I did the training at GE OLMP this month. OLMP stands for operation leadership management program. This class is for the young up and coming operation managers in the GE Industrial businesses. GE OLMP is always a fun class to teach. Lots good questions and GE is in an interesting company.
For the 2013 fiscal year GE’s revenue was flat and they were forecasting an improvement in their industrial operating margin of 70 basis points (a basis point in 1/100th of a percent so 70 basis points is 0.7%). That means this if you take GE industrial’s operating income and divide it by revenue they would see that number go up by 0.7%. GE actually hit 66 basis points when it closed the year. So they missed their number by .04%. After they reported their numbers GE’s stock went down quite a bit. GE management decided it was the .04% miss that caused the drop based on analyst’s questions. I believe in the short run there might be some truth to that but in the long run the real problem is GE’s revenue is flat over the last three years. That is their real challenge.
Sometimes companies get too focused on one metric and worry too much about what Wall Street thinks. GE is in a major cost cutting mode looking for the .04% margin improvement. They even changed their policies on how we get reimbursed as outside trainers to get that little margin improvement. All these types of moves are not going to fix the flat revenue problem that I see as their biggest challenge.
It was a good visit with my GE friends. The only complaint I had was I left SLC at 60 degrees and went to Louisville where the overnight low was about 10 degrees. The weather is crazy these days. I can’t ski in February because it’s too warm then I go to Kentucky and freeze.