Great ResignationDiversity and InclusionCompensationCEO DailyCFO DailyModern Board

GE CEO Larry Culp on humility and why every detail counts

March 2, 2022, 10:30 PM UTC
GE Chairman and CEO Larry Culp.
Photography courtesy of GE

When it comes to Larry Culp’s management style, the GE CEO says a lot of it can be summed up by what famed UNC basketball coach Dean Smith preached: “It’s about the team,” Culp says. “How do we get better every day, even when we win the national championship?”

As GE looks toward its future, the corporation is divided into three still-very-large companies. Culp is relying on Smith’s ideas, as well as the leadership values of humility, transparency, and focus, to put GE back on top.

On this week’s episode of Fortune‘s Leadership Next podcast, co-hosts Alan Murray and Ellen McGirt talk with Culp about his plans for GE’s future, his management style, and how managers can help every team member do better every day. Listen to the episode or read the full transcript below.


Alan Murray (0:07): Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations.

Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray, and I’m here with my fantabulous co-host, Ellen McGirt. I don’t know if “fantabulous” is really a word, but if it is, it applies to Ellen McGirt.

Ellen McGirt (00:38): Well, I will take it, and thank you so very much, Alan, and thank you all, to everyone. But Alan, I’m here with some news. I have to confess that I’ve been thinking about leaving Fortune after I read our next guest’s internal communications to all his employees. After I read this document, I feel like I’m Kaizen certified just from reading what he writes. I’m ready, I’m ready. I think I’m ready.

Murray (01:01): I would hate to lose you to Kaizen, but for anybody who isn’t familiar, Kaizen is a Japanese business philosophy that basically means continuous improvement. And our guest today is all over it. He is Larry Culp, who is the CEO of the legendary GE, but before that, was CEO of Danaher, where he developed a real reputation for continuous improvement.

McGirt (01:26): He really did, and he’s not a name that people know as well as they probably should. And I think what’s interesting—and you know, as well as anyone at this moment in time—is when Larry took over, continuous improvement was exactly what GE needed.

Murray (01:39): Yeah, I mean, at the turn of the century, GE was the most valuable company on the Fortune 500. Its stock price went down pretty steadily for a couple of decades. Larry Culp, a couple of years ago, was given the job of turning it around. And in the end, he’s announced a plan to break GE into three separate companies. So it’s fascinating, and for people who invested in the company, a somewhat dispiriting journey, but boy, it was a great conversation talking to Larry Culp about it. Let’s listen to him here.

Murray (02:14): Now, I promise you, we will not dwell a lot on history. [Laughing from others.] But I think we should start there, because everybody who listens to this podcast knows that 22 years ago, 23 years ago, GE was the most valuable company, I think, in the world, certainly the most valuable company on the Fortune 500, and it’s been through, at least in terms of market valuation, kind of a 20-year downhill slide. You only took over a couple years ago. When did you start, Larry?

Larry Culp (02:46): October 1, 2018.

Murray (02:48): October 1, 2018. And more power to you for taking it on. And we want to talk to you first about where you’re headed in the future. But I have to ask you first, based on what you’ve seen for the last couple of years, what happened? What went wrong? What do you think the mistake was?

Culp (03:04): Alan, over the last three and a quarter years, I have consistently, both privately and publicly, talked about today and talked about tomorrow, but haven’t really spent a lot of time on yesterday.

Murray (03:18): He’s not going to answer our first question.

McGirt (03:22): I knew it. I can tell by the smile on his face, he was not answering the question.

Culp (03:28): I like to be consistent, and every waking hour since the fall of 2018 really has been focused on driving the transformation of this business. You see that in our balance sheet: $87 billion of debt by the board at this point. I think a lot of progress with the operational transformation. Really proud of the fact we got to a point where we generated nearly $6 billion of free cash flow last year. And I’m sure we’ll spend some time on the announcement we made in November, relative to the launch of three independent, focused GE offspring, and that’s that’s really what what I’ve been about. But this is a company, as you both know, that goes back to Edison, has a phenomenal history. I’ve been the beneficiary of not only the talents on the team, the technology, the customer relationships the world over this company has nurtured for over a century. So we’re not unmindful of that. But today, it’s all about where we go from here.

McGirt (04:28): But let me ask you, just to, before we go into all of that, let me ask you, though, sort of the leadership version of what it means to be an outsider—someone with the kinds of extraordinary skills that you have and accomplishments that you have coming into a troubled company. What were those early days like? How did you check in? Did you use executive assessments? I know there’s always listening tours, but you seem like such a nuts-and-bolts leader, student of leadership. How did you take a pulse of your talent and your bench?

Culp (04:57): Ellen, back in those days, when I didn’t know anybody, I didn’t know the businesses, I didn’t know the jargon and the GE vocabulary, I just tried to spend as much time as I could asking questions and listening. As you may know, they called me out of class back in the fall of ’18. I was teaching a leadership class at the time, and in the Case method. It’s all about asking good questions and really listening actively. And in many respects, through that fall, I really continued that inside of the company not only in the corporate office, but within the businesses, shop floors, out with with salespeople. Tried to talk to as many customers, investors, both sell side and buy side, as I could, just begin to put the pieces of a puzzle together. Because there was no manual as to where we go from here, both in terms of the deleveraging, the operational transformation, and even the cultural change that I think is underway at GE.

McGirt (05:58): I will tell you this already, if I was in that class when my professor got tapped to run GE, I would put that on my resumé.

Murray (06:09): There’s so much there to unpack about your leadership style that we really want to dive into, but I’m going to try my first question in a slightly different and hopefully more acceptable way. As you said, let me put it this way, GE was the pinnacle of conglomerates, right? You had these different businesses all together under one brand, the notion that central processes and central leadership development and all of those things could make it work. In November, you said nope, not going to do it that way. We’re going to break it apart into an aviation-focused company, an energy-focused company, and a health care-focused company. Was that because the whole idea of conglomerates was wrong? Or is it because we live in a different time than we did 20 years ago? Or is it something else altogether?

Culp (07:00): Alan, in many respects, I don’t think I said that in November of 2021. I probably said much of that, absent the corporate spins that will occur, back in November of 2018. Because a good bit of what we began to hear, and in turn do, was really manage, if you will, from the bottoms up. And we look at GE today, as it was three years ago, really as a company made up of 30 P&Ls, so we made it less about the center, more about the company. Right? Less top-down, more bottoms-up, and in turn, made it less about the functions and functional initiatives and more about cross functionally. Managing these businesses as whole cloth, almost regardless of the size of the P&L, whether it was a $10 billion business or a billion-dollar business. And in many respects, what we announced this past November is the logical extension of that effort to couple lean with a more decentralized approach.

Now clearly the capital markets, I think, by and large favor focus pure plays. Remember, I grew up in a company that, for 25 years, was in a number of different businesses, outperformed dramatically over time. For me, I think performance is the ultimate panacea. There are a lot of ways in which you can perform. But the transformation the last three years has been focused again on a much more bottoms-up approach. And I think what we announced in November, the two-step spin in early ’23, with health care in early ’24, with our power and renewables businesses, in many ways, just builds on that effort, and I think the capital markets have and will be quite receptive.

Murray (08:47): Yeah, they have, but let me just do a quick follow-up. Are you breaking into three pieces for the capital markets? Or are you breaking into three pieces because you believe it’s a better operating style?

Culp (08:59): Yes, yes to both. Right. And I think we’ve been doing much of the latter over the last three years, more each year, as everybody understands how to run that play. Have we become more externally oriented? I think the deliberations the board went through, Alan, last summer was really focused on when to optimize the potential of these businesses running that play under one roof, or three. And I think in turn, what we concluded was the alignment from the boardroom, through the management team, and including investors, would be far tighter. In addition, clearly, you’re going to have greater accountability. Because when you’ve got a number of businesses under one roof, there’s only one stock ticker, but without being too shortsighted, it helps focus the mind when you know that your results are out there being discussed every hour of an active trading day.

McGirt (09:53): Yeah. That’s certainly true. You mentioned culture a couple of times, and I just wanted to acknowledge that this historic change for you, this historic assignment, happened at a time when the world was about to go through some tremendous transformations themselves. Of course, I’m talking about the pandemic, and then, post-George Floyd’s murder, really a global conversation about race and equity and justice and all of those things. How do you think about those external pressures and the social issues as you think about leading GE through this enormous transformation?

Culp (10:28): Ellen, one of the things that I appreciated when I was on the board, and all the more when I became CEO, was just how capable and resilient the GE team is. And I would argue that’s all the more true today. So when the pandemic hit, and when we all began to tackle and, in our case, rejuvenate our diversity and inclusion efforts in the wake of the George Floyd murder, it was something the GE team was able to take very much in stride. Again, I think, in large part because of that resiliency. So it’s been a very full agenda. But at no time, I think, was the team of the view—well, we can’t add that to the list. Because that, all of that, is our reality, has been, and certainly will be. But I think all of that created opportunities for us to continue to differentiate ourselves. And I think the GE team has done a nice job. Plenty more to do though.

[Music]

Murray (11:33): I’m here with Joe Ucuzoglu, who is CEO of Deloitte US, and had the good sense to sponsor this podcast. Joe, thanks for being with us. And thanks for your support.

Ucuzoglu (11:44): Thanks, Alan. Pleasure to be here.

Murray (11:45): Joe, we talked about technology adoption accelerating in 2020. But at the same time, it also seemed like there was an increased focus on people, on human capital. Can we hope for a future where we have both more technology and more humanity, all at the same time?

Ucuzoglu (12:03): Well Alan, I’m particularly energized leading a large professional services firm where people are at the core. This is all about pairing great people with innovative technologies. It’s not about replacing one with the other. It’s allowing people to free up more of their time to do what humans do best. The technology is an enabler for great people to use their creativity, their complex judgment, and decision-making skills. But at the same time, I think we have to recognize that getting this right definitely requires a new kind of corporate leadership. I would say, out with the autocratic, all-knowing CEOs sitting in the corner office, and in with those who bring vulnerability, empathy, and humility. Those are such critical attributes to unlocking the creative talents of the workforce in such a dynamic economy.

Murray (13:00): It is very different when you’re trying to get a group of creative people to solve a problem than when you’re simply giving orders and telling them what to do.

Ucuzoglu (13:08): It requires a brand of leadership that places a premium on instilling values, instilling principles, and empowering people to be able to make those judgments on the front line, instead of waiting for some checklist or waiting for some prescriptive order from corporate that spells out exactly how each of those decisions need to be made.

Murray (13:29): Joe, thank you.

Ucuzoglu (13:30): Alan, it’s a real pleasure.

[Music]

Murray (13:37): Larry, you call yourself a lifelong student of leadership. We say this podcast is about the changing rules of business leadership, but from your perspective, have the rules changed? Is it a different world than the world Jack Welch, to pick a leader out of the blue, presided over? And are the rules of leading teams different, or or are they the same?

Culp (13:59): Well, I think if you back up from the topics that Ellen just hit on, and half a dozen others we could talk about, and focus on the core principles of pulling together a real team of outstanding individuals who collaborate and do that effectively, and well, you know, ideas around focusing on the customer and driving real differentiation over time, I think those are timeless principles that define outstanding leaders—at least outstanding leaders in business, and perhaps even in other areas. So the application is always in context, but I think we could talk about a number of those principles. I’m not sure they’ve really changed over the last two or three years, or really over the last 20 or 30, but I could be wrong.

Murray (14:48): You sometimes use the word humility, and you talk about serving your people, which I think is a key part of your leadership style, and not every CEO’s leadership style. Can you talk about why that’s so important to you?

Murray (15:01): Sure. Humility is one of our three leadership behaviors. And as part of the transformation rule over three years ago, we talked about humility, transparency, and focus as the three leadership behaviors we wanted to instill in all the GE leaders, regardless of where they are on the org chart. I think humility is important, because if you’re uncomfortable, or even afraid to ask questions, and actively listen to the answers, right, if you think that you as a CEO, or any other leader, need to constantly be in send mode, you’re in trouble, right. Because you’re not going to pick up the signals and the unstructured intelligence that you need to do your job—managing your team, responding to changes in the marketplace, what have you, and very much in the spirit of Kaisen, right, continuous improvement. You’ve got to believe that you can actually get better, but if your competence becomes arrogance, you’re not asking questions, you don’t see opportunities to improve, guess what happens? It may not happen overnight, but you’re going to be in trouble. At least that’s the philosophy that I believe deeply in.

McGirt (16:13): So I have read all your comms, and I feel a little bit like the medical student that has a brain surgery manual and now I’m wandering around with a scalpel. I feel like I know just enough to be dangerous. But I would imagine that I am not that different from a lot of folks who were working at GE when you joined, and you bring this new operating principle to them. And to think about the new behaviors, how you’re measuring those behaviors, as you said, and new ways of listening and working together. What are some of the things that you learned about bringing that philosophy to GE, and how can any leaders who are listening to this think about culture change through a similar mechanism with a central core philosophy?

Culp (16:53): Ellen, I would say that, maybe more than anything, you have to walk the talk, and you have to do so visibly. But at the same time, I think you have to look for opportunities to show people that you can handle the truth.

I remember I was at a meeting several years ago, and I knew we had just won a piece of business but hadn’t gotten off to the best start. We were in the session with the team and operating review. And there was an opportunity therein, to just say, how has the kickoff gone? I had a sense that it hadn’t gone well. But it was an opportunity to see if the team would trust me with that reality. Well, one of the individuals piped up and said, we’re really happy we won the business, but we need to do a better job, because this didn’t start well. That was just gold, right? Because I’m sure there are a lot of people around the table wondering if they’d ever see this individual again. And it gave me an opportunity to exhibit an ability to handle that truth. Do a little bit of what we call problem solving. Try to understand the root cause of what happened, to get better positioned to actually do something about it. You have to do that every day. You have to do that multiple times a day. And over time, I think people see you walking that talk and begin to understand how they can do it themselves.

Murray (18:13): You can’t get this across in a 30-minute podcast. But Larry, you’ve got to tell us the story about the men’s locker room, because I think that’s a wonderful example.

Culp (18:22): Well, for those who don’t read our internal comms as closely as Alan and Ellen do: The first week of October we were up in Lynn, Massachusetts. I say we—I had two of our CEOs there with another probably 100 GE-wide leaders in attendance for a five-day Kaizen event where we were going into a plant where we make military engines, aviation engines, to improve processes. One of the keys is, no detail is too small to be tended to. In the men’s locker room up in Lynn, Massachusetts, there was a schedule sign that said “men’s lockeroom,” and locker room was one word with one r, and it clearly had been done years and years ago. And I happened to mention it in one of my daily vlogs that week. Well, as you might imagine, it was fixed in about 10 minutes time…

Murray (19:18): But had been there for decades.

Culp (19:20): …for decades. Some people—some people thought it was inappropriate for me to flag it, because I was picking on somebody who did it, and that was not my intent, but I was really trying, again, to walk the talk. If we’re going to walk past a misspelling in such a prominent place in a factory where we make engines that are underwing, when our peacekeepers are in the air, in harm’s way, that’s a problem. But the best part of the feedback I got was, yeah, they said to me, Larry, you don’t understand. In Boston, it’s “lockahroom.” There is only one R.

McGirt (20:00): We’ve got a couple of lightning round questions at the end. But before we do that, I just wanted to ask about your early life. You have had such an extraordinary career. You mentioned only one other company before you joined GE, and HBR named you one of the top 50 CEOs in the world, of a company not a lot of people know very well. I mean, you really have been head-down doing this work for a very long time. And I was wondering if there was anything early in your life that led you on the executive track? Or if there was a moment when you really thought, yes, I can do this and be excellent, all the way up to the top of an organization.

Culp (20:34): Well, I don’t think I was dealing with that last question until I was in my first CEO role for about three or four years. It was daunting, in so much that I had an opportunity to become a CEO at a very early age. When I think way back, I think the fact I had a chance to play a lot of basketball growing up has influenced my leadership style and my approach far more than I would have ever anticipated. In so much as I love when a team is in flow, and we can move a ball around, we don’t care who scores as long as we win.

And I happened to grow up at a time when, and Alan will appreciate this, when Dean Smith was a coach at North Carolina, and I just think, you go back to what Coach Smith preached, and those teams in the ’70s and ’80s. It’s a lot of what we’ve been talking about, right? It’s about the team. How do we get better every day, even when we win the national championship? Now I joke with people that, back in ’81, when I came out of high school, Coach Smith made a an error giving that last scholarship to that kid from Wilmington, Jordan, rather than me, but no complaints. But Ellen, that’s what seriously—that’s what comes to mind, those opportunities.

McGirt (21:51): Well, as a New York fan, that helps. There were a lot of Tom Brady references in your internal comms that I had to scratch out, but that was delightful.

Murray (21:59): I loved the UNC analogy. Ellen, you want to do your lightning round?

McGirt (22:03): Yep. We’re asking all of our guests this year to just give us a quick pulse on what’s top of mind for them on three key issues. Just a couple sentences, whatever comes to mind. The first one is, what’s top of mind for you when it comes to COVID?

Culp (22:16): COVID. I’d say top of mind, our team safety, first and foremost. Secondly, probably making sure we’re doing all we can in our health care business to help modernize the overall system from here.

McGirt (22:30): Top of mind for you when it comes to the economy.

Culp (22:33): Inflation. Inflation is real. I’m not of the transitory camp. I think I have more company today. So we’re trying to do all we can at GE to work the price lever. Not easy, but also to make sure we’re redoubling our efforts on product cost.

McGirt (22:47): And last, it’s a personal one. What is top of mind for you when it comes to your own leadership?

Culp (22:53): How do I lead differently, mindful that in the next two years, we’re going to have three standalone businesses? It’s a different setup than the last three years, right, so I’ve got to, I’ve got to sort that out.

Murray (23:07): Yeah, it’s, you know, GE has been such a critical part of our history. I think I’ve told you this, Larry. Ellen, you may not know this, but for the first 15 years of my life, I lived in a household with a father who worked for Westinghouse. And so the letters “GE” were prohibited. I mean, we could not buy light bulbs, refrigerators, anything from GE, it all had to be from Westinghouse. So you know, it looms large in my early years, but Larry, last question here, because I was thinking, and then there’s another generation of people who bought it and enjoyed the big stock swoon in the, in the 1990s, and have cursed anyone associated with GE for 20 years as that huge swoon has fallen off.

But you said something that I want you to just use your last words with us explaining. We know GE is going to be three much smaller companies when this is all over, I mean, still Fortune 500 companies, but small—but yeah, they’re not tiny—but you said they are going to be much stronger. What gives you that confidence that these are going to be stronger companies?

Culp (24:14): Alan, just let me backtrack for just a moment. I joke with people, the only person who was not happy that I took this job was my father-in-law, because, like your dad, he worked for Westinghouse. I think we talked a moment about health care. Right? GE Healthcare sits at the center of precision health. You look at what we do in shaping the future of flight and our aviation business, let alone the way we’re going to lead, and truly lead, in the energy transition. These are going to be businesses that not only have size, but scale to solve some of the most pressing problems possible. So again, that alignment, that accountability we talked about earlier, the fact that we’re not going to talk about deleveraging and operational transformation. We’ll be talking about customers solutions growth, and I think a better financial profile going forward. All of that speaks to strength.

These are not companies that will suffer at all for being smaller, because again, they are going to be quite large in their respective spaces. I’ve said for a long time, size is one thing, strength is another, and I just think, you put all of those dynamics together, these are going to be three outstanding, and certainly strong, independent businesses.

Murray (25:31): Larry Culp, thanks so much for being with us. And thanks so much for being willing to spend the last few years of your life here wrestling with this iconic company. We wish you the best.

Culp (25:42): Thank you, Alan. Thank you, Ellen.

MurrayLeadership Next is edited by Nicole Vergalla, written by me, Alan Murray, along with my amazing colleagues, Ellen McGirt and Megan Arnold. Our theme is by Jason Snell. Executive producers are Mason Cohn and Megan Arnold. Leadership Next is a production of Fortune MediaLeadership Next episodes are produced by Fortune‘s editorial team.

The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.

Never miss a story: Follow your favorite topics and authors to get a personalized email with the journalism that matters most to you.