WHY DOES a company spend $1 billion on training? In a word, ‘growth’, says Tom Quindlen, vice president and chief marketing officer of GE Commercial Finance.

With $152bn in revenues and $17bn in net income, GE is one of the powerhouses of the US economy. But although it is one of the world’s smoothest takeover artists, absorbing more than 100 companies a year, its size means that as a matter of arithmetic it takes a bigger and bigger acquisition fix to have an effect on the top line.

As CEO Jeff Immelt has emphasised for some time, the company has to rely for extra performance on organic growth.

If not from buying extra sales, or squeezing costs to boost the bottom line, where will the performance improvement come from to meet the company’s brutally demanding targets? The answer has been termed the ‘middle line’: get ting more from what the company does already every day.

The industrial arm of the 126-year-old, Connecticut-based firm turns out everything from light bulbs to aero engines, medical scanners to environmental technology. But, growing out of customer finance, it also has an increasingly powerful financial services side. GE Commercial Financial Services, previously part of GE Capital, is now the largest single GE division, accounting for $230bn in assets and $4.5bn in earnings last year. Europe accounts for roughly one quarter of those totals.

GE’s long experience of the industrial arena already differentiates it from traditional banking and financial service providers and has served it well among the mid-sized customers which are GECF’s staple buyers. But to meet GE’s growth and earnings goals it needs more. ‘When a customer is making the next buying decision, I don’t want them even thinking of anyone but us,’ says Quindlen. The division is also targeting the very largest corporations, which have historically preferred conventional standalone finance houses, and where the company’s customer base is small.

This is where training and education come in. To get where it wants to be, GE knows it must be smarter. It needs to bulk up its intellectual capital. But to make the most of the stock that it has, it needs something else again. As the director of HP labs once sighed: ‘If only HP knew what HP knows.’ Increasing the middle line means not only GE knowing what GE knows, but being smarter about what it does with it. Unparalleled history and vast accumulated experience are not enough on their own. Being able to mine them for useful knowhow requires social as well as intellectual capital, the type of thing that can only come from networks of formal and informal contacts built up over time across the group.

Part of GE’s social capital therefore derives from a highly unfashionable concept: the career. Quindlen has been with GE for 21 years, which is not unusual for the company, all of whose most senior managers are insiders. His seven moves, encompassing stints in industrial as well as financial services units all over the world, are less typical, although not unique. He says candidly that the possibilities of change and diversity, underpinned by near-continuous training – in his case a formal company session for nearly every year of tenure – were a powerful inducement to stay. In GE’s system, it is training, both functional and leadership, that links personal development with company performance.

‘It all comes back to growth,’ says Quindlen. ‘The investment in training, and the ability to pursue a diverse career within the same company, are powerful inducements to recruit and retain great leaders.’ And great leadership and functional ability, combined with continuity and ‘boundaryless’ networks across the group, make it possible for the group to leverage rich resources in new ways.

One of these new approaches is something called ‘ACFC’ – ‘At the Customer, For the Customer’. ACFC is the kind of free consultancy Marks & Spencer once carried out for its customers, only more diverse and less direct. Apart from the technical stuff, says Quindlen, ‘A lot of customers ask us about the generic things we’re good at: Six Sigma, HR processes, leadership succession, or how to do acquisitions and mergers. So we had the idea of opening up our expertise to customers and partners to solve their business problems.’

In effect, it allows customers to mine GE’s accumulated experience. ‘We lend them our intellectual capital.’ The rationale is that as the customer’s business grows faster, so does its need for financing from GE. Commercial Finance has been particularly adept at this kind of knowledge transplant. It claims to have helped more than 1,200 customers to make a total of $1bn cost savings since 2002, and, although it’s impossible to quantify the impact in terms of new business for GE, most people believe it is substantial.

Particularly attractive to customers has been Six Sigma, a statistics- and tool-based improvement methodology. (A six sigma process is one with fewer than 3.4 defects per million.) But it is controversial: critics charge that it is overly complex and top down, essentially a means for getting people to meet targets.

Quindlen concedes that he was taken aback when asked to take on the job of Six Sigma champion for a commercial finance unit, but came out of it a wholehearted fan. ‘It makes you focus on your core processes from the customer’s point of view,’ he says. ‘When you ask for data, you’re always thinking about the customer.’ Six Sigma has, he notes, changed his view of leadership and made him a better leader.

Coming back to the mantra, it also, he says, helps GE to grow. Better core processes mean better service, so cus tomers come back for more. Six Sigma is in high demand on the ACFC programme, too.

‘Growth,’ sums up Quindlen, ‘doesn’t happen by accident.’ Building a sales organisation is part of it, but it is not simply about sending out more salespeople to rope in new customers. Growth outside can only come from growth inside – organic in more senses than one.

Simon.caulkin@observer.co.uk

CORRECTION: Jeffrey Pfeffer’s article referred to in last week’s column appeared in Academy of Management Review (Jan 2005), not as attributed, and Sumantra Ghoshal’s article appeared in in AM Learning and Education (March 2005). Apologies.

The Observer, 9 October 2005