General Electric

Improve GEs Competitiveness in the Long Run

Organizational Performance Team B7 October 2014

Internal background
General Electric moved from its deep-rooted orientation : innovation
1890 - 1930

Edison General Electric and Thomas-Houston merge to become The General Electric Company
GE establishes the first laboratory in the United States dedicated entirely to scientific research
Recognizing that an essential element to doing business is capitalization and cash flow, GE organizes The Electric Bond and Share Co. to provide financing to small
utilities; this is the precursor of GE's Commercial Finance division
Many electric innovations : Electricity in the kitchen with hot point, locomotive, first broadcast, Radio and X-ray during WWI, also played a key role in Real Estate (Empire state building)
Initiate the use of plastic with electricity : creation of plastic department

1930 - 1970

Responding to the difficult economic environment consumers face during the Great Depression, the GE Credit Corporation is created to help finance the sale of GE
Appliances to American families. Consumer financing by the General Electric Contracts Corporation is made available to meet the widespread demand for the new variety
of electric appliances, and to meet consumers' needs to buy them over time
Expansion of GEs brand awareness : First nobel prize in U.S. for GEs scientist (Irving Langmuir)
GE precursor of companys mixity : Burr Blodgett was the first woman scientist to join the GE Research Laboratory
GE opens the world's first licensed nuclear power plant

1970 - 2001

2001 - 2014

Innovation awarded : In 1978, GE marks 100 Years of Technological Innovation. A record total of 865 new U.S. patents are awarded during GE's centennial year
Jack Welch was appointed as CEO of GE (1981-2001): He is now recognized as one of the best managers in the history, $380 billion increase of shareholders wealth
Pioneer in open innovation : GE's NBC launches CNBC, the Consumer News and Business Channel a 24-hour, consumer-oriented business news program service
Competitive advantage oriented : First outside computer commpany to go online with www.geplastics.com
Divesification GE commercial finance Growth in revenues through finance: Creation of loan valuation model during the massive loan auctions in Asia
International expansion : the U.S., GE Global Research opens its first global operations in Bangalore, India, to develop products that matter for this growing market and to recruit even
more of the world's brightest technologists.

In 2001 Jeffrey Immelt succeeded Jack Welsh

International expansion: GE opens the China Technology Center in Shanghai, the third location for GE's corporate research and development operations
Government and environment : GE meet or exceed government regulations for fuel-efficiency and greenhouse gas emissions, the new fuel-efficient GE Evolution Series locomotives,
(comply with 2005 regulations)
Diversification: GE Consumer Finance rebrands to GE Money, giving the business a unified global brand. GE Money ANZ (Australia/New Zealand) creates the 'Dual Card' an
innovative consumer card
Structural change: Since July 5, 2005 , it has been reschulded from an organization in 11 divisions, to structure into 6 clusters of activities
Despite a good liquidity ratio GE has been downgraded from AAA to AA+ in 2009 by S&P
In 2014 GE acquired Alstoms energy department for $17bn

Sectors Overview
General Electric focus on sustainability
GEs positioning
Datas

General Electric
Company

Koninklijke Philips
Citigroup Inc.
N.V

Market Cap

243.32B

150.72B

25.53B

Employees

307

252

99,769

0.03%
146.12B

0.11%
69.94B

-0.06%
28.76B

0.35

N/A

0.42

28.28B

N/A

3.40B

0.12

0.24

0.08

14.85B

9.25B

1.33B

EPS

1.27

3.08

1.48

P/E

19.03

16.16

18.68

Qtrly Rev Growth

Revenue
Gross Margin
EBITDA
Operating Margin
Net Income

Scope
Sector : Industrial Goods
Main industry : Diversified Machinery
Mature market
Strengths
Strong Market Capitalization
Positive Net Income
Financial viability
Weaknesses
Relative low margins operated
Taking into account the high level of
capitalization, financial ratios remain low

McKinseys study proved that an assessment on organizational performance will help GE improve its
profitability. Our main point is to move from a less-risky sustainable plan to a high financial performance.

Problem statement
GE is worsening its leading position and innovation by focusing on bottom
line performance

Current situation
GE has lost 40 percent of its share value in the last ten years by competing in existing mature markets
It has been downgraded by S&P from AAA to AA+ even if it succeeded in maintaining a positive bottom line and a
high liquidity ratio
GE is doing fine for now: quarterly +$0.39 cents per share (overperformed Wall Streets expectations), 6th largest
firm in the U.S., 14th most profitable and the #7 company for leaders

Problem short term vision

Focus on financial bottom line is part of GEs culture but it only ensures short term profit
Even in external partnerships (acquisitions, mergers and joint venture), GE doesnt take any risk and just analyses
the profitability of the targeted company. Moreover, there is a lack of explanation on the link between their different
businesses (have a clear mission statement)
This bottom-line culture prevents GE from investing in long-term innovation
The relevance of keeping the activity of finance services (i.e. GE Capital)

Aim of the project: Restore GEs competitiveness and profitability in a long term vision

OHI Analysis
Alignment
Predominant practices
Direction
GE has conducted for one decade a strategy turned to external growth by
doing a lot of partnerships and acquisitions enabling the company to improve
the overall profitability while maintaining sustainability. This growth affected
the internal vision of the company's future in the long-term.
Even though it has thoroughly diversified its former activity, GE's deeprooted concern has always been "progress". It means all employees want to
improve the way the world works.
Furthermore, the company has achieved a clear internal short term strategy:
financial performance and sustainability. That short-term strategy is part of
our problem statement but is well spread within the company.
GE is making its employees feel involved especially through the
implementation of a bottom-up innovation (with the software tool Fastworks
for instance, and innovations' meetings)

Direction
ABLE
Shared vision
Strategic clarity
Employee involvement

OHI Analysis
Alignment
Environment and values
3 main traditions : unyielding integrity, commitment to performance and
thirst for change.
Transform their culture around the "culture of simplification combined
the principles of Lean Six Sigma with the culture of The Lean Startup:
fast action, quick adjustment and measured outcomes.
Increasing customer intensity and work at market speed as well as
driving a leaned structure (fewer layers, simpler rules and more field
empowerment) are their main objectives
Providing everyone who works at GE with opportunities to exercise their
responsibility, integrity and creativity while growing themselves, their
career and the business of GE at the same time
- Leadership
Jeff Immelt is the 9th CEO of GE since 2001. He has been named the
world's best CEO.
GE invests in the development of leaders. Their view of leadership is
very much linked to their growth values which are : external focus, clear
thinker, imagination and courage, inclusiveness and expertise
GE continually examines its governance practices in an effort to regain
investor trust and improve overall effectiveness.
The board and its committees annually conduct a performance selfevaluation and recommend improvements.
The primary role of GEs board is to oversee how management serves
the interests of shareowners and other stakeholders. They have
adopted governance principles to ensure that the Board is independent
and informed of the key risks and strategic issues facing GE.

Predominant practices
Environment and values ELITE
performance
Lean management
culture of simplification

Leadership
ABLE
governance
Independent Board

OHI Analysis
Execution
Accountability
The structure of GE is mainly top-down stream but it also pays attention to
bottom-up innovation.GE equips leaders at all levels to overcome
tomorrows challenges and inspires them to navigate the complexities of a
new age with clarity, courage and integrity. All the employees pursue the
same target progress. The rewards and compensation are based on the
performance of the employees. For leaders, the company measures them
on how they adapt in real time to an ever-changing world, perform amidst
ambiguity and execute to achieve long-term goals. For employees, the
company has annually performance evaluation process. The top performers
will be rewarded. However the worst-performancers are not necessarily to
take the industry death penalty. Instead, they are provided other
opportunities to improve themselves. GE is a we company. The employees
feel very engaged with the company.
Coordination and control
GE implements a performance management system for years. And it
implements well the 360 degree feedback process . It created tools (six
sigma, design for six sigma, lean, work-out, change acceleration process
and quality management system) to drive operational excellence, which is
one of GEs advantages. Moreover, GE keeps good financial performance
by using rules to clarify transaction and balance appropriately and making
the financial and transaction reporting timely and unbiased.

Predominant practices
Accountability
ELITE
Consequence management
Personal ownership

Coordination and control ELITE

People performance review
Operational management
Financial management

OHI Analysis
Execution
-

Capabilities
GE is known for its elite talent acquisition capabilities. According to Erica
Briody, Talent Acquisition Director for GE Energy Europe , purpose of GEs
Talent Acquisition is twofold, bring the best talent into GE, by building a
pipeline to fuel sustainable growth. Secondly to make sure every candidate
has a positive experience which helps to enhance our brand. GE has a clear
Employee Value Proposition (EVP) and use that to make sure that the hiring
processes and approach are aligned to that and everyone involved in the
recruiting process delivers to that.
GE invests over $1 billion a year in leadership development. General Electric
(GE) carefully ranks its employees, with the best groomed for leading
positions. It is known for grooming the best CEOs and has a well structured
successor planning. GE is known as Americas CEO Factory.
Motivation
GE Fosters a We Company Culture through its Sustainability Programs.
GE uses its Ecomagination program to engage employees in
environmental sustainability initiatives. To foster employee well-being, the
companys Health Ahead program provides GE employees and their
families tools and resources to live a healthy lifestyle.
GE has an effective rewards and recognition program in place and it rewards
its top performers as much as possible. GE has historically had a series of
inspiring individuals at the top who have driven the employees to work to
their full potential.

Predominant practices
Capabilities ELITE
Talent Acquisition
Talent Development

Motivation ELITE
Rewards and Recognition
Inspirational Leaders
Employee Involvement

OHI Analysis
Renewal

GE renewal strategy is at the corner of a new era

Turning the ailing renewal strategy into an elite attribute

1. GE used to have an
AILING renewal strategy
A few years ago, we could have
considered GE renewal to be
ailing, and definitely too inside
focused. This giant was
growing only by expansion
and the margins were (and still
are) decreasing.
Both the Innovation part and
the External Orientation were
clearly underperforming (except
the part consisting in buying
and somehow integrating
profitable companies)

3. And should aspire to

become ELITE !
However, GE developed
several initiatives such as
Global Research or to improve
this field, and are trying to put
customers and their
satisfaction as primary
objective.
Those improvements are too
fresh and limited to be really
efficient but show that GE
understood some of its
problems and is working on it

Immelt doesnt want to stop at

this stage and clearly knows
that renewal is critical for GE,
and requires a much better
external orientation. He wants
GE to develop its strategic
partnerships and will focus on
capturing and generating ideas
to maintain leading positions.
Moreover, the ultimate goal is to
refocus on meeting needs and
expectations of customers and
all the stakeholders

2. But is becoming ABLE in

many practices

Customer focus as a new External Orientation

GE is taking measures to stop being only inside-focused
Customer Focus is becoming better and better as Jeff Immelt understood that it will be key for GEs long
term growth and sustainability
Welchs obsession to make every process simpler, faster and more efficient had drawbacks
Now: focusing on customers to gain insight and deliver value and quality to them
Takes time to change entirely the mentality of such a massive group
Competitive insights
Still inside focused: GE businesses are often leader or 2nd in their industry. GE tend to think itself as the
best and often forget to analyze what are the competitors strengths and how to adapt them within GE
More than Business Partnerships, GE integrates high performing companies in fields/industries
No clear strategy at the group level
Would benefit from strategic partnerships and thats what they just start doing
Government Relations are very good, especially with the US, and ensure regular income for GE;
Communities are less well managed. GE suffers from protests following Fukushimas accident and their tax
evasion. However, the Spirit & the Letter set basis and guidelines to better perform in this field.

General Electric External Orientation is becoming better, especially when it comes to understand the
markets needs, as well as integrating profitable companies with high growth potential. However, focusing
too much on the bottom line might prevent GE from getting some inspiration from its competitors

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Innovation cannot stay only inside any longer

GE is developing new strategies to capture ideas
Capturing external ideas hasnt always been GEs strength (too much inside focused) but they are improving
themselves in this field
GE Global Research and competitions to drive ideas from the outside
Now understand that GE has good ideas, but not all of them
Top-down innovation is not part of GEs development
No inspirational leader that can drive innovation for the entire group (too diversified)
But Bottom-up innovation is working well and being improved
Employees are encouraged to participate and bring new ideas in
Knowledge sharing requires a strong effort from the top-management to be really efficient
Too large and diversified company
Now easier and more frequent to move people from one business to another, so is the knowledge

The Innovation used to be mostly coming from the inside: a truly bottom-up innovation. But in todays
competitive landscape, GE needs to capture in a much more efficient way external ideas, and have strong
inspirational leaders in each business unit.

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The Four Archetypes Analysis for GE

Subtile
Leadership Driven

Execution Edge

Market Focus

Knowledge Core

Career Opportunities[1]

Knowledge-sharing

Bus. Partnerships

Talent acquisition

Open and trusting

Creative/entreprenurial

Customer focus

Role clarity

Performance contracts

Employee involvement

Competitive insights

Consequence mgt.

Inspirational leader

Talent development

Government/community
relations

Rewards and incentives

Strategic clarity

Internally competitive

Financial mgt.

Personal ownership

People performance review

Personal ownership

Capturing external ideas

People performance rev

Operational management

Bottom up innovation

Process-based capability

Career opportunities

Operationally disciplined

Top-down innovation

Shared vision

Performance contracts

Consultative leadership

Meaningful values

Outsourced expertise

Professional Standards

Consequence mgt.

Consequence mgt.

Strategic clarity

Financial mgt.

[1] the words in red mean the practices that GE is doing well; the green ones mean that GE is just starting to do it or the practice is vague;
the black ones represent the practices that it is not doing well

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The Four Archetypes Analysis for GE

Subtile

Leadership
driven

Under Immet s leading, GEs leadership structure is becoming more and more decentralized. The leadership
team enpowers more responsibilities to employees from all levels. The goal of GEs leadership is to gain a
belief in individual excellence and collective progress. GE pays heavy attention to employees improvement
and career growth. It brings together leaders from around the world to create a learning environment that
educates and enriches. In this environment, employees have more career opportunities and the gain trust to
each other as well as to the company.
GE, as one of the most successful companies in the world, has a clear strategy in its internal management
(both in financial and operational management). It has effective performance management system to
evaluate its peoples work and effective rules to maintain the operational excellence. However, GEs
leadership team has been more focusing on short-term strategy than the long-term vision. This will impact
GEs financial growth and sustainability in the long run.

Market
focus

In recent years, GE has been more and more noticing on the importance of customers. Costomer focus has been
one of GEs long-term strategy. To better reach customers expectation, GE employees have clear shared vision
which is to progress, to make peoples life better and better. Immelt aimed to create value for customers by
leveraging GEs core competencies delivering superior, highly customised products and services to high-growth
market. However, concrete methods are not found to lead people reach the goal.
As it is losing its rapid growth in the market place, GE is seeking new strategies to expand its business. GE is
acquiring many profitable companies to enter high-growth markets. GE benefits from these acquisition activities.
But it also faces problems which is how to keep its highly-diversed businesses consistent. Another issue is that GE,
as always a leading company, is somewhat arrogant. It pays more attention to inside competition than outside one.
GE has noticed and is tranforming to more outward-looking. It is getting better but it takes time for the
transformation. The question is that GE always has a bottom line culture because of which GE may have missed a
lot of good opportunities to enter in new markets and businesses.

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The Four Archetypes Analysis for GE

Subtile

Execution
Edge

GE has a highly competitive culture. The top executives generally rank the employees by performance and let
the bottom 10% go. This makes the employees give their best and compete agaisnt each other.
GE is often highlighted as an organization that develops some of the most effective leaders. Most companies
have a version of the talent-review system we use at GE.
GE uses its Ecomagination program to engage employees in environmental sustainability initiatives. GE
also uses gaming techniques to promote sustainability among employees and developed the Eco-Treasure
Hunts program to make sustainability fun. Having best leaders at the top also encourages the employees.
GE has a strong culture entrenched in its values, the three traditions of GE Unyielding Integrity, Commitment
to Performance and Thirst for Change. Since its foundation GE has nurtured a growth culture.

Knowledge
Focus

As mentioned in the OHI Analysis, GE excels in talent acquisition. The talent acquisition at GE is aligned with its
Business Strategy. For instance, to support a renewed focus on technological leadership and innovation, GE began
targeting technology skills as a key development requirement during its annual organizational and individual review
process. 1)
GE provides competitive salary packages to its employees and considers it a fundamental obligation in order to
remain competitive.
GE uses the PIE(Performance, Image, Exposure) Model for Role Clarity
GE is known for provididng the best career opportunities to its employees. It has the best options for career
advancement.

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