GE’s Biggest Challenge: The Culture Play

As the company restructures, its new CEO plans to align culture as well.

When GE’s new CEO John Flannery got on a call with investors late last week, he stated what many investors already suspected: The firm needed to make some wholesale changes in order to do best for its customers and shareholders.

But what might have surprised many was the first thing Flannery said needed to change—the firm’s corporate culture. “Our culture needs to be driven by mutual candor and intense execution, and the accountability that must come with that,” he said.

Although the headlines around any major company shift usually centers on assets, experts say that focusing on culture is an oft-overlooked yet critical element. “It’s a very smart move and focus for GE to make,” says Linda Culliton, a Korn Ferry senior client partner and global account lead who spent 11 years at GE.

Organizations are always embarking on new strategies to get ahead, but culture often gets in the way of their ability to execute upon the strategy. “Culture has a huge impact on what an organization does,” says Stu Crandell, senior vice president of the Korn Ferry Institute. When Korn Ferry surveyed more than 7,500 executives from around the world, only 32% said their organization’s culture aligned with its business strategy.

As reported, GE is planning a major shift in its business, selling off some large assets and divisions. Over the years, it built up a business and culture to become the world’s preeminent industrial firm, with the engineering and technology know-how to solve any customer need.

Cultural shifts—whatever they may be—have to start in the executive suite, experts say. Top leaders need to define the culture, communicate it to all organizational levels, and act and behave in ways that reflect and reinforce desired outcomes. And any shift likely also involves realigning people performance management and compensation programs, business processes, and even hiring decisions so that it aligns with the new culture.