Management at Work
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ounded by Thomas Edison in 1878, GE is the only one ers’ every move until the 1980s. In the 1960s, the company
of the original Dow Jones Industrial Average 12—the pioneered the application of strategic management as an
dozen firms that made up the first DJIA in 1896—that’s approach to handling business opportunities and challenges,
still on that venerable list. In fact, while all the other origi- and today the principles of strategic management are so
nal firms have been acquired or gone out of business, GE is thoroughly ingrained in management thinking and practice
still one of the most consistently profitable companies in the that they’re often the capstone course for undergraduate de-
world. It doesn’t boast the fastest growth or the highest market grees in business. At about the same time, the company lent
value, but it’s consistently among the world’s most highly re- its name to the GE Business Screen—a process, developed
garded firms, garnering high marks year after year in surveys of jointly with the consulting firm McKinsey, for identifying
the world’s “most admired” and “most innovative” companies. a corporation’s optimal portfolio of business units. By the
Indeed, from its earliest days, GE has been a leader in de- 1980s and 1990s, GE was building an effective global culture
veloping not only new products and manufacturing processes, while pioneering such programs as Six Sigma quality initia-
but new management techniques and practices as well. Many tives and Work Out, a reengineering program designed to
of these have been duplicated by other firms, but rarely does simplify work and empower employees.
a firm beat GE to a new development or surpass GE’s skill in GE also has a reputation for reconfiguring or even aban-
implementation. The company’s first organizational innova- doning long-standing programs when they no longer serve their
tion was the creation of a corporate research and development original purposes. “Most people inside GE,” says current CEO
lab, established in 1900, and in the 1930s, GE was the first Jeff Immelt, “learn from the past but have a healthy disrespect
U.S. firm to offer pension and profit sharing plans. for history. They have an ability to live in the moment and not be
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GE also centralized decision making in the 1950s, burdened by the past.” Since taking over in 2001, for example,
producing the unique “Blue Books” that governed manag- Immelt has pushed hard for innovation to complement the
tendency of Six Sigma to promote efficiency over creativity.
accelerated product development and promotion from GE’s
He’s also worked to give the company’s traditional internal ori- army of engineers and marketers. According to Immelt, the
entation a sharper “external focus” on its customers. contest and other initiatives demonstrate GE’s willingness to
In 2008, GE Research was awarded the INFORMS prize, seek innovation outside the company: “A lot of these energy
which is given annually to a firm that effectively uses the ideas,” he explains, “are never going to see the light of day
techniques of management science—mathematical modeling because [startups] don’t have the muscle to commercialize
and other analytical methods—to make better management them. . . . [I]t’s kind of win win,” he adds. “Selfishly for GE,
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decisions. Management science is important to GE, says VP we can be the go to player to get more good ideas faster.”
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for Global Research Mark Little, “because it’s so relevant to Finally, GE works hard to develop leaders. Every year,
how we perform for our customers”; at GE, he adds, the ul- for instance, about 9,000 GE employees take classes at the
timate aim of management science technology is “to create company’s legendary in house management school in Cro-
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more customer value at lower risk.” tonville, New York. The current curriculum at Crotonville
Today, GE is also focusing on innovations in environ- revolves around what Immelt characterizes as “a whole
mental technology. Launched in 2005, its “Ecomagina- new set of leadership traits,” including “external focus” and
tion” initiative, according to Immelt, reflects the company’s “imagination and courage”—traits, according to Immelt,
“commitment to address challenges such as the need for that lay “the foundation of how you become innovative. . . .
cleaner, more efficient sources of energy, reduced emis- What I tell people is that we have to develop new leaders
sions, and abundant sources of clean water.” In July 2010, for growth—people who are passionate about customers and
for example, GE announced a $200 million “Ecomagina- innovation, [people] who really know markets and products.
tion Challenge”—a contest to fund promising ideas for [Traditional] professional management isn’t going to give
improving America’s electricity infrastructure. In Novem-
you the kind of growth you need in a slow growth world. . . .
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ber, round one ended with 12 start-up companies receiving You have to change,” Immelt concludes, “or else you don’t
a total of $55 million in investments, plus the prospect of have a great future with this company.”
Case Questions
1. Does the pattern of management developments at
changes that GE has made over the years? Explain each
GE over the last century seem to reflect the pat- of your responses.
tern suggested by management theory? Explain your 3. Why, in your opinion, has GE been so successful in
answer. integrating the management science approach with less
2. Which of GE’s management innovations seem to draw
quantitative approaches?
on a classical management perspective? Which seem to 4. In what ways does the change in GE’s approach to lead-
draw on a behavioral management perspective? How does ership reflect the same conditions as those that influence
the contingency perspective explain the management its current approach to management?
Case References
Geoffrey Colvin, “What Makes GE Great?” Fortune, March 6, 2006, http:// April 15, 2008, www.firstscience.com on January 27, 2011; Ryan McCarthy,
money.cnn.com on January 27, 2011; Betsy Morris, “The GE Mystique,” “GE Launches $200 Million Innovation Contest for Smart Grid Technolo-
Fortune, March 6, 2006, http://money.cnn.com on January 27, 2011; Bill gies,” Huffington Post, July 13, 2010, www.huffingtonpost.com on Janu-
Lane, “Management Secrets from Inside GE,” U.S. News & World Report, ary 27, 2011; Adam Aston, “GE’s Innovation Avalanche,” GreenBiz.com,
January 25, 2008, http://money.usnews.com on January 27, 2011; “GE November 17, 2010, www.greenbiz.com on January 27, 2011.
Research Named Winner of 2008 INFORMS Prize,” FirstScience News,
