Ge’s Management Theory

General Electric (GE) was founded by Thomas Edison in 1878 as a way for him to fund his research into electric light. Only one year later in 1879 he accomplished that mission when he created the first incandescent light. Incandescent light was only the beginning, over the next 128 years GE became an innovator in the advancement of technology and implementing new ideas. Some of these products included the first electric powered X-ray machine, television, radio, locomotives, home appliances and radar systems. While GE was building a name for itself with great new products it also became a leader with its innovations in management.

In 1900 GE embarked on its first management initiative by creating the first corporate research and development lab. A short 30 years later GE became the first company to offer pension and profit sharing plans to its employees. Adding to their long list of firsts within management GE created a unique set of “Blue Books” that governed a managers every move. In the 1960s GE partnered with the consulting firm Mckinsey and created the GE Business Screen which allowed them to analyze GE’s large portfolio of strategic business units. Quickmba.

com (2010) states the screen was developed in an effort to improve an already utilized system called the BCG Matrix. The new GE Screen identified two areas of improvement. First, the GE Screen utilized the axes as industry attractiveness and unit strength while the BCG Matrix used market growth and market share. Second, the GE Screen has nine cells and the BCG matrix has only four. In the 1980 and 1990s GE developed an effective global culture as it continued its expansion into different areas of business. During this time they were the first to offer the Six Sigma quality initiatives program.

GE. com (2010) describes Six Sigma as a disciplined process that allows them to focus on development and delivering near-perfect products. The process is comprised of 6 main concepts: Critical to quality, defect, process capability, variation, stable operation and design for six sigma. When put into practice GE believes they can identify all possible defects creating a flawless product. According to Jeff Immelt the CEO of GE, “Most people Inside GE learn from the past but have a healthy disrespect for history”. What he means by that is the company can change course easily and does so frequently.

They never look back and always keep an eye on the future. Sometimes if a program isn’t working they will simply abandon the program all together. GE puts a lot of emphasis on developing great leaders and goes as far to fire the lowest 10 percent of its employees each year. While some of these policies are debated as unethical they must be working. GE training programs have produced CEO’s all over the world. Some of those include Kevin Sharer of Amgen, Chris Kearney of SPX, Steven Bennett of Intuit, Larry Bossidy of Honeywell and Larry Johnson of Albertsons.

While GE does produce great leaders it’s the culture within that makes the company so successful. In 2006 they were named the most admired company in the world by Fortune, Barron’s and the Financial Times. As a matter of fact they have been given this distinction 6 of the last 10 years. In addition, GE is the only remaining original Dow Jones Industrial Average 12 from 1896. GE began its journey in 1878 producing great products and in 2010 is a company that produces great leaders. It’s no mystery why Dr. Clay Christensen a professor at Harvard University describes GE as “The best school of management in the world bar none”.

Case Questions: 1. Do the various management developments at GE over the last century seem to follow the same patterns as the development of management theory? I do believe that over the past decade GE has followed the progression of management theory. It all started with the classical perspective in 1900 when GE created the first corporate research and development lab. At the time the behavioral perspective began taking shape around 1930 GE was the first to look at its employees as more then tools to create products. They began to see employees as valuable resources and were the first to offer pension and profit sharing plans.

GE was beginning to understand that to maximize a workers potential you must consider their thoughts, feeling and emotions. In the 1960s when the quantitative perspective was emerging GE developed the Business Screen. The screen was one of many new tools that used mathematical concepts to help guide a company’s business dealings. As described previously the screen was used to to identify the optimal portfolio of business units that a company can hold. 2. Which of GE’s management innovations seem to draw on a classical management perspective? Which seem to draw on a behavioral management perspective?

I believe that GE’s innovation of Six Sigma, Workout and Blub Books all drew on the classical management perspective. More specifically the Blue Books drew on scientific management as they were more concerned with improving the performance of each manager. The Six Sigma quality initiative was more administrative management as is dealt with the idea an entire organization can become more efficient. There are two innovations that I believe drew on the behavioral management perspective. First, the pension and profit sharing plans for its employees that I discussed earlier.

Second, is the policy of firing the lowest performing 10% of workers. Without question I believe this policy represents Theory X, which provides a pessimistic view of workers and suggests workers respond better to threats and coercion. 3. How does the contingency perspective explain the management changes that GE has made over the years? By definition the contingency perspective suggests that appropriate managerial behavior in a given situation depends on, or is contingent on, a wide variety of elements. Simply put one shoe doesn’t fit all.

As GE grew from a company producing simple products to a company managing business units across the globe it has learned to alter its management behavior based on the environment from which it operates. For example, the manager of a microwave factory will need to manage using a different set of tools then a manager heading up NBC Universal. References GE. com. What is Six Sigma? Retrieved January 12th, 2010, from http://www. ge. com/en/company/companyinfo/quality/whatis. htm QuickMBA. com. GE / McKinsey Matrix. Retrieved January 10th, 2010, from http://www. quickmba. com/strategy/matrix/ge-mckinsey/