The GE Work-Out: How to Implement GE's Revolutionary Method for Busting Bureaucracy & Attacking Organizational Proble

2002

Introduction:

The Power of Work-Out

GE IS ONE of the most successful companies on earth. Yet every day, thousands of people at GE face the very same set of problems and challenges that confront every other organization in the world, regardless of size, shape, or mission. What’s the best way to deliver products and services to our customers? How can we improve our margins and our efficiency? How do we get everyone onto the same page? How do we stay ahead of the competition? How do we attract, develop, and retain the best talent? How can we make the best use of technology? How do we move quickly to new opportunities?

Does GE have answers to all these questions while other organizations do not? Of course not. But what GE does have that most organizations lack is a deeply engrained and internalized process for addressing and solving its problems—quickly, simply, and with the involvement of people who will ultimately carry out the decision. That process is called Work-Out. This book will show you how to apply Work-Out in your own organization to solve your organizational problems.

No program—not even Work-Out—can transform your organization overnight. But in the short run, Work-Out will help you solve problems faster. And in the long run, it can help your organization develop the culture and the skills necessary to move more quickly, nimbly, and successfully in our complex, global world.

A Quick Look at Work-Out

At its core, Work-Out is a simple, straightforward methodology for cutting out bureaucracy and solving organizational problems—fast. Large groups of employees and managers—from different levels and functions of the organization—come together to address issues that they identify or that senior management has raised as concerns. In small teams, people challenge prevailing assumptions about the way we’ve always done things and come up with recommendations for dramatic improvements in organizational processes. The Work-Out teams present their recommendations to a senior manager in a Town Meeting, where the manager engages the entire group in a dialogue about the recommendations and then makes yes-or-no decisions on the spot. Recommendations for changing the organization are assigned to owners who have volunteered to carry them out and follow through to get results. That’s Work-Out in a nutshell.

Work-Out can be applied to almost any type of problem. It was first used at GE to harvest the low-hanging fruit of overgrown bureaucracies—to reduce meetings, reports, and approval levels. It can be used to cut in half process times in product development, order entry, employee communications, and more. Or Work-Out can be used to bring your people together with customers or suppliers to develop innovative ways of doing business together.

Work-Out also can be used by almost any type of organization— public or private, commercial or not-for-profit, large or small. While developed at GE, and now part of GE’s DNA, Work-Out also has been successfully adapted in organizations ranging from General Motors to the State of West Virginia, to the World Bank, to Zurich Financial Services. But in all of these organizations, no matter what the issue, the process remains much the same. Bring together the people from the organization who know the issues best. Challenge them to develop creative solutions. Decide on the solutions immediately in a public forum, and empower people to carry them out.

Low-Hanging Fruit

Work-Out often starts with an attack on the low-hanging fruit of bureaucracy—getting unnecessary and unproductive work out of the organizational system. For example, one of the earliest Work-Outs at GE Capital, sponsored by the Chief Financial Officer, focused on identifying and eliminating unnecessary administrative procedures—things that get in the way of doing business and serving customers. After an initial introduction by the CFO and an external consultant, 40 people from various businesses and functions within GE Capital broke into small groups and started brainstorming. What procedures didn’t make sense? Where were they wasting time? What activities seemed to add little value?

The CFO of GE Capital at that time didn’t really expect very much to come out of this discussion. After all, he thought, GE Capital was one of the fastest-moving, least bureaucratic units within GE. It wasn’t a tired old industrial business with 100 years of antiquated procedures. But, who knows, maybe a few good ideas would emerge.

Much to the CFO’s amazement, with a minimum of prodding, a floodgate of comments seemed to pour out of the participants. Facilitators covered page after page with notes about bureaucratic procedures for expense reimbursements, making travel arrangements, obtaining office supplies, updating personnel data, taking education courses, upgrading software, and more. Some of the bolder participants talked about the bureaucracy associated with core business functions too— such as filling out forms for deals, preparing presentations for approval meetings, keeping track of customer data, overwhelming amounts of extra analysis to justify various investments or initiatives. After a couple of hours, the walls of a large meeting hall were covered with flip-chart pages. The facilitators then asked the CFO to leave and let the participants sort out the best ideas from this raw material.

After a break, each small group shared its ideas and comments with the rest of the participants. Although there was lots of overlap, the sheer number of ideas was still impressive, far more than anyone had imagined. After a great deal of discussion, the group decided to divide the ideas into three themes—expense approvals and reimbursements, materials purchasing, and deal analysis and approvals. People then volunteered to be in one of the three groups to address these themes. They then spent the rest of the day inventorying the ideas that fell into their category and selecting which ones were really worth pursuing. For each one selected, the teams roughed out the estimated impact of the change—either in terms of dollars saved or time captured.

The next day, the three groups reconvened in a plenary session to dry run their recommendations and make sure everyone was on board. After lunch, the CFO returned, along with a number of other senior GE Capital managers to hear the recommendations. For several hours, all 40 participants, plus the senior managers, talked through the ideas one at a time in a town meeting. After each idea was discussed, the CFO was asked to say yes or no, right away, on the spot. Although feeling very uncomfortable about making these kinds of decisions at first, he eventually warmed up and got into it. Before too long, among other things, expense reports did not need multiple approvals, people could purchase approved software without going through the IT organization, and a predeal process was established to see if deals were worth pursuing before going through all the analytics. For a company that didn’t have any bureaucracy, a lot of streamlining was starting to occur—fast.

More Than Just Problem Solving

If Work-Out was only about solving problems or reducing bureaucracy, it would still be a powerful methodology that organizations could incorporate into their repertoire of business tools. But at GE, and at many other firms, Work-Out is more than that. It is also a catalyst for creating an empowered workforce that has the self-confidence to challenge the inevitable growth of organizational bureaucracy. It can help create a culture that is fast-moving, innovative, and without boundaries. Whether it is intended or not, Work-Out also becomes a vehicle for developing managers and leaders who make quick decisions in an energizing dialogue with employees—instead of hiding in their offices making decisions by fiat (or avoiding tough decisions). This is why Work-Out is at the core of what Jack Welch calls the social architecture of GE—the very way that the firm works. And having Work-Out in its DNA has given GE a powerful foundation for implementing other important initiatives, including Six Sigma and e-commerce.

You can read this book with an eye toward using Work-Out to solve problems and reduce bureaucracy in your organization. But if you keep reading—and if you organize or participate in a Work-Out and feel its energizing power—you will get a sense of how frequent Work-Outs can transform the social architecture of your own organization.

A Story 10 Years in the Making

Transforming the DNA of a firm does not happen overnight, nor does the writing of a book. This book has been more than a decade in the making, starting with the birth of Work-Out at GE in the late 1980s. As insiders to the process, we had a unique perspective on Work-Out’s origins, its original intent, its early development, its evolution within GE, and its application to dozens of other organizations around the world. The GE Work-Out gives you access to these perspectives.

Dave Ulrich (then and still a professor at the University of Michigan), had taught in programs at Crotonville—GE’s management development institute—in the 1980s and was perhaps the first consultant to discuss the Work-Out concept with CEO Jack Welch and Jim Baughman, then head of Crotonville. He helped form the management team that governed the rollout of Work-Out and remained a key counselor to GE for years thereafter. Steve Kerr, then a professor at the University of Southern California and now the Chief Learning Officer for Goldman Sachs, joined the effort in 1988 as a consultant for the GE Nuclear business. On the strength of his success there, he joined the inner circle of consultants and eventually became GE’s first Chief Learning Officer, with responsibility for Crotonville. Starting in 1988, Ron Ashkenas, then and still a managing partner at Robert H. Schaffer & Associates, worked with the oldest and youngest GE businesses— Lighting and GE Capital—to craft their specific flavors of Work-Out. He eventually also helped adapt Work-Out to GE Aerospace, GE Electrical Distribution and Control, GE Supply, and dozens of companies outside of GE.

From the early days, when we were helping design and implement Work-Out at GE and then later when we were adapting it in our work with other companies, we have always wanted to combine our individual experiences and share lessons learned with others. This book is the result. Our purpose is not to glorify GE—or to position Work-Out as the next flavor of the month—but to share the GE transformation experience and methods in ways that might be useful for leaders facing change and trying to help their companies succeed. The fact that Work-Out was developed in the late 1980s and then reinstitutionalized in GE in 1999 reinforces the idea that it has staying power. But we believe that this power goes beyond just GE. From our point of view, the principles of Work-Out have application for leaders in all types of positions and in all types of firms.

Work-Out can help your organization change, fast. A decade ago, when the Work-Out ideas came together, its focus on rapid response helped firms like GE compete. In today’s ever-changing business context of constant change, these principles apply even more. The late 1980s may seem like ancient history, but Work-Out has become more relevant, not less, since it first took shape.

A Multifaceted Account

Although we were all part of the same team in the development of Work-Out at GE, our experiences in implementing the process were varied as we tailored Work-Out to different businesses, clients, and starting points, both within GE and elsewhere. Therefore, the book injects elements of the Work-Out story and describes types of Work-Outs that may be unique to our individual perspectives. In other words, there is no one way or right way or perfect way to do Work-Out, and the multiplicity of Work-Out stories in this book will reflect that reality. A Work-Out can be either very simple or very complex. Sometimes we did Work-Out with very simple frameworks and tools, allowing enormous flexibility and creativity in the process. At other times, Work-Out was more structured and disciplined with prescribed tools and applications. By detailing our experiences in all of these different settings, we convey the richness of Work-Out and how you can apply it to whatever challenges that you and your organization face.

Work-Out did not emerge out of thin air. We believe that if you want to get the most out of it, you should understand its roots, which we describe in Chapter 1.

There was already plenty of change afoot in GE by the time Work-Out began in the late 1980s. The company had already achieved the distinction of being #1 or #2 in every industry in which it competed, and had acted on CEO Jack Welch’s mandate to fix, close, or sell any business that did not meet the criteria. The more than 150 separate strategic business units had already been drawn together into 13 core businesses, and Welch had spent years downsizing and delayering. In other words, huge amounts of change, leading to tremendously positive results, had already been accomplished.

But GE in 1988 still faced an enormous challenge. The strategic shifts and the downsizing and delayering had reduced the workforce by 25 percent, but the workload that these remaining people had to do stayed the same. Employees and managers felt overloaded and overwhelmed trying to work in the same old ways. As Welch later explained, the hardware of the company had changed, but the software had not. Meeting this challenge provided the original impetus for Work-Out. But reducing unnecessary work also meant that all work, and work processes, became fair game. And that required the eventual creation of an entirely new culture and way of working across an organization with hundreds of thousands of people around the globe. Work-Out was the organizational software that made this change possible.

No Snake Oil

Despite its massive impact on GE and other firms, Work-Out is not a magic elixir. It is a simple set of concepts, tools, and experiences that have been effective at GE and many other organizations—businesses, universities, not-for-profit organizations, and state governments.

In its most robust form, Work-Out changes culture, develops new kinds of leaders, improves teamwork, develops analytical ability, creates new language, bridges organizational boundaries, supports succession planning, improves customer and supplier relationships, and gives everyone in the organization powerful new roles in achieving excellence.

But even in its simplest form, when stripped to its essence, Work-Out allows people to get some obstacles out of the way so they can do their work better. In many organizations, that alone would be a significant gain.

Work-Out for You

This book will help you understand and implement a GE-style Work-Out. It describes GE’s Work-Out approach to busting bureaucracy and solving organizational problems. And, more importantly, it guides you through the decisions you need to make to plan for and implement your own Work-Out. Through case examples from GE and other organizations where Work-Out has been used, you will observe the big moves and the subtle shifts that can make Work-Out successful in a variety of settings. You will understand the planning meetings, leadership coaching sessions, and the famous Town Meetings that are the Work-Out hallmark. You will see the challenges, obstacles, and successes that Work-Out Leaders, participants, and consultants experience. And you will see what it feels like to be engaged in a Work-Out, and what it takes to make the effort successful.

As we said at the beginning, Work-Out sounds simple, and it is: Get a group of people together for a few days. Identify problems and solutions. Present them to key leaders. Get yes-or-no decisions. Applaud. Implement. Do it again.

Simple, yes; easy, not necessarily.

But it is powerful. And once you make the decision to try it, Work-Out can reward you and your organization many times over. This book is intended to be your guide to flying solo in Work-Out, using the resources your company already has. That may not be enough to get you to maximum impact, but it surely will start you thinking, help you get some other people engaged, and enable you to run a Work-Out event. Once you look at your organization’s strengths realistically, you’ll be able to pick the right starting point. As you move through Work-Out, you should be able to make Work-Out a natural act in a natural place—in other words, not an isolated event in a training workshop or hotel somewhere, but a way of doing business every day at work. That’s what it became at GE.

It is important to tailor Work-Out to your organization’s specific needs.

• Do you need to develop strong leaders who can mobilize people to do something outstanding?

• Is bureaucratic, nonvalue-added work taking up too much time for too many employees?

• Does it take forever to get things done that should be done quickly?

• Are you facing a huge problem that needs to be solved pronto?

• Do you have recurring problems that you’ve learned to live with because they never become quite painful enough to do something about?

• Are you being eaten alive by a zillion little problems that block progress and divert energy?

• Are your people complaining about how hard it is to do their jobs well?

Each of these conditions would suggest a different way to start Work-Out, to wire it for success. Once started, all Work-Out efforts follow approximately the same basic pattern. Then, enhancements are customized to fit conditions in each organization.

This book also helps you avoid the most-likely Work-Out pitfalls, the deadly and dangerous missteps that can undermine Work-Out efforts. Managers, employee participants, and consultants who have used Work-Out will—through our voice—share their experiences with you, serving as your guides as you embark on the Work-Out process. Based on their experiences, we provide you with conceptual frameworks, tools and activities, best practices, and hindsight interpretations. With their help, you can launch a Work-Out process that can take your organization to new levels of success.

Who Will Benefit from This Book?

Wherever you are in your organization, if you’re in a position to influence the way things get done, this book can help you. For the senior leader or manager who wants to improve organizational performance quickly, it offers a tried-and-true method to make it happen. If you want to strengthen customer relationships, it offers a way to make real improvements that weld your customers’ interests to your own—and the same principles apply up the value chain as well, bringing suppliers and producers into ever-more-profitable synch. And besides guiding Work-Out leaders and sponsors through the program, the book helps participants at all levels get the most mileage out of the time and thought they put into it.

If your role is to help managers improve performance quickly—either in a staff function such as HR or as an external consultant—this book offers a systematic way to address problems and opportunities of any size. It will help you help your clients get immediate action—concrete results they can take to the bank to measure the worth of your advice.

A Guided Tour

This book is organized into three parts. The first—What Is Work-Out?—gives you the background on how Work-Out evolved at GE, how it works, and how to assess your organization’s ability to implement it. Chapter 1 presents the story of how GE developed and uses Work-Out. There you will see what GE leaders, employees, and consultants found to be most helpful, most important, and most problematic about Work-Out. You will also get a sense of the resources GE employed, the heritage on which it built, and the gains it generated with Work-Out.

Chapter 2 presents the basis for Work-Out in the latest thought on organizational behavior, culture, and change. It helps you understand why Work-Out works, both as a problem-solving tool and as a vehicle for longer-term transformation.

Chapter 3 helps you identify and prepare for the normal skepticism and resistance that Work-Out—like any change process—is sure to generate. The chapter then guides you through an assessment of your own company’s strengths and deficits, and helps you determine how ready your organization is for Work-Out. It will point out how and where you could start a Work-Out effort, given your company’s particular realities. If you can’t find a strong enough starting place for a large-scale program, it shows you how you can take a more modest approach to get ready.

If you are ready to go, Chapter 4 will show you how to do the basics—how to lead a fast, simple Work-Out right away.

Part Two—Making Work-Out Happen—provides a hands-on guidebook to all the details of installing Work-Out in an organization. Chapter 5 gives an overview of the pieces, practices, and program elements of the Work-Out approach. Work-Out is not just an event, although the workshop and Town Meeting forum is central to the approach. It is a system of integrated activities that create specific decisions that can easily be implemented and later evaluated. You need to keep the whole process in mind—like an entire journey. The chapter’s road map is intended to chart your route so you know where you are, where you have been, and what is yet to come.

Chapters 6, 7, and 8 are detailed maps of each part of the Work-Out trip through one cycle—the planning phase, conducting the Work-Out event (including the Town Meeting), and implementing Work-Out decisions during the first weeks after the Town Meeting. In each, you will read about what other companies did at this stage, how they did it, and what you need to know and do to travel this particular piece of the road. You will find stories, examples, charts, and tools that are most appropriate for the activities you are undertaking. They describe a way to do Work-Out, but you should feel free to customize Work-Out to the needs of your organization. These chapters coach you in creating the Town Meeting, where smart and courageous decisions can take place, and they describe the roles and responsibilities of all the participants at each stage of the Work-Out process.

Companies, people, and business problems all differ, so Chapter 9 describes variations that contain the essence of Work-Out, yet accommodate the idiosyncrasies of different organizations, businesses, employees, and leaders. It will show you how to customize the process for maximum impact on your organization’s most critical concerns— whether they be busting bureaucracy, streamlining processes, or strengthening the customer-supplier value chain. Chapter 10 then provides an extended case study of how one organization—Zurich Financial Services UK—used Work-Out to transform its culture and its results.

Part Three, Work-Out’s Long-Term Payoff, is about how Work-Out can be a vehicle for transforming your organization. It explains the value of shifting Work-Out from a one-time experience, or even a sequence of experiences, to an embedded and essential part of your business. At its most powerful, Work-Out becomes what you are and what you do naturally. It becomes your organization’s culture—a culture where natural acts of good communication and smart decision making can take place naturally, without the need for special meetings. When Work-Out takes hold, stuffy, rigid, bureaucratic, hierarchical, slow companies become smart, agile, spontaneous, energetic, and quick. And more successful. And better places to work.

Chapter 11 describes the leadership characteristics and behaviors necessary to support and sustain Work-Out in the longer-term, and how to accelerate the development of such leadership to build a fast and agile organization. Every firm needs to have its own leadership brand that sets it apart from others, and Work-Out can be a powerful way of creating, developing, and reinforcing that brand, both with today’s leaders and with the facilitators who will become leaders of the future.

Most leaders begin Work-Out as a pilot or experiment. Chapter 12 explains how to move Work-Out from a one-time event to an ongoing process within the company. This chapter catalogues decisions about picking the pilot area, using facilitators, investing in a governing body, measuring results, and other actions designed to ensure success.

Chapter 13 examines how Work-Out changes culture. At its most robust, this is the ultimate agenda of Work-Out. We define culture as the identity of the firm as seen by its best customers, made real to employees. Culture change comes when a firm develops a strong agenda of principles and characteristics it wants to be known for, then makes this agenda real to both employees and customers. Work-Out tools are a way of making a new identity come to life in employee behavior and customer experience.

Finally, Chapter 14 is designed to inspire you and spur you on to make Work-Out your own, no matter what your position within the firm. Although Work-Out is about improving company performance, it is also about empowerment and engagement—not for others, but for every one of us. Whether you are the CEO or a frontline manager, you can use Work-Out to drive your organization forward. We guarantee you will find it exhilarating and exciting. It can give you a new approach to your professional life, and a new leap in your own personal development. This chapter will help you see that you do not need to wait for someone else to get Work-Out started. You can do it yourself.

In the appendix we have referenced all of the book’s Work-Out materials in one place. This Work-Out Leader’s Tool Kit will make it easier for you to access the many tools that are provided throughout the book. We also have included a simulation case for training Work-Out facilitators, and we share a talk given by Dave Ulrich to GE officers in 1990, when Work-Out was about a year old. It captures some of the early concepts and experiences of the effort and may help with your own first steps.

If this all sounds enticing, get ready, and go do Work-Out! Let this book guide you, and have a good trip!

What Is Work-Out?

CHAPTER

Work-Out, GE, and the Largest Corporate Transformation in History

One of the ways we’ll know that Work-Out has been successful is that my style of leadership will no longer be tolerated in this company.

—Jack Welch

IN MOST ORGANIZATIONS, change efforts come and go—and somehow rarely make a difference. But at GE, a company with hundreds of thousands of people spread across the globe and businesses ranging from jet engines to light bulbs to credit cards, one particular change process helped spark a complete transformation—Work-Out. The transformation that it launched in the late 1980s continues today to help GE reduce bureaucracy, empower people, and continually reinvent ever-more-effective ways of doing business. Without it, GE might be just another company. With Work-Out as part of its DNA, GE has become one of the most admired, profitable, and innovative companies on earth.

At its core, Work-Out is a very simple concept. It is based on the premise that those closest to the work know it best. And when the ideas of those people, irrespective of their functions and places in the hierarchy, are solicited and turned into action—on the spot—an unstoppable wave of energy, creativity, and productivity is unleashed throughout the organization. At GE, there have been literally hundreds of thousands of Work-Out Town Meetings, where ideas have flown in torrents—giving GE access to the only unlimited resource on the planet, the imagination and energy of talented people.

Work-Out did not appear fully formed like Venus from the sea. Starting with Jack Welch’s vision of what GE could become, Work-Out evolved from the efforts of thousands of people struggling, learning, and grappling together to translate vision into reality. This chapter tells the story of that evolution.

Birth of an Idea

In the middle of 1988, Jack Welch and Jim Baughman—head of the GE management-development center at Crotonville, New York—were flying home from a visit to GE’s Appliance Park in Louisville, Kentucky. Concerned about poor quality and low productivity in the Major Appliances business, Welch had met with groups of frontline workers, usually without their managers, and asked them what it would take to improve performance. Over and over again, he heard the same refrain, We have lots of ideas. We know what needs to be done. But nobody listens. Nobody lets us do it. And when he asked managers why they weren’t letting their people act on ideas, he heard the other side of the story, We don’t have time. We have half as many managers here now as two years ago, but just as much work to get through. We have just as many bureaucratic requests to answer, forms to fill out, and meetings to go to. And anyway, whenever we do want to try an idea, we have to go through so many people to get approvals and money that it’d be out of date before we started. Why bother?

This began to sound like a broken record. Everywhere Welch went, he heard the same thing. Workers had ideas, but no authority to act. Managers had authority, but no time to evaluate and approve. Organizational gridlock. Bureaucratic standstills. The GE machine wasn’t in danger of grinding to a halt, but it was far from working at its best.

Welch’s GE: The Neutron Jack Era

Obviously, this was not what Jack Welch had in mind back when he began the restructuring of GE in 1981. From Reginald Jones—a storied figure in corporate America—Welch had inherited one of the oldest and most successful companies in the world. GE innovations ranged from light bulbs to turbine engine technology to Lexan plastics and industrial diamonds—and as far afield as consumer financing. Its organizational processes and approaches—decentralized management, financial analysis and control, strategic planning, and management education—were being taught at leading business schools and modeled throughout the corporate world.

But despite the record of success, the GE of 1981 faced severe problems. Decentralization had led to a proliferation of strategic business units—numbering more than 150 when Welch took over. The emphasis on financial analysis and control had led to multiple management layers, large staff organizations, and a choking tangle of bureaucratic machinery. With so much internal process to deal with, GE’s businesses were more often than not turned inward, virtually ignoring changes in the marketplace. Decision-making processes were slow and painful, often leading to white papers and reports rather than action. And financial performance, while steady,