Featured, Features, Interview

A Conversation with Larry Culp

Tasnia Huque, Contributor

Tasnia Huque (MBA ’20) discusses GE, LEAD, and career advice with Culp.

Danaher CEO turned HBS LEAD Professor turned conglomerate CEO again—Henry Lawrence “Larry” Culp Jr. (MBA ’90) likely needs no introduction. Currently at the helm of General Electric, Larry is no stranger to running Fortune 500 companies. He is, however, the first outsider to run GE in the company’s 127-year history, bringing his optimism towards a GE turnaround when the world seems to think otherwise. What drives his motivation to take on this difficult challenge? How does he think through his legacy with this new role? Where is GE headed? Read on for a fascinating interview with Larry.

Tasnia Huque: I would love to start at the beginning. How did the GE opportunity come about?

Larry Culp: It started in the spring of 2018 when I was appointed to the board of GE. I ran Danaher for 14 years, from 2000 to 2014, and GE as a multi-industry conglomerate is very similar to Danaher. GE had moved to Boston, and location-wise it made sense.

A new set of board members in 2017 had taken a fresh look at the company. My decision to join the board in 2018 was based on thinking about the future trajectory of GE, and less because of stock price movements. GE was facing some serious operational challenges as well as being highly levered on the balance sheet. We collectively thought bringing in a new CEO may be more challenging towards a turnaround over an experienced CEO.

At the time, the board had several people to choose from, but the view was that I may perhaps be the best candidate to pursue the necessary changes at GE. I had experience in industrial portfolio management and had also worked with them as a colleague during my time on the board, so they knew my working style. In October 2018, I was appointed CEO and Chairman of the Board.

TH: How did you get conviction that that was the right next step for you given your long tenure and success at Danaher?

LC: I will have to say I was very happy with my post-CEO life. I was teaching at HBS, doing some private equity, fishing and skiing a lot. Some friends said: “Why put your legacy at risk?” And I thought that is exactly why I should do it. At 55, preserving legacy is not the mental framework I am living by. I strongly believe GE as a company matters to the world: we employ 300,000 people who need leadership. I have spoken to Warren Buffett and to the President about how GE is so important for the entire country.

Ultimately, there really is no age not to embrace challenge, and I would tell this to all my LEAD students: make your own decisions, take risks. This is in a way acting on my words, and I hope I can be an example to my students.

TH: Danaher predominantly grew via acquisitions, but GE seems to be pursuing a different playbook with divestitures. Do you think applying the “Danaher” strategy to create shareholder value will work here, or is a new playbook warranted for GE?

LC: The experience in buying certainly teaches you best practices about selling businesses. I understand how the process works, what good deals look like, how strengths and weaknesses of assets are pitched, and how it all gets done. Even with our recent sale of the BioPharma healthcare division and more than $20 billion in proceeds, we have ways to go to lower our leverage ratio. As such, we are not quite declaring victory. Our power and aviation businesses are performing well but can improve.

What’s more important beyond M&A is how to run an industrial business well. At Danaher, being an active buyer made sense because shareholders trusted us re-investing cash into the business to be the right long-term strategy. Ultimately though, serving the customer was at the center of everything Danaher did. And I want to bring the same focus to GE. I want to concentrate on strong daily management. Setting priorities at a large massive organization is difficult—how do you best establish processes and how do you enforce? Some examples are Toyota production-like efficiency, agile product development, lean methodologies—fundamentals I learned and practiced at Danaher that I am looking to bring to GE now.

TH: GE historically has been a phenomenal training ground for up-and-coming managers. Do you see GE maintaining a brand in strong organizational management for the new generation? Given fundamental differences in thought and desires between past and current generations, how, if so (desire for remote work or flexible hours, for example)?

LC: I am a big believer in business being a team sport. If you don’t have a great team, it is hard to succeed, and we are certainly still working on the human resource challenge. Kevin Cox joined us recently as Chief Human Resources Officer from American Express, which I am excited about. Diversity and Inclusion are also very important to us, and we will address them in due course, but these things take longer to have an impact. But impact them we will.

TH: What did you find challenging transitioning from running a company to being a professor? Is there any specific takeaway from your teaching at HBS that you are now applying in your current role?

LC: A new job at a new organization can be daunting. Teaching the case method is enjoyable but also quite challenging. Joshua Margolis in the LEAD course team was my mentor, and he is a terrific and phenomenal teacher himself. Preparing to teach a case is difficult even if you have taught before because no case discussion is ever the same. The best-case teachers are very thoughtful about what questions they ask, how they ask, and when—that skill does not come naturally. It at least did not come naturally to me. I prepared a lot, but also listened aggressively to what’s happening in the classroom real-time. It might not seem this way to you, but whilst teaching, the clock seems to move much faster than the 80 minutes—so I needed to listen and tie-in prep materials with time racing by. Expectations are also high with the caliber of students in the room.

My core takeaway is the sheer importance of listening—there is always a lot to learn and that has been extremely valuable. At GE, people have an acute appetite to hear from me frequently, but not unlike the classroom, there is real value in listening first, learning, selecting, and then offering a point of view.

TH: The Danaher case has been a mainstay of the Strategy curriculum at HBS for years. Let’s imagine it’s 2030, and HBS professors are publishing a case on Larry Culp at GE. What do you hope will be the most exciting themes of that case? The greatest accomplishments for the company and for yourself personally?

LC: Well, I hope it’s the GE case and not the Larry Culp case. I want people to focus on the company and not on me. I hope they say there was a point in time when some were concerned, and others had given up hope that a global industrial icon was not going to survive in 10–20 years. However, despite that we went in, embraced reality, realized GE’s challenges but also its strengths that weren’t getting the same attention the issues were. And we very deliberately and diligently addressed the issues and took GE to a position of strength. It was very much a financial strategy at the outset because of the leverage issues we are dealing with, but over time became operational strategies, which ultimately led to a strong cultural change. And those three threads over time allowed GE to regain its strength and be a company fit for the upcoming century.

TH: Any final advice for current students as we think about our careers or time at HBS?

LC: It is important to keep in mind that after graduation a lot of the peer pressure will dissipate. It is really only you and the new job, and so it is helpful to not get caught up in the “swift” recruiting currents. Take the time at HBS to reflect on strengths, weaknesses, interests, and priorities, and choose wisely, but also recognize that the first job need not be a career or a life-long commitment. Again, take risks.


Tasnia Huque (MBA ’20) hails from Dhaka, Bangladesh, and is an aficionado of all things media and tech. Before HBS, she was an Investor with Cue Ball Capital, an evergreen venture and growth equity firm. She also has experience in Investment Banking at Barclays and in Product Management at Toast, a B2B2C restaurant management platform. You can find her on her blog, www.yetanotherview.com, or on Twitter @tasniahuque.

 

April 3, 2019
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