GEWatcher- Measuring performance

In the mid-1950's the GE CEO, Ralph Cordiner with the help of some of the best management academics and consultants, created a course, Professional Business Management, to develop the strategic and implementation skills of the company's management. This course was based on four words: Plan, Organize, Integrate, Measure.

I wish to discuss the last word: measure.

Measuring included a comprehensive listing of key business results, such as profitability, cost reductions, market share. Every business unit, then called "product departments", had a very extensive evaluation of these key result areas. In addition, GE had a very large "financial traveling audit" staff, that continually evaluated the operations and helped the company avoid embarrassing surprises.

In the 1970's Fred Borch installed a new strategic management system and again included a very comprehensive review system. But this went beyond the numbers and included in depth strategy reviews. These strategy reviews included assessing the business units, renamed "strategic business units"; product/ service, marketing/ sales, production, technology and financial strategies, implementation plans and programs to assure that the business units were being responsive to external, market, technological and competitive changes and were implementing programs that were consistent with their investment strategies and strategic drivers.

These reviews were time consuming and expensive and in some cases, and often an overkill, but they did enable GE to avoid missing its promised numbers and the key stakeholder expectations.

Since I have not been part of the GE system for over 24 years, I am not sure what the company does in reviewing strategies, at all levels, and assuring that they are internally consistent and able to respond to change, but it appears that this might be one area that needs to be re-assessed and changed so that the company doesn't embarrass itself with the investment community as it did this past quarter.

I am strong believer in learning from the past and from mistakes. GE's ability to ADAPT is one of its "secrets to its success".

Bill Rothschild, author of "The Secret to GE's Success", now available in Korean, Indonesian, Japanese, Spanish and English, and will shortly be published in Chinese.