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.

Pope Benedict - Exceeding Expectations

Pope Benedict XVI visited the United States during the later part of the week and over the weekend. I have never been impressed with "spectacular events" because they are often so over publicized and promoted that by the time they happen the reaction is "why?".

Americans love the theatrical and so this even makes things worse, and often have very HIGH EXPECTATIONS that are difficult to achieve.

Pope Benedict was the surprising exception. He never promised anything and delivered a very inspiriting result. In fact, many Americans, including me, wondered why he was coming in the first place. Let me outline why I am so impressed with his visit and its potential positive results on the American Catholic Church and maybe society in general:

• First of all, he was willing to confront one of the greatest scandals and embarrassment in the recent history of the Catholic Church...the pedophile scandal. He didn't hesitate to confront and even say he was scandalized and that it was MANAGED badly by the American Hierarchy. Which is true...some of the American Cardinals and Bishops should have been removed from their leadership positions for their inability to admit mistakes and then to try and hide the reality, which has spanned many decades.


• Second, the Pope met with some victims of the scandal...this was a sign of REAL leadership and especially for someone who could have avoided the embarrassment of such an event.
  
• Third, he went and participated in a Jewish celebration, a clear sign of reaching out.
• Fourth, he invited the youth to become more involved. His visit to St. Joseph's Seminary and the over 25,000 enthusiastic youth was inspiring, especially when you could see so many young women in religious habits and young men in "roman collars". ( I believe that one of the reasons for the lack of vocations is that American women's religious orders stopped wearing their habits and many priests stopped wearing the roman collar, and so became part of the crowd and not different from the crowd. It is like the military when soldiers wear civilian clothes, they stop being soldiers and just become like every one else).


• Fifth, the Pope, is multi-lingual, included a Spanish element to his homily and made it clear that the Latino/ Hispanic population is a key element of the religion in the United States and will continue to increase their leadership in the church
  

In short, Pope Benedict, did what all leaders should do: NOT OVER PROMISE and EXCEEDED ALL EXPECTATIONS. I think this is the model of JESUS CHRIST... Pope Benedict, like his predecessor, John Paul II, is a clear strategic leader in his own right and built on his own unique talents.

Pope Benedict has said on many occasions he was not John Paul II is not trying to emulate him, but be himself. This visit demonstrated he was truly his own man and demonstrated that he too, like his predecessor, is the RIGHT LEADER FOR THE RIGHT TIME.

Since I am an enthusiastic Roman Catholic, it just demonstrates to me that the Holy Spirit has again enabled the Church to have the right leader for this time of crisis. Benedict is what I describe in my book, (Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership), a missionary, risk taker.

I wish him well and congratulate him on his ability to stimulate and challenge the American Catholics and the church. I wsh him a long and productive life.

Bill Rothschild, author of Risktaker, Caretaker, Surgeon, Undertaker- four faces of strategic leadership.

GEWatcher 12- "Welch violated on of the GE key success factors- Leave and get out of the way"

It has been an amazing GE week...for people like me who are alumni and investors.


In my book, The Secret to GE's Success, I emphasize that among GE success factors, has been their ability to make their numbers and never over promise...

But on Friday, April 18, 2008... Jeff Immelt had to apologize because GE was unable to meet the income targets that he had just two weeks before said were "in the bag". Even worse he missed badly and had to blame more than one business unit for the miss. This caused a major sell off of the ENTIRE DOW since the most reliable company missed and everyone thought that things were bad and getting worse.

To make matters worse Jack Welch, the GE legend, went on CNBC (a GE owned cable network) and its competitor FOX NEWS... to say that Immelt's miss was irresponsible. This unprecedented action made things worse... and it was compounded when Jack..ate humble pie.. and said he was miss interpreted.

One of GE's great strengths in the past was that its CEO's retired and then disappeared. Unfortunately Jack has not disappeared and continues to promote himself. He has columns in Business Week, is a frequent guest on news programs, and even leads expensive, executive session.

This is what I wrote in my book:

"Leave and Get Out of the Way. This is another critical piece of GE’s leadership success. GE leaders have been required to leave when they retired and not permitted to hang around either as members of the board of directors or as advisers. This practice has enabled the new leader to take command without being second-guessed by his predecessor."

It is clear, that even if Jack Welch meant well, he appears to unable to leave GE behind and not continue to play the role of CEO. Unfortunately, he made the situation worse and has caused many to question Immelt's game plan and abilities. This is not positive.

I will continue to comment on the GE strategy and its ability to create and meet realistic expectations.

Welch said that Immelt can't surprise everyone again... I agree and Immelt and his team must be able to make the numbers with no excuses.

Bill Rothschild, author of The Secret to GE's Success and the most unique strategic thinking software and tutor available, StrategyLeader(tm). This software is available for a 10 day trial on www.strategyleader.com.

GE Surprised itself

High Expectations and Surprising Yourself

During my 25 year GE tenure and my subsequent 23 years as a consultant to major corporations, I stressed two leadership tenets

1. Set minimum expectations and always meet or even slightly exceed them. This demonstrates that you are credible and can always be counted on.
2. Never surprise your “key stakeholders”, especially customers and investors and most of all YOURSELF. This shows that you have done your homework and are prepared for uncertainty.

Last Friday, Jeff Immelt and his GE team violated both of these leaderships tenets.

In my recent book: The Secret to GE’s Success, I ended my 127 year strategic history of the company with concerns about Immelt’s ability to “meet high expectations and avoid surprises”.
I cited four concerns:

"Ability to “Go Big”, which was the theme of the 2005 annual report. In this area, I applauded his “missionary zeal”, but didn’t believe that he could grow organically, at a 8% compounded rate, because of the size and complexity of the company ( adding $14 billion of revenues each year and even a higher rate of earnings can’t be achieved forever… it is simply the “law of BIG numbers”).

“Selling Solutions Globally” - highlighted the complexity of selling to developing nations, like China and India, who are not willing to “repatriate earnings and even nationalize companies” if they are too profitable and big.

“It Always Takes Longer Than You Think”, focused on how difficult it is to get large, infrastructure orders and maintain strong competitive positions.

“Maintaining a Strong and Deep Bench” focused on GE’s willingness to invest in people and even allocate a month of the CEO’s time to evaluating key people. When you have over 300,000 employees with a wide variety of cultures, religions and skills, this is almost impossible. GE has been and continues to be the prime source of executive and professional talent by headhunters and companies who have a “just in time” staffing philosophy.

Chief Executive Article. In June, 2007, I published an article in Chief Executive magazine, entitled: “Decision Time for Buffett and Immelt”, in which I contrasted the “GO BIG” simple approach of Warren Buffett with the complex approach GE’s Immelt. In this article, I stress three actions for Immelt to consider: Make the company less complex.
Continue to Prune the Portfolio.
Create “tracking stocks”- that would allow investors to invest in sectors of the company, while allowing GE to remain in control and one company.

Blogs on Amazon and Google. Since November, 2007, I have been writing a series of blogs, entitled GEWatchers, to keep my readers and clients up to date on what Immelt and his team are doing strategically and how their actions compare to what made GE successful in the past. These are indexed on this site, along with blogs on other major topics.

Bill Rothschild author of five key books on strategic leadership.

"Past is Uncertain As the Present & Future"!!!

Today's business press is full of articles and quotes about what caused the current economic mess. Greenspan, who was on the job for 18 years (which is too long for anyone), is defending his actions and says that he did what was right given the information he had. Others disagree and blame him for the current situation. John Reed, former Citicorp CEO has stated that the merger of Citicorp and Travellers was a mistake, while Sandy Weil his successor says it was a good move.

Obviously each of these individuals have their own view of what happened, which may be right or wrong, but it is really perception that is the foundation of even history. I am an avid read of American history and am amazed when I read different biographies about revolutionary heroes, which is popular today. The story of Jefferson, Washington, Adams, Burr all supposedly deal with the same "facts" about what happened, but they all have a different bias.

Unfortunately in the United States today, we focus only on what is happening today and don't learn from the past. We keep making the same mistakes, but it gets worse, because the actions of leaders today impact the entire world and not just one country.

Further we have created "news and commentary" networks and publications, that are so interested in getting the "headline first" that they often ignore the facts. In addition, the major organizations and companies tend to employ "spin doctors" to only show their good side and ignore their failures and weaknesses.

We can only learn from the past if we recognize that there were good and poor decisions and actions. However, we need to examine whether what worked or failed in the past, will work or fail today. This should be an integral part of all educational institutions and company training courses.

I believe that all of companies and institutions should take the time to examine their history and share it with the world. This means being willing to give all sides and then using these insights to improve the organizations. But it must be remembered that "the past is as uncertain as the present and future" and that it is okay to have different perceptions and conclusions.

When I developed the GE strategic planning workshops and seminars at Crotonville in the 1970's, I hired consultants and professors to study GE's past strategies and identify what they did well and not so well. One of the consultants came back after a month study and told me "in GE the past was as uncertain as the present and the future". I laughed and asked what he meant. He said that he interviewed dozens of executives and they all had a different perception of GE's past. This was a lesson I never forgot.

In the original GE Strategic Planning workshops, a four-hour "strategic history of the company" module was included, that covered both GE's successes, failures and even questionable management actions, such as "the great electrical conspiracy" and participation in cartels.

These sessions were a major success and I ultimately continued to lead these sessions, both inside and outside of GE. It is the foundation of my new book" The Secret to GE's Success", which also used these insights, as well as what I have learned from own experience and study, to evaluate GE today and the current leadership and strategies.

History is a critical element is learning and in developing sound business and public strategies. I believe that all companies and institutions would take the time to learn from its own past successes and failures and not just study "other company or organizations case studies". The real learning takes place when it is relevant to the students, employees and managers and it is a critical part of creating sound, viable and successful strategies and execution plans.

In short, know your self first and then learn from others.

Bill Rothschild, author of "The Secret to GE's Success"-which enables readers to learn from the successes and failures of an American Icon Company and put these lessons to work for themselves.

MBA needs to be combined with on the job experience- it worked in the past, why not now?

The April 7,2008 Financial Times' article " Masters and Misgivings" celebrated the 100th anniversary of the Harvard Business School and raised several critical issues about the worth and need for MBA degrees. It was amazing to learn that over 500,000 students will receive MBA degrees globally in 2008.

The MBA degree has become almost a must for those who want to become senior managements in many organizations. It is like the bachelors degree became a must for my generation. But the real issue, is it worth the time and effort and would organizations be better off taking undergraduate degree holders and train them.

GE's Talent was homegrown.
In my recent book: "The Secret to GE's Success", I stressed that one of the reasons that GE has been successful for over 127 years, is that it has developed its own talent and created a strong and deep bench. Training programs began with the founding of the company in the 1897 and has continued today. The first programs were technical programs, but the company recognized the need to train financial and business leaders and in the early 1900's added its renowned Business Training Course. The programs were further enhanced in the 1950's when all of business functions, (sales, marketing, human resources, manufacturing) added their own unique three year programs, that combined on the job training and after work educational programs.

It was at this time that the company opened its famous Crotonville executive management center. The Crotonville courses were taught by a team of both academics and GE staff to assure that the concepts were translated into practical applications and built on real problems and situations and not just case studies. The GE programs built a strong, deep bench of skilled and committed professionals and managers. However, there were no degrees given by the Crotonville or GE training programs so they were not a marketable as an MBA or Masters degree. This was intentional to avoid GE being raided by others.

Today's Graduates want a marketable degree.
Over the last few decades, many companies have stopped their own training and relied almost exclusive on hiring MBA graduates. This was result of the unwillingness of MBA graduates to want to do entry level work and spend more time in the classroom. The company's found this less expensive and so they have relied more and more on hiring the graduates, either directly from the Universities or from the consulting and accounting firms who are still the largest employers of MBA grads.

Need Combination of Academics and Real, Hands On Experience.
Unfortunately, this approach has left some gaps in the experience and skills development of the new recruits. Since most MBA grads start working in middle management or in consulting firms positions, they lack the practical hands-on experience that they can only gain by being in the trenches and learning from the bottom up.

I started my career on GE's Business Training Course and then moved to the Employee Relations Program. On these programs I had assignments as a factory foreman, in the "apprentice shop", in the bookkeeping organizations, in short, in the less desirable but important parts of the business. It is the old story, if you haven't lived it you really can't appreciate what it takes to do some of these routine, sometimes boring, manual jobs. No MBA program can provide this first hand experience and it shows when their graduates enter the workforce. Most lack the sensitivity to the workforce and many consider themselves anointed.

One of the criticisms about the current MBA programs is that they are focused on techniques and not the real applications. Case studies are still academic and not real and you really can't solve real problems unless you face them and must solve them under pressure and with time constraints.

Combinations work...
I believe that MBA programs do have value, but maybe they need to be combined with "on the job, entry level training programs. Maybe the solution is to have students serve an apprentice ship and then go to MBA programs, designed by their employers and paid by them. This is not a new concept. In the 1960's I developed and managed two key technical programs for the GE Missile and Space Division. One was an entry level program, called the Space Technology Engineering Program (STEP)and this enabled the participates to get a Masters at the University of Pennsylvania. The other was a more advanced program called the Systems Engineering Program and it allowed participants to get a doctorate at U of Penn. Both were highly successful in combining academics and practical experience.

Business is not a science... it is an art and this requires learning to apply common sense in a more efficient and organized way...I call it Organized Common Sense. This can only be done with a combination of real life and some academic training and no MBA program can do this on its own.

Bill Rothschild, author of "The Secret Tot GE's Success" and "How to Gain and Maintain the Competitive Advantage in business". Both are available on Amazon.

Bring Back Simplicity and Common Sense

In the past few days I have read a number of articles which reinforces my belief that things have gotten so complex that many major organizations and even governments really don't know what is going on and how much risk they have undertaken.

The first article dealt with the mess on Wall Street. It is clear that the "GO BIG/ GO GLOBAL financial institutions, have become so complex that no one really knows what is going on and even the degree of risk they have taken.

The standard, but dull" "debit and credit" logic, got lost in the ingenious ways of booking income and profits, often,"off their balance sheets", so that their leaders really didn't know they were vulnerable. This is a reflection of our times and just bad leadership and management.

Warren Buffet has said it repeatedly, "if you don't understand it then don't invest in it". He christened this type of creative bookkeeping as "weapons of mass destruction" and I agree.

Another article described, how one of Rupert Murdock's affiliates, Harper Collins, is going to establish a new "imprint" that will refuse to allow the bookstores to return books and will not give authors large advances. The article pointed out that publishers print too many books because they get huge orders from the book chains, who then send them back (30-40% of the books are returned).

The book publishing and selling business has also followed the "GO BIG", "Be all things to all people if it sells" and has become complex, it is hard for an author to get published and a reader to find a good book to read. The mass merchant, "all things to all people" mentality has destroyed the small "mom and pop" bookstores where you could go and be waited on by "book lovers" and even find a book that wasn't just being hyped. Today you enter the superstore and it is not clear what it is... it has thousands of books, but often you can find what you want.

I continue to believe that one of the major problems with GE's ability to get its stock price where it should be ($50 a share versus $38) is that the company is so complex and has the obsession to "Go Big/ Go Global" that the investors would prefer to invest in simple companies like Warren Buffet's Berkshire Hathaway and not have to make a career out of finding out what is really going on, as well as the company's real assets and liabilities. This was one of my key points in my book: The Secret to GE's Success (page 249) and in many of my "GEWatcher blogs".

It is clear that even the Federal Reserve is confused since there are so many creative, often financially unsound, instruments. They still have no idea what Bear Sterns is really worth and what its real assets and liabilities are.

I think the world should adopt the Warren Buffet school of management: "keep it simple, invest in what you understand and avoid complexity". It has worked for him, so why would it work for others... maybe the MBA programs should have a "Buffet strategic thinking and investing course or even program."

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC... who specialize in logical and effective business strategies and implementation programs and consulting...author of Putting It All Together- a guide to strategic thinking and decision making. Recently updated and available on http://www.strategyleader.com/

GEWatcher 10- Losing the Nuclear Power Race?

It is clear that one of the most significant ways that the United States and rest of the world will become more petroleum independent is by adding nuclear reactors.

Unfortunately, for GE it appears that Toshiba, who purchased the Westinghouse Nuclear business from British Nuclear Fuels in the fall of 2006 for $4.2 billion", appears to be in the leadership position.

The Wall Street Journal's April 4, 2008 edition reported: " that Toshiba will build four nuclear power plants in the US valued at a combined 1.4 trillion yen". "Since moving under Toshiba's umbrella, the U.S. company has received a total of a trillion yen in orders to build nuclear plants in China."

Nuclear is a key part of the United States energy policy and it is anticipated that there will be 30 new reactors planned over the next 20 years.

In my book: "The Secret to GE's Success" (pages 236- 237), I pointed out the GE lost the deal to purchase the Westinghouse PWR technology, which accounts for over 75% of the total global nuclear plants installed, because it refused to raise it bid and allowed Toshiba to win the prized Westinghouse nuclear business. I asserted that this was a mistake and that it was unclear whether the GE Hitachi combination would be successful in winning its fair share of the nuclear orders worldwide. So far, it appears that my prognosis was correct and that Toshiba is winning the order race.

In my book, I also point out that a successful nuclear strategy requires solving the nuclear waste problems and standardizing the type of reactors used in the United States. Both Japan and France have elected to use nuclear as a means of solving their energy problems, but they also have a complete system and standardized units. The United States does not.

Another surprise is that GE has not done better in China, where it has made significant investments in the Olympics, opening plants and offices and even moved one of its Research centers to Dalian. It appears to me that GE should have been able to get at least some of the nuclear orders in China.


Bill Rothschild, author of "The Secret to GE's Success" and CEO of Rothschild Strategies Unlimited, LLC (specialists in helping management teams improve their strategic thinking, decision making and execution.)