For most of the last century, GE has been famous for turning out well-trained and experienced managers. A rigorous process that identified potential leaders, then providing learning while shifting them between the conglomerate's various business units produced skilled executives who were the envy of - and have been widely sought after by - other companies. Former CEO Jack Welch was noted for saying that his primary responsibility was developing talent.
But GE is also known for adapting to changing circumstances. It's historic emphasis on breadth is now, in the globalizing, technologically driven era, morphing into more of a focus on depth in one industry or professional concentration. The reason seems to be that the global economy has caused the company to winnow its portfolio of businesses while raising the price points of the items being sold. Developing and maintaining relationships with the super-sized entities buying those products while understanding how to wring costs out of a complex supply chain has taken precedence. The company will continue to look for ways to broaden managers' experience within the business unit, but the days of the generalist appear, in this stage of the cycle, to be waning. Sic transit gloria mundi. JL
Kate Linebaugh reports in the Wall Street Journal:
General Electric Co. is opening a new chapter in management philosophy. The conglomerate that once groomed jack-of-all-trades generalists is now betting on deep industry experts instead.
The shift is a change in philosophy at a corporation that for decades had made a rigorously applied but generic management tool kit central to its identity. Like all companies, GE wants some of both traits in its leaders, but the balance has tipped toward expertise
Rather than purposely relocate its senior leaders every few years to expose them to more of the company, GE now is leaving them in their business units longer than it used to, in hopes their deeper understanding of products and customers will help them win sales.
The shift reflects a winnowing of the conglomerate's portfolio under Chief Executive Jeff Immelt, as well as a tougher environment for big-ticket equipment like power plants and medical equipment, where budgets are tighter and competition fiercer.
GE Vice Chairman John Krenicki held executive positions in chemicals and materials, lighting, superabrasives, transportation, plastics, and advanced materials before ascending to be the leader of the energy business, GE's biggest industrial unit, a post he has held for seven years.
"The next leader of GE Energy won't have a C.V. like mine," Mr. Krenicki said. "Its next leader will likely come up through GE Energy."
The energy operation run by Mr. Krenicki is a $44 billion business selling everything from heavy-duty gas turbines to compressors for deep-sea oil drilling to wind turbines. The aim is for the business to reach $100 billion in sales by the end of the decade.
"The world is so complex," Susan Peters, who leads executive development at GE, said in an interview. "We need people who are pretty deep."
That said, Ms. Peters notes that executives seeking to ascend to the top are still expected to have a number of stints at several of GE's businesses. And some jobs, like the CEO of its locomotive unit, are used to groom executives to run bigger businesses. The current CEO of GE Transportation, Lorenzo Simonelli, came to the job after six years at the consumer-products unit and four years in the audit staff.
GE for years has produced senior managers able to seamlessly slip into the executive suite at companies as varied as Boeing Co. and Nielsen. To shape executives, the conglomerate spends about $1 billion a year on management training and has a rigorous annual performance evaluation process known as Session C that started back in the 1950s.
Expertise is one of five qualities that executives are measured on in that process, and executives say it recently has been given more emphasis at meetings like the annual Boca Raton, Fla., retreat for GE's top 600 executives. In the past, though, executives could expect to switch jobs frequently.
GE's commitment to professional managers who are steeped in company tradition through short stints in multiple businesses can be traced back to the company's fifth president, Ralph Cordiner, who published a book on his philosophy in 1956. Through prior GE Chief Executive Jack Welch's era, that paradigm was applied particularly to promising executives for whom new postings were seen as tests of an executive's mettle.
"We were moving people every two years so it was musical chairs and the joke was you could parachute into a business that was on an upswing and get all the credit," said Noel Tichy, a professor at University of Michigan's Ross School of Business, who ran GE's Crotonville, N.Y., leadership training center from 1985 to 1987.
The evolution of GE's management philosophy strives to promote accountability so executives can see a business cycle through. It also comes as competition has gotten tougher across its businesses, from medical equipment to locomotives.
The company's latest shift toward putting greater value on subject-area expertise aligns with Mr. Immelt's strategic repositioning of the company. The CEO shed big businesses like plastics, insurance and media to focus GE's portfolio around a few core businesses: energy, aircraft engines, health care and financial services.
Anders Wold came to GE as part of an acquisition of a Norwegian ultrasound business in 1998 and now runs that business at GE. The unit was a bit of stepchild in GE's imaging business, which is dominated by expensive products such as magnetic-resonance-imaging machines and CT-scanners.
His strategy was to recruit talent with deep customer relationships and expertise in the field. Employees, he said, needed that depth to be able to listen effectively and translate needs into new technology.
"Customers won't tell us exactly what they want," he said. "If you are very generic, if you don't have that domain understanding, you will develop products that will be average and not very successful."
"GE as a company can't just take a generic approach here," he said. "We have to be viewed as the specialist." The approach helped the group boost its sales to $2 billion last year from $200 million a decade ago. Now, ultrasound is the biggest division at GE's health-care unit. Mr. Immelt took notice and has used ultrasound as an example at company meetings. "There has been very clear messaging to give priority and to develop domain knowledge," said Mr. Wold.
GE's aircraft-engine operation, one of the company's fastest-growing businesses, is led by David Joyce, who has spent his entire career within the GE Aviation unit, working on engine platforms. Previous leaders of the business had come from outside of aviation.
AMR Corp. Chief Executive Tom Horton said Mr. Joyce's deep knowledge of the engines is a key part of their relationship. Mr. Horton recalls being in Beijing and calling Mr. Joyce at a late hour in Cincinnati with a question about an engine maintenance issue.
Mr. Joyce, who had read about the issue in a field report, was able to explain it in detail, in part because his background as an aviation engineer gave him a solid understanding of the engine mechanics.
"He is a good partner," Mr. Horton said. "When you have people who are in a job longer they can see things through," said Ms. Peters. "People are likely going to be in the jobs longer both for domain knowledge and accountability. It is because of the complexity in the world."
Internally Mr. Joyce's ascent also went over well, according to GE employees, who said it removed the challenge of getting an outside executive up to speed on a new complex industry. And the aviation business won accolades internally for its 2011 performance
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