GE's business from a Stakeholder perspective
"A Company like General Electric has no magic or secret source of wealth, from which it can subsidize good works. It is actually a clearinghouse of economic activity. The Company collects money from its customers, at competitive prices, in return for products and services. All this money is in turn redistributed to employees, share owners, suppliers, and others in proportion to their respective contribution to the Company's results, and also to the government's tax collectors. To the degree that education and other community activities contribute to the success of the Company and the society in which it operates, they should and do receive a share of the proceeds.
The important principle I should like to express here, in relations with customers, share owners, employees,
suppliers, educational institutions, charitable activities, government, and the general public, is that all activities must be guided by the recognition of common purposes and of the contribution that each group makes toward their achievement. Now. the modern corporation, particularly one which has such deep roots in the United States society' as General Electric, is taking an increasingly enlightened view as to what such institutions as education actually provide, and what are the Company's consequent obligations. I am certain that business must do more, rather than less, to help higher education in the years ahead. But the guiding policy must be one of equal and reciprocal obligations, with complete respect for the independence and integrity of each part. With this view, a balanced view of the claims and contributions of all who affect the Company's operations, we have a sound guide toward meeting our responsibilities to society.
An important consideration in meeting a company's public responsibilities is participation in the national defense. Like most other companies. General Electric prefers commercial, non-defense business because it is generally more open for Company-determined innovations and is more profitable. But because of the Company's unique technical capacities, it is called upon regularly to develop and produce complicated equipment and systems for the armed forces. Today, defense business amounts to about 20% of General Electric's total volume and uses an even larger proportion of its technically trained people."
The important principle I should like to express here, in relations with customers, share owners, employees,
suppliers, educational institutions, charitable activities, government, and the general public, is that all activities must be guided by the recognition of common purposes and of the contribution that each group makes toward their achievement. Now. the modern corporation, particularly one which has such deep roots in the United States society' as General Electric, is taking an increasingly enlightened view as to what such institutions as education actually provide, and what are the Company's consequent obligations. I am certain that business must do more, rather than less, to help higher education in the years ahead. But the guiding policy must be one of equal and reciprocal obligations, with complete respect for the independence and integrity of each part. With this view, a balanced view of the claims and contributions of all who affect the Company's operations, we have a sound guide toward meeting our responsibilities to society.
An important consideration in meeting a company's public responsibilities is participation in the national defense. Like most other companies. General Electric prefers commercial, non-defense business because it is generally more open for Company-determined innovations and is more profitable. But because of the Company's unique technical capacities, it is called upon regularly to develop and produce complicated equipment and systems for the armed forces. Today, defense business amounts to about 20% of General Electric's total volume and uses an even larger proportion of its technically trained people."
On the Development of GE's management system:
"Up until 1939, the Company was able to operate efficiently under a highly centralized form of management. During World War II, however, General Electric began a period of almost explosive growth which caused its managers to question whether it might not be necessary to evolve new techniques of organizing and managing the Company.
From 1920 to 1939, the Company's sales volume had risen slowly from $200 million to $342 million a year. By 1943, under the pressure of war production, it rose suddenly to $1,370,000,000 a year—over a four-fold increase in four years. Postwar experience and forecasts indicated that this was only the beginning of an opportunity for continuing, rapid growth in serving the nation's demands for electrical and related products. The Company produced over $3 billion worth of goods and services last year; and if we do the job we should do of satisfying customers, this figure may well rise—as the Company has publicly stated many times—to $6 billion early inthel960's.
It is obvious that a Company with such growth characteristics, and operating on such a scale, requires a different managerial approach than the Company of the 1920's and '30's. This was, of course, recognized by Gerard Swope, who served as president during those decades when the foundations for future growth were carefully laid, and by Charles Wilson, the Company's president during the hectic, war-torn '40's. Under their leadership, I was asked to study the new problems of organizing and managing such a rapidly growing enterprise.
From the beginning of the study, it was apparent that the Company was going to require increasingly better planning, greater flexibility, and faster, more informed decisions than was possible under the highly centralized organization structure, which was suited for earlier and different conditions. Unless we could put the responsibility and authority for decision making closer in each case to the scene of the problem, where complete understanding and prompt action are possible, the Company would not be able to compete with the hundreds of nimble competitors who were, as they say, able to turn on a dime.
In addition, General Electric faced the need to develop capable leaders for the future; the need for more friendly and cooperative relationships between managers and other employees; the need to stay ahead of competition in serving the customers; and the very human need to make the work of a manager at all echelons of the organization more manageable. The work had to be made more manageable so that it could be understood and carried out by people of normally available energy and intelligence, thus leaving no requirement for the so-called indispensable man."
From 1920 to 1939, the Company's sales volume had risen slowly from $200 million to $342 million a year. By 1943, under the pressure of war production, it rose suddenly to $1,370,000,000 a year—over a four-fold increase in four years. Postwar experience and forecasts indicated that this was only the beginning of an opportunity for continuing, rapid growth in serving the nation's demands for electrical and related products. The Company produced over $3 billion worth of goods and services last year; and if we do the job we should do of satisfying customers, this figure may well rise—as the Company has publicly stated many times—to $6 billion early inthel960's.
It is obvious that a Company with such growth characteristics, and operating on such a scale, requires a different managerial approach than the Company of the 1920's and '30's. This was, of course, recognized by Gerard Swope, who served as president during those decades when the foundations for future growth were carefully laid, and by Charles Wilson, the Company's president during the hectic, war-torn '40's. Under their leadership, I was asked to study the new problems of organizing and managing such a rapidly growing enterprise.
From the beginning of the study, it was apparent that the Company was going to require increasingly better planning, greater flexibility, and faster, more informed decisions than was possible under the highly centralized organization structure, which was suited for earlier and different conditions. Unless we could put the responsibility and authority for decision making closer in each case to the scene of the problem, where complete understanding and prompt action are possible, the Company would not be able to compete with the hundreds of nimble competitors who were, as they say, able to turn on a dime.
In addition, General Electric faced the need to develop capable leaders for the future; the need for more friendly and cooperative relationships between managers and other employees; the need to stay ahead of competition in serving the customers; and the very human need to make the work of a manager at all echelons of the organization more manageable. The work had to be made more manageable so that it could be understood and carried out by people of normally available energy and intelligence, thus leaving no requirement for the so-called indispensable man."
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