From his crew cut, clean shave and open neck shirt, to his straight way, you can still classify Kevin Nolan as the archetypal General Electric engineer.
This is exactly what GE Appliances’s CEO was until 2016, when Haier of China bought the Kentucky-based white goods business of GE for $ 5.4 billion in cash. The takeover brought about what appeared to be an inevitable clash between a management model inherited from the American conglomerate and Haier’s radically decentralized vision. Nolan, then the GE unit’s chief technology officer, went to China to answer the question that astonished observers often asked – and still ask – about its new owner: “Who is this company? What are they about? ”
Zhang Ruimin, Haier’s founder, took over the management of a municipally owned Qingdao refrigerator factory in 1984 and encouraged its transformation into a network of thousands of spin-off “micro-enterprises” based on a unique transformation model called Rendanheyi. Zhang became honorary chairman last month after creating what the company describes as a “self-organizing, self-driven and self-developing ecosystem enterprise” with an annual turnover of Rmb300 billion (£ 35 billion). Every micro-enterprise takes the initiative in developing products and services with and for customers. They often compete with each other for capital, purchasing central services such as human resources.
In China, Nolan first asked to see Haier’s organization chart. “There is no organization card,” he was told. A few weeks later he was asked to become chief technology officer of the whole group. “It was an honor. And then they introduced me to another CTO and then another CTO. So we had three. Where I come from, the CTO is kind of the top of the engineering organization, so there should be only one. And I was very confused. “
He was also concerned about how the system would work in the US, partly because the white goods market was more mature there, partly because GE Appliances was still moving at the pace of a top-down, process-driven system.
As a former GE “process man” who laid down such rules for new acquisitions, he found it hard to believe that Haier would not want to take a tighter grip on GE Appliances and its 15,000 staff. Instead, Haier merely insisted that the group set its own “leading goal” and strive for “zero distance” between customer needs and company operations. In 2017, Haier named Nolan CEO of GE Appliances, a role he believes would never be offered under General Electric’s carefully structured leadership development process.
He does not have to underline the obvious irony: for many at GE Appliances, the sale felt, Nolan says, “like your parents threw you out of the house,” but it’s the parents who have struggled since. Efforts to clean up and simplify GE led to November’s announcement of a three-way break up. GE Appliances, meanwhile, recently announced a $ 450 million investment in its headquarters and manufacturing facility and the addition of 1,000 jobs over the next two years.
Nolan and his team set a well-known main goal: “We want to. . . the number one company in america in five years. ” Jack Welch, GE’s CEO from 1981 to 2001, would have recognized the goal. “Boundlessness [a goal Welch set for GE in 1990], you have to win in your markets, empowerment: that’s really the essence of what the company is about, right? Because these are timeless things, ”says Nolan.
Nolan says GE Appliances’ new goal was born out of an engineer’s upset about the way executives sometimes block new ideas. Instead of allowing entrepreneurial staff to experiment, functions like HR and law want to “control everyone’s lives”.
Under GE, Nolan has always been “frustrated with how slowly we are growing, because I always knew we had great technology, great innovation, but many times we just did not implement it. . . did not approve the budget, ”he says. “And then three years later you would see how the competitors come out [the same idea] and be successful. ”
Three questions for Kevin Nolan
Who is your leadership hero?
Mr. Ballentoni, my high school math teacher. He could recognize abilities and discover passions. He saw the talent I did not know I had. He does not know it, but he is one of the people with the most meaningful and profound influence in my professional life.
If you were not a CEO, what would you be?
My passion is making, my trade is engineering, my day job is HUB. If I were not a CEO, I would still be a manufacturer and an engineer making watches.
What was the first leadership lesson you learned?
Do what makes you happy. In other words, match your work to your passion and enjoy it.
Like Nolan, Haier’s Zhang is a fan of Welch, despite diving in the US businessman’s legacy. GE Appliances’ goal was definitely a smart way to fuse GE’s culture at its most successful with the Chinese owner’s unique approach.
But with the five-year mark ahead next June, GE Appliances can still not claim to have reached its target. Nolan says it is the “fastest growing” device company in the U.S., by revenue and market share, but Whirlpool remains the largest on both measures. Pressed to the point, Nolan claims to be “number one in the hearts and minds of consumers”. It’s a credible goal, but it certainly would not have satisfied the infamous hard Welch.
Even Welch, however, did not take his management revolutions as far as Nolan intended. To accommodate the differences between the fast-developing Chinese market and the more mature U.S. economy, Nolan has maintained some key platforms, such as finance and engineering, to share best practices. But he also encourages micro-enterprises. The number has now grown to 15, and he is eager to break the group down further, into potentially hundreds of smaller entrepreneurial teams.
“You see most sports – 10 people on the field, nine people on the field. If you had a sport with 300 people on the field, it probably would not be too fun. Right? This is called chaos, ”he says.
From the outside, Haier can also sound chaotic. But Nolan insists that striving to close the gap with the customer can yield extraordinary results. He cites an idea put forward during the pandemic of GE Appliances’ FirstBuild innovation unit, which was set up by GE. An engineer decided there had to be a better way to grow mushrooms. By working with fellow mycophiles outside the company, they have developed a growing room, called Mella, backed by the Indiegogo crowdfunding platform.
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Can a series of such small devices knock Whirlpool off the podium? Nolan points out GE Appliances is still focused on making mass production of refrigerators or dishwashers more efficient. At the same time, however, the cost of small runs of highly specialized products is now lower than it ever was, due to 3D printing and other technologies.
“I would say I have more direct reports than most CEOs will ever have and I can continue to have more,” Nolan says. However, he sees his lead role as fighting the bureaucracy which can overwhelm the innovative small micro-enterprises, while the larger, mature operations thrive without careful attention from top to bottom.
“Every corporation wants to make one of something and make a lot of it and make a lot of money. So corporations want completely simple, individuals want completely customized, ”says Nolan. “The future is how can you. . . use leverage so that we can supply things at a cost that is affordable but customized for you? . . . This, I think, is what successful companies will have to find out in the future.. ”
The gleam in his eye is that of an engineer with a brilliant idea that the bureaucrats can not kill for once.