Davenport, Leibold, Voelpel: GE’s Pursuit of Boundarylessness and Synergies

Under the legendary Jack Welch, GE has been one of the fastest-growing, most profitable and highly rated conglomerates in the world, with a market capitalization in the range of US$250 billion. GE has constantly outperformed its rivals and has consistently topped the polls as the world’s most admired company.

At a time when many firms have focused on only a few core businesses, GE is highly diverse. Between 1981 and 1997, GE made 509 acquisitions worth US$21 billion. Its businesses are as varied as light bulbs, home appliances, jet engines and financial services. GE has also successfully managed multiple brands simultaneously and chosen to maintain separate identities for their acquired brands, such as Hotpoint, NBC and RCA.

Many commentators have tried to explain the success of GE. Most agree that major factors are the management style of Jack Welch, and the importance of the mission and principles which guide the businesses and the managers. These principles are few:

Be number one or two in the market in every business. GE is no. 1, not just in market share, but in expanding the scope of its markets. (GE later relaxed this principle).

Share and adopt successful new ideas across businesses; the pursuit of ‘boundarylessness’. A business CEO is expected to try out ideas successful in other GE businesses and to promote the sharing of successful ideas from his/her own business. Groups of employees from all levels regularly meet to propose means of improving efficiency and solving problems. And pay and promotion are tied to boundaryless behavior via the sharing of ideas and transfer of knowledge. GE’s success appears to be rooted in Welch’s movement of ideas and also management talent around a diverse corporation.

Challenge and question the status quo. Welch regularly meets with his managers and insists that they challenge him about his policies and initiatives; this is filtered down the corporation by sessions of lower-level employees questioning their managers face-to-face.

These principles provide challenging, even ambiguous, demands on management. A business CEO may naturally wish to focus on that business rather than spending time and effort sharing ideas across businesses, experimenting with the ideas of other businesses, or being challenged about bases of success. However, it is not enough for the CEO to point to high business performance; sharing is seen as equally important even if potentially time consuming. Nor can managers claim that the requirement for sharing is an excuse for poor performance of their business; Welch’s management control systems required high levels of performance in terms of market share, financial targets and shareholder value.

Related

Facebook Comments