BSG From the Boardroom

Boston’s abuzz with the prospect of snaring another corporate HQ logo—this time GE.  As one leaves (EMC?), so others arrive (so we hope).   There is even rumor that this might start a trend, and other brands may follow suit (Baxter spin-out from IL, original code name “Project Tiger” was announced in 2014, others?)

The Boston Globe has been covering this story pretty closely, and when they looked into the potential impact on Bay State executive talent, I got a call to get our POV.  Here was their output on the topic.

And that got us here at the firm to riffing on the conversation.   Here was the back-of-the-envelope ciphering we ginned up:

• GE has been trimming costs, selling assets & businesses that do not meet the GE IRR thresholds for several years now.  Good example is Q4 2015 where earnings were up year over year, on lower revenues.  So the formula Immelt and leadership team is deploying is working: sell underperforming businesses and cut costs.  This drives shareholder value.  See here. As well as the number of analysts listing GE as a buy vs. hold/sell.
• What does all this mean for their corporate relo?  The Boston Globe first covered it here. And Reuters was even more blatant here.
  • Given Wall Street freefall in Q1 thus far, and uncertain earnings for Q1 for GE (due out in April), they will likely “slow roll” hiring up here, trying to see which direction economic winds are blowing before potentially overbuilding/overcommitting on the hiring front.  A corporate move like this actually is a terrific serendipity for GE as it functions as a hidden forced attrition mechanism where they don’t have to announce “HQ layoffs” in an effort at cost reduction that results in negative PR and headline news, but rather it is simply a byproduct of strategic decision to move HQ.
  • Depending on oil prices, corporate earnings in Q1, and a host of other macro forces (see our blog post on this after hosting noted macroeconomist Dr. Allen Sinai end of last year and black swans he identified here. GE will probably start to hire (or not) in earnest after Q1 earnings results are announced in April.