Question

Analyze the decline of the value of the General Electric Corporation as it relates to a series of poor managerial decision-making. What should be the consequences of a failed management strategy? How can accounting policies assist in hiding poor decision-making decision-making

Answer 1

General Electric has been a piston of the American economic engine for 125 years. It pioneered the light bulb and the jet engine. It survived the Great Depression, the dot-com crash and the 2008 financial meltdown.

But now GE faces a different kind of challenge -- a nightmare cash crunch that could take years to recover from. GE (GE) has been left in turmoil by years of questionable deal-making, needless complexity and murky accounting.

These problems were self-inflicted. And they are startling because they happened not just at an icon of American business but under two legendary CEOs, Jack Welch and Jeff Immelt.

GE's shopping spree gone bad

Welch, the CEO from 1981 to 2001, built GE into a super-conglomerate that owned a major bank and NBC. But that business model has since been cast aside as overly complex, and in retrospect, it's clear that Welch's shopping spree masked problems.

Those problems blew up when he left. The most obvious example is GE Capital, the finance company that dealt GE a near-fatal blow during the 2008 crisis.

"Immelt inherited a company from Jack Welch that had brushed a lot of issues under the rug," Inch said.

Martin Sankey, a senior research analyst at Neuberger Berman who has been following GE closely since 1981, said Welch made his share of mistakes with deals and operations, "some of which showed up on his watch and others showed up later."

Not long ago, the criticism of Welch would have been unthinkable. He was a larger-than-life force whom Fortune named "manager of the century" in 1999. That aura has since been punctured.

Welch, who declined to comment for this story, still appears frequently on CNBC. He recently launched an online MBA program at Strayer University, named after himself.

Consequences of a failed management Strategy are:

1. Unrealistic goals or lack of focus and resources

Strategic plans must be focussed and include a manageable, clearly defined number of goals, objectives, and programs. Adequate resources to accomplish those goals and objectives outlined in the plan must be adequately allocated.

According to a recent study, effective communication methodologies enable project teams and organizations to increase quality, scope, and business benefits success. When planning a project, the scope must be comprehensive, detailed, and crystal clear to team members, stakeholders, and, preferably, to the entire organization to lay the foundation for its success. Implementing a holistic planning process, building a realistic business direction for the future, and employing effective communication channels among teams greatly improves the chances for successful implementation of your overall business strategy.

2. Plans are overly complex

We all know someone who is a plan over-engineering extraordinaire. They write pages and pages of text, mix in complex, overly detailed charts and diagrams, and create a schedule with so many contingencies and restrictions that it becomes virtually impossible to follow — let alone implement — by the project team.

If plans aren’t effectively capable of being communicated because of their complexity, then team members cannot be expected to carry them out as intended.

3. Financial estimates are significantly inaccurate

Cost estimating: art or science? All too often, projects proceed with little more than a general estimation of what sorts of resources are needed (this holds true for estimating required people-power, too). The further along a project is allowed to proceed without adequate financial controls and checks in place, the higher the overall costs involved. This can include more than just bottom line financial costs, but can also extend to customer satisfaction and your perceived reliability as a business and team.

4. Plans are based on insufficient data

Often — and particularly in the software development realm where Agile processes have been implemented — relevant project data is scarce at the initial planning stages. Without a proper tool in place to help teams flexibly modify plans as a project evolves and more information becomes available, this often encourages plans that are too high-level or overly broad (and vague).

If plans are based on wrong assumptions due to insufficient — or misunderstood — data, they drive the project towards disaster from the outset, particularly if there is no Plan B in place and no means with which to easily modify the plan before the project slides out of control.

5. Inflexible/undefined team roles and responsibilities

Often times, project managers and team members are considered primarily delivery (wo)men. They’re handed a project plan, and informed that their performance will be measured based on how well the project delivers against that designated plan. If they question the assumptions, estimates, or the general approach set forth in the plan, they’re instructed to “just get on with it,” as expectations have already been set. Guess who will likely be blamed if plans fails?

While it’s imperative that everyone involved in a project understands from the outset what their work is, how it fits into the project as a whole, and to whom they will be reporting, it’s also important that there be mechanisms by which their feedback is factored into the planning and project processes, particularly as changes in project circumstances require.

6. Staffing requirements are not fully understood

Resource planning is a crucial part of the project planning process, and, if not carefully implemented, incorrect assumptions and estimates made regarding human resource requirements, including the number, role, skill, and timing perspectives can impact project timeframe and overall bottom line costs. After all, plans depend on the resources who deliver them. Data and information is crucial both at the planning stages, and throughout the project process, to monitor availability and project status, and to make any necessary course corrections.

7. Project scope inflexible to changes

Experience tells us that simply because a plan has been implemented and everyone has agreed to it doesn’t mean that all will go as expected. It’s never a good thing when the scope of a project changes and it can usually be avoided through proper planning. But being adaptable and having a “Plan B” in case it does happen along the way is imperative to help attain the overall project goal.

What to do?

Considering there are so many reasons why plans can fail, one might wonder why ever plan at all. For one, mapping out a plan before embarking onto its implementation has plenty of benefits. It allows for a better understanding of objectives and their alignment with broader organizational goals, but it also helps identify and take into account any impediments that exist in reaching those objectives.

Planning helps reduce, and even eliminate, uncertainty, improve efficiency of operations, and find smarter ways to complete project tasks and deliverables. Studies have shown that organizations that have adopted project portfolio management (PPM) solutions, including effective project management tools to help manage projects and the portfolio, and also conduct ongoing reviews of these projects see an increased likelihood of portfolios that meet schedules, scope, quality, budget, time, and business benefits.

Well-defined project planning also provides a basis for monitoring and controlling work on the project, which is crucial to staying on top of schedules, milestones, costs, risks, and issues.

Employing effective software measurement tools therefore becomes essential, not only for early forecasting and estimates, but for measuring compliance and identifying trends and deviations along the way.

Making decisions is the most important job of any executive. It’s also the toughest and the riskiest. Bad decisions can damage a business and a career, sometimes irreparably. So where do bad decisions come from? In many cases, they can be traced back to the way the decisions were made—the alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighed. But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker. The way the human brain works can sabotage our decisions.