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.