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 / Winter 2003 / Issue 33(originally published by Booz & Company)


GE’s Next Workout

Senior managers’ behavior visibly changed, too. “We never intended Work-Out to be an assessment technique,” notes Mr. Kerr. “But when you watched managers browbeating their people in these public sessions, you could see how dreadful they were to work for. Other managers, who hadn’t really been noticed, suddenly shone when a Work-Out session put them on the spot.”

In 1989, a team at NBC proudly unveiled a video satirizing their own efforts to reduce expense reports — a parody of those old 1950s “how a bill becomes a law” short documentaries — to the Work-Out design team. “I happened to look across the table at Welch,” recalls Mr. Ashkenas. “He was the only one not laughing. When the lights came on, he pounded the table. He said GE wasn’t just paying us to fix their expense reports. Why couldn’t we use Work-Out to fix their problems with product development or customer service?”

Over the next 10 years, GE expanded Work-Out’s scope and scale, embracing varied types of improvements. Gradually, Work-Out touched customers, suppliers, and subsidiaries overseas, in, for example, China. By the mid-1990s, Work-Out was a perk routinely offered to customers and a unique source of competitive advantage for GE. By the time Mr. Welch left in 2002, the Work-Out process was woven into day-to-day practice. Today, when GE businesses hit any kind of bureaucratic snag or market uncertainty, it’s second nature for the senior manager in charge to say, “Let’s do a Work-Out on that.”

“It’s like voice mail or a calculator — another tool we use all the time,” says John Rice, president of GE Power Systems. “We don’t spend as much time in prep work or team building as we used to, but that’s a function of the fact that people with five or 10 years’ experience here already know the drill.”

Cultivating Strategists
Can the same kind of innate skill be developed for strategic thinking? That’s what GE is currently trying to find out as CEO Jeffrey Immelt begins to put his imprint on the new strategies he wants the company to pursue. As his predecessor did, Mr. Immelt makes frequent appearances in the Crotonville pit. In the first of one of those appearances, a class participant asked him to name the biggest difference between himself and Jack Welch.

“Look,” said Mr. Immelt (whose personal style is a bit more laid-back than that of Mr. Welch), “I grew up in the 1960s and 1970s — with rock and roll, women’s lib, civil rights demonstrations, and the Vietnam War. It’s imprinted me; it’s affected my view of the world.”

Bob Corcoran recalled that comment recently, as a way of introducing the striking strategy and management changes happening at GE today. The company has stopped battling the Environmental Protection Agency, for instance, over the need to dredge the Hudson to clean up PCBs. Now, GE is actively looking to manage the cleanup (in part as a way to build its own capabilities for other such work). And some of the business that Mr. Immelt emphasized in the last GE annual report has clear social or environmental dimensions: wind power, water processing, and security technology.

The other shift relates to a new philosophy of strategy formulation. Mr. Immelt is instituting, for the first time since the early 1980s, a more formal strategic planning process at GE. Under Mr. Welch, long-term planning was practically a dirty word; one of his first acts was to fire nearly all of the company’s entrenched (and rather bureaucratic) strategic planning staff. Instead of bringing back the planners, Mr. Immelt is involving line managers in debates and dialogues about long-term strategy in which they talk through their perceptions of technological change and the business environment and envision the “big wins” that might be possible over the next 15 years.

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