The Culp Effect: How Culture Breathed New Life into GE's Bottom Line and Stock Price
- Team Trek
- 20 hours ago
- 3 min read
For decades, General Electric (GE) was an industrial titan, a symbol of American innovation and corporate prowess. Yet, by the mid-2010s, the company was in crisis. Its once-unshakeable stock price was plummeting, its debt was spiraling, and a sense of malaise had settled over its vast operations. Then, in October 2018, Larry Culp stepped in as CEO, ushering in an era that would fundamentally transform not just the company's balance sheet, but its very soul. Culp's arrival marked a radical departure from GE's previous corporate culture, particularly the punitive, blame-oriented environment of the past. Culp, by contrast, championed a lean leadership system focused on continuous improvement and, crucially, a systemic way of working. It was a shift away from "sizzle" and showmanship towards practical, hands-on, problem-solving substance.
From Blame to Blazing a New Trail: The Cultural Shift
Culp's approach, deeply rooted in the Danaher Business System, was a systematic overhaul of how GE worked. He didn't just talk about change; he led it by example, introducing key pillars that redefined the company's culture.
Transparency and Accountability: Culp created an environment where bad news and mistakes were viewed as opportunities for learning, not reasons for punishment. He fostered a culture that encouraged sharing "bad news" to solve problems quickly, expecting leaders to respond with support rather than blame. This was a direct antidote to the fear-based culture of the past.
Leadership by Example: Culp actively participated in "gemba walks"—going to the actual place where work is done—to observe processes, understand challenges, and help teams solve problems directly. This hands-on approach signaled to every employee that their work mattered and that leaders were committed to real, tangible change.
Continuous Improvement: The mantra of "Nobody is perfect, but we're striving for perfection" promoted a culture where even small, incremental improvements were valued. This constant pursuit of excellence became a fundamental part of GE’s DNA, leading to a long-term journey of operational refinement.
This transformation wasn't achieved by just discussing new behaviors; it was about demonstrating them. The company moved away from its old, bureaucratic structures and toward a model of practical change, with Culp himself demonstrating the new way of working by even giving a round of applause to the operators at the front of the auditorium.
The Tangible Impact: Profitability Soars, Stock Recovers
The cultural transformation wasn't abstract; its effects quickly rippled through GE's financial performance. The focus on lean operations led to tangible improvements in every part of the company.
Operational Improvements: The Lean approach led to significant reductions in cycle times and waste, improving quality and delivery across the company's businesses. This efficiency directly impacted the company's profitability.
Financial Stability: The improvements in operations contributed to rising profits, which allowed Culp to aggressively deleverage and restructure the company. This process ultimately led to the creation of independent, investment-grade businesses and significantly reduced GE's debt.
Market Capitalization: The most striking indicator of investor confidence, GE's market capitalization quadrupled during Culp's tenure. Let's look at the numbers. The five years before Culp's arrival were brutal for GE shareholder
Performance Before and After Larry Culp’s Arrival
This period saw massive declines, with the stock losing over 40% in 2017 and an additional 55% in 2018. However, the five years after Culp took the helm tell a dramatically different story:
While there were still ups and downs, the overall trend shifted decisively upwards. The +95.71% total return in 2023 highlights the market's renewed confidence in GE's future, driven by its strengthened balance sheet and operational excellence. This remarkable turnaround wasn't achieved through flashy acquisitions or financial wizardry; it was the direct result of a fundamental shift in how the company operated, from the factory floor to the executive suite.
A Lesson For Leaders
Larry Culp's tenure at GE offers a powerful lesson for leaders across all industries: culture isn't just a buzzword; it's a strategic asset. By prioritizing psychological safety, empowering employees, and embedding a culture of continuous improvement, GE not only averted disaster but charted a course for sustainable growth and profitability. The turnaround wasn't merely a financial one; it was a human one, demonstrating that when you invest in your people and foster a culture of respect and problem-solving, the financial rewards will follow.