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Taking a Lesson from GE: How to Transform your Company through Engagement

Posted on January 19, 2016

Getting work out tips from a 79 year old man, no matter how fit he might be, seems a bit unconventional. Unless of course those tips are from Jack Welch, former CEO of GE and creator of the “work-out” cultural initiative implemented during his time there. This work-out system drove GE to double digit growth during his two decades at the helm. In the spring of 2001, as Welch was nearing retirement, GE was the most valuable company in the world with a market cap of $597 billion. The question is - what was the secret work-out formula and how can you apply it to your company?

The Background

Before Welch took the reigns in 1981, GE was a “GNP company,” an aging manufacturing giant whose profits grew at the same rate as the American economy. It was also, by Welch’s account, a bloated bureaucracy with over 25,000 managers (including over 130 vice presidents) and filled with red tape. Managers had no insight into employee morale and no ideas on how to improve things. Welsh knew that turning GE around, meant big changes needed to be implemented.

A Solution Appears

His plan involved turning GE from a hierarchical, command-and-control company to a learning organization. In this system, employees were encouraged to find creative solutions to problems. Following these 3 main points:

1. Import the best ideas into the organization
2. Reward employees who bring in the best ideas
3. Celebrate new ideas

This new approach was a complete break from the popular scientific management stystem created by Frederick Winslow Taylor. Scientific management was the basis of the assembly line - a hierarchical system where employees performed routine specific tasks over and over and over. While Taylor’s system was a perfect fit for physical labor, Welch knew the work world had shifted to a knowledge economy, where value was created more by more mental, and less physical, exertion. In this new system employees were no longer regarded as replaceable cogs but rather valuable resources who could provide valuable feedback for organizational improvement. With this in mind, in 1989 Welch launched a bold cultural initiative called “Work-Out.”

The Work-Out

As a part of this initiative, all employees were required to attend their respective Work-Out session. A three day session that consisted of workers giving suggestions to managers for improving processes. Managers were required to give every suggestion a response - “Yes,” “No,” or “I’ll get back to you at a specific date.” And most surprisingly, managers in these Work-Out sessions said “Yes” 80 percent of the time.
Over the course of years, looking to employees for suggestions in improvement delivered big results. Among them:

  • In just three years after the Work-Out program was launched, company earnings attained double-digit increases, in 1992 and continued for every year after that. Previously single-digit increases were the norm throughout the 1980s.
  • Inventory turnover, a good measure of how efficiently products are being managed, was over eight in 1999 where it had been in the three to four range for GE’s last 100 years.
  • Operating margins rose to 17.3 percent in 1999 where they had been under 10 percent for GE’s previous century.

By including all employees in the program, Welch managed to unleash the value of GE’s 300,000-person work force. GE’s receptivity to new ideas also enabled the company to rapidly adopt and popularize the system of production, originally created and used to great results at Motorola.

Applying These Lessons to Your Organization

Welch’s Work-Outs have a number of takeaways that can be useful to your business. First, they functioned as a good alternative to the traditional “box on a wall” approach to handling employee suggestions. Often this approach comes across as alienating, ideas are put into the box (or submitted with a simple electronic form) and never heard from again. By formalizing an employee suggestion handling process and encouraging managers to provide meaningful feedback, Welch showed employees that GE was interested in hearing their ideas, and rewarding them for those ideas.

Innovation and engagement success doesn't just happen at companies like GE, and lucky for you it doesn't require an entire cultural overhaul to achieve. If your company is ready to change the way it engages employees, and captures new and innovative ideas, then it's time to give the Vocoli team a call at 888.919.5300.

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