In the long history of General Electric, its chief executives have come up through the ranks, and in modern memory embodied managerial archetypes tuned to their times: Jack Welch, the celebrity CEO who built a sprawling conglomerate, and Jeff Immelt, the torchbearer for digital transformation.
Then there’s Larry Culp.
He is an enigma to most people in Boston, even though he runs one of the world’s best-known companies. The 58-year-old doesn’t burnish his bold-names cred working the social circuit where other executives hobnob.
Instead Culp is a genuine throwback, a guy who got his start on the production line, in this case the family welding shop, and became an evangelist for the exacting Japanese philosophy centered around an unrelenting improvement in business practices — a philosophy that helped revolutionize the manufacturing world over the past half century.
It is called kaizen, and to learn about it, Culp became that rare Harvard MBA who chose to cut his teeth in business learning from the Japanese how to more perfectly make air conditioners. Really.
“He would rather be walking through the factory than talking to the chamber of commerce,” said Bill Stromberg, chief executive of investment giant T. Rowe Price, who has known Culp for three decades and considers him a mentor. “That hands-on approach is what makes him great.”
Culp is, by many accounts, stabilizing a once-mighty company that had big ambitions when it moved to Boston in 2016 to be among the whiz kids with their laptops, sitting in coffee shops and soaking up visions for a day when software, not the heavy-metal hardware of trains, planes, and power plants, ruled the business universe.
But the move masked a deeper need within GE. It had, in the view of many critics, become a bloated corporate behemoth that had lost its vaunted discipline and overindulged in deal making. Soon it would be hemorrhaging money and amputating entire divisions.
The troubles suggested that GE, whose roots run to inventor Thomas Edison, wasn’t so much in need of finding new ways to make money as getting back its manufacturing mojo.
If GE was going to survive and thrive in the Internet Age the way it had in the previous century, it needed a back-to-basics taskmaster, someone who could remind the company of how it once got so dominant — by making things well and making them efficiently.
The part, it would seem, was written for Culp.
Yet he fills his role without being a cyborg or grim disciplinarian at a company in the throes of billions of dollars in cost-cutting. Rather, Culp is what close friend Kevin Sharer called a “joyful warrior.”
“When I say ‘joyful,’ it’s a role model leader who, by his actions, words, and examples, leads and inspires people to do things they didn’t think were possible,” said Sharer, the former CEO of biotech behemoth Amgen. “When I say ‘warrior,’ the thing Larry is fighting is the past, the last decade of failure, and he’s fighting the status quo and the belief that things can’t change.”
Over 6 feet tall, with wavy salt-and pepper hair, Culp comes across as measured but friendly, smiling with ease. He may live and breathe by “kaizen,” but he’s not all work and no play; when he stepped down from his previous job running another manufacturing company, he said he hoped to spend more time fishing. He can be intense, but those around him say he is not the intimidating type. He is known at GE not as an alpha-male boss, but as a leader who knows how to listen.
The old GE was about putting the smartest people at the center of the company. Culp’s GE focuses on making customers happy and on rigorous attention to what’s happening on the factory floor.
In 2019, his first full year as GE chief executive, Culp was on the road most of the time, often visiting factories from Ohio to South Carolina. He is the old-school operations guy who would sometimes show up in jeans to talk shop with machinists and technicians. At some plants, it was the first time workers had ever met the global company’s CEO.
He honed that “how things work” fascination as a boy growing up outside of Washington, D.C., where he hung out in the welding shop his grandfather founded and later his parents would run. His first paying job was hauling heavy equipment there. His management career has been defined by just two employers, both of them industrial conglomerates: Danaher Corp. and GE.
“I’m not somebody that likes to run the business from my desk,” Culp said in an interview with the Globe.
In 2018, Culp was enjoying what he calls his “so-called retirement” from Danaher. He was teaching leadership and strategy at his alma mater, Harvard Business School, and working as a senior adviser for Bain Capital. He bought a home in Beacon Hill. Then he was recruited to the GE board by the man whose job he would ultimately take, CEO John Flannery. Culp said he probably would have turned down the offer to join the board had he not been in Boston already.
In business school circles, Culp is a bit of a cult figure, the subject of case studies on how he transformed Danaher into a major player in medical testing and dental equipment. He spent almost a quarter century there, becoming CEO at the age of 37 in 2001. On his watch, the Washington company increased revenues and its market capitalization five-fold by perfecting the kaizen lean manufacturing philosophy most prominently associated with Toyota.
“Larry had an extraordinary career at Danaher and was really one of the architects of what was called the ‘Danaher System,’ which is consistent with what he’s doing at GE,” said John Connaughton, co-managing partner at Bain Capital. “He brings a lot of structure and discipline.”
There is a lot of rhetoric in the business world about creating a highly efficient, customer-driven organization. On this, Culp is the real deal. Listen to him as he described why he spent time in Japan learning to build air conditioners so he could “understand what a maniacal emphasis on waste elimination with an eye towards serving the customer is really all about.”
“For some folks, lean is a set of tools. The tools are important, but lean is much more than that. It’s really a way of life,” Culp explained in a virtual event in October. “Lean is a means to an end — that end being a stronger set of businesses, a stronger GE, and a better, more vibrant culture.”
The irony here is that GE was long the standard-bearer of the tightly-run American corporation, notorious for its brawn and dominance in its markets, and on Wall Street for always beating its profit estimates. Welch was the world’s leading proponent of another management philosophy, Six Sigma, that also preached a gospel of constant improvement in work processes. GE was famous for the way it schooled up-and-coming managers and executives, and even used its college-like campus in New York state to develop them.
But the company that has laid claim to the lightbulb, the washing machine, electric stoves, power plants, jet engines, and the television network that first made Donald Trump a media star went astray — badly.
Its massive GE Capital arm, source of so much profit in the glory years, had never fully recovered from the 2008 recession. When GE decided to sell off most of the Capital businesses in 2015, it held onto some of its liabilities, a move that would weigh heavily on the balance sheet after the firm relocated to Boston from Connecticut.
Then there were the ill-timed acquisitions of Baker Hughes, which services oil and gas producers, and the energy business of French conglomerate Alstom, just before big downturns in their industries. Immelt had also committed to spending more than $1 billion to turn GE into a software titan. The GE of Welch and Immelt behaved as if it could wring profits from any kind of product or business, but that hubris came with a cost.
GE struggled to meet its earnings targets and Immelt was out. Flannery, who had run the health care division, found himself in charge in mid-2017, and immediately was under pressure to radically rethink GE’s size, maybe even break it up completely.
One by one, the dominos fell mercilessly, including those old liabilities from GE Capital, which forced the company in 2018 to take a $6.2 billion charge and reserve billions more to shore up its old long-term-care insurance operations. At rapid-fire pace, GE moved to divest some businesses, such as lighting and trains, and cut costs and employees to preserve cash in the face of a mountain of debt. Its stock price plummeted, and then in humiliating fashion, GE was drummed out of the Dow Jones industrial average, where it was the last original member.
The body blows landed as GE was planning a sleek headquarters campus along Fort Point Channel, the company’s launch pad into its next century.
The final straw for Flannery was a $23 billion charge in GE’s struggling power business. After just 14 months, he was out, and in October 2018, Culp became the first outsider to run the company since it was founded in 1892.
“He understood he could be called, he didn’t expect to be called, and he didn’t want to be,” said Sharer, who was on the faculty of Harvard Business School with Culp. “To me, it’s a national service. It’s an important company for America.”
In his short tenure, Flannery pursued an aggressive paring of the company’s portfolio. Culp continued in that vein, reducing GE’s dividend to a nominal amount and jettisoning a new tower in Fort Point in favor of a more modest headquarters there. Culp also launched a boot-camp-style exercise to root out fat and waste, to streamline the manufacturing process and make it more responsive to customers’ needs and schedules.
Drawing on his time in Japan, Culp peppers meetings with talk of lean principles such as “genba” (where the real work happens) and, of course, “kaizen” (continuous improvement). GE, in its annual report, describes the process that unfolded under Culp as a “ruthless prioritization of work to improve safety, quality, delivery, and cost.”
Importantly for Culp, this self-examination begins on the factory floor.
Case in point: At the company’s gas turbine plant in Greenville, S.C., the team found the production process had become overly complicated. One critical and expensive part traveled a serpentine path around the factory floor, traveling more than three miles over 85 days to complete the machining process. Workers found that if they rearranged the shop floor and replaced some old machines, they could reduce the travel distance to 165 feet in a straight line.
Along with other lean ideas, the Greenville plant in 2020 cut overall production time for a turbine roughly in half, to less than 40 weeks. Inventory levels went way down, saving hundreds of millions of dollars in tied up capital. Under Culp, similar “Lean Action Workouts” have been held at GE locations around the world.
“We’re an industrial company, which means the way we design, the way we manufacture, the way we service our products is where we win or lose,” Culp told the Globe.
Under Culp, GE seemed to find its footing in 2019. Then the pandemic hit. The abrupt shutdown of global travel decimated a GE cash cow: the jet engine business. Almost immediately, Culp had to cut roughly 25 percent of GE’s aviation workforce.
But by the end of 2020, Culp had stabilized GE’s cash flow. Then on March 10, he announced a $30 billion deal to peel off the company’s aircraft leasing business.
The GE of today is down to just four manufacturing segments: power, which makes turbines for traditional electric plants; renewables, such as wind turbines; health care, which includes imaging machines such as MRIs; and aviation, where GE has its biggest footprint in Massachusetts, the jet engine plant in Lynn.
When GE decided to move to Boston in 2016, it had revenues of $117 billion, 333,000 employees, and about 500 factories worldwide. Today, two CEOs later, the number of factories has been cut in half, the workforce is at about 174,000, and annual revenues are at $80 billion.
In August, Culp agreed to a two-year contract extension and received a one-time stock grant that won’t vest for another three-plus years. That award could eventually be worth more than $200 million, but only if the share price averages at least $16.68 for 30 straight days by August 2024.
Its stock now trades in the $13 range, around where it was when Culp became CEO, but roughly double its price last summer in the depths of the pandemic.
Culp is, in his own words, far from done.
“If we were over at Fenway, the scoreboard would be no further along than the middle of the third,” Culp told the Globe. “There’s so much in front of us.”
But he’s yet to win over a key audience: The GE union for workers at the Lynn plant feels the CEO is neglecting some of the company’s domestic factories. The Lynn plant still has a punch-press system dating to 1943, one of numerous outdated machines throughout the plant, said union local president Adam Kaszynski.
“We know Culp knows how to invest in a plant to make it more profitable, efficient, productive, but we aren’t seeing it here,” Kaszynski said. “We’re fighting for every scrap of investment.”
In Boston civic and business circles, Culp remains a sight unseen, and few expect him to emerge after the pandemic.
“We in the business community don’t see him very much at all, but we understand why,” said Mary Jo Meisner, the former Boston Foundation executive who focused on civic leadership and now consults to CEOs. “We want the company to stabilize and stay here.”
GE’s troubles have caused some worries about the depth of the company’s commitment to Boston. However, like Immelt, Culp sees value in being in a hub for innovation talent.
“The company being in Boston is just a glove-fit for what we’re trying to do,” he told the Globe. “Boston’s hard to beat. We’re happy to be here.”
Culp does share a particular abiding passion with Bostonians: He is a lifelong Red Sox fan, adopting the team as a kid growing up outside Washington in the 1970s while playing on a Little League team called the Red Sox.
Like many CEOs, Culp likes to use sports analogies. He recently summed up his approach to steering organizations through a tough situation this way: “We simply got to get Dave Roberts to second base.”
The reference is to that celebrated moment in the 2004 playoffs against the Yankees, when pinch-runner Roberts stole second, setting off a chain reaction that resulted in the Sox winning their first World Series in 86 years.
Culp, in many ways, is sweating the small stuff to achieve what seems like the impossible — a company restored to something like its old health and international stature.
“Boston has a lot of comeback stories in sports, but I think those are relevant,” Culp said in a talk for the Boston College Chief Executives Club in November. “There’s always something that can be done to improve the trajectory of things. That’s what we do as leaders, hopefully just find a way to take that next step and encourage folks to sometimes steal second base, and we’ll take it from there.”