Back in the late 1980s, when General Electric Co. (www.ge.com) declared war on a lumbering bureaucracy and set forth to streamline its global operations, Ron Ashkenas was in the trenches. As managing partner of the consultancy Robert H. Schaffer & Associates (www.rhsa.com), he was one of a team of outside experts assembled by then-chairman and CEO Jack Welch to create the program known as Work-Out. The idea was to solicit the opinions of people throughout the organization - in design, production, marketing, sales and delivery - on how to do things better. Every employee attended countless Work-Out sessions to share their ideas on eliminating redundant processes and speeding up time-to-market.
Ashkenas, who later co-authored a pair of books on the experience ("The Boundaryless Organization" and "The GE Work-Out"), worked within two of the company's divisions, GE Lighting and GE Capital. (At the time, GE's oldest and newest business units, respectively.) Company-wide, the effort ended up saving "hundreds of millions of dollars, maybe billions," he says. In the process, GE was able to introduce new products faster, by bringing together individuals from product development and the supply chain - two areas that had rarely spoken before. The program offered managers "a tremendous opportunity" for eliminating process bottlenecks, and took many months out of the product-development cycle.
GE was already a leaner organization from the start of the program, at least in terms of headcount. Welch had spent the earlier part of the decade mercilessly slashing GE's workforce from 300,000 to about 200,000. That effort earned him the sobriquet of Neutron Jack, referring to a neutron bomb's supposed ability to kill all the inhabitants of a building while leaving the structure intact.
Following the layoffs, Welch realized that "he had a company that was structured properly but was still acting in the same way - analytical, complex, hierarchical, waiting for someone else to make a decision," Ashkenas says. So with Work-Out, Neutron Jack became Caring Jack (to coin a term that nobody used at the time), willing to listen to anyone in the company who was still left standing.
Product quality was another big concern at GE. It didn't necessarily follow that the empowering of workers would lead to higher-quality products. Neither would Welch's endless push for higher productivity, as long as key manufacturing processes remain unchanged. But Welch waited to implement formal Lean and Six Sigma campaigns until Work-Out was solidly in place.
"His feeling was that GE didn't have a culture that could support Six Sigma," explains Ashkenas. "It requires a lot of analysis, detail and training. On top of an already analytical, slow-moving organization, that would have just made it slower."
GE chalked up some major successes in the wake of Welch's efforts. Earnings growth soared into the double digits. The goal of being number one or two in every market in which GE competed was largely achieved. (Never mind the ongoing turbulence at NBC-TV.) More recently, the company has withstood a series of reversals in many of its business units. Welch retired and was succeeded by GE veteran Jeffrey R. Immelt in September 2001 - just four days before the terrorist attacks of 9/11. A subsequent economic slump, and the far more serious current one, took their toll on company fortunes. GE suffered a 19-percent decline in earnings in 2008.
While Immelt has put his own management stamp on the company, he has built his efforts on the "fundamental underpinnings" that were laid down in the Welch years, Ashkenas says. He has continued to pursue Work-Out, Six Sigma and Lean processes, while adding more of an external focus on the customer. More than half the initiatives at GE's corporate campus, the John F. Welch Leadership Center in Crotonville, N.Y., are focused today on customer issues. Ashkenas himself is back at GE part-time, extending Work-Out at GE Capital, where a whole new generation of employees is in place.
"It's not just for internal management development anymore," he says of the Crotonville campus. "Most product design is done with customers, as I understand. For GE, it's certainly not just talk, and it's not just slogans."
Next: I talk to Ron Ashkenas about his latest book, and why many executives are unprepared for the complexities of our modern-day financial world.
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