Bob's Gutsy Leadership Blog

Can the Danaher Playbook Save GE?

General Electric has been in a long-term decline ever since Jack Welch left the company in the year 2001. Since then roughly $300 billion of market value has been erased by the two CEO’s who followed Jack.  The 2nd of these two CEO’s was very recently removed from his responsibilities after only 13 months on the job.  He had led the company to a $124 billion market value decline in that short period.

To replace this short-timer, the GE Board of Directors hired the former CEO of Danaher.  Back in 2001 when he became the Danaher CEO, the company had $4 billion of annual revenue.  When he retired 14 years later in 2015, that revenue was $20 billion. For perspective, an investor who had put $10,000 into Danaher 20 years ago would have more than $200,000 today.  Over that period, a $10,000 investment in GE would be worth $8,700.

This Danaher veteran is famous for developing the so-called “Danaher Playbook.”  That system is modeled after the famous “lean” approach used at Toyota.  It is based on an intense commitment to efficiency and constant assessment of the business units against performance metrics. Danaher’s system has eight such metrics which include financial targets like core revenue growth as well as measures of customer satisfaction, on-time delivery, employee morale and retention rates.

With the Danaher Playbook, each business is assessed monthly in face-to-face meetings.  New executives are pulled away from their jobs and schooled in the Danaher way, which centers around a philosophy known as Kaizen. Derived from the Japanese word Kai, meaning change, and Zen, meaning good, Kaizen focuses on continuous improvement through in-depth sessions to assess progress.

The structure of Danaher is almost an upside down version of GE.  While Danaher is a conglomerate, it doesn’t use the GE-style corporate umbrella.  Danaher has only about 200 of its 67,000 workers in corporate functions. Under its two previous CEO’s, GE has operated with large corporate research, technology and administrative groups, believing those corporate groups could come up with insights and programs useful to several product divisions.  In contrast, the emphasis at Danaher is delegation of all this to the individual business units and then holding them totally responsible for excellent results.

If the prior Danaher CEO behaves the way his experience would suggest, General Electric should be in for a major housecleaning, which is very badly needed.  A measure of how serious GE’s problem really is can be seen in the stock price which thirteen months ago was in the $25 per share range and today sits at about $10, a 60% decline in a very short period.  It will be very interesting to see the highly regarded Danaher Playbook take aim at the excessively bureaucratic GE.

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