Hi Chris,
It’s rare that I find myself disagreeing with you, but you & Paul were incorrect in your views on GE’s demise.
I started as an Engineering intern at GE in 1995, when Welch introduced 6Sigma. I then worked in multiple functions & businesses including Appliances, Aircraft Engines, Capital Equipment Management, TIP/Mod, Oil & Gas, Healthcare & Retail Finance - with intermittent bouts at external tech / automotive alternative energy companies.
I have been tempted to write the story of “How GE Lost its Way” and the rest of America’s great companies followed…for some time now.
The story closely mimics Ayn Rand’s plot lines in her famous novels.
There was significant hate for Jack Welch within the rank & file, but the man was a business genius. Like most things, history is rewritten to make the guilty appear innocent, and based on your discussion with Paul, it appears that you have bought into the story.
Jack’s greatest mistake was picking Jeff Immelt as his successor.
Jack had set GE up to prosper for decades, much as Trump started doing for the US pre-Covid…
Jack knew that great companies must be #1 or #2.
He knew that the bottom performers must be regularly culled from the herd and rigorously divided employees into A, B, & C players forcing the C players to step up their game or be forced to move on, so that they didn’t drag down the performers. The culture was brutal, but inspiring - for those of us who were smart, wanted to learn, & were willing to work really freaking hard.
Jack implemented 6 sigma, with the intent of teaching his leaders how to think critically with data. I remember being an intern at this time. Between (1995-1998), I had 4 internships at GE Appliances & Aircraft Engines alternating semesters with my academic study in Engineering.
During my 1st internship, decisions were made based on the loudest voice in the room (the popular leader). When I came back 6 months later, 6Sigma had so dramatically changed the culture that no one opened their mouth unless they had real data to back up their recommendations. The change was shocking, even for me, a person who has always loved & thrived on change. It was inspiring & it worked. GE became the most well-run company on the planet.
6 Sigma truly became the way we worked from Product Management (customer VOC to product definition to design to design for manufacturability to supply chain management, marketing, sales, distribution, & delivery). It was an amazing experience to be a part of. Rigorous understanding of customer needs, process, & product was truly the way we worked. I am grateful to this day to have been an a part of that. The most basic “Greenbelt” training on the program was 4 weeks of classroom training and 2 intense projects over the course of 4 months. I’m still in awe of the transformation.
Then GE made 3 critical mistakes & human nature figured out how to game the system:
1-Everyone who aspired to be a leader was required to go through 6 Sigma. Masses of people who were not capable of critical thinking & any level of data analysis or any understanding of how processes work within complex systems went through the program & figured out how to game the system. They had interns or leadership program engineers (the best of the best, smartest, hardest working new grads from every university, including the regular universities where kids like me had worked full time while going to school full time & still performing at the top of our class) do the thinking & hard work on their projects so they could receive their “certification”. Projects were eventually selected & allowed that were truly meaningless. They defined the customer not as GE’s actual customer, but as their manager or some other leader or department within the organization. These people then rose thru the ranks without learning the critical thinking skills that Jack had given them the opportunity to learn. It’s no wonder they then eventually operated their functions, businesses, & divisions using “smoke in mirrors”. This is how they learned to play the game and why 6 Sigma eventually became a joke and a dirty word.
Mistake #2: They disrespected & lost their “Oak Trees” within the organization. An oak tree has strong roots. An oak tree is a person who stays planted. In the business environment, an oak tree understands how and why things are done the way they are. They’ve been around. They also teach, mentor, & train new people in the right ways to do things. They value having deep expertise in an area, and while Jack structured his leadership programs so that people like me could get exposure to every major function in the business, the Oak Trees mentored and trained us along the way.
#3 The Real Reason GE Fell - Jack picked the Wrong Successor. This was Jack’s Greatest Mistake and the ultimate undoing of GE. Jack had an incredibly strong slate from where he could pick his successor. When he anointed Jeff, many left immediately to lead the next crop of amazing companies. Many said they left because they were slighted by not being chosen. While that could certainly be part of it, I think they left because they knew Jeff was a smoke in mirrors snake oil salesman & saw GE’s future under his leadership well before the rest of us.
Immelt’s 1st Big Policy was GE’s downfall. He called it “Front Room - Back Room”. It was sold to the market as solidifying GE’s focus on Sales Growth & “the customer”. In truth, the customer & eventually sales - suffered. Why? It was simple. With FR-BR, those of us in the “Back Room” , at least all the smart people, who designed & supported products & processes clearly saw that to be rewarded and continue growing in our careers, we needed to leave the Back Room like bats out of hell. And so we did…. And the company eventually rotted from within.
Product designs, processes, and customer service suffered. It still has not recovered to this day.
I wrapped Christmas presents with my stock option papers one year as an internal family joke.
Acquisitions were made and those involved in the acquisitions were promoted within 1 year of the acquisition after completing the sale and spending all of the plentiful integration money. Leaving those left who were sincerely trying to make the acquisition successful with the hard work AND the inability to call out those who had just been promoted for torpedoing any actual chance of integration success.
Do you know that after Immelt, it took 7 years for a GE acquisition to even get back to break even profitability? There was only 1 exception & I was fortunate to be a part of it, but that’s a story for another day…
There is much more to say on this topic, but it will likely bore anyone who has read this far.
Perhaps I will write the story of “How GE Lost its Way & the World Followed” some day.
But alas, I may not be as smart as I think, for if I were, I’d be so independently wealthy that I wouldn’t worry that writing such a story could prevent future employment opportunities…
