Cross-functional teams - Sample Essay
GE has developed cross-functional teams tasked to improve design, yields, supplier agreements, and global best-cost sourcing. Through this, GE should meet its customer delivery dates and technical specifications. General Electric must also develop initiatives that work in a multi-business company. Open communication between businesses, employees who believe in the GE culture, development of strong leaders and businesses, and development of innovative products are the foundation to achieving the organization’s objectives. According to the CEO, “Our teams are trained to share ideas with each other and they love to compete. At GE, a single best practice can generate billions of dollars in savings, earnings, and revenues for investors” (GE, 2008).
According to Jeff Immelt, GE is committed to executing the financial goals the organization has outlined. He states in the investor’s letter “We plan to press our advantage in the essential themes that will shape our growth for decades: infrastructure technology, emerging markets, environmental solutions, demographics, digital connections, and creating value from origination. We love the leadership position we are building, and it is already delivering for you” (GE, 2008).
The organization maintains an expectation to earn the respect of the business world through the execution of its strategic plan. GE routinely ranks in the top five Most Admired Companies list published by Barron and Fortune magazine. GE was also named in Chief Executive Magazine as number one on the “20 Best Companies for Leaders.” It should also be noted that GE was named the fourth most innovative company according to Fast Company. This ranked GE behind companies like Google, Apple, and Facebook.
GE is also dedicated to civilizing communication throughout the organization and concentrating on things that may discourage investors, which may include adjustments to historical financial accounting results. General Electric continues to improve its model for controllership, and has provided additional regulatory assets throughout the organization in hopes of predicting key issues. Financial Projections Even in today’s difficult markets, General Electric had another record setting year in 2007. “Revenues grew 14% to $173 billion. Earnings from continuing operations grew 16% to $22.5 billion. We generated record industrial cash flow, and returned $25.4 billion to investors through the dividend and stock buyback” (GE, 2008)
In his letter to GE’s investors, CEO Jeff Immelt stated “We performed well against the operating metrics that we use to measure our progress. Organic revenue growth was 9%, surpassing our goal of growing at 2 to 3 times GDP growth. Earnings per share (EPS) from continuing operations grew 18%, well above our double-digit goal. Our operating profit margin grew 70 basis points, below our 100-basis-point goal, but we made good progress.
Returns reached 18.9%, and we are on track for 20% in 2008. Industrial cash from operations grew 15%, well above our target, and our free cash flow was $19 billion” (GE, 2008). As an organization, GE is well suited to achieve this aggressive financial objective. The leadership believes this because they have a historical reputation for delivering on previous objectives. The organization’s key slogan is that they invest and deliver; every day, every quarter, and every year. The key to success for GE is to continue its growth in 2008.
In the same letter, CEO Immelt addressed the growth projections from General Electric stating “In 2008, we should hit all of our financial goals and outperform the S&P 500. Our revenues should grow by at least 10% to $195 billion, with organic revenue growth at 2 to 3 times GDP growth. Our earnings per share should grow by at least 10%. Our return on average total capital (ROTC) should near our target of 20%. We expect to return $18 billion to our investors through the dividend and stock buyback” (GE, 2008). These are very bold projections that are backed with historical data. General Electric has averaged double digit earnings growth the last 25 years with increased dividends the past 32.
GE is able to maintain and predict success because of their historical ability to meet the organization’s goals through effective management and planning. GE believes that as an organization they are “uniquely positioned to win in the essential themes of this era. They help to create the future and, by doing so, drive its growth” (GE, 2008). GE considers it a company built on leadership that has developed strong businesses that win within their industry. The leadership, coupled with strong business, delivers consistent earnings growth throughout the organization and it economic cycles. GE is a company that gathers ideas throughout the organization that drives superior revenue growth, profit margins, and high returns.
Critical Success Factors Certain factors will play a major role in the continued growth of General Electric. One major factor in GE’s future success will be continued innovation. “Fast Company ranked GE the fourth most innovative company in the world behind only Google, Apple, and Facebook” (GE, 2008). Innovation has been the driving factor in GE’s part success and will be the main factor in future success.
Continued development of the organization’s business leaders plays a role in the success of GE. GE believes that “building strong leaders is a strategic imperative” (GE, 2008). General Electric must continue to develop employees and future leaders who hold GE’s culture, legacy and reputation at the core of their work ethic. Strong leaders within the organization will have the foresight to plan for the future challenges of the organization. General Electric must also continue to remain a high performance company and continued growth of the GE brand. Should General Electric fail in any of these areas, the consecutive string of positive growth years could be in jeopardy.
Controls and Evaluation Even a company as large as financially stable and strong as GE is faced with many issues that can affect the long-term growth of the organization. In order to combat this, the Board of Directors and its committee are tasked with identifying these issues and developing plans to address these issues. “The Board and its Committees focus on the areas that are important to shareowners – strategy, risk management and people – and in 2007 received briefings on a variety of issues including: controllership and risk management, compliance and litigation trends, U.S. and global tax policy, environmental risk management, social cost trends, acquisitions and dispositions, intellectual property and copyright protection, global trends, the reshaping and broadening of GE’s businesses, and cost reduction” (GE, 2008).
This control measure helps to stay in front of the ever-changing global climate and aides in addressing major organizational issues before they become widespread. The Board is not the only control and evaluation entity in place. General Electric has also established two councils tasked to drive results: “a Commercial Council and an Operating Council. Each has about 20 members from around the Company that meets regularly to learn from each other, challenge each other, and root for each other” (GE, 2008).
The Commercial Council was formed in 2003 as a result of historically slow growth rates. The council focused on developing processes that would attain the desired revenue growth of 2 to 3 times the GDP growth. The organization believes that “at 8% organic growth, we would be safely ahead of our financial and industrial peers” (GE, 2008). The results of these councils have been positive. The council has led the “Growth as a Process” initiative which has resulted in the increased revenue growth the company was looking for.
General Electric has oultined specific and attained longterm financial goals that will require close monitoring and evaluation. Traditionally stock price is based upon the financial strength of the company therefore, General Electric must ensure that it achieves the financial growth it has outlined. In order to keep General Electric on track, the leadership should ensure that internal controls are in place to prevent excess spending and fraud. General Electric should also have external controls, through an independent auditor, to ensure that General Electric is on track to meet the objectives the leadership has announced.
General Electric is one of the world leaders in innovation and even a company as large and stable as GE needs a sound strategic plan. A strong plan allows GE to stay ahead of the changing marketplace and identifies key areas of success and improvement. GE’s strategic planning process outlines longterm objectives for the organization, contrl measures, the factors critical to the future success of the organization, and developed attainable financial projections. General Electric is a leader in the technical, social, economic and competitive aspects of the industries in which they operate. The CEO and Board of Directors have developed a plan that will meet the goal and objectives outlined in the strategic plan. General Electric’s strategic planning is effective and efficient and keeps GE atop the global marketplace.
CNN Money. (2008) Top 20 most admired companies. Retrieved on May 3, 2008 from http://www.ge.com/investors/personal_investing/why_invest/index.html
General Electric. (2008) Our Company. Retrieved on May 3, 2008 from http://www.ge.com/company/index.html
General Electric. (2008) Our Company. Retrieved on May 3, 2008 from http://www.ge.com/investors/personal_investing/why_invest/index.html