Letter to Shareholders

A Resilient Culture

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This year, GE turns 125 years old, a remarkable achievement in resiliency. We remain the only original DJIA company still on the list. Our company is both valued and admired, this year ranking #7 on Fortune’s “World’s Most Admired” list. What makes a company endure for so long? Performance is a must, and we are blessed with great people that have integrity as their foundation. More than that, we have a determination to shape our own future, and a refusal to let things take care of themselves. It requires a willingness to abandon old management ideas, while testing the boundaries of our capability. It requires a certain amount of conviction, not from conceit, but because you know what you believe.

For years, and to great effect, we have focused on matching GE’s culture to the challenges we face. We have not let age and size become drawbacks, because we understand that complex challenges do not require complex organizations. Designing a culture of simplification, we have cut management layers by one-third and needless administrative procedures. It’s not easy to give an enterprise in its 13th decade the feel of an ambitious start-up, but we are doing just that.

We have teams that are capable and empowered, with clear responsibilities and abilities to make local decisions. Collaboration and candor are rewarded, including the right to “call out” bureaucratic bosses. We tightly link the GE Beliefs with performance development to make sure compensation is aligned with outcomes.

We took a new look at performance rankings. We will always reward our best people and fire those who don’t perform. But the centerpiece of GE today are purposeful, high-performance teams dedicated to winning together. What we require is a strong sense of mutual accountability. Each leader depends on the other to “do their job” in pursuit of valuable outcomes for customers and investors. Our leaders get rewarded – or fired – based on how well they perform for each other. A simple culture requires transparency around performance.

An essential part to being a meritocracy is a commitment to diversity. We recently announced an initiative to hire 20,000 women for STEM roles at GE by 2020, with 50% representation in our technical entry programs. This will require about a 40% increase over the next few years. We know that diversity makes GE more competitive and promotes a performance culture.

Culture change is critical to becoming a Digital Industrial. We have been at this for six years, and I can tell you a digital transformation requires a constant push. No one has yet captured the unique spirit of the Industrial Internet. It requires more than having one foot in the “industrial camp” and the other in the “digital camp.” We must find a new place together.

This is, first and foremost, about talent and structure. To recruit the best, we must allow multiple talent streams to exist and view that as a strength. We have revamped our IT function, making it more technical and organizing it around platforms instead of businesses. We have learned that outsourcing digital muscle – a move industrial companies made 20 years ago – is a loser today. Every new GE recruit will learn to code. We don’t expect them all to write software, but they must understand the “art of the possible” in a digital future.

Becoming a Digital Industrial requires comfort in being in a horizontal and vertical world simultaneously. Winning requires knowledge of Predix and industrial markets. To accomplish this, we need people who are more committed to winning in the market than doing exactly what their boss says. Big industrial companies get lost in processes. The urgency of digital is making GE better.

To be a successful Digital Industrial company, we must adopt behaviors that allow us to work faster and be both more agile and customer-focused. Employee feedback is critical to this process. In fact, it has been the driver behind most of the culture changes, like FastWorks, that have succeeded in making GE a simpler place.

In 2016, we said goodbye to the old GE opinion surveys and introduced a new feedback tool: the Culture Compass.

Pictured: Nayeli Romero, GE Transportation

The Culture Compass

Simple

We prioritized what we needed to know from employees, focusing on meaningful topics and limiting the number of questions to 10.

Transparent

Employees see results together, at the same time.

Fast

We collect feedback from employees for one week. After answering the questions, results are available immediately. No more waiting.

Frequent

We solicited employee feedback twice in 2016, in July and again in November.

PERSONAL

All employees own the results and their actions, not leadership. Employees are empowered to draw their own conclusions and take action based on what will produce the most impact from their customers.

Becoming a Digital Industrial requires both speed and a form of “staying power” that doesn’t always exist in Silicon Valley. When you are flying at 35,000 feet above the Atlantic Ocean – and the miracle that is keeping you aloft is a GE engine – you value tenure and expertise. If no one that built the engine still works at the company, you should worry! If every employee leaves every company every five years, you can’t build a jet engine or the analytics that make it perform better. Building the future requires a respect for collective strength.

Driving change of this magnitude requires conviction. The more I have had the chance to view the world, the more I admire the people who stand apart from the crowd. When the “in crowd” always changes, it helps to know what you believe in.

We believe in our unique multi-business structure. We know that our horizontal innovation combined with domain expertise can beat single-market players. Our Oil & Gas customers are happy to have GE invest in their industry as a symbol of reliability. They know that innovation from Aviation and Healthcare will make their industry better. Hospitals and pharmaceutical companies welcome GE’s role in developing innovation in healthcare. They recognize that Healthcare must “industrialize” to meet the productivity challenges in front of them. They value and reward our difference. We don’t fit into a simple thesis or model. If you want to invest in a big company that grows, GE is for you.

We believe in sustained investment in both growth and cost-out. This may sound basic, but it is rare. Achieving high share with high returns and high customer loyalty is never built through acquisitions. Rather, it requires sustained investment over time in technology, capability, and efficiency. We, alone, have sustained our industrial research lab for more than a century. This commitment is critical to deliver complex technology. It requires conviction, and it delivers for you.

At this moment of maximum cynicism, I am reminded all over the world why companies like GE matter. I recently returned from a trip to Africa, a continent where GE has experienced explosive growth and is winning, even in a tough economy. I was reviewing a huge pipeline of power deals with Lazarus Angbazo, Elisee Sezan, and Leslie Nelson, members of our African leadership team. I could remember eating breakfast with them in Ghana almost 10 years ago. At that time, we couldn’t sell a gas cooker let alone a complex gas-to-power project. But, I have watched these talented individuals mature into capable leaders for GE and their countries. They have grown while we have grown.

Later that trip, I visited the Nelson Mandela Children’s Hospital in Johannesburg where GE innovations will bring quality medical care to the youngest patients in need. This world-class institution is positioned to serve the poorest families. These innovations are at the intersection of science and social responsibility. Through it all, I was accompanied by Jay Ireland, an American who has led our work in Africa for six years and is considered the finest executive in the region. Nothing in Jay’s background would have suggested that this was his destiny other than his character and curiosity. Yet Jay has had a profound impact on solving problems and developing people in Africa. He has changed many lives and GE’s future. Companies are about good people doing good work together. I could not have been more proud of all the great people at GE.

As much as anything, they make me optimistic about 2017 and beyond. I feel great about where we are and where we are headed. I can’t recall ever feeling such excitement about our opportunities or such confidence in our ability to meet them.

Jeff Immelt

Jeffrey R. Immelt

Chairman of the Board
and Chief Executive OfficerFebruary 24, 2017

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