exploring managerial careers
Power Play at General
Electric
For years, General Electric has been the pillar of manufacturing
standards and stood as an icon for the American economy. Despite
its strong history, CEO woes and a power struggle from within
during the past few years have started to unravel the company’s
control.
Jeff Immelt, long-time CEO, was respected and revered for his
discipline. However, this mentality took its toll and led to
declines and complacency. The struggling company wanted change and
desperately needed growth; it appointed John Flannery. Shortly
after the appointment of Flannery, the new CEO pulled a change of
his own as well—firing half of the company’s board.
This type of move was almost unheard of, and the purge as
presented was planning to cut dividends and slash less profitable
business lines. The pressure from investors was felt immediately by
Flannery, and this move was a desperate attempt to regain some
footing and remain atop the industry standard.
Fast forward to 2018: after only one year on the job, the board
decided it was done waiting for the turnaround and took drastic
action, ousting Flannery and absorbing $23 billion in loss from the
process.
The tumultuous and fast-paced changing tech-dominated economy of
the 21st century showcases the harsh realities in this GE change of
power. “The market didn’t even give the company the benefit of the
doubt that things would work,” said Ivan Feinseth, chief investment
officer at Tigress Financial Partners. “Flannery’s plan hasn’t
worked.” The market favors tech companies such as Google and Amazon
rather than traditional manufacturers. And the new CEO, Lawrence
Culp, will have an uphill battle to take over all of the woes of
GE. As the first outsider to take over leadership, he has a lot to
prove as well. His successes at Danaher preceded him and the
company’s stock has soared since the change occurred, already
showing a positive impact.
Sources
O. Staley, “ GE is firing half its board as a new CEO cleans
house,” Quartz at Work, November 20, 2017,
https://qz.com/work/1133787/ge-is-fi...-cleans-house/;
T. Heath and J. McGregor, “General Electric, fallen icon of
corporate stability, names first outsider as CEO,” Washington
Post, October 2, 2018,
https://www.washingtonpost.com/busin...=.0111eb2c36ea;
M. Sheetz, “GE shares soar after company suddenly dumps John
Flannery as CEO,” CNBC, October 1, 2018,
https://www.cnbc.com/2018/10/01/ge-r...-guidance.html;
T. Rivas, “GE’s New CEO Inherits a Troubled Kingdom. Here’s What He
Has to Do Now,” Barons, October 2, 2018,
www.barrons.com/articles/ges...to-do-now-1538495223.
Although the circumstances of the changes in
leadership at GE may be unique, the exercise of power and political
behavior in organizations is certainly not. Power and politics are
the lifeblood of most organizations, and, as a result, informed
managers need to understand power dynamics. In fact, organizations
are composed of coalitions and alliances of different parties that
continually compete for available resources. As such, a major
influence on how decisions are made is the distribution of power
among the decision makers. Unequal distribution of power in
organizations can have a critical impact on many aspects of work
life, including employee motivation, job satisfaction, absenteeism
and turnover, and stress. Hence, an awareness of the nature and
pervasiveness of power and politics is essential for a better
understanding of these other behavioral processes.
The concept of power is closely related to the concepts of
authority and leadership. It is important to understand when one
method of influence ceases and another begins. For example, when
does a manager stop using legitimate authority in a work situation
and start using unauthorized power?
Finally, on an individual level, many people attempt to exercise
influence in organizations by using power tactics. An awareness of
such tactics helps managers to recognize them and to take
appropriate actions. Keep in mind that attempts by others to
exercise power do not have to be successful. A number of mechanisms
are available to countermand or neutralize influence attempts.
Knowledge of these strategies gives a manager greater latitude in
his response to power plays by others.
In short, power and political processes in organizations
represent a topic of central importance to students of
organizational behavior. Along with other group processes, such as
communication and decision-making, power and politics can
considerably influence both the behavior and the attitudes of
employees at various levels of the organization. In addition, they
can further influence the extent to which various units within the
organization secure the necessary resources for task accomplishment
and ultimate organizational success. In short, General Electric is
not alone.