A Rising Tide, does the U.S. economy lift all boats? If so, what happened to GE?
The Dow Jones Industrial Index opened at a record high yesterday morning. The U.S. economy is by far the strongest it’s been since the great financial meltdown of 2008. Employment is stronger than it’s been in decades and wages are growing.
A rising tide lifts all boats, or does it?
On Monday, General Electric ousted CEO John Flannery after only 13 months in the role. Some, like the Yale professor Jeffery Sonnenfeld have argued that wasn’t sufficient time to effect a turnaround in the behemoth organization. And, in some ways, no doubt he’s spot on in that assessment.
Certainly, Flannery inherited a mess. Thirteen months to deliver dramatically better results in an organization the size of GE would be a tall order.
These shortcomings are occasionally due to bad strategy. More often though, the shortfalls are the result of bad execution of good strategy. GE suffered from a malady common to businesses of all sizes: Poor execution of a viable strategy.
In our Strategy-Execution-Results (SXR™) Framework, we’ve identified 7 Gears that translate strategy to results. While it’s possible that ALL seven gears need work at GE, two really pop off the page:
People at all levels of the organization need a scorecard that shows how their performance impacts results. This allows everyone to make changes to their efforts in time to impact performance. By many accounts, one of the things that tripped up Flannery was the $23 billion charge GE took in its power business that seemed to catch the board, and perhaps others, by surprise. This was on the heels of another $15 billion charge in its legacy long-term health insurance business in January.
Aligning the Architecture (Systems, Structures, Processes and Culture) to the Strategy
Organizational architecture provides the almost unseen forces that pull the organization in the direction it wants to go. The architecture creates what we call “Organizational Gravity.” Culture is a key component of architecture. Clearly, it’s critical for GE to change the slow, bureaucratic culture that has creeped in over the last several decades with a faster, more responsive, more performance-driven culture. Just as clearly, the culture has not evolved at a fast enough pace to enable GE to execute its strategy.
So, while 13 months may not be enough time to see dramatic improvement in results, it is enough time to see change in the fundamental items that lead to better results in the future – in this case, an opaque scorecard that continues to deliver surprising (in a bad way) results and a cumbersome culture not aligned to GE’s strategy.
If your boat is missing out on the rising tide, or even if it’s just not rising as fast as the other boats in your industry, here are a few questions to ask yourself:
How clear are you on your strategy? Does it really create unique value for your customers that cause them to choose you over all their other options?
How well does that clarity extend through your organization? At minimum, does everyone in the organization understand their role in the show in executing that strategy?
To what extent is your architecture aligned to your strategy? Does your culture enable you to attract the talent you need to be successful? Does it help speed execution? Or, does it impede progress?
How visible is the scorecard? How well do people at every level of the organization see how their performance impacts the results they are supposed to deliver? Or, like GE’s power business, are people surprised, even at the Board level, about the gaps in performance?
Does bad news travel as fast as good news so that people can see the gaps in performance and react to them as quickly and as effectively as possible?
While few people lead businesses with the size and complexity of GE, the lessons from GE’s travails apply to many. It appears the strong U.S. economy does not lift all boats. You explicitly align and turn the gears of execution to effectively translate strategy to results.