Analyzing Jeff Immelt Under Examination Condition

Jeff_Immelt

Jeff Immelt

In June 2014, I did my Leadership Integrated Examination at the University of Stellenbosch. It was the final assessment in the leadership module of the MBA. The module took us more than 2 years to complete. This last assessment was an analysis (under exam conditions) of a case study on Jeff Immelt, the outgoing Chairman of General Electric. Jeff is one of my biggest role models in leadership. I recently read his new article in Harvard Business Review – https://hbr.org/2017/09/inside-ges-transformation#how-i-remade-ge. I had to dig out my submission in 2014; and I was pleasantly surprised that the themes of my analysis were spot on 2 years later.

Enjoy my submission below. [Long Post Alert]

Personal Mastery – making the values shift

The story does not start with Jeff Immelt but going back one step in history, it is important to realize the importance of effective succession planning. Taking over a company as big as General Electric is a huge leadership challenge but this is even more complex if one succeeds a giant such as Jack Welch. Till date, some people still do not know the name of the present GE CEO and that shows the larger than life image of Jeff’s predecessor. The first thing that jumps at me comes from Jim Collin’s book – Good to Great. The importance of grooming predecessors and handing over a great company was one of the major takeaways from the book. Jack’s faith and grooming of Jeff paid off and it is easy to see with the continued success enjoyed by General Electric today.

Jeff’s humility and focus on making the company to be the superstar is one of the characteristics of Level 5 leadership proposed by Jim Collins. These are leaders that are not interested in becoming celebrities but rather want the bigger good for their organizations. They are executives “that build enduring greatness through a paradoxical blend of personal humility and professional will”. They never want the spotlight but are only interested in achieving a common purpose. Their resolve is to achieve the extraordinary by leading and getting the best out of their people. Because they are not seeking any personal glory, these leaders are able to do what is best for the company and not what will boost their own ego. They are also able to learn from diverse sources and are life-long learners. The humility ensures that all employees have faith that their contributions are not going to land them in trouble.

Jim Collin’s Level 5 leadership relates to the third and fourth wave of leadership values described by Christo Nel and Nolan Beudeker. Interestingly, the third and fourth wave values are very high on stakeholder engagement even when the views are in conflict. It is also very open to respect and diversity of opinions, values courage and the ability to speak out and always creates an environment that embraces debates. His focus is not only on profits but the way profit is made. This shows his level of integrity and a penchant to solve humanity’s biggest problems.

Becoming a CEO the same week the world witnessed a big tragedy in the magnitude of the 9/11 terrorist attack can already destroy the career of a rookie CEO. Jack’s humanity and compassion immediately came to the fore as he showed in cash and kind. One of the attributes of great leadership is courage! The ability to make decisions in the most uncomfortable times is important for any serious leader. His leadership by example in this difficult period helped to instil confidence both internally and externally.
Jeff’s positive nature is one point that has to be emphasised. Marcial Losada’s 1999 research emphasised the importance of this trait. Losada opined that high performing organizations are those that have at least a 5.6:1 mix of positive to negative statements. Even in the midst of uncertainties, a volatile financial environment, tragedy, slumping share prices; Jeff kept the faith up and kept building his team’s momentum. The Gottman Index that was discussed in class uses the same principle of positivity and how it keeps marriages but it can be applied to any relationship including business. Jeff’s reactions to under-performance of GE businesses didn’t put him down. It actually spurred him to work harder and hope for a better future.

Leaders must embrace anxiety and learn to deal with it. In the case of Jeff – his first year saw a dismal performance. He could have reacted the default way and be angry but he decided to see the solution and that it does not lie in the problem itself. He knows that the ideal future must be created far from the current future. He needed to evolve a culture of innovation that was not a strong point of GE prior to this period. GE’s tyranny of competence in this regards was their solid track record and big financial muscle. But that is not going to sustain their leadership position.
Jeff was also able to check his critical voice and exhibited boldness in his decisions. He knows what he achieved under Jack Welch and the way he achieved those things. His critical voice could have kept him down especially with his Vision of turning GE into a more innovative company. If he decided not to rock the boat, there is no ways he would have been able to achieve the results he wanted.


Driven From the top but fuelled throughout

The concept of systems thinking is very strong through this case study. In actual fact, systems thinking might have saved General Electric. Most organizations continue to tow the same path once they are able to make profits and have perfected a business model. The danger is that the future is very unpredictable and only organizations that are able to continue evolving would survive and indeed grow. Jeff’s ability to realize that the current future of GE is not enough to take the company to its ideal future is a turning point. He was able to understand that their present capabilities, ways of working, products and services cannot sustain the level of growth he has anticipated for GE. One of Jeff’s greatest strengths is his VISION. He was able to see the future and hence it was easier for him to understand the ideal future better than most people. I bet some of the stakeholders would have been aghast at his bold vision and declarations. Why would anyone want to change a winning formula? Daring to dream carries its risks but also the reward and is the only way to grow a company in a very competitive and recession business environment of those days. I had some fear of derailment for Jeff’s very high content Vision profile as it might have cost the company a great deal if he made a wrong investment decision. His risk appetite was a bit high and he might have been over-confident of the capabilities of General Electric.

Though Jeff made some departures from some of GE’s traditional ways of working, but one important component he kept that helped him to succeed is tightly linked to the characteristics of GE as an organization with 3rd and 4th value waves. The characteristic is of a high performing organization with a decentralized structure that shares skills as needed. He was also able to articulate his vision for the company and this was backed by his high Interdependence profile. Some leaders are only able to generate vision but lack the ability to share the vision with their team. All through the case study – Jeff successfully led the change at General Electric by being able to inspire his team to greatness. There is also a spirit of team work with silos broken down to foster innovation. GE created an environment where diverse units are able to collaborate to create winning products. An example of his courage shows up again by his resolve to foster innovation in the face of a financial crisis. Some other business leaders would only want to consolidate and use defensive strategies for their organizations to survive but Jeff wanted more! He went on the offensive by having concrete actions to secure the ideal future for GE.

A potential derailment for GE in their expansion and R&D effort might have been to forget the need for continuous operation excellence. It is very impressive to see that the company balanced their day-to-day activities and their preparation for the future. The commitment of GE to both transactional and transformational leadership development is very commendable. The investment in their people through various initiatives like academies was another way of deriving competitive advantage.

Freeman’s stakeholder theory became very important for corporations especially after the Enron scandal and other financial crimes committed by big companies. The role of business in society is now a big focus with different regulatory and legislative instruments in play. A big corporation then has to be led by a CEO that is authentic and open to stakeholder engagement. Hiding information raises serious concerns for different stakeholders including shareholders, regulatory agencies, labour unions, customers, etc. With the share prices down in the first few years of taking over and a growing resentment of big business; Jeff was the perfect kind of leader that could instil confidence in the company’s ability to remain profitable but also committed to sustainable business practices and social responsibility. His resolve to share information and also drive GE into an age of corporate social responsibility is very commendable. GE today remains one of the most recognized and respected brands due to that move. Most companies have to understand that firms of endearment principles guarantee continuous talent attraction and customer loyalty.

Putting the right people in the different sections of the company to lead from there is also a strategy well-utilized by Jeff. It is also easy to see that the people are energized and empowered to contribute to the growth of the organization. Jeff was also not afraid to make changes like reducing the number of business units.

Transforming (leading) the organization through a culture of performance towards the ideal future.

Change management is very hard and leaders like Jeff with such a big conglomerate face such a tough assignment in propagating a paradigm shift throughout the organization. One of the greatest challenges he faced was integrating the newly acquired businesses that were central to GE’s growth strategy into the mainstream GE organization. His ability to change his own thinking and world view despite having worked mostly in the old GE ways was essential to the successful change process. So, instead of trying to take his people out of the box, he took himself out of the box first. Recruiting a CMO, A VP for corporate social responsibility, making tough decisions to guide GE into the new era showed his own commitment to change and spurred on his team to do same. He also understood the principle of Leader as a Learner. Their “Experienced Commercial Leadership Program” was a major avenue to develop GE leaders. He is also very cautious in his optimism about change by recognizing the fact that change is a long process. The case study might have been more enriching if some of the challenges and dynamics that go with changing such a big organization including the phases are shared. It is not probable that some resistance was not experienced.

Innovation thrived in GE due to Jeff’s commitment to new economy values. There was no parent-child relationship with his team and it was very easy to break new grounds due to a very open environment where ideas were shared. That is one of the reasons GE continues to be a leading company in several product lines ranging from financial services to air jet engines. This also shows that leadership is not about technical abilities but a call to lead people to inspire the genius out of them. The wide range of products and services in GE’s portfolio is a great pointer for this.

Stakeholder engagement strength of GE is based on the way they treat their customers not as a revenue base but as partners. This creates an environment of trust and innovation as the company is able to better understand the needs of their client even before the client realizes it. This spurs growth and profitability and attracts customer retention. He sets good examples by doing what he preaches first and his team had no choice than do the same. Jeff doesn’t only create futures with his internal team but also with customers.
Jeff once said that the two most important jobs are managing change and developing people. His train the trainer approach helps to solve the problem of not being able to touch the lives of more than 310,000 employees worldwide directly. But by training and communicating the vision of the company to his inner circles, they in turn pass it down till it reaches all echelons of the company. Mentoring and coaching is thus one of Jeff’s strong points and he is quick to recognize patterns of developmental needs in his organizations and proactively bridges the gap through continuous training. As a leader, he is also not anxious about his weaknesses but rather learn from others. GE’s use of Six Sigma that was popularized by companies such as Motorola and Lean principles made popular by Toyota shows that Jeff is a life-long learner. They could have considered building their own improvement models but instead they used existing and proven models and this saved the company a lot of money.

Great leaders celebrate little and big victories. They also encourage their people with these celebrations and this fosters a willingness to do more. Jeff celebrated when it started becoming obvious that the company is turning around the corner. The ability to create a new ideal future based on new strengths and capabilities is a big deal especially in the face of torrid financial climate. But it is also easy to see that he is not a man that stagnates after victories. He kept asking for more from himself and his team. The result of such principle guarantees that GE has a view of ground breaking technologies that will be launched in a much longer horizon than many other companies. Long term thinking and inspiring teams for the future is important for leaders. Company’s growth is limited to the extent that the leaders can visualize into the future.

Diversity awareness also showed strongly in Jeff’s thinking. The world is now a global village and businesses can no longer limit themselves to their countries of origin or their favourite turfs. GE would have been in some trouble if not for Jeff’s understanding of economic models. Due to GE’s heavy investment in infrastructure business – it is very easy to see that the United States which has most of its infrastructure developed already cannot keep providing the growth needed for GE. Hence, the bold move of exploring opportunities in the developing world like China and India is paying off. This would surely open the market further to the African continent where GDP is growing at a better rate than the developed US and European economy. Developing capabilities in those regions is one of the competitive advantages that GE is enjoying today. Countries like China are producing more Engineering graduates annually than any other country in the world and this provides a skill pool for a company like GE to tap into.

Jeff has led GE to turn their big size which could be a derailment risk as it stifles innovation to a huge advantage. It takes a high impact leader who has the focus and ability to inspire teams to success to pull off such a daunting task. In his words – “our goal is not just to be big, but to use our size to be great”. One of the ways they have used this advantage is the principle of portfolio diversification that allows the spread of risk over many product lines. This eventually nullifies the risk as some products perform very well, some just well and some maybe poorly.

Jeff uses situational leadership styles brilliantly at GE. In the beginning when things were very tough and he needed to make tough and urgent decisions, it was clear that he didn’t do a lot of deliberations but made the choices. As things stabilized, it is easy to see that he became more collaborative and interdependent with such initiatives such as Imaginative Breakthroughs. This is an important attribute of great leaders which is to have different responses to situations as they arise.

Another lesson from the good to great company studied by Jim Collins applies to Jeff Immelt. The hedgehog concept showed that breakthroughs in transformation require an understanding of three intersecting elements namely: a) what a company can be the best at; b) how its economics work best; and c) what ignites the passions of its people. Jeff kept asking those questions and that is the reason they have been able to drive innovation and used continuous improvement processes like Six Sigma to cut costs and improve quality. Also, by encouraging their people, GE is able to get the best out of them in terms of creativity.
I would have loved to see what Jeff is doing regarding succession planning as it is important for the company to continue its strong growth.

Conclusion

Jeff’s leadership challenge was a very inspiring one and the way he has taken GE to greater heights is a testimony to this. Succeeding such a charismatic leader as Jack Welch already posed a big challenge to anyone but Jeff with his big dosage of positivity was able to weather the storm. His humility shines through as he is not one of the rock star CEOs and people pay more attention to the brand. I think the next CEO of GE will benefit from the focus on the brand. I consider Jeff as an authentic leader. He did not try to copy Jack but developed his own style whilst keeping the core principles of the company. His ability to inspire others and drive them to high performance is legendary even in the face of uncertainties.
The world definitely has a lot to learn from this leader.