General Electric: Global management by stress

Stuart Lawrence stuartwl at walrus.com
Sat Sep 8 10:44:38 MDT 2001


Multinational Monitor July/August 2001

Global Management By Stress

By Robert Weissman

For two decades, Chief Executive Officer Jack Welch has pushed General Electric
to operate at the extremes.

For workers, Welch’s pedal-to-the-metal approach has meant job flight,
outsourcing, tense relations on the factory floor and a constant worry that
their job, or their entire factory, might be gone tomorrow.

More than a decade ago, labor analysts Jane Slaughter and Mike Parker began
describing the introduction of Japanese work management schemes in U.S.
factories as “management by stress” [see “Management by Stress,” Multinational
Monitor, January/February 1990]. The idea of the schemes was, and is, to stretch
production arrangements so as to eliminate any slack. Under this approach,
Slaughter and Parker explained, all workers should be working their hardest, all
the time, and the standard of what constitutes hard work should constantly be
elevated.

Under Jack Welch, GE has openly embraced the management-by-stress model as much
as any company, applying it throughout the production process. Welch has
displayed a fondness for faddish jargon, introducing programs with names like
Six Sigma, most of which reflect management-by-stress principles.

A series of internal GE documents reveals what GE’s pursuit of management by
stress means in concrete terms. They show the company consciously seeking to
maintain a high level of tension among workers; pressuring suppliers to move to
low-wage countries by threatening to deny them GE contracts if they refuse; and
operating management training schools that teach executives and mid-level
managers how to implement management-by-stress and “union avoidance” techniques.

“Maintain a High Level of Tension”
In a stunning document that the United Electrical workers uncovered a decade
ago, GE management at a Parkersburg, West Virginia plastics facility instructed
its managers to employ a “Kick in the Ass” employment strategy.

A “Positive Leadership Development” memo discusses the “tension-productivity
correlation.” While warning that too much tension can undermine employee
efficiency, it instructs that “if an individual/organization has low tension,
then a raising of that tension level would be appropriate. Herzberg refers to
this as KITA, an acronym for Kick In The A-- (Pants).”

The memo notes that most people suffer from high tension, meaning that
techniques to reduce tension — “counseling, additional training, lending an ear,
giving recognition, allowing the person to do their own thing, etc.” — should be
employed. However, “if approaches used to reduce tension do not result in
increased productivity, a new assumption of low tension can more safely be
 made.”

In this case, it is time to turn to the KITA approach. “Maintaining a high level
of tension through the KITA approach does maintain acceptable productivity
levels,” the memo notes. “It requires constant time and attention of the leader,
because productivity will fall without that false tension being maintained.”

A companion 1991 document focuses on team manager training. It contains a series
of modules to make managers more effective. Module Four instructs supervisors
that they have five obligations: to appoint the right people for positions; to
make sure employees know their responsibilities; to properly train employees; to
“set standards for professional pride;” and to “weed the garden.”

“When you have met your obligations to an individual,” Module Four states, “and
they continue to fail to live up to the job description or the Team’s
expectations, they must be terminated, or replaced.”

The KITA approach is designed not only to squeeze workers’ physical labor, but
their mental labor and ideas, says Chris Townsend, political director for the
United Electrical Workers, which represents GE workers.

The tension from this management style is pervasive, Townsend says. At meetings,
workers should sit up at the table. If you lean back, “your posture suggests you
are a potential weed,” he says. With the massive layoffs, job migration and
outsourcing at GE in recent decades foremost in employees’ minds, the fear of
being weeded out becomes internalized.

“Migrate or Be Out of Business”
GE does not limit its stress management system to employees. It drives suppliers
to constantly cut costs, as well, including by coercing moves to lower-wage
countries.

A written presentation from a GE supplier company, Ametek, reports on an April
1999 GE Aircraft Engine conference for suppliers, and indicates the pressure GE
applies to suppliers.

The GE meeting, held in Monterrey, Mexico concerned “supplier migration.” At the
meeting, according to the Ametek materials, GE “set the tone early and
succinctly,” telling suppliers to move their operations from the United States
to Mexico, near GE’s newly migrated facilities.

The message from GE, according to Ametek, was:

• “Migrate or be out of business — not a matter of if, just when.”
• “We sincerely want you to participate and will help, but if you don’t, we will
move on without you.”
• “This is not a seminar just to provide information — We expect you to move and
move quickly.”

More than 100 people attended the GE conference, according Ametek. They were
told that the average worker pay is $6 a day, and that Mexico has “friendly
unions” and a “long-term low-cost labor market.”
Multinational Monitor has also obtained a GE presentation made a week after the
Monterrey conference.

The April 29, 1999 Powerpoint presentation, “GE Aircraft Engines: Global
Sourcing,” shows that GE’s supplier migration strategy is limited neither to
Mexico nor to the Aircraft Engine division. The document divides the world into
three regions. In a page titled “Changing the Game - Staffing for a Global
Presence!” GE identifies three sourcing poles: Latin America, Central and
Eastern Europe, and Asia.

The Global Sourcing document also indicates that other GE divisions are set to
pursue the supplier migration strategy. These include GE Appliances, GE
Transportation Systems and GE Power.

The GE document describes a “migration process” by which suppliers are
approached about “migration opportunity,” asked to decide their interest level,
invited to a migration seminar, and then surveyed to determine further interest
level. This was indicated for the first quarter of 1999.

It also describes a broader eight-point “migration strategy” for the second
quarter, by which:

• Suppliers are evaluated across commodity, by commodity leaders;
• Special processes and shared resources are identified by low-cost pole;
• The supplier list to migrate is shared with GE Transportation Systems and GE
Power;
• Suppliers are invited to migration seminars for Asia and Central and Eastern
Europe;
• Suppliers are given resources, incentives and timing to move;
• Suppliers work with shelter provider to establish greenfield operations;
• Suppliers are set up in an aero-trans-power mall; and
• Suppliers begin production in the low-cost pole.

A Powerpoint presentation for a 1999 “Global Sourcing” GE Transportation Systems
meeting in Boca Raton, Florida highlights similar themes. Urging that “each
business team has to develop a plan to overcome its hurdles of resistance,” it
lists the following as among “opposing forces:”

• Not enough incentive in successful businesses to rock the boat and personally
take a risk;
• Everyone’s very concerned about job security as more and more product is
sourced; and
• Tendency of purchasing organizations to source from existing and local
suppliers.

Key to overcoming these obstacles, the presentation continues, is “strong
top-down leadership” that “sets aggressive goals and demand[s] results,” and a
successful effort to “bring good suppliers with you to emerging markets ... make
them your global suppliers.”

Teaching Union Avoidance
For both its expanding facilities in the “low-cost poles” and its remaining
operations in the United States and other higher-cost countries, GE constantly
pushes for cost reductions.

The Jack Welch way is taught to rising executives at an in-house campus in
upstate New York. GE’s Crotonville operation offers “Corporate Leadership
Development” to managers who want to climb the corporate ladder.

“GE’s goal of becoming the most customer-responsive and productive company in
the world depends first and foremost on people,” says the 1998 Crotonville
catalogue. “Recognizing this fact, the Chairman has charged CLD-Crotonville with
providing educational interventions that will reinforce the values, sharpen the
skills and develop the leadership talent needed to reach this goal. The
CLD-Crotonville courses in this catalog help us fulfill this mission.”

A New Manager Development Course (NMDC) is mandatory for first-time managers
within their first year of appointment. This course is for first time managers
“to successfully lead the GE way.” The course intends to teach how to: “identify
leadership strengths and development needs through a 360 assessment;” develop
business strategy, including through the “Change Acceleration Process;” and
“prepare an action plan for leading and managing direct reports.”

Other courses are more pointed, focused on finance, sales and sourcing
decisions. The courses typically run one day to a week. Tuition is charged,
with, for example, $1,750 charged for a four-day Service Strategies Program and
$800 tuition required for a two-and-a-half day Human Resources Orientation
class.

The catalogue is laced with the New Age business jargon that Welch uses to
describe his hardball tactics.

Of particular interest is a “Personnel Relations Leadership Seminar,” which
“provides an understanding of GE’s non-union philosophy, practices and strategy
used within the United States. The seminar covers legal issues, why and how
organizing starts and proceeds, and union campaign tactics and strategies used
by both the Company and the Union.”

Participants in the seminar are told they “will become adept at using the UA [UA
stands for union avoidance] tools found most effective to assess union
vulnerability and become familiar with methods to reduce organizing risks.”

One of the course learning objectives is to inculcate anti-union sentiment in
managers. The stated goal is to “provide participants with the belief that
maintaining a union-free status of their associates is mandatory for maximizing
personal, business and employee objectives.”

Who Pays?
Underlying Jack Welch’s perceived success at General Electric has been a
relentless focus on cost reductions. But the jargon included in the Crotonville
course book and sprinkled throughout GE documents — “continuous improvement,”
“high performance,” “developing and maintaining competitive advantage,”
“boundaryless” teams, organizations and relationships, “change acceleration
process,” “culture change,” “change management,” “human resources best
practices,” “productivity solutions,” and much more — conceal the human impacts
of the global management-by-stress model. These include the psychological strain
of living with constant fear of job loss and managers employing KITA strategies,
the physical risks of working on sped-up lines, the community devastation
resulting from GE shifting production around the world in search of ever-lower
cost wages — and then demanding suppliers do the same, and the lost collective
opportunities and benefits for employees who would unionize but for GE’s
“non-union philosophy, practices and strategy.”

There is little doubt that global management by stress has contributed
significantly to the giant leap in GE’s share value during Welch’s reign. But
that jump has come at a price, which the GE documents suggest has been paid in
considerable part by employees and communities that host or hosted GE
facilities.

http://www.essential.org/monitor/mm2001/01july-august/julyaug01corp2.html


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