Learning from "March Madness"

I enjoy the NCAA basketball March madness. It is fun to watch a real playoff where all of the conferences, large and small, have a chance to compete and see you is really the best. Every year there is always a "Cinderella" team or two, who upset the higher ranked, more publicized teams. But normally it is the highly seated teams that win it all.

Every year the same names appear at the top. This is not a matter of chance but a clear reflection of the college's commitment to being the best. These teams reflect the spectrum of giant state universities, to smaller but committed institutions.

There are several lessons that we can learn from these institutions.

1. They are committed to being winners and not just competing. I am always amazed when I hear coaches say they just want to be competitive and not that they want to win it all. The same is true in the business world. The leaders are focused on being the best and not just showing up.
2. The teams have long tenured coaches. Some of the coaches have been in their jobs for over twenty years and have moved up gradually, but consistently and when they are on the top they know how to stay there.
3. Many of the successful programs have had a strong succession plan. When the coach leaves or retires, they have assistants really willing and able to take their place. This is a strong contrast to the losing programs, who have no continuity and no succession planning.
4. The coaches build teams to fit their strategies and the really good ones, adapt to change. The great coaches are flexible, but highly demanding and if the players, regardless of their talent, don't follow the game plan, they either don't play or even are dismissed from the team.
5. The colleges commit the resources to attract the players and the fans. Their facilities are "second to none" and they are continually investing in them. They provide supporting staffs to recruit, train and provide academic support.
6. The winners have a loyal fan base, who show up even when things are not going well and support the coach and team players.

These are just a few of the positive lessons we can learn from March Madness. They are similar to what I learned from my study of General Electric...that I summarized in one word, LATIN, in my book: The Secret to GE's Success.

• Leadership- the universities have committed, long tenured leaders who want to win and allocate what it takes to consistently do so. They have a strong succession plan in place.
• Adaptability-good coaches, like leaders in all institutions, must adapt to change and not have one "cookie cutter" approach.
• Talent- the winners learn how to recruit, motivate and retain the talent. This has become increasingly difficult since many of the recruits are just "passing through" on their way to the professional ranks.
• Influence - they winners influence the policies of the NCAA to assure that the sport remains a sport and is not overwhelmed and influenced by the money that is spent. The college presidents work to retain "student/ athlete" and not hired guns. Of course this is a continuing challenge, as it is for any institution.
• Networks- the winning programs create strong networks with alumni to provide funding, as well as to help to find jobs for their graduates.

The lessons are the same, whether it is a winning basketball team or a giant company.

Winners have long term strategies and invest in providing the resources to be successful over the long term.

Bill Rothschild, author- The Secret to GE's Success.

GEWatcher9 "Strategic Portfolio Management Continues"

One of the major reasons, that Jack Welch was so successful was that he had the strategic instincts to know what he liked and made deals that focused on his priorities. Nothing and no one was sacred and Welch didn't let fondness for any one business stand in his way in making tough strategic decisions.

I believe that his ability to acquire RCA at a bargain price and then package RCA's strong consumer electronics brand and businesses with the weaker GE brand and make a strategic deal with Thomson of France, was one of this defining moments.

WIN/WIN. Welch got the Thompson Medical Systems business, which he loved, and got rid of the consumer electronics business, which he hated. While Thompson enhanced its world wide consumer electronics business. Both were happy!

Jeff Immelt and his team have taken similar steps in the Consumer and Commercial Financial arenas. Recognizing the vulnerability of the consumer financial markets and their declining margins, Immelt had done the following:

• "GE yesterday agreed to sell its corporate charge card unit to American Express Co. for $1.1 billion. It also agreed to swap GE Money units in Germany and the U.K. to Spain's Banco Santander SA in exchange for Italian commercial lender Interbanca, which is valued at 1 billion euros ($1.58 billion)."
  GE Money, as it was exiting WMC last year, agreed to buy part of UniCredit SpA's Bank BPH unit in Poland for 625 million euros ($893 million). In September, GE Money said it would invest $200 million in India by 2011. The sale of the corporate payment services unit to American Express should result in a gain of $200 million to $300 million, or 2 cents to 3 cents a share, and is included in GE's first- quarter forecast of 50 cents to 53 cents a share, Lehman Brothers analyst Robert Cornell, Goldman Sachs analyst Deane Dray and JP Morgan Analyst Stephen Tusa wrote in a notes yesterday and today.
• It's not an exit from consumer finance, it's part of a really deliberate strategy that comes from a pretty clear agreement with Jeff,'' Cary, 48, said yesterday. GE Money competes with the commercial-finance division for capital to be invested in higher-return areas." (http://www.bloomberg.com/ March 28, 2008)
  

Sound Strategic Portfolio Management.

I applaud these moves, since I have never been a strong advocate of the GE Consumer business and have believed that GE's strengths were in the commercial and industrial financial arenas, where it can combine its technical, market and financial skills to gain a competitive advantage.

This is sound strategic thinking portfolio management and is consistent with GE's past successes. It clearly demonstrates that Immelt and his team are continuing to assess their portfolio and willing to make strategic, longer term decisions and is not wed to any one business, even if it has been successful in the past. The divestiture of the "once beloved GE Plastics" was another example of this willingness to move ahead and not protect "fond" memories.

As a GE investor and alumni, I hope that this type of selectivity and portfolio management will enable the company to increase its disappointing stock performance.

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC (specialists in helping clients enhance their strategic thinking and decision making skills) and author of global bestseller: The Secret to GE's Success".

What happened to Usury Laws?

What ever happened to the usury laws?

It is interesting that there has been so much discussion about reducing interest rates to help solve the foreclosure problem. The Federal Reserve has reduced interest rates so low they are negatively impacting the older population who are on fixed income. It has significantly contributed to the decline and fall of the United States dollar and is increasing the prices of oil, heating oil and other commodities, which again impact the middle class, working people and those on fixed income.

But it is interesting there is NO DISCUSSION about the exorbitant "credit card fees and interest" charged by the credit card companies. These companies have encouraged credit card users to have several cards and only to pay the minimum payments. They charge what should be called "usury/ loan shark" interest rates at time in the low 20 percent level. If someone misses a payment they charge hefty fees.

The result is that many consumers are maxed out on their credit cards and pay a significant part of their discretionary income on just paying interest.

There should be an analysis of this situation and a move to force the credit card companies to reduce their interest rates to a reasonable level and stop behaving like loan sharks.

This may be an easier and more effective solve or at least reduce the current liquidity situation.

Bill Rothschild, author of The Secret to GE's Success...available on AMAZON and at your local book store...Visit www.strategyleader.com for more blogs and strategic leadership books and articles.

The TOILET PAPER INFLATIONARY INDEX...

We all know that gasoline, heating oil, measuring liquids, meat and poultry are regulated by law, a gallon is a gallon, a pound is a pound and so on. So, Exxon Mobil, can't make you fell as though the price has not increased by just giving you less for the same price..The same is true of the butchers, the dairy companies, and many other regulated consumer markets.

But Proctor Gamble, one of the best managed, highly admired companies and their key consumer packaging companies, like Lever Brothers, Johnson and Johnson, Kellogg are able to create the image that they have not raised prices, by reducing the quantity in the package and keeping the price the same.

Judge for yourself---Just look at the size of the regular toilet paper, paper towel package and you will visually see inflation at work. The same is true of over the counter medicine, like aspirin, vitamins etc. or the amount of cereal you get in a package. In most cases the package is the same or even big, with the headline: family, giant size, but when you open up and look inside it is only three quarters to half full.

This is inflation and it is never discussed or used to show that prices are increasing. In fact, it also provides the wrong impression about sales, since consumers must buy more packages to just keep up with their needs it gives the impression that sales are increasing, when they or not. Further, it contributes to the "garbage/ land fill" problem since there are more paper or plastic packages being thrown away every day.

This is just another indication that the country has a major inflation problem that is not being addressed. It supports the issue I raised in an early blog about the UNITED STATES GOVERNMENT and INDUSTRY ORGANIZATIONS...having elected to GIVE US FEEL GOOD NUMBERS... so that we don't worry and they can work on other problems, likes solving the banking and falling dollar crises.

CREDIBILITY is the key any successful society and leaders. I strongly hope that everyone will start to be honest and describe reality, even if it is not popular...Leaders must be honest... this involves those who sell to consumers...when the price is going up... don't make the consumer feel it is not...keep the same package and charge more...or tell them that they are getting less for the same price.

Let's be truthful. We must stop deceiving the public, but most of all we must stop deceiving ourselves. This is the only way that we can focus and solve all of the major problems facing us.


Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC and author of the global best seller:
"The Secret to GE's Success"...available on AMAZON... and "Putting It All Together- a guide to strategic thinking" that focuses on creating realistic and viable strategies and implementation plans. (available on http://www.strategyleader.com/.

GEWatcher-8 "Missionary Leadership"

One of the most critical jobs of any leader is to make converts and keep the loyalty of the flock. They must believe deeply in their mission, have positive vision and take actions that are consistent with both. I have been very fortunate to have worked with several successful missionary leaders.

These individuals had several unique characteristics:

• They were true believers and their faith was based on a combination of analysis, intuition and decisiveness.
• They did what they said and when they were wrong they admitted their mistakes and tried to do better.
• They were willing to bet their career and personal wealth to execute what they believed.
• They were willing to share the wealth and were not greedy.

Though I have some disagreements with what GE's CEO, Jeff Immelt's "go big/ go global" strategy, I am impressed with his personal dedication and missionary zeal. It is clear that he believes that he has selected the best strategy, has the best team and will succeed.

He has personally sacrificed to do what he believes is right. This included being willing to give up a $7.1 million bonus because the stock didn't do what he expected and recently investing over $5 million in purchasing GE stock at a time, when most would not have recommended that he do so. He believes that "ecomagination" will work and that GE can grow its organic businesses. He truly believes that size and diversity are critical for GE's continued success.

Immelt is a TRUE MISSIONARY LEADER.

In the past few days, the investment community appears to have listened to his continuing assertion that GE stock should sell at a premium and the stock has moved strongly.

I still have many concerns about his strategy and vision and will continue to comment on them, as well as those areas I agree with, but I admire his conviction and wish him well.... I too believe GE is a good long term investment and is undervalued.

Bill Rothschild, author of "The Secret to GE's Success" and "Risktaker, Caretaker, Surgeon Undertaker- the four faces of strategic leadership"- both books describe the missionary concept in more detail and shows how leadership, strategy and talent must fit together. They can be purchased on AMAZON and http://www.strategyleader.com/.

Sensible Succession Planning

It appears that Warren Buffett has "reluctantly discarded the notion of continuing to manage the portfolio after my death" and has embarked on finding three successor to fill his job. This is consistent with my June 2007 Chief Executive Magazine article entitled: "Decision Time for Immelt and Buffett." In this article, I contrasted the GE succession planning system with Buffet's lack of concern and lets wait until it is necessary approach.

"Trust Me vs. Obsessive" was the title of one of the paragraphs.

• This is what I wrote: " General Electric has gained a reputation as an innovator in management systems and practices. it succession planning system is complex, time-consuming and expensive, In some ways, it has become an obsession. Reginald H. Jones, Jack Welch's predecessor as chairman and CEO, even reorganized the company to select his successor. Immelt spends a month a year performing the process."
• "Buffett is the other extreme. He is 75 and "he is Berkshire Hathaway" he makes it clear that he has a successor in mind. He doesn't plan to leave and asserts "trust me" that everything is under control".

In a recent March 13, 2008 Business Week article, Rick Wartzman quoted one my favorite author's and management scholars...Peter Drucker: "we tend to pick people who remind us of ourselves when we were 20 years younger". First, this is pure delusion. Second, you end up with carbon copies and carbon copies are weak".

In my book: The Secret to GE's Success"; I emphasize that one of the reasons that GE is still alive and vibrant is that it has had only ten CEOs in its 127 year history and each one was different than his predecessor. Jones was a financially trained executive and different than his predecessor the risk taking Fred Borch; the aggressive Welch was very different from statesman Jones. And it is clear that Jeff Immelt is not a carbon copy of Welch.

There are those in GE, that will tell you that the reason that GE has been able to have internal candidates to succeed its leaders, is because of its elaborate manpower system. But it is important to point out that Borch succeed Cordiner and Jones Borch BEFORE the current elaborate system was in place and both were the right leaders for the right time. In fact, the only two CEO's that were selected with this type of system were Welch and Immelt.

I agree the current system may help but is not the only reason and in fact, it may inhibit the company's growth, which I believe happened under Reg Jones' tenure. (page 185 in my book: "The Secret to GE's Success")

I strongly believe that the reason GE has had this ability is because it has had a commitment to developing people from its beginning and it has been able to recruit, develop and motivate people because of training programs at all levels. I joined GE out of college and became a very committed GE employee because I knew that if I did my job, the company would provide opportunities for me to grow and develop. I also knew that I had to earn my strips and it was not just because of I had friends in high places.

Another key to GE's successful CEO and senior management successions is that it has recognized that different leaders and professional skills are required for different business situations and places on the life cycle. In my book: "Risktaker, Caretaker, Surgeon Undertaker- the four faces of strategic leadership", I describe the different types of leaders and teams required and explain how GE and a few other companies have recognized this fact and have been able to select different types of leaders and professionals to fit its market and competitive environments.

In conclusion, I am pleased to see that Warren Buffett now recognizes the need to select a successor but it is also important to emphasize that his successor will have a very difficult time succeeding a legend and will never have the acceptance as he has had. This is what I wrote: " But it is clear that his successor will not be placed on the same pedestal as Buffett, and if expectations are not met, the investors will not be as kind in their response".

I totally agree with Peter Drucker's quote in his 1999 book: "Management Challenges for the 21st Century" : "Succession has always been the ultimate test of any top management and the ultimate test of any institution"... In my book I put it this way: "Avoid Cookie Cutter succession planning".

Bill Rothschild, author of: "The Secret to GE's Success" and "Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership". Both available on Amazon and http://www.strategyleader.com/

GEWatcher 7- A Two Sided Sword- Taking Public Stands

Throughout GE's history its CEO's have been willing to take public stands on major issues and influence public policy. Gerard Swope, the GE CEO from 1923 to 1939, was a major advisor to the Roosevelt administration and was the architect of the National Recovery Act and Social Security. Ralph Cordiner was a strong proponent of legislation that was viewed as anti- Big Government and anti- Big Labor. Cordiner hired Ronald Reagan to espouse these views.

Jeff Immelt in 2004 conceived the idea of building on the need to "green" the world and at the same time sell GE products. He called this "ecomagination" and has created specific measures on helping the company improve its own energy savings, but also to demonstrate how it is has impacted the company revenue and earnings growth.

All of the GE's CEO have tried to blend their efforts to INFLUENCE public policy and support the company's ability to compete and be profitable. Swope's NRA program would have created cartels and permitted leading company's in each industry sector to increase their leadership position. The NRA only lasted three years and was declared unconstitutional. Cordiner recognized that if BIG government and BIG labor controlled the economy GE would not be able to compete. Immelt recognizes that GE will significantly benefit by helping the country and the world become more ecologically friendly.

Unfortunately, when a major company and its CEO takes a stand there will always be advocates of the opposite point of view that will challenge you, especially if you represent a major company.
Jeff Immelt experienced this reality at the Eco:nomics conference at which he was invited to speak. He said: " I came because I was invited"..and "I don't need to be lectured by anyone in this room on how to compete". "Immelt's outburst came toward the end of a Q &A session that saw him repeatedly assailed by ideological conservatives angry over his involvement in the US Climate Action Partnership, a coalition of large businesses lobbying for a carbon cap and trade system, and his leadership role in pushing the business world to embrace clean energy and sustainability."

Immelt obviously was angry and it is apparent that he didn't expect to be criticized. Unfortunately, he must recognize that he must always be ready to defend his position both from a external, value to the world and customers, and internally, making money. Jeff seems to been unprepared for being criticized and reacted.

Jeff made another good point in his talk: " There is no completely free markets. The government has its hand in every industry: housing has mortgage tax credits' GE got into commercial aviation because of DOD helped fund it; etc.... " It is true that GE entered and has been supported by government money. It developed the jet engine during WWII because the US needed a jet engine... its nuclear technology was a by-product of the US nuclear program... and many other businesses were supported by the US government. This is only fair since all of its foreign competitors have been financed and supported by their governments. Nothing is pure...

Overall, I applaud Immelt's focus on helping solve the environmental and pollution problems since it has the abilities to do so...but it must always be remembered that his primary mission it to enhance the wealth and well being of his key stakeholders...employees, investors etc. He must never be SURPRISED or upset when others challenge his strategies and mission. This is just part of the game!

Bill Rothschild...author of "The Secret to GE's Success" the only book that explains the company's successes and failures and the lessons we can all learn from this remarkable company.

Teaching how to make strategic and implementation decisions with limited information.

The February 4, 2008 Business Week included this story "The case against Case Studies" about how Glenn Hubbard, Dean of Columbia business school was not happy with the traditional case study and was experimenting with what he calls "decision brief" which requires making decisions with less information.

In the late 1960's and early 1970's, when I ran the GE Crotonville's Manager Development Course, a four weeks program and all of the strategic planning programs, I recognized that case studies were inadequate to teach strategic thinking and decision making and so I created an "in-basket/ computer competitive simulation case" that forced teams of students to work to together with limited information to create viable strategies and test their decisions via a simulation. In fact, I used this approach with then Columbia Business Dean, Boris (Bob) Yavitz, at the two week strategic planning program at the University's Arden House executive center in the early 1970s.

This approach created competitive business teams..consisting of a General manager and all of the key functional managers (engineering, marketing, finance, human resources and manufacturing) and split the data up among the team. The GM received information typical of the what a GM would get, the engineering manager received his type of information and so on. This forced the team members to share information, integrate and communicate among each other and use the "strategic thinking tools" we were teaching. In addition, the team could purchase additional information for a fee, if they wanted to...some of which was useful and other not so useful. Just like the real world many of the expensive studies are not very useful, while others are very helpful.

During the stimulation, the teams had to make decisions and were given quarterly results, which included some additional information. At the end of program the teams had to present their strategies and results to a simulated board of directors and were evaluated based on the quality of the strategy, their presentation and the simulated financial results.

The program was very successful in all regards. The students learned the art and science of strategic thinking, they learned how to integrate and communicate among each other, as well as to make assumptions, decisions and see if the financial results. If the team didn't manage their cash well, they could go bankrupt. Many teams, led by senior executives, went bankrupt and were not able to make decisions with limited information.

I don't know if this type of simulation and "in-basket" exercise is still being used at Crotonville, but it was highly effective at the time. Maybe, Dean Hubbard might find it useful to study its effectiveness in the Arden House programs and see if would complement his latest new case study approach.

Bill Rothschild, author of Putting It All Together- a guide to strategic thinking, which summarizes the art and science of the concepts and approaches used at GE and many other successful companies.. Learn more by visiting: www.strategyleader.com.

GEWatcher 6- Continuing FRUSTRATION

At the end of my latest book: "The Secret to GE's Success", I provided my perspectives and insights about Immelt and his ability to meet the "high expectations" that he has set for the company. I promised my readers that I would continue to objectively evaluate Immelt and his teams performance. I just finished reading the extensive, Sales oriented 9 page, "letter to investors" in the 2007 annual report and would like to use this letter to see what has changed and how it compares with the key points I make in my book.

"Impressive Results but Poor Stock Performance" was my closing comments in the book. This continues to be a great frustration for Immelt and his team. Jeff strongly believes that GE is still a BEST BUY and is UNAPPRECIATED... it clear that he is very frustrated. In fact, in recent days it was reported that he lost over $7 million bonus because the stock didn't perform and he also reported that in the past week he invested over $5 million of his own money in GE stock. So, you must applaud his commitment and belief that the stock will ultimately achieve its value.

Again the numbers are impressive..revenues were up 17%, earnings 22%. The company asserts that it is the "third straight year of organic revenue growth of 2 to 3 times GDP growth. This is an interesting change in goals. When I was researching and writing my book, the GE Annual Report's Cover headline was "GE BIG" and asserted the company would grow organically 8% per year. I challenged this assertion and said the company couldn't do it. But based on this report organic growth was 9%, so it would appear I was wrong.

But now the goal is not 8% but a multiple of GDP... I find this interesting since GE now generates "more than half the revenues outside the United States, so why use GDP as a measure?
Of course my greatest concern is the validity of the numbers. In my GEWatcher Blog- 3 I discussed a WSJ article which stated that:
" In each of the past three quarters, GE has corrected financial statements because it improperly booked income at its rail, aircraft engines, health-care, energy and water units". It is important to note that these are GE's major growth businesses and continually lauded by Immelt and his executive team as the great hopes for the future. "In the fourth quarter of 2003, for example, GE locomotive unit overstated revenues by 22.6% and profit by 16.6% according to SEC filing". (Immelt says that this has been corrected in the latest annual report.)
But even if the numbers are okay... I am still concerned about the entire idea that GO BIG is the right strategic goal. "Growth or its own sake" is not a viable or intelligent strategic goal. By the way, the new GE theme is INVEST and DELIVER and not GO BIG...I like this better, but the real issue is where and how much to invest and the ability to adapt to change.

So, lets review where GE is placing its bets...

Environmental solutions, ties with Jeff Immelt's personal theme of "ecomagination", is high on the list...and it makes sense...the company has acquired the wind turbine, solar, waste management and several others to provide a "full market basket" of energy businesses. Note that a great deal of this growth is from ACQUIRED companies and not organic growth.

Unfortunately GE missed the opportunity to acquire Westinghouse Nuclear and had to settle for a joint venture with Hitachi in the nuclear business. I think Nuclear is the biggest opportunity, but am not convinced that GE is in the strongest position to be the leader...but of course, this was always GE's problem since they selected the "second customer preferred" technology, BWR rather than the preferred one, PWR. Over the past two decades the technologies have changed, but it is interesting to note that Westinghouse and European nuclear companies have won recent Chinese contracts.

Emerging Markets..."China and India are the biggest emerging markets and are essential to GE. Immelt forecasts revenues in the region to move from $5 billion in 2006 to $13 billion in 2010. "Here we win by being a LOCAL PLAYER". In short, GE is going to continue to build plants, sales offices and even transfer R&D to these countries. I have a major concern about this strategy and will continue to follow it in future blogs.

Digital Connections... one of the major issues for Immelt is UNBC.. he states: "UNBC is a great example of a business that becomes more valuable as its market evolves". "We have refocused UNBC in global markets around fast growing cable, film and digital businesses".. In short, Immelt continues to be committed to UNBC. I also have concerns about this issue. UNBC has taken a "liberal stand on most major issues", which can have a negative impact on the GE brand, and its network ratings are poor and it is still #4. GE has placed a significant bet on the Chinese Olympics and this may be either a big win or a big loss.

It is true that CNBC is the leader, but Fox is likely to take share as they roll out their Business Network and use the extensive resources and brand strengths of the Wall Street Journal. However, only time will tell and since I have no real inside information I will just monitor and comment as time goes on.

In conclusion, it is clear that Immelt and his team are dedicated, committed to GE and its investors. They have a game plan and believe in it. The leadership continues to be deep and strong and as they point out in the annual report "we develop great leaders". But as I pointed out in my book, one of GE's "success factors" has been its ADAPTABILITY... the leaders willingness to change if and when necessary and admit they were wrong and move on. I am not sure that Immelt and his team are adaptable.

Complexity is still my greatest concern. The revenues are now $173 billion... it has exited businesses, like Plastics, Reinsurance etc, with revenues of over $50 billion and acquired businesses with revenues in the $80 billion since 2002. It is moving aggressively globally and betting on countries with major problems.. these types of change would be difficult for a mutual fund to manage, but it must be unbelievably difficult to integrate and operate businesses in this type of dynamically changing portfolio. I know GE says everything is under control, because they are skilled, but it is still a major challenge and concern.

Immelt closes his letter saying that GE's success is based not "on the sum of its parts" but on its totality and points out that it is ranked high on the Barron's and Fortune lists and fourth on innovation. But to truly understand GE and its abilities to succeed over the past 127 years, you must clearly understand the reasons... these reasons are clearly articulated in my book and I use the word: LATIN... It is because of the company's Leadership, Adaptability, Talent, Influencing and Networks that it has been successful. I will continue to evaluate each of these key factors in future blogs to determine if they are continuing, improving or declining. There is no question the company has a deep, talented bench...but it is also true that they are the target of all of the head hunters and every day I read about a GE executive moving to another company.

PLEASE ADD YOUR INSIGHTS AND PERSPECTIVES..

Bill Rothschild, author of "The Secret to GE's Success" and "Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership". Both available on Amazon and on http://www.strategyleader.com/

GEWatcher 5- GE's success in dealing with dissent

The Business Week, Interactive Case Study of March 4, 2008 describes the dissent that Immelt faced when he introduced the concept of "ecomagination" in 2004. The article portrays Immelt's surprise when only six of his 35 senior officers approved of the concept and approach. This is not a new situation for GE leaders.

Ralph Cordiner had to move the GE headquarters out of Schenectady in 1953 because there was so much negative reactions to his introduction of decentralization. GE had been a highly centralized organization and dominated by the electric utility businesses in Schenectady. Cordiner's new organization and leadership system was a threat to their power and they resisted. But Cordiner's approach proved to be the right change and GE prospered from it.

Fred Borch and Reg Jones also had a similar near revolution when they introduced Strategy Planning. This new system was not welcomed by the senior management. In fact, Borch insisted, like Cordiner did before him that everyone go to Crotonville to learn about the new system. I led all of these sessions and personally saw the resistance and resentment. Again Borch and Jones was right and the company benefited.

Over the 126 years there were many situations where the CEO and his senior officers had to take stands and introduce changes that were not welcome and resisted. And in each case the company was better because of these changes and, in fact, if they didn't happen, GE may be like its traditional competitor, Westinghouse and just a memory.

I am not sure that "ecomagination" is in the same category of the previous major strategic and organizational changes, but I am happy that Immelt has had the conviction and courage to make it successful. He has displayed the same strategic skills of his highly successful predecessors.

If you want to learn more about the unique GE leadership and how they changed the company at the right time, read my book: "The Secret to GE's Success" and continue to read these blogs.

Bill Rothschild, author of "The Secret to GE's Success"