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Last Monday, Larry Culp did what he did dozens of times during his career: talking to a group of nervous employees as a new boss. This time it was different because it was not a takeover by a company. I just had the impression of being one.
Hours earlier,
General Electric
Co.
GE 4.11%
shocked millions of investors and 300,000 employees by abruptly dismissing CEO John Flannery and sending in Culp, who joined GE's board of directors in April, to save the troubled conglomerate.
The new boss did not have an ID badge or a work computer, but he lost only a short time talking to the 150 top GE officials based in Boston. A few days later, he flew to the Atlanta office of GE, an electric company, which was forced to reduce his financial goals and dividends, thus erasing more than $ 100 billion in market value.
Culp's arrival not only helped install GE's first outsider in its 126-year history, it also paved the way for a new management philosophy that guided him every not since he became CEO of Danaher Corp. at 37 years old. developed a cult following, largely because Danaher used it to buy a series of companies, increase its profits and reward its shareholders.
Danaher, based in Washington, DC, and established in 1984, is a much smaller company than GE. It has disparate units that make everything from dental instruments to centrifuges to water purification systems. His annual business figure was about $ 4 billion when Mr. Culp took office as CEO in 2001 and $ 20 billion when he retired about 14 years later . GE achieved a business turnover of $ 121 billion last year and employs nearly five times more people than Danaher.
Nevertheless, an investor who invested $ 10,000 in Danaher 20 years ago would have more than $ 200,000 today. During the same period, $ 10,000 invested in GE would be worth approximately $ 8,700.
Danaher's game manual, inspired by similar systems used by Toyota Corp., is defined by a manic commitment to the efficiency and constant evaluation of business units with respect to eight performance parameters. These include financial objectives such as growth in core revenues as well as measures of customer satisfaction (timeliness) and employee morale (retention rate).
Each company is evaluated every month during face-to-face meetings. The new cadres are removed from their work and shaped like Danaher, centered on a philosophy known as kaizen. Derived from Japanese words kai, meaning change, and Zenkaizen focuses on continuous improvement through in-depth employee progress review sessions.
Established in the 1980s, the Danaher Business System, or DBS, is the underlying process upon which the rest of society relies. "The DBS is our culture and the foundation of everything we do," reads a slide from a 2013 presentation by Mr. Culp to investors.
Harvey Bond, Danaher's manager in Europe until early 2011, remembers spending the night eating pizza with Culp on a visit to a factory in Europe for a kaizen event. "He has safety shoes with steel toecaps and is completely immersed. He turned off his phone, "Bond said. "He knows that in the morning, people will talk about what he was doing."
Culp, 55, grew up near Washington, DC, where his father had a welding and machine shop. He studied economics at Washington College and earned an MBA from Harvard Business School, where he called Danaher's CEO for a job in 1990. He wanted an operational position in a company capable of competing with foreign manufacturers that he admired. said a Harvard student newspaper. He led smaller industrial units until he was called to lead the company in 2001. He developed mainly through acquisitions, notably through the purchase of $ 6 billion. from Beckman Coulter, manufacturer of medical tests.
Danaher tends to attract little attention and so does Culp. During his 14 years at the helm of the company, he did not spend much time talking to the media. Unlike his GE predecessors, Culp did not have a public account on Twitter until this week. He refused to be interviewed for this article.
Rather than invite senior managers to Danaher's headquarters to conduct activity reviews, Mr. Culp went to the units, camped in the office, and walked around the factory to get an idea of the situation. said former colleagues. Since joining the GE Board of Directors, he has visited several GE operations, including overseas.
Danaher's structure is almost an inverted version of GE. Although it is a conglomerate, it does not use the GE type umbrella to take advantage of these activities. Danaher employs about 200 people out of 67,000 in professional positions.
One of the fundamental principles of GE under former President Jeff Immelt was that different business units such as energy, aviation and health care enjoyed access to the "GE Store" for shared research and technology. Management training was provided at the Crotonville, New York Leadership Academy, in research centers employing thousands of scientists and engineers in Germany and China, as well as in financial teams and global trade.
Photo:
Zuma Press
Danaher's senior executives are skeptical about the true value of research in different divisions, depending on who knows their thinking. Increased efficiency – by reducing inventory and improving manufacturing processes – reduces the amount of working capital tied up in the business, thus allowing this money to be used for growth of the company. business.
The company is so determined to eliminate waste that it would not be surprising that one-hour meetings be stopped mid-way to determine if the next 30 minutes were needed, said Paul Leinwand, director of PwC's global strategy and co-author. "A strategy that works: how winning companies bridge the gap between strategy and execution," which focused in part on Danaher.
Danaher's headquarters itself is a stark contrast to GE, which is building a new corporate base on the Boston waterfront. Danaher is located on the eighth floor of a glass office building in Washington, DC. There is no signage for the company in the lobby or on the building.
The company became Danaher started in 1969 as a real estate investment trust by brothers Mitchell and Steven Rales. In 1984, it was renamed after a Montana creek where the brothers fished. He evolved beyond his roots when his founders discovered that they had the gift of buying and transforming manufacturing companies.
The Rales brothers, now billionaires, both remain on the Danaher board and together own 11% of the company, according to FactSet Research. Steven has been chairman of the board since 1984 and has been chief executive for six years, ending in 1990. Mitchell and his wife, Emily Wei Rales, are renowned art collectors who have opened a modern art museum with items from their wallet in Potomac, Maryland.
Photo:
Mark Reinstein / Corbis / Getty Images)
When Culp took office in 2001, he reinforced the DBS approach. Every day, he posted notes for employees on the company's intranet, often pointing to incremental improvements made by workers or teams, Danaher's former CEO Steve Simms said at a news conference. round table held in 2012 as part of the strategy + company publication. Executives are evaluated annually on how they apply the principles.
Although GE has its own reputation for recruitment and training, Danaher also has a rigorous system. It is essential that employees be closely linked to the Danaher culture, a factor that is more important than performance. During the hiring process, the company uses a business psychologist to help define the candidates' profiles in order to make sure that they fit in perfectly with each other. at the DBS. The new employee is then immersed into the practices of his new employer.
The company often moves executives and ensures to have a solid foundation for key positions, so that it can change direction and create new companies, allowing another person immediately fill the vacant position. The approach is similar to that of GE, which consists of alternating frames between units and geographical areas. The senior executives of both companies also spend time each year teaching leadership or management techniques.
The success of Danaher lies in its careful process of evaluating acquisitions, according to those familiar with this process. The company is looking for companies that offer branded products that are used by professionals, which are generally more profitable and have pricing power. It also looks for companies whose costs are poorly managed, which means that they can become more profitable by paying more attention to areas such as manufacturing, supply chain and back-office operations. -office.
2017 revenue per unit
Several analysts contrast GE's strategy to enter the water treatment business with Danaher's. In several operations costing at least $ 3 billion, GE acquired water filtration activities using different and competing technologies and then grouped the groups under a single sales force. The bet did not pay off: GE sold the water business last year for 3.4 billion dollars.
In contrast, Danaher focused on analyzing water, an area with potential for growth, notes RBC analyst Deane Dray. It has gained market share and expanded into other parts of the market, making it a major component of a division with annual sales of $ 4 billion.
Such movements have strengthened Danaher's reputation. Trian Fund Management, the GE-based activist investor with a significant stake in GE, has highlighted Danaher's outstanding performance in various presentations calling for change in much older and larger industrial companies, including DuPont and GE.
Danaher has an ever-evolving list of more than 100 potential acquisition targets and carries out about a dozen transactions a year. When the company acquired Pall Corporation for $ 14 billion in 2015, it had been cultivating for more than a decade the manufacturer of purification and filtration equipment, according to people close to the transaction. Danaher executives often do their own financial analysis, which makes them less dependent on traditional investment banks.
It remains to be seen how Mr. Culp will work to solve GE's enigma, which is hampered by his energy sector and the complex division of GE Capital. Mr. Culp will face the same problems and use the same resources as Mr. Flannery, which lasted 14 months.
For the moment, people accustomed to the topic say that he's going ahead with Mr. Flannery's plan to create a health division and sell GE's stake in
Baker Hughes
focus on power and aviation. It was a plan developed with the help of Mr. Culp and the rest of the council.
Mr. Culp had received more than $ 200 million in compensation when he retired at the age of 51 as CEO of Danaher. At the time, he wanted to spend time with his wife and young children and fish in exotic places. He also said that organizations, even the best performing ones, had to be updated.
"I'm a long time student of Thomas Jefferson," he told a conference call in April 2014 to explain his early retirement. "And he was always struck by the wisdom of what he wrote about the benefits of the revolution, every 20 years then."
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