Slip-sliding away..

General Electric – GE – has been one of the most admired companies of the last century, an original member of the Dow Jones Index, and famous for operational excellence.

17 years ago, they appointed a new CEO, Jeff Immelt who had been Head of GE Healthcare.  Since then GE has lost $100 billion of shareholder value and there is talk of it being split up.

What happened? Poor capital allocation is one explanation – they overspent on some poor acquisitions made at the wrong time (the top of the market) and then sold them at a loss.  The CEO also assumed that their culture of operational excellence  and training would just continue, that it did not need tending to – poor operational execution was the next explanation.  And then the corporate culture was always said to be one of push-back, debate, and candour almost to the point of rudeness, and that was its strength.  However, that changed under Immelt; it is said that he did not listen to his subordinates, that he killed debate.

All three of the above explanations were down to the CEO.  When he left last year, the share price bounced up on an otherwise flat day in the market.

When it comes to the degradation of culture in an organisation, the old adage is that “a fish rots from the head”.

Story source:  Fortune Magazine


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