What would Jeff (or Jack) do?

Author details how to succeed the GE way

By Harriet Weinstein

Special Correspondent

March 25, 2007

General Electric Co's "Imagination at Work" ad slogan could almost have been created for its former corporate planner, William Rothschild.

During his nearly 30 years at GE, Rothschild led and designed courses in strategic thinking and decision-making at Crotonville, GE's education training center, now called the John F. Welch Leadership Development Center, in Ossining, N.Y.

He also was responsible for GE's first market-based corporate strategic plan and held management and professional assignments in finance, manufacturing and human resources.

After he left the industrial and financial giant, Rothschild set up a successful consulting business, wrote four business books and took up teaching. Now, he has written a book about GE - a project he has been thinking about since leaving in 1984.

"I can't stop saying remarkable when discussing GE," Rothschild said.

His book, "The Secret to GE's Success," profiles the company's leadership throughout its 127-year-old history, from light bulb-inventor Thomas Edison through iconic former Chief Executive Officer Jack Welch to the current leader, Jeffrey Immelt.

"The Secret to GE's Success" was written for GE employees, retirees, management and shareholders as well as for regular GE watchers, the author said. It's a history book and a handbook for executives seeking to learn the secrets of GE and fold them, where possible, into their company's culture.

Imagine the impact

GE's operations have on many of us. Shareholders, for example study the numbers diligently for GE, whose market capitalization was recently in the range of $360 billion, making it the world's second-largest-company.

GE has 350,000 employees worldwide and has $175 billion in annual revenue. Its businesses include aerospace, financial services, diagnostics, consumer products such as refrigerators, washers, dryers, lighting and entertainment through NBC, MSNBC and Universal Studios.

Under Immelt, GE is researching business possibilities such as wind energy, water and other green products, Rothschild said.

Fairfield County-based units produce more sales for GE than perhaps any other region. Its Consumer and Commercial Finance units and many of their divisions are headquartered in the County, including its equipment and aircraft leasing units.

Immelt sits at the company's Fairfield corporate headquarters, and its money is counted in Stamford at GE's treasury operation.

CEOs of legend

Keeping all those balls in the air is a monumental task, and one of Rothschild's themes is that GE has been successful due to the influence of its highly talented chief executive officers.

But Rothschild believes that often those who write about GE during the Welch era - a time of tumultuous change at GE in the 1980s and '90s - downplayed the influence of previous GE leaders.

"If it wasn't for the 100 years that preceded him, he (Welch) would not have been able to do it," Rothschild said. "He inherited a very strong, well-managed, deeply talented company and was able to build on this heritage."

Rothschild reported directly to Welch for three years.

Not even Edison

Rothschild, 73, shows GE in its times and bad times in the book, and that its leaders didn't always have the right answer for building the business.

An early struggle he relates involved Edison and his company, Edison General Electric, which he created to generate and distribute newfangled electricity to homes and businesses.

Edison chose direct current technology, perceived as simpler and safer than alternating current. But A/C had the advantage of allowing for centralized power plants and widespread distribution; D/C would have required countless generating stations no more than a few miles apart.

The marketplace favored alternating current. Edison was forced out and a merger occurred resulting in the General Electric Co. in 1893.

Learning LATIN

To illustrate the elements of GE's success, Rothschild developed the acronym LATIN for the following qualities: leadership, adaptability, talent, influence and networks.

"These are not the 10 Commandments," Rothschild said, cautioning executives who may be reading his book as a "how-to" guide. "They (the rules) need to be adopted. It's a good place to start."

Of the all-important leadership element, he said its success requires not only a talented chief executive, but also the corporate patience to let the leader do the job. "GE has been willing to select the right leaders and the right people for the right time and give them enough time to execute the right strategies," Rothschild said.

The average tenure for GE's 10 chief executive officers is 12.6 years; the average American CEO spends just 4.6 years on the job, Rothschild said.

The author also applauds GE's practice of bidding a fond but firm farewell to departing executives.

When GE's leaders retire, they leave the company's premises and are no longer members of the board of directors, allowing the new leader to work without interference. Likewise, those who lose the competition for a big job within the company are also shown the door.

Immelt in 2001 ascended to CEO spot over rival GE execs Robert Nardelli and Jim McNerney, who were both sent packing to avoid future distractions and in-fighting for the new leader.

Changes on the fly

Adaptability also is a key to GE's success, according to Rothschild.

"Nothing and no one is sacred or indispensable," he said. "They systematically and objectively assess all of their businesses and key people and are willing to invest in the winners and prune those who don't fit."

An example is the recent announcement that GE would sell its plastics business, where recent return and future growth prospects were below GE's standards. The company would rather sell a unit that is not first or second in its market segment and invest in a unit that is, or soon will be.

Not always successful

GE has a talent bank that is legendary, Rothschild writes in his book, and it is mostly grown from within.

"It's a company that has been creative in its strategies, creative in its talent pool and has a very deep bench. It's all homegrown people, not just-in-time recruiting," said Rothschild, referring to the practice of materials arriving just before needed to avoid building inventories. "Many companies wait until the last minute and hire a headhunter."

But success at GE doesn't always translate to success elsewhere in the corporate world. In January, Nardelli, who had risen to GE corporate vice president and president and CEO of GE Power Systems, was ousted as chief executive at Home Depot, where he landed after losing the battle to Immelt.

The giant home improvement chain didn't fare well under Nardelli, showing problems with its financial health, customer service and strategic direction.

After the Nardelli event, some questioned the relevance of the famed GE training. "Guess what, they are not always successful. Sometimes, they aren't able to move into other settings and do well," said Noel Tichy, a professor at the Ross School of Business at the University of Michigan. "Nardelli didn't have the people touch."

On the other hand, McNerney, who held many top leadership posts at GE, including executive vice president of then-Stamford-based GE Capital, is overseeing a turnaround at Boeing Co., which appears ready to leap back into the lead as the top seller of commercial airliners worldwide.

All the pieces Rothschild offers an explanation of why many former GE executives are successful corporate leaders: "GE executives perform well when they take over companies with a large portfolio of business and they can prune and cut out businesses and replace them. I call these 'surgeon leaders,' " Rothschild said.

Tichy said McNerney's post-GE success came from his ability to move on. "McNerney never put GE in anyone's face," Tichy said.

While corporate boards looking to fill top job slots often snap up GE-trained executives, observers say they can't always successfully import the GE culture that comes along.

"Managers look to effective organizations and try to figure out 'What piece can I bring to my organization,' but in fact what they miss is that it is not any one thing," said Batia Wiesenfeld, professor of management and organizational behavior at the Leonard N. Stern School of Business at New York University. "It is the congruence (or fit) between all the pieces.

" The GE connection

Like the bulk of GE executives, Rothschild joined the company through its Business Training Course, now the GE Financial Management Program. He began his career in 1955 and retired from GE in 1984 to start a consulting company, Rothschild Strategies Unlimited LLC, where he has been coaching CEOs and their teams. Clients have included BellSouth and IBT in Atlanta, Avon Products Inc. in New York, Pitney Bowes in Stamford and many others.

Many clients call him because of his former GE connection, Rothschild said. Web site, strategyleader.com, features a GE Watchers section, along with information on strategic thinking and competitive strategies for his corporate clients.

Rothschild now is working on a proposal for a strategic leadership course based on "The Secret to GE's Success" for the University of Bridgeport where he is an adjunct professor and teaches in the masters of business administration program.

Copyright © 2007, Southern Connecticut Newspapers, Inc.