Borch's Growth Opportunity Ventures taught GE many lessons, which GE later incorporated into its strategic thinking and management systems and into the GE Code as well. Let's review some of the reasons that only a few of the ventures survived and succeeded.
Leadership
Unrealistic view of how long ventures take to succeed: Most of the ideas that the growth council proposed have become real and profitable businesses. But it has taken decades for them to materialize, and it has required a sustained, long-term commitment and the investment of leadership, people, and money. This is evident with the ultimate success of jet engines and financial services, and—I would argue— the likely resurgence of nuclear power.
* Recommendation: Realistically assess the time it will take for your new ventures to grow and become profitable. Make sure that you err on the side of being conservative—and don't overpromise.
Too many ventures at one time: GE's biggest error was to believe that it could pursue all of these ventures at the same time and that it had the financial and human resources to make them all successful. Each of the opportunities required more cash and capital than anticipated, and the total requirements were enormous—beyond any one company's ability to fund them. In fact, it is amazing that the company didn't go broke during this period.
Without doubt, Borch grew the company: Revenues increased more than $3 billion in three years. But it was a profitless growth, which dearly demonstrated that the company needed a new way of planning and setting priorities.
* Recommendation: Be selective. Don't bite off more than you can chew. Focus on the most attractive opportunities where you can most easily succeed and be sure that you have a clear understanding of what it will take to win before you embark.
Adaptability
Didn't understand the businesses: Though the council identified growth opportunities, it did a poor job of figuring out what it would take to sell the products or services. It lacked an appreciation of the competitive environment and the response of the incumbents, and—most important—it didn't take into consideration the power and influence of governments and labor unions.
* Recommendation: If you are planning to move into a new market, either by internal ventures or acquisitions, be sure you really understand what is critical to being successful.
Talent
Believed they could do anything: GE leaders believed that they could do anything and that the company's managers had been equipped to manage any business regardless of size, technologies, markets, and so on. Clearly, the outcomes of the ventures demonstrated that this conviction, which dates back to Cordiner and Smiddy, was simply wrong.
* Recommendation: Never assume that just because you have been successful in your current businesses that you have the skills and abilities to succeed in others. Recognise that all businesses have some distinct aspects that will separate the winners from the losers.
Networks
Made staff earn a living: Although Borch's assumption that he could reduce staff by requiring them to earn their keep turned out to be dead wrong, the idea of having a discretionary, fee-based staff is worth considering.
This approach has several advantages. First, it is Darwinian: Only the fit will survive. Second, it forces the staff to make a contribution to keep clients, and therefore it forces them to keep current. The major dangers are that some will survive just because they have friends inside the company and that the staff may become too myopic.
* Recommendation: Separate your staff organisation into two groups: essential and discretionary. Determine if you need your own discretionary resource, or if you should outsource it. If you think there is an advantage to having your own staff, then make them earn their keep.
Admitted mistakes and changed: To Borch's credit, he too recognised these errors, and in the second half of his tenure, he changed the company's management system to ensure that these types of mistakes would not be repeated. The ability to admit mistakes and make major changes is clearly one of the major contributions that Borch made to the GE heritage.
* Recommendation: Everyone makes mistakes. Sometimes the mistakes are large, and sometimes they are small, but they are all a part of leading and taking risks. The key is to follow Borch's example and be willing to admit your mistakes, take corrective actions, and try not to hide or make excuses.

If you wish to read the entire book...it is available on AMAZON.

The Training Ground...

The following is an excerpt of THE SECRET TO GE's SUCCESS, which appeared Express Computer , in India's leading IT weekly business

Manage-Wise
The training ground
Many electric utility executives, engineers, and professionals were graduates of GE’s test and management programs. Since GE kept only a percentage of the trainees, the company encouraged those who didn’t make the GE team to work for the electric utilities. This cultivated strong bonds between “GE alumni” and the company.
These mutually beneficial relationships between manufacturers and their customers were very common and were practiced in all major industries. It was the personality and skills of Coffin and his team, however, that made GE even more successful.
Coffin recognized the need to hire the best people and keep them loyal. He instituted several major training programs that still exist today, and he hired qualified people regardless of their race, religion, or politics.
Building a bench
From its inception to the present, GE has had a strong farm system organization. The company has always believed in the concept of recruiting young, retaining the best, and building from within.
Coffin and his management team recognized early that it was very important to recruit talented individuals early in their careers and then provide the training and work assignments to enhance their skills and company loyalty.
In 1901, GE established apprentice programs in Schenectady, Lynn, Bridgeport, and Fort Wayne, which were the major manufacturing locations. A combination of work assignments and evening classes were developed in four areas: machinist, draftsman, blacksmith, and moulder. Upon completion of a course, the graduates were awarded a “Certificate of apprenticeship.” This program was one of the key programs in the company until the 1950s. There were ties to local universities so that the apprentices also could work on getting engineering and technical degrees.
Coffin knew that the company needed competent, GE-trained and GE-loyal engineering staff, so he created the Engineering Test Program. This program was an entry-level program for all engineering recruits. The trainees were assigned to specific “testing” operations in the product departments, as well as the General Engineering Laboratory. Some were sent to the Corporate Research and Development Center.
Coffin also recognized the need to hire talented nontechnical college graduates, so he established the Business Training Course (BTC). The college recruits were given a variety of financial assignments, and they were required to take very intensive accounting and financial courses two nights a week. The trainees had to take weekend exams, and they were given grades as though they were in college.
Grades and work appraisals were used to determine who would be promoted. The best graduates were assigned to the Auditing Staff, enabling them to learn about the various company operations and enhance their ability to lead in these businesses. Graduates of the Auditing Staff became the financial linchpins, and often the general managers, of the company’s business units.
A personal recount
This is the program that I joined in 1955. I was a Fordham University Russian Language and area studies major, and I had never had an accounting course in my life. I soon found that I was not alone. More than half the BTC enrollees were liberal arts majors. GE believed it was the trainee’s ability, rather than his or her undergraduate major, that mattered.
All of the GE training programs had six common characteristics:
The programs recruited from the best technical high school, colleges, and universities. The apprentices were recruited from the best high schools; the engineering and BTC program candidates came from the best colleges and universities. The recruiters’ focus was on the candidates’ ability to learn, not just on their experience. This candidates’ selection process resulted in programs being filled with excellent and committed students. It also resulted in strong relationships between GE and the best high schools, colleges, and universities.
The GE training focused on the GE Way of doing things. Even if you were a skilled engineer or accountant, you often had to forget what you had learned in school and relearn the GE Way. Some of the trainees found this difficult, so it was often easier for GE to hire those with less education in an area and train them than it was for GE to convert those who already believed they knew how to do it. (My lack of previous accounting knowledge made it easier for me to learn the GE Way, in contrast to those participants who already had accounting degrees and had to “unlearn” what they already knew and then relearn the GE Way.)
The program trainers assigned challenging work. All of the programs used work assignments that were designed to help the participants practice what they were taught. GE was able to develop such challenging teaching materials because the program administrators assigned a “mentor” and “counselor” to each student to help him or her learn and adapt.
The programs included tests and work appraisals. The BTC, for instance, had Saturday morning examinations at the end of each course, and these three to four hour exams were as rigorous as any college or university exam. Numeric grades were given and posted for all to see, just as they would have been in college. (I was amazed at having to take exams and get grades. I was equally amazed at how competitive the program was.)
Breeding the best
Up or out. Throughout its history one of GE’s strengths has been its willingness to focus on the best and “prune” those not making the grade. So too did the company let go of those students in its training programs who couldn’t get the grades GE was looking for. The company used a combination of exams and work assignment appraisals to determine whether a trainee would (a) continue in the program, (b) be asked to leave the program but be allowed to stay with the company, or (c) be asked to leave the company outright.
GE gave certificates, not advanced degrees. Though the GE training programs were intensive and demanding, the graduates received only a GE certificate and not an advanced degree. This was done to ensure that the graduates stayed with GE and were less marketable on the open market.

Excerpt from 'The Secret to GE’s Success' by William E Rothschild. Reproduced with permission © 2008, Tata McGraw-Hill Publishing Company Limited. Price: Rs 595. Vishwanath_Ghanekar@mcgraw-hill.com
window.print();

Destroying STAKEHOLDER value and confidence!

During the past six months we have witnessed many companies destroy their stakeholders' personal wealth and confidence. Note I use the word "stakeholders" and not shareholders. Stakeholders include employees, communities, governments, investors, stockholders and any one who has a vested interest or "stake" in an organizations.

There are FOUR factors that have contributed to this destruction:

1. Unrealistic expectations. Most of the LOSERS have promised results that were unrealistic, poorly conceived and missed them dramatically. It is truly amazing how much money major organizations have lost and missed their promised results.




2. Surprised Themselves. To make matters worse, the management of these organizations have not only surprised their stakeholders, but themselves. This is the worse SIN anyone can commit. It means that the organizations lack internal assessments and believe their press releases and not the reality of their situation. It appears that they have had staff organizations who were "yes people" and not willing or able to point out that the "emperor has no clothes".




3. Arrogance and unwilling to admit mistakes and take responsibility. Not only have these "so called leaders" fooled themselves, but have been so arrogant that they refuse to admit they made mistakes and were at fault. They use the "blame game" to say that everyone else was at fault and not themselves.




4. Rewarding themselves for failure. Finally they destroy organizations, put them in bankruptcy, do harm to their investors, employees, communities, but have the nerve to take HUGE compensation packages. They reward themselves tens of millions of dollars and benefits for FAILURE.

It is amazing that these four characteristics can be attributed to major organizations. Some are still viable, but many have been destroyed forever and everyone has lost.

The real issues are: WHY DID IT HAPPEN AND WHAT CAN BE DONE TO PREVENT THIS IN THE FUTURE. I hope that the major MBA programs are studying this situation and will determine if they were also responsible for the problem and how they can prevent it in the future.

Bill Rothschild, author of the only comprehensive, objective and insightful assessment of GE's 127 years... THE SECRET TO GE's SUCCESS and Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership.

Damm the torpedos....

"Damm the torpedoes...full speed ahead" is an old adage from the Second World War... it shows courage and convection that the game plan was right and even if things are on going to plan, we will win.

This is what Jeff Immelt is asserting. He is a TRUE believer that his GO BIG, GO GLOBAL, PORTFOLIO GAME PLAN is right and will succeed.

Based on my 40 plus years, as a strategist, successful consultant and ardent student of strategies and GE, I have great concerns about this "macho" style. It is true that GE has a very diverse and in many cases strong portfolio and competitive position. But I still believe that the company is too complex and subject to too many unique and possibly unattractive situations.

I still recommend that the company stop its growth for growth sake approach and refocus, get smaller, less complex and invest in winners....this is the essence of the strategic leadership that has made the company successful in the past... it still gets down to LATIN...right LEADERSHIP, willingness to ADAPT... having a strong, deep TALENT pool, INFLUENCING the key stakeholders, by meeting expectations and having realistic and viable NETWORKS and programs.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS, the only comprehensive, objective and insightful assessment of GE's successes and failures and what we can learn from them.

Paranoia...poor choice of words.

Immelt is in INDIA and said he was PARANOID about the current World Economy... Since he graduated from Dartmouth and HARVARD... I am confused about his choice of worlds... I think the word PHORIA would be find for any rational individual to describe today's world, but Paranoid had other meanings... this is what I found on the Internet...

• Paranoia is a disturbed thought process characterized by excessive anxiety or fear, often to the point of irrationality and delusion. Paranoid thinking typically includes persecutory beliefs concerning a perceived threat towards yourself. In the original Greek, παράνοια (paranoia) simply means madness (para = outside; nous = mind). Historically, this characterization was used to describe any delusional state.
  Sometimes in common usage, the term paranoia is misused to describe a phobia. For example, a person may not want to fly out of fear the plane may crash. This does not in itself indicate paranoia, but rather a phobia. The lack of blame in this case usually points to the latter. An example of paranoia, however, would be fear that the pilot is an alcoholic with no evidence to suggest such, and would crash the plane as a result of this.

Please Jeff... select the right word to describe your feelings and perceptions, since every word you say and everything you do has a major impact of ALL YOUR STAKEHOLDERS.

Bill Rothschild, author of the ONLY objective and insightful assessment of what make GE able to prosper and grow over 127 years...THE SECRET TO GE's SUCCESS and continuing assessment of the IMMELT ERA..(GE Watcher..on http://www.strategyleader.com/

The "GO BIG" Failures

The 1950's there were the GO BIG Conglomerate Era, when Harold Geneen's ITT, Litton Industries ruled and became so big that they failed.
In the 1960's it was other giant GO BIG companies, like GM, Ford and major steel and chemical companies went BIG and ultimately became so big that they allowed the smaller, more focused Japanese companies to gain beachheads in the US market and gradually eroded their share and profitability. Today they are contracting and beginning forced to merge to just survive.
In the 1990's it was the DOT COM Wonder kids, who WENT BIG and forgot that they had to make money on the way up the growth curve. Most have died or been combined with other companies.
The major Business Schools, academics, consultants and management publications and books taught management to THINK OUT OF THE BOX.. be imaginative, destroy the bureacrats, forget about the inhibitors of doing it right, be creative with the accounting and financial systems, USE OTHER PEOPLE's MONEY and not have large reserves.
In short, the " experts" promoted the GO BIG proponents and eliminate those in their organizations who challenged and required the organization to consider the positives and negatives of growth.
In the past year, THE "GO BIG insurance company", AIG, "THE GO BIG mortgage" company, Countrywide, "GO BIG Energy company", ENRON all went into bankruptcy and have had to be rescued.
The MESSAGE is loud and clear...BIGGEST for its own sake, is not a viable long term goal and all companies must reinstate the solid, objective and "tough minded" strategic thinking and decision making that made the strong in the first place.
They must remember that:

• ALL THINGS TO ALL PEOPLE strategies never work and



• SELECTIVITY,



• CHALLENGING everything and being willing to prune the portfolio and focus on those segments that are attractive and where they are strong.

In short this means relearning and applying the disciplines of sound strategic thinking, execution and being prepared for change. I have spent my entire career teaching and helping my clients do this type of thinking and decision making and it has worked. I continue to provide these services.

Bill Rothschild, author of the PUTTING IT ALL TOGETHER- a guide to strategic thinking and decision making. The first guide to strategic thinking and its updated edition and STRATEGYLEADER (R) strategy software and tutor. BOTH are available on http://www.strategyleader.com/, take a look.

WHAT A DISAPPOINTMENT...WHY?

Today the Dow average went to the fifth highest levels...YET...GE Declined...

Immelt and his DREAM team need to explain what is happening...

There may be a logical reason...but it is not OBVIOUS.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS... the only book that gives a comprehensive, historical and OBJECTIVE view of the GE SUCCESSES and FAILURES, BUT GE management have done whatever they could to negate its success in the United States,

"Never Over promise and Minimize (if not avoid) Surprises!!"

"Never Over promise and Minimize (if not avoid) Surprises"

This was the essence of the Ralph Cordiner and Reg Jones eras in Strategic GE's history.

These are some quotes from my book" The Secret to GE's Success" which focus on creating and meeting investor expectations:

• " In the 1950's, Cordiner initiated Investor Relations as one of the new corporate functional services. The organization's job was to help create realistic expectations among the investment analysts and then communicate expectations internally so that the operating and executive officers understood the right level of profitability to achieve.


• "Jones was one of the most skilled executives in this regard. He established a team consisting of staff members from investor relations, finance, and strategic planning (my job at the time) as well as his own vice chairmen to determine the expectations that could be achieved consistently"


• "If there was a gap between what business units promised and "Wall Street expectations" Jones recognized that if he compelled all of the businesses to increase their profit levels, he might negatively impact the ability of at some divisions to execute their approved strategies.. a special evaluation was created to assure that the increased profit levels didn't negatively impact the "growth businesses" (again one of my jobs).

I had the good fortune of being part of the Jones process and helping the company meet Wall Street Expectations while implementing the approved strategies. It was challenging but fun.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS the most comprehensive, objective assessment of GE's 127 years of progress, now in six languages.

Challenging the FOLKLORE...Team Competence versus Loyalty

One of the obvious failings of the Bush administration has been Bush's emphasis on loyalty rather than competence. There is no question that President Bush has had several unqualified members of his team and they have held their jobs because they have been "team players".
This has practice is also very prevalent and obvious in many large corporations and it has negatively impacted all of the key stakeholders.

According to Doris Goodwin's " Team of Rivals", Lincoln selected his cabinet members because they were competent and provided another perspective, even if they have adversarial views. His cabinet included people who ran against him and in some cases even criticized him in public. One of his team was running against him even while a member of the cabinet. But Lincoln used the talents of these adversaries to lead in probably the biggest CRISIS that the country had to face.

In my book: Risktaker, Caretaker, Surgeon, Undertaker- a four faces of strategic leadership I emphasize that there are no one leader for all times and that the team must fit the leadership type and the situation. If an organization is in crisis, the leader and the team must be willing to challenge everything, hold nothing sacred and seek all views.

In my latest book: THE SECRET TO GE's SUCCESS.. I emphasize that GE has avoided the "cookie cutter" approach and selected leaders and team players that were different and fit the unique situation.

When I was GE's Corporate Strategist, I always looked for and selected people who provided different insights, even if I didn't agree with them. When I led the Management Development Program and Strategic Planning Workshops and Seminars, I included professors and outsiders who challenged the GE Folklore and didn't just recite the party line.
I am not sure what is happening in GE today, but it is vital that all companies and organizations seek out people who are competent and not just "back slapping/ yes" people. Unfortunately it appears that most of the failing companies today have not sought "teams of rivals" but "teams of friends, neighbors and those who refuse to challenge the folklore".

Bill Rothschild, CEO of Rothschild Strategies Unlimited, LLC

Warren Buffet to the rescue and GE's Secret to Past Success!

The last time that GE had to have a "white knight" come to their financial rescue was in 1897, when Edison GE and Thomson Houston had to merge and JP Morgan put in capital to save the company.

On October 1, 2008, it happened again... this time it was Warren Buffet, bought $3 billion of Preferred Stock... to help save the GE TRIPLE A rating.

Since I wrote my book, THE SECRET OF GE's SUCCESS, I have challenged IMMELT and team...GO BIG strategy. It was clear to me that promising to grow the company 8% organically seemed to be improbable, if not impossible. Unfortunately, I have been right and a change in strategy is required.

GE introduced strategic thinking, decision making and planning in the 1970's because Fred Borch had embarked on nine new, organically grown, ventures. Five of ventures failed, but Fred recognized and admitted his mistakes and focused on being selective and not growing for the sake of growth. This action enabled the company to focus on winners and contributed to the Welch's remarkable earnings and stock value growth. There are lessons to be learned from this period in GE's 126 year history.

I still have faith that GE leadership will rise to the occasion and replicate the company's past success and ability to adapt to change. However, it will require all five key success factors: Leadership, Adaptability, Talent, Influencing and Networks (LATIN).

If you wish to learn the reasons for GE's past success, take a look at my book: The Secret to GE's Success, now available on Amazon's Kindle and in six languages.



Bill Rothschild, author of Global best seller: The Secret to GE's Success, Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership, GEWatcher blog on Rothschild Strategies Unlimited LLC website: http://www.strategyleader.com/

Adaptability, Realistic Expectations- key to GE success.

Two of the reasons that GE has had a successful 126 years is because the leaders were adaptable, set and met realistic expectations. It is highly promising to see the Immelt team continue this successful leadership approach.

It is clear that the company must reduce its dependence on Financial services and its complexity. GO BIG has not worked and focus and selectivity must become the new theme.

Bill Rothschild, author of the insightful,comprehensive, objective 126 year history of GE, THE SECRET TO GE's SUCCESS...a global bestseller.

Selling Your Name for a short term gain???

Unlike his predecessors, Jack Welch was willing to sell GE' pride position, its name, lovingly called the MONOGRAM. The reason that Jack's predecessors were unwilling to sell the Monogram when they sold a business was that they believed that if the acquiring company didn't provide quality products and services it would reflect on the entire company. This was one of the reasons that Reg Jones was not able to sell the maturing housewares businesses (toaster, coffee makers etc) and the very unprofitable Television business.

Welch was willing to take the chance and so he sold the Monogram, for a five year period to get rid of Housewares and for an unlimited period to divest television.

Today it appears that Immelt and his team are willing to actively market the brand name. They have created a new joint venture with a Taiwan company to sell GE BRANDED High Definition/ Interactive Televisions, for a forty nine stake in the new company.

Other companies have done the same, but I am still a firm believer that when a company invests over 100 years in building a strong brand, it should not be used for a "quick/ opportunistic" deal.

Bill Rothschild, author of the most comprehensive, objective history of a truly remarkable company, designed to help the reader learn from both the company's successes and failures...THE SECRET TO GE's SUCCESS, now in six languages and a global best seller.

GE's historical strengths....

Over the past few months I have highlighted many of the reasons that GE is having problems and why its stock is moving in the wrong direction.

But I totally agree with Jeff Immelt that GE is a strong, well managed, strategic company and should be more highly respected and valued.

GE has faced major problems before and has been able to adapt and even make the company stronger.

• It started with GE's ability to survive the GREAT DEPRESSION. The Swope/ Young team was able to survive during the Great Depression, even though the company revenues dropped 75%. One of the human resource innovations was the LAMP business allowed workers to volunteer to work four days a week, with four days of pay to prevent 25% of the workers from losing their jobs.


• In the 1950's, the GREAT ELECTRICAL CONSPIRACY, which was a major price fixing scandal, shocked the company to its core and even changed its succession plan, but it was able to move beyond and the company became stronger.


• In the 1960's Borch embarked on a number of misguided ventures, most of which failed and caused the decline of its stock, but Borch took action and installed the strategic management system which saved the company.

One of the criticism, I have received about my book THE SECRET TO GE's SUCCESS, has been that I am too supportive of GE.

It is true I strongly believe that GE's leadership has been able to ADAPT to change and, though I have challenged the Immelt GO BIG/ GO GLOBAL strategies, I am still a GE fan, I believe that Immelt and his team will do the same and succeed.

(However, this will be even more difficult since the company is now so big and complex, but if Jeff and his team, learn from the past and uses GE's enormous, deep leadership, technological, innovative and marketing skills, GE will win and the GE investors, as well as all stakeholders will reap the rewards).

Bill Rothschild, author of the most objective, comprehensive view of GE's successes and failures and the lessons we can learn from them, THE SECRET TO GE's SUCCESS...now a global best seller in six languages, including Simplified Chinese.

GE's Second Home Country...CHINA

I recently wrote an article in the June 2008 edition of Chief Executive Magazine, entitled: "Whose going the wrong way!" in which I compared the Chinese strategies of Korean, Japanese and Taiwanese companies and US companies. The former are dis investing in China, while US companies, especially GE, are making it their prime target and investing heavily.

The article demonstrates that focusing to heavily on China may be unattractive.


I am glad that I am not in GE management today, since it appears that GE plans to do exactly what I think is not the right strategy. When I was GE Corporate Strategist in 1981, I was a strong proponent of GE's investing in China, but my opinion has changed. Unfortunately, GE waited too long and now in trying to make up for lost time.

This article shows how committed GE is. I have major concerns about this focus. Take a look at what GE is doing:

GE to launch 5 regional headquarters in China
http://www.chinaview.cn/index.htm 2008-09-15 20:51:35

Print
SHANGHAI, Sept. 15 (Xinhua) -- General Electric Co. will soon set up five new regional headquarters in China to further tap a huge market that boasts huge business potential.
The U.S. giant now operates two regional headquarters in Shanghai and Beijing. The new locations will be in Shenyang, Wuhan, Chengdu, Xi'an and Guangzhou -- provincial capitals in the country's northeast, central, southwest, northwest and south, according to Chen Xiangli, president of China Technology Center under GE.
The move is in line with its new strategy of making China the multinationals second home country, Chen told a GE-sponsored technology conference in Shanghai.
"China is not only a market, but also a significant research and development base and a fundamental foothold for GE's future development," he said, stressing the company would rely on its business growth in the country in future.
"GE has been following the American and European markets over the past century, but China will turn into a priority in future," said Wang Xiaozhong, the center's public relations chief inspector.
The new headquarters would help existing functional departments in different regions to further explore the market and develop more China-oriented products, Wang added.
Since last year, GE has invested 55 million U.S. dollars to the center on the research and development of new products for China, with a focus on clean energy, water treatment and new materials, among others.
The center now boasts more than 60 advanced labs and employs some 1,400 people.
GE's China sales volume accounted for about 2.54 percent of its global turnover of 173 billion U.S. dollars last year.
Chen believed the company had great growth potential in China and the country would no longer remain at the end of the international sales chain dominated by the European and U.S. markets.

Bill Rothschild, author of the most comprehensive, objective GE strategic history "THE SECRET TO GE's SUCCESS"... now in Chinese and five other languages.

What happened to GE's accounting and financial management strengths?

In my latest book: THE SECRET TO GE's SUCCESS, I conclude that one of the GE's strengths has been its financial management and accounting systems.

I joined GE as a member of the Business Training Course (now called Financial Management Program) and learned to admire the talent of the financial organization. It was clear that when GE reported its earnings there was 99% confidence level.

During the Welch era, there was concerted effort to reduce the power of the financial organization, because it was felt that it inhibited creativity and entrepreneurial flexibility.

It is clear that over the last thirty years that GE's accounting and financial auditors have not be able to assure investors and government officials that GE's financial statements and practices meet the historical standards of the past.

There are several very disturbing situations that illustrate this reality.

First was the surprise of GE's missing its expected results in the first quarter of 2008. It was clear that everyone, even the CEO, was surprised that about the miss. This caused GE stock to fall from 42 to 25 and it still hasn't recovered. The investment analysts and companies have moved the company into a hold mode.

Second, the company has had to restate its annual statements several times over the past few years and lower its reported earnings.

Third the SEC announced it was issuing a Wells Notice and taking civil actions and there are several stockholder suits.

It is difficult for me to imagine that GE would find itself in this position and it has clearly impacted the company's credibility and reduced shareholder value. It is clear that the reduction of the internal auditing, the inability to spot external and internal changes that can impact the top and bottom lines and the shear size, complexity, continuing "deal making" and global expansion are all causes of these problems.

The question is whether current financial leaders are ready, willing and capable to do what it takes to restore the confidence of all key stakeholders, especially the investment community and government agencies.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS (now in six languages) and GEWatcher blog found on (http://www.strategyleader.com/)

So what is happening STRATEGICALLY at GE!!!

It is clear that the vision of GO BIG, GO GLOBAL and MAKE DEALS, continues at GE.

Since the Olympics, GE has not done much, but this is probably because everyone is on vacation and unwinding from the CHINESE show. GE selected Shanghai as its headquarters and a major Chinese technical center.

Immelt has become a Dartmouth trustee, which is one of his loves. He had hosted the visit of John McCain in Erie, which was one of the locations that Ronald Reagan used to display his loyalty to innovation and American industry.

However, there are several Governmental actions that are disturbing. The most recent was the SEC's concern about GE's book keeping and a CIVIL suit.

Overall, it is clear that the GE/ Immelt team are convinced they are on the right track and will continue the same philosophy and strategy...but the stock market has not bought in and the stock is doing nothing.

As we promised we will continue to be the Strategic GEWatcher and objectively and strategically assess their moves.

Bill Rothschild, author of the SECRET TO GE's SUCCESS (The only book that provides the historical strategic insights to understand the company and the probability of its strategic success. Now in SIX languages.)
Learn more by visiting http://www.strategyleader.com/

Standing and Fighting- a key success.

Many leaders have taken the easy way out. Rather than taking strong stand against adversaries they have been willing to give in to unreasonable and uneconomical demands rather than standing a fighting.

This is painfully obvious today when we witness the problems in the automobile and its supplier industries. General Motors and Ford have bleeding heavily and are not able to compete against its non-union foreign competitors. Not only are their wages high, but they are forced to pay for workers who don’t work, fund pensions, and contribute to ever increasing health benefits. In addition, these companies are forced to operate in old, non-competitive factories in locations that have high taxes and worker protection laws.

All of these problems were not caused by the current management but by those who preceded them, especially the leaders in the 1950’s and 1960s. Following World War II, the United States experienced its most prosperous times. There was enormous demand for consumer and industrial products. During the war, the entire US manufacturing effort was focused on winning the war and not on providing consumer and industrial products. Further the US companies stood alone in the ability to provide these products worldwide, since the European and Far East producers had been devastated during the war.

Unlike other major companies in autos, steel, aluminum and transportation, GE was unwilling to “pay off” the unions with overly generous, non-economic wages and benefits. Instead, GE leaders took a strong stand in the mid-1950s against the then strong labor unions dominance and uneconomic demand.

Led by Lemuel Boulware, GE’s refused to participate in industry bargaining and negotiated with the unions on a company basis. They carefully thought though what was in the balanced interest of employees, investors, stockholders and made a “fair offer” prior to the negotiations. Though they were willing to make some concessions, they were firm and were willing to take a strike rather than give away the shop. They christened this approach “Doing Right Voluntarily” and used these policies and practices to assure that the company didn’t mortgage its financial future. In addition, GE made it clear that it was ready willing and able to move its established plants to friendlier, non-union locations, rather than be blackmailed.

This practice became known as “Boulwarism” and though it received a great deal of negative press, it worked for a number of reasons:

1. 
   First, GE had a long positive track record from the company’s inception of caring about its employees and their well fare. They instituted a suggestion system in 1906, a pension program in 1912 and insurance in 1920.


2. Second, the major GE union, the United Electrical Workers (UE) was a communist led union that appeared to be more concerned with having a people’s revolution than about the conditions faced by the GE workers themselves. This union was highlighted in the McCarthy hearings and was ultimately ejected from the CIO.


3. Third, the CIO created a competing non-communist controlled union, under Jim Carey, who aggressively sought to convert the UE members to the IUE. Further other powerful unions were part of the GE bargaining units, including the Teamsters and the IBEW. So Boulware divided and conquered the unions and didn’t have to face one dominate union, as there were in the auto, coal and steel industries.


4. Fourth, as we said GE did its homework and was willing to give the workers, both union and non-union, attractive and even innovative benefits before they were required. In most cases, the workers recognized that the benefits and wage increases were fair and balanced and were will to accept them without a strike. This neutralized the unions bargaining power.


5. Fifth GE hired the “Great Communicator” and the popular host of GE Theater, Ronald Reagan to tour all of the GE plants and spread the message of evils of Big Unions and Big Government. Reagan claimed to have visited 135 GE research and manufacturing facilities and met with some 250,000 individuals. It ultimately led to his own conversion and gave him the underpinning of his successful election to President of United States.
   Sixth and probably most important, GE was willing to close plants in unattractive union locations and move them to non-union cities. This was very powerful, since it gave the company power that the auto, steel and coal companies didn’t have. GE was an early proponent of moving to the southern US and overseas.
   

Overall the GE Boulwarism approach enabled the company to maintain control over its own destiny and not allow Big Unions and Big Government to dictate to them. GE was unwilling to mortgage the future for short term gain and was willing to take a strike if it was needed. This was sharp contrast to the other industry leaders who accept peace at any price and didn’t appear to care about the long term implications of giving away the shop.

This is just one of the elements that has enable GE to prosper and grow over its 126 years of existence, while other United States giant companies have gone out of business or are one the verge of bankruptcy.

The complete story can be found in Bill Rothschild’s latest book “The Secret to GE’s Success”, published by McGraw Hill and is now available Simplified Chinese, Korean, Indonesian, Spanish, Japanese and CD.