Book it: best bets for board reading; From a hotelier's secret to the secret of GE's success, from being rich to being an imperfect board member, leadership insights from a roundup of new books on business.
Position | LEADERSHIP - Company overview |
Building blocks of the GE juggernaut
From The Secret to GE's Success by William E. Rothschild, copyright 2007 by The McGraw-Hill Companies Inc. Published by McGraw-Hill (www.books.mcgraw-hill.com).
IN 1950, CHARLIE WILSON selected his executive assistant, Ralph Cordiner, as his successor to lead General Electric, while Philip Reed remained as chairman. Cordiner was an appliance salesman who worked his way up through the sales and merchandising organization for the Edison General Electric Appliance Co. In 1939, he left GE and became president of Schick Razor. Three years later, he rejoined his former boss, Charlie Wilson, at the War Production Board. When Wilson returned to GE, Cordiner returned with him as his executive assistant. In 1950, Wilson turned over the company to Cordiner, who served as president from 1950 to 1958 and as chairman from 1958 to 1963.
Management by Objectives (MBO) Is Born At GE: Unlike other major companies that narrowed their product lines after World War II, Cordiner and Reed decided to continue to pursue the diversification route. To their credit, they recognized that managing a diversified and complex company required a different management approach and organizational structure. They therefore retained the services of academic and consulting experts to determine what changes needed to be made.
The GE team decided to embrace a new management concept, which became known as "management by objectives" (MBO), and to break the company into numerous decentralized product departments. Product departments became the building blocks of the company. They were assigned the responsibility to develop competitive and business strategies and plans to meet the overall financial objectives: 7 percent return on sales and 20 percent return on investment.
This represented a dramatic change from the company's traditional centralized organization. Before MBOs, corporate management was responsible for setting the objectives and developing the strategies, and the operating units were expected to execute them with little or no deviation. In effect, the shift transferred power from the centralized functional units to the product department general managers.
Broad (and Employee) Stock Ownership: Cordiner was a strong advocate of having a very large number of shareholders so that GE could not be controlled by any one individual or investment group. The company decided that when the stock price reached $100, it automatically would be split to keep it within reach of the small investor.
In order to encourage employee stock ownership, the company implemented a stock bonus program that permitted employees to invest systematically in GE stock. For every dollar they invested, the company would add another 50 cents. This program--which is very similar to the current 401(k) programs so popular today--was arguably 40 years ahead of its time.
Outside Board of Directors: Cordiner wanted to have a board of directors that included a diverse and experienced group of outsiders. As he put it: "To assure that the interests of the owners will be protected, General Electric has 19 men, of whom only two (the Chairman and myself) are company executives. They are national, and come from a wide variety of businesses and industries, including education, food, agriculture, mining, manufacturing, marketing, banking and transportation."
Again, this approach--although certainly not unique to GE--can be seen as well ahead of its time. Today, many companies are scrambling to replace insiders with outsiders on their boards.
William E. Rothschild is a former senior strategist for General Electric Co. He worked for GE for more than three decades. He now has his own consulting firm, Rothschild Strategies Unlimited LLC and is the author of four previous books (www.strategyleader.com).
What's rich? 'Twice what I am making'
From You, Inc.: The Art of Selling Yourself by Harry Beckwith and Christine Clifford Beckwith, copyright 2007 by the authors. Published by Warner Business Books (www.hachettebook-groupusa.com).
THIRTY YEARS AGO, a friend studied what industries might become hot and decided on the one that would be his life's work. He wanted big money, and this hot industry looked like it would be minting plenty.
There was just one problem. It's clear--indeed, it's been demonstrated--that no amount of money is enough.
This was suggested in a fascinating Newsweek article in 1994. A team of journalists set out to discover, Who in America feels truly rich? And just...
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