Bob's Gutsy Leadership Blog

GE Should Learn from the Turnaround Wizards!

If you go back 20 years, General Electric was one of the most admired companies in the world.  It participated in a variety of different product categories and in each, it had a firm goal to be the number one or number two player, or get out.  Since then, it’s been virtually a straight line down and currently, we are reading daily of the fact that General Electric may not be salvageable.

You don’t find many examples of major companies who find themselves in a steep negative spiral and then a new leader is able to turn the situation around and put it on a winning track. This is an interesting topic, because we can learn valuable lessons from the small number of successes that there are. Here are two that are the most significant in my estimation:

  • Chrysler– It the 1970’s Lee Iacocca, an outsider, became the CEO of Chrysler, which was in a death spiral.  He quickly simplified the organization and most importantly, introduced a wildly popular new model; the minivan.  By 1983 Chrysler had paid off a huge government loan that was crucial to the turnaround, and Chrysler was thriving.
  •  IBM- In 1993 IBM was headed to bankruptcy and its board hired outsider Lou Gerstner and he went to work streamlining the company.  Much to the surprise of industry experts, he de-emphasized hardware and launched a major new business unit focused on IT services and built it in to a giant business.  By the mid 1990’s the company was highly profitable again.

Stepping back from these examples and others, there are five characteristics that clearly emerge as the way to turn around a sick organization, or to further strengthen successful ones:

1.) Fresh Talent– You need to reach for an experienced, objective, aggressive new leader who is not vested in the practices of the past.  This person can come from either the inside or the outside, as long as they have the skills just mentioned.

2.) Develop the Plan for Success– This starts with extensive interviews inside and outside the organization, as well as detailed reviews of the marketplace, competition, technologies, and trends.  The result should be a significant new business thrust that must be very distinctive and of high customer appeal.

3.) Simplify the Organization– Managers hire too many people, and with time, you end up with a bloated bureaucracy that complicates and slows down decision making.  This has to be cleaned up quickly.

4.) Key Measures– A scorecard needs to be designed that enables the organization to see progress toward the achievement of the plan and makes the ultimate goal clear.  This also helps in signaling when course corrections in the plan need to be made.

5.) Sense of Urgency– The new leader needs to create a clear sense of urgency that is felt by the entire organization.  Without it, the organization will be lulled into a sense that all of this will wither away and we will soon be back to the status quo.

Iacocca and Gerstner are the epitome of these characteristics; learn from them!

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