Case 11- 6
General Electric Company
The General Electric Company is a large multilocation corporation engaged in the manufacture and marketing of a wide variety of electrical and allied prod-ucts. In 1964, there were almost 400 separate product lines and over three mil-lion catalog items. Sales volume in that year totaled $4,941 million, and net income was $237 million. Total employment was about 262,000.
Early in the 1950s, General Electric initiated an extensive decentralization of authority and responsibility for the operations of the company. The basic unit of organization became the product department. AB of 1964, there were over 100 of these departments.
The company recognized that ...view middle of the document...
3. Measurements were to be designed as aids to judgment in appraisal of per¬-
formance, and not to supplant judgment.
4. Measurements were to give proper weight to future performance as well as
current performance, in order to facilitate the maintenance of a balance be-¬
tween the long run and the near term.
5. Measurements were to be selected so as to facilitate constructive action,
not to restrict such action.
This case was prepared by R. H. Caplan/R. N. Anthony, Harvard Business School. Copyright @ by the President and Fellows of Harvard College. Harvard Business School case 113-121.
The overall measurements project was divided into three major subprojects: 1. Operational measurements of the results of a product department.
2. Functional measurements of the work of engineering, manufacturing, mar-
keting and finance, employee and plant community relations, and legal components of the organization.
3. Measurements of the work of managing as such-planning, organizing, in-
tegrating, and measuring itself.
The first step in the subproject on operational measurements was to develop
an answer to the following question:
What are the specific areas for which measurements should be designed, bearing in mind that sound measurements of overall performance require a proper bal¬ance among the various functions and among the aspects (planning, organizing, for example) of managing ?l
In seeking an answer to this question, the organization made a careful
analysis of the nature and purposes of the basic kinds of work performed by each functional unit with the purpose of singling out those functional objectives that were of sufficient importance to the welfare of the business2 as a whole, to be termed "key result areas."
The Key Result Areas
In order to determine whether an area tentatively identified according to the preceding analytical framework was sufficiently basic to qualify as a key result area, the organization established a criterion in the form of the following test question.
Will continued failure in this area prevent the attainment of management's re¬sponsibility for advancing General Electric as a leader in a strong, competitive economy, even though results in all other key areas are good?3
As an outcome of analysis and application of this test, eight key result areas
were decided on. These were as follows:
2. Market position.
4. Product leadership.
5. Personnel development.
6. Employee attitudes.
7. Public responsibility.
8. Balance between short-range and long-range goals.
Each of these key result areas is described below.
llewis, "Measuring, Reporting and Appraising Results of Operations," p. 30.
~he word business is used here to refer to a product department, not to the whole company. 3lewis, "Measuring, Reporting and Appraising Results of Operations," p. 30.
The key index used by General Electric to measure profitability was "dollars of...