A dramatic change of fortunes at General Electric (GE) has come under the spotlight in an in-depth Bloomberg analysis. The piece notes that the corporation – famously co-founded by Thomas Edison and JP Morgan – has struggled since the retirement of totemic figurehead Jeff Immelt in the summer of last year, with the financial statement it filed a few months later stunning Wall Street insiders.
In the time between November 2016 and filing that statement, the firm revealed, it had lost a staggering 46% of its value – equivalent to $120 billion. During the same period, by contrast, the Dow rose 41%: a painful indication of how wide of the mark GE was compared to the rest of the business community.
“Soon after,” the analysis notes, “GE said it would halve its once-sacrosanct stock dividend because it was short on cash. It also said it would sell or spin off $20bn in businesses, including its lightbulb division.”
The piece adds that, in January, GE was informed of a $6.2bn insurance loss related to costs incurred more than a decade ago by its financial-services business. The US Securities and Exchange Commission is now looking into the matter. Crucially, Bloomberg notes: “GE’s new CEO, John Flannery, has grimly promised that ‘all options are on the table,’ including the once-unthinkable option of dismembering the company … The message is that the company, even if it isn’t broken up entirely, will get smaller and simpler. ‘Complexity hurts us,’ [Flannery] said in November. ‘Complexity has hurt us.’”
What can a leader do to skilfully and effectively manage the breakup of a complex organisation – particularly in order to preserve staff morale throughout the process and assure them it’s for the best?
The Institute of Leadership & Management's CEO Phil James says: “The lifespan of corporations is shortening. As such, the idea of an organisation being a national treasure, or some sort of entrenched institution, is very much over. It’s all down to change, and in many cases, that’s something to which we should be less resistant: perhaps if Carillion, for example, had been broken up into its constituent parts when it became clear that they lacked synergy – a malaise that management author John Mariotti described as ‘nonergy’ – then the core of the company may have survived.”
James explains: “Essentially, administrating any major, organisational restructuring drive is all about dealing with change, and its effects. It’s about communicating. It’s about being honest, and genuine. If employees are assured that you really are rooting for them, and you are trying to make the change effort work, and that you have their interests at heart rather than your own, then they will trust you. As a consequence, they will be far more supportive and accepting of your course of action.
“That will not be the case if they think that you are hiding important information, or being in any way self-serving.”
He adds: “Of course, there is always a wave of sadness in an organisation when it shifts from a longstanding form or arrangement – one need only look at Unilever’s recent decision to shut down the Colman’s Mustard factory in Norwich to understand how people’s emotions are affected by such events. But it is conceivable that, if responsible buyers can be found for a complex organisation’s various subsidiaries, then the essential livelihoods of their employees will survive intact. People have an extraordinary capacity for resilience – particularly if they have a bedrock of trust to rely upon.”
For further thoughts on building trust, check out these learning resources from the Institute
Image of GE logo courtesy of testing, via Shutterstock
Other resources of interest
- 08 August 2018