New York: As soon as Jeffrey R. Immelt, General Electric Co.'s (GE) chairman, became chief executive in 2001, his foreign-based managers began pressing him to move some major operations overseas.
“They'd say, ‘GE will never be really global until you do,’” Immelt recalled. For years, his reaction was, “That’s really stupid; no need to do that.”
But his managers kept up the pressure, and Immelt figured that “with so much smoke, there must be a fire.”
So in 2004, he moved GE Healthcare from Wisconsin to outside London, the home of Amersham, a company GE had just bought.
Clearly, he liked the results. GE now has research centres in Munich, Shanghai and Bangalore, India. The unit that sells equipment and services to oil and gas companies is based in Florence, Italy. And this month, GE promoted an American executive, William H. Cary, to lead GE Money. The company also said that it would move the group's headquarters to London from Stamford, Connecticut, to be closer to the growing number of customers in Europe and Asia.
The European operations are helping GE rebuild its image in Europe, where hard feelings still linger from GE's aborted effort to acquire Honeywell International Inc. in 2001. The centres in Asia help build new relationships with governments of developing countries, both as showcases for technology and as sources for jobs.
Sales of engines, turbines and other so-called infrastructure items are not only the biggest contributors to GE’s profits these days, but also the greatest source of its growth.
“Everyone talks about outsourcing manufacturing, but it is the high-level R&D jobs that are the great marketing tools,” Immelt said. “And I’m a salesman, remember. I know that you don't get to sell things for long unless you are part of the culture into which you are selling.”
Much is at stake. Last year, for the first time, GE’s overseas revenue surpassed domestic sales. But more important, overseas sales are growing even though the slowing American economy is damping sales back home.
That is true of many companies, of course. But for GE, the result has been more than a shifting of revenue. The company's once-rigid hierarchy and vaunted training programmes are going through a huge overhaul, as American executives learn to treat foreign-born colleagues as equals, not subordinates. “They are managing their worldwide organization as a network, not a centralized hub with foreign appendages,” said Christopher A. Bartlett, a professor at the Harvard Business School who has written a case study on GE.
This year, in a highly symbolic gesture, GE Transportation, which is based in Erie, Pennsylvania, moved its annual sales meeting to Sorrento, Italy, from Florida. “It was time the Americans learned what it's like to deal with jet lag,” said John Dineen, who leads the unit.
In a sense, GE is returning to its past. When John F. Welch Jr. became its chief in 1981, GE was organized geographically, with powerful country heads—usually American-born—running different regions. He reorganized the company around businesses. Now, Immelt is creating a hybrid of the two approaches.
“Jeff recognizes that the centre of gravity is shifting,” said Noel M. Tichy, a management professor at the University of Michigan who has written about GE.
That is true outside GE as well.
International Business Machines Corp. (IBM), which now derives 65% of its revenue from overseas, operates most of its software and services business from India. It has moved its global procurement centre, as well as most of its voice recognition technology work, to China. Last year, for the first time, IBM brought 23 Chinese employees to its headquarters in Armonk, New York, for nearly two weeks to learn about IBM's ethics and culture. In September, the same 23 workers went through training in Shanghai, to learn how to apply those principles. IBM also has begun to send American executives to training sessions in Asia, both to teach and to learn.
“The people in Armonk can't just say, ‘grow earnings 30%,’” said Denis Fred Simon, provost of the Neil D. Levin Graduate Institute of International Relations and Commerce, which helped IBM devise the new training programme. “They have to understand what it means to operate on the ground in China.”
But GE’s size—$173 billion (Rs6.86 trillion) in revenue last year—and product diversity make the task of imparting such understanding especially formidable. So GE’s American managers now travel overseas for management training almost as often as European executives come to GE’s management centre in Crotonville, New York. Today, GE researchers in Shanghai or Bangalore have the kind of autonomy that used to exist only in Niskayuna, New York, where the GE Global Research Center long reigned supreme.
Immelt is thinking about replicating Crotonville in China, and building a residential lodge at the Munich research centre, similar to the one in Niskayuna.
And foreign accents are heard at higher rungs of the management ladder. GE’s country managers, who act as liaisons between GE businesses and customers in their territories, increasingly hail from the regions they manage and are growing in internal stature as GE’s overseas sales continue to soar. “In places like China, governments are big customers, and it's the country heads who have the relationships with the governments,” said Deane M. Dray, the GE analyst at Goldman Sachs.
Most business heads are still based in the United States. And because they control the bottom lines of their respective units, they still have the most clout. But foreign-born nationals are rising through the businesses. The executive roster at GE Transportation includes Pierre Comte, a Frenchman who runs Global Signaling from Paris, and Rafael Santana, a Brazilian who manages GE Transportation-Americas from Brazil.
Evren Eryurek, manager of global rail operations, works from Florida, but he is Turkish. Dineen is American, as is Tim Schweikert, president of GE Transportation China. But their successors, Dineen suggested, “might well be foreign-born”.
Immelt, who never did a foreign stint himself, can easily picture that. He would not name them, but he said he could think of at least three foreign-born nationals who could succeed him when he retires in a decade or so. “The business CEOs have to be socially and politically astute and able to anticipate political risk,” Immelt said. “There are more people competing for these top jobs, but a lot fewer who qualify for them.”
Management experts say that may soon change. “Students coming out of the Indian Institute of Technology are every bit as talented as those who study in London or New York,” said Robert N. Bontempo, a professor of executive education at the Columbia Business School. “And the globalization of big companies has enabled them to get meaningful work experience without leaving their countries.”
The transition has been bumpy for American employees. They no longer have first crack at plum assignments and promotions. And they no longer get to lord it over foreign colleagues. “Sometimes you need dogmatic leadership,” Immelt said. “You need to say, ‘I don't care if you like this, it’s happening.”’
Recalcitrant executives are coming around. “It is easy to fly anywhere from London, and I'm not out of phase with anyone's time zone,” said Joseph M. Hogan, chief executive of GE Healthcare. “I call China in the morning, Europe midafternoon, then the US last.”
There are more tangible results as well. Mark Little, who runs the Niskayuna research centre, noted that the Shanghai lab came up with a new desalination method, and researchers in India devised a less-expensive electrocardiogram.
“As outsiders, they can focus on what we weren't doing, not on what we'd done well for 100 years,” Dineen said.
GE’s goal is to create a generation of foreign-born insiders. It has been holding what Susan P. Peters, who leads executive development at GE, calls “talent forums” at GE businesses in the Middle East, Asia and Europe, at which corporate human resources people evaluate high-potential people in their 30s, and suggest development plans.
John F. Lynch, GE’s senior vice president for human resources—and a Scotsman by birth—said the number of GE managers on foreign assignments has long hovered around 1,800 a year. But until a few years ago, probably 80% were Americans doing overseas stints.
Today, a similarly disproportionate number are foreign nationals working outside their home countries, many of whom are en route to becoming country managers.
©2008/THE NEW YORK TIMES