G.E. Rediscovers the Value in Providing Real Value to Manufacturing Customers
I'll apologize if today's post seems off-topic to my healthcare readers, but I have to share a link to a Sunday New York Times article about General Electric (“G.E. Goes With What It Knows: Making Stuff“).
After being seduced by the idea of making easy money through “financial engineering,” G.E. is relearning that there's value in making stuff – a true “value added” activity that benefits society and our U.S. economy… increasingly building more of that stuff right here in the U.S. after chasing cheap labor around the world. This seems like good progress.
From the article, in the aftermath of the financial crisis (after which, GE took federal TARP bailout money):
The company, Mr. Immelt insists, must rely more on making physical products and less on financial engineering â€” a path that, he insists, is also necessary for the American economy as a whole.
Mr. Immelt candidly admits that G.E. was seduced by GE Capital's financial promise â€” the lure of rapid-fire money-making unencumbered by the long-range planning, costs and headaches that go into producing heavy-duty material goods.
Much of this seduction was blamed on Immelt's predecessor, Jack Welch. Immelt is speaking out loudly about a return to sanity:
“Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy â€” and somehow still expect to prosper,” Mr. Immelt said in a typical speech last year before the Detroit Economic Club. “That idea was flat wrong.” He added: “Our economy tilted instead toward the quicker profits of financial services.”
I still believe that manufacturing is a truly value-creating activity – that creates wealth where it didn't exist before and that money pays for the services provided in an economy – including healthcare. Forget the imagery of “burger flipping jobs,” but beyond that I never believed the U.S. could truly be a services economy.
GE is helping to reverse that trend:
Mr. Immelt is backing his words with actions â€” plans announced over the last 18 months include the creation of more than 4,000 jobs in manufacturing production and research in the United States. They include new factory jobs in Kentucky, Ohio, New York, Alabama and Mississippi, for making products including energy-thrifty washers and dryers, fluorescent light bulbs, sodium batteries, environmental coatings and jet engines. And the company is opening a research center in Michigan for advanced manufacturing technologies.
It seems that, in some of these new or expanded factories, that GE is demonstrating it's relatively recent embrace of Lean after being exclusively Six Sigma-focused for so long. Even if the article doesn't say “Lean,” you can see elements of it:
Production is organized around the concept of “high-performance work teams,” typically six to 12 workers.
It's a bottom-up approach that shuns hierarchy, and places most of the responsibility for continuous improvement on the teams. An egalitarian ethos is reflected in the job titles. The boss, Jeanne Edwards, is the “plant leader.” Line workers are called “production associates.” There are no supervisors here, only “leaders” and “coaches.”
Leadership and coaching is a far better model (and more like Lean) than old traditional top-down management models.
The article talks about impressive cycle time reductions of 80% in some businesses.
Some of these new manufacturing employees are learning that factories aren't necessarily environments where you're expected to check your brain at the door. One new employee commented on how you're expected to make a lot of decisions. Hooray for GE for not having production employees be un-thinking robots.
Again, from the article:
Jeffrey Parker, 29, was hired last year. A college graduate, he had never set foot in a manufacturing plant before and had worked as a mortgage broker for Countrywide Financial.
He says his perception of manufacturing work was laborers tethered to machines, doing boring repetitive tasks in grimy factories. “I had a real rough, blue-collar view of what manufacturing life is like,” he says. “It's not like that here.”
I'm glad to read about what seems like some real progress and a shift in direction at GE. You can also read a take on this article from our friends at the Evolving Excellence blog (commenting on the interesting McKinsey subplot to the story about GE's problems).
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As an employee at manufacturing company that makes carbide dies and tools I get a great opportunity to see American manufacturing up close. Attention to value and quaility sure seems to be on the up swing to me! Thanks
Thanks for the nod to the folks behind that yellow line.
I hope that GE’s initiative is successful, but given their own nod to euphemistic jargon (coaches? sheesh), I fear that the outcome will be little more than a series of post mortem PowerPoints and a buffed resume for some.
Just like Six Sigma.
I think this shows the insufficiency of six sigma as a business model. GE invested more than anyone in trying to make six sigma a management model compared to a project methodolgy and perhaps they failed. GE has received billions in guaranteed government loans (more than Chrysler got). I’ve often wondered if a weakness of lean is in corporate strategy but because Toyota and Ford didn’t have to line up at the government trough for bailout money maybe not.
I also have to ask, “was Jack Welch brilliant, determined, or lucky?” Maybe more of the last two and less of the first one in retrospect.
Ford, BMW, and Toyota all took federal “TARP” bailout money, as was recently in the news. Here’s a blog post but you can google it for more official news sources:
Having worked for a company that was run by G.E. progeny that transplanted Jack Welch’s culture, which is about as anti-lean as I can think of, I’m skeptical as to whether or not they will actually adopt the lean philosophy. This will take years to see.
I am at least happy that GE is moving some manufacturing back to the U.S. Time will tell and we’ll see if their culture evolves. I certainly don’t hold Jack Welch up as an example of a lean-style leader.
I hope that Immelt can inspire other companies to stop chasing cheap labor and manufacturing in the US, like Welch did for swinging it the other way. I hope GE does it right and it works out, because there are still a lot of people that see GE as “the way it should be done.”