JEFF IMMELT – AND THE NEW – GE WAY

INNOVATION, TRANSFORMATION, AND WINNING IN THE 21ST CENTURYBy DAVID MAGEE

The McGraw-Hill Companies, Inc.

Copyright © 2009 David Magee
All right reserved.
ISBN: 978-0-07-160587-8

Contents

Chapter One

FOLLOWING A LEADER

“Leadership is about confidence and I always knew I could do this job.” —Jeff Immelt

Jeff Immelt jokes that he had one really good day on the job after taking over as chairman and CEO of General Electric in 2001 before trouble struck. He knew that replacing Jack Welch, who grew the company exponentially during America’s robust economic growth period at the end of the twentieth century while becoming a true celebrity CEO, would not be easy. The last thing he wanted to do was go down in history as another Phil Bengston.

A former University of Minnesota All-American tackle who became an assistant football coach right after graduating from college in 1934, Bengston made several stops in the NCAA and NFL before joining Vince Lombardi’s Green Bay Packers staff. He was the only coach to last the full nine seasons with Lombardi. Serving as defensive coordinator, his low-key approach blended well with the fiery Lombardi, and the Packers won five NFL titles and the first two Super Bowls under their leadership. When Lombardi left in 1967, Bengston was hired as head coach, but he was let go after three seasons with a losing record.

Most observers believe that Bengston never had a chance as the Packer’s head coach. Green Bay’s star players were aging. The Packers had already been to the pinnacle several times. Fans were so used to Lombardi and his ruthless, winning ways that no replacement would be good enough. After all, there was only one Vince Lombardi.

Like the legendary Packers coach, known to be at times aloof and angry with players, Jack Welch was not perfect as a corporate leader despite a titanic reputation. He failed in attempts to make money with retailer Montgomery Ward and brokerage firm Kidder Peabody. He was not able to pull off a $45 billion bid for technology and manufacturing company Honeywell at the end of his reign. And some of Welch’s famed strategies, including continual cost-cutting and a focus on the American consumer showed flaws near the end of his managerial run.

Still, like Lombardi, Welch went out on top as an unrivaled winner, and history shows that there was only one Jack Welch in twentieth-century U.S. business. So following in his footsteps would not be easy for anyone, regardless of preparation or pedigree.

Immelt approached the job with all the self-confidence a person would need to follow in the footsteps of a legendary leader and run one of the most diversified, successful, and respected companies in the world. Drawing upon an Ivy League education (Dartmouth undergraduate; Harvard MBA) and more than 25 years of shouldering many heavy responsibilities as a GE employee, he knew in the deepest reaches of his mind that he could ably lead the conglomerate well into the twenty-first century.

The Competitor

Born in Cincinnati, Ohio, in 1956, Jeffrey R. Immelt is the son of a school teacher and a retired GE employee who put in 38 years of service. From an early age, his parents—Joseph, who was a middle manager in the GE Aircraft Division, and Donna, who taught elementary school—emphasized the value of learning for Jeff and his older brother, Steve.

“(My parents) believed that a good education was the great social equalizer, something that stays with you your whole life and that allows anyone to live their dreams,” said Immelt.

While attending Finneytown High School, Immelt was known as a fierce competitor, buffering his battle to be the best with a comfortable personal style. As a prep basketball player, for instance, he once spoke up to the coach in front of the team, suggesting that the coach was yelling at the players too much. Immelt remembers catching the coach off guard with his bold assessment. But then, he said, the coach took his advice, backing off from his verbal lashings to the team.

Immelt was an A student in high school, and sports were a passion. He liked the measurements provided in the classroom and on the playing field, places where grades and scores yielded tangible, quantifiable results. Standing six-feet four inches tall with a firm handshake and full, bushy hair, Immelt was an imposing presence on the football field. An offensive lineman, he wanted to play in college at an Ivy League school. Dartmouth provided the very complementary academic/athletic collegiate opportunity he was looking for.

“Sports or other competitive collaborative activities are an exceptional way to develop leadership, teamwork, and the ability to deal with success and failure,” says Immelt.

According to classmates at Darmouth, Immelt was a beloved, all-around student, getting As in the classroom as he did in high school, playing football, and having so many friends it could at times be burdensome. A member of the Phi Delta Alpha fraternity freshman pledge class of 1974 with Immelt, Jeff Crowe recalls being struck immediately by the “very, very quick-witted, natural born leader.” Immelt pledged Phi Delta Alpha, reputed as a more “social” and “beer drinking” fraternity, even though more Dartmouth football players were members of another. From day one, says Crowe, “it was a foregone conclusion that Jeff would be president of the fraternity.”

Immelt was, of course, named to the fraternity leadership position as a junior. The Wednesday chapter meetings could be raucous affairs, with one brother trying to outshine another. Yet Immelt possessed a take-charge ability, his classmate says.

He was a leader on the football team as well. In the huddle, Immelt was calm in the heat of battle, typically making jokes talking with teammates about subjects other than the play at hand to diffuse pressure. He might make light-hearted fun of an opposing defender or remind the quarterback of a bone-head move the weekend before.

Immelt was named captain of the football team his senior year, and he held similar status with his fellow math major students. He was popular throughout campus, friends with virtually the entire Dartmouth student body. He liked to have a few beers and laughs with friends, but he was also serious with a keen eye on the value of education.

“Jeff was in high demand,” recalls Crowe, today a partner in a venture capital firm in Palo Alto, California. “Somebody was always looking for him to do something, to hang out. But Jeff was determined. He would sneak out of his room at the fraternity house and go down the fire escape and go to the Catholic Student Center so he could study by himself.

“That is still a standing joke about Jeff among his fraternity brothers.”

In the summertime in college, Immelt returned home to Cincinnati and worked at a Ford Motor Company assembly plant, taking cues from employees on how they responded to interaction with management. At graduation, Immelt was given an award for character voted on by the entire senior class—he once passed the high honor off in a show of humility by suggesting in a joke that it was given to the student who could chug the most beer—and five years later at the first class reunion he was selected by peers to address the class.

“That shows you what people thought of Jeff,” Crowe says. “This was an Ivy League school with a lot of talented people who could easily fill that role.”

Immelt remembers the year he graduated from Dartmouth— 1978—was a tumultuous time in the world, filled with uncertainty.

“High oil prices had pushed the economy into recession,” he said. “Jobs were hard to find, and unemployment was over 10 percent. There was unrest in the Middle East. Americans were being held hostage in Iran.”

With a Bachelor of Science degree in applied mathematics, he took a job with Procter & Gamble, briefly sharing an office with future Microsoft CEO Steve Ballmer, himself a new company hire. But Immelt did not stay at Procter & Gamble long, enrolling one year later in Harvard’s MBA program. In Boston, he lived with friends from Dartmouth, who noted upon Immelt’s taking a job with GE in 1982 that if he stayed at the company for the duration of his career, he would likely end up as CEO. And apparently, his friends were not the only ones noticing Immelt’s confidence and poise.

When Immelt was interviewed for the GE job while at Harvard, he met with eventual company vice chairman Dennis Dammerman, who was so struck by the young prospect’s poise that he sent his application “straight to managers” so the application would not “get lost in the mix.” Immelt was hired in the company’s commercial leadership track training which meant that he would work in jobs across GE’s diversified businesses before landing a management position.

“He was the best guy I saw that day,” recalled Dammerman, who would become one of several key mentors to Immelt during his GE career.

Following in his father’s footsteps as a GE employee, Immelt started as an internal sales consultant in the marketing department at company headquarters in Fairfield, Connecticut. From the start, he was not just another employee, having been marked by Dammerman as one to watch, making the company’s list of 5,000 employees worth watching and evaluating for management advancement. Within one year of his being hired, Immelt was moving along the upward track, promoted to the company’s plastics division based in Dallas, Texas, as a district sales manager.

Immelt’s timing in joining GE could not have been better considering all business barometers were pointing upward for the company and a new, aggressive CEO named Welch was barely into his second year leading the company. Welch himself followed a well-respected business leader, succeeding Reginald H. Jones in 1981 after Welch was chosen from a pool of qualified candidates in a succession contest. Welch wasted no time in restructuring the company Jones built, eliminating more than 100,000 jobs in his first few years in office and literally writing and delivering in the early 1980s the preamble to how to grow a business in a slow-growth economy.

Welch’s road map to success was no secret to those who studied his style:

• Sell old-line businesses.

• Acquire number one or two businesses in segment or businesses which strengthen GE’s number one or two businesses in segment.

• Cut costs and jobs.

• Eliminate bureaucracy.

• Cultivate bottom-up employee initiative.

• Push management hard from the top down to outperform expectations.

Lessons Learned

In the beginning of Welch’s tenure, many GE employees cringed at the rapid-fire, shrink- to-grow management strategy he employed. The company was profitable and respected when Welch took over, yet he was cutting jobs by the thousands! In response, some in the media and inside the company nicknamed him Neutron Jack, presenting him as a corporate villain.

Jeff Immelt was not among Welch’s critics. Welch could be excruciatingly demanding, but from the moment he took over until he retired in 2001, says Immelt, Welch was the right leader at the right time. Like Dammerman, Welch soon became a mentor for the up-and- coming company manager. Immelt, in fact, got to make a presentation before Welch in 1982, just 30 days after going to work for GE in marketing. The meeting was in contrast to a prediction by a Morgan Stanley partner trying to woo Immelt to work for the financial company. Immelt was told if he went to work for GE, he would likely not even meet Welch for another decade. In just one month, however, he was in a meeting with Welch.

Dating back to its founding in the late 1800s, GE’s culture was based on a hire-the-best, train-them-well, and promote-from-within process built on the premise of creating strengths for the future from the already-existing foundation, thus resulting in long-term sustainability. When Welch took over in 1981, for example, the company had results-oriented management practices in place but needed to be leaner and more aggressive in acquisition to grow. So Welch went to work. History shows he was more of a trailblazer than a status quo executive, but many observers and employees did not really understand either the methods or the madness of his actions at first.

Shrink the workforce to grow the company?

This corporate concept was foreign at the time.

Soon enough, however, GE’s stock price was ticking higher and higher, soaring over the span of two decades from a market capitalization of $14 billion to more than $400 billion. Revenues were growing fast as well, and it was not long before U.S. CEOs were mimicking Welch’s harsh-talking, results-oriented style.

Throughout his career, Welch could be a hard man to work for if you did not like direct, confrontational criticism. But if you made or exceeded your numbers as a manager, he was quick to reward with generous bonuses and stock options, as Immelt found out in his first big assignment as regional sales manager for GE Plastics in Dallas, where he oversaw 15 direct reports. He got off to a robust start and had a good feeling about Welch and the future of GE.

Immelt knew from his nearly four decades with GE of the company’s reliability, but he also sensed that GE’s best days were ahead. Immelt was willing to do the work necessary to get the job done, sending the company and his career to a loftier perch. He was a Harvard MBA, but he was not above finding solutions even if it meant working the manufacturing floor.

“I was in El Paso on a Friday visiting a customer, and our product wouldn’t work,” recalls Immelt. “The customer was irate! So I called our factory. They told me that we couldn’t get a replacement product until Monday. I spent the entire weekend fixing and packaging parts with my customer. It never crossed my mind to say to them … ‘I can’t do this; I have a college degree!'”

From overseeing his first group of direct reports, Immelt says he learned to manage everything from “crusty veterans” to “young hotshots.” He also learned in pushing for sales growth at the plastics division during tough economic conditions that GE was all about monthly and quarterly results, or else.

“My manager called and said, ‘You had a terrible month. I don’t care if you have an MBA from Harvard, I’m not keeping you if you have another bad month.’ He was just that direct,” said Immelt. “So I learned that in GE you’ve got to get results. I also learned how to sell and how to manage people who were different from me. I really learned a lot from that experience.”

In his early years, among the most valuable lessons learned by Immelt was humility. For instance, during a meeting with Larry Bossidy, the retired CEO of Allied Signal (now Honeywell) and best-selling business book author who spent 30 years rising through the ranks of GE, Immelt proudly bragged on his yearly sales results, which increased by 30 percent from the year before and were just 2 percent over his stretch forecast.

GE’s executive in charge of plastics, Bossidy responded bluntly, “To what do you attribute your poor forecasting?”

Chapter Two

CONFIDENTLY SEIZE OPPORTUNITY

“Generationally, you know, there are a lot of different styles that are out there. What you’ve got to do is have a style that works for you, and you have to have a style that works in the time that you’re in.” —Jeff Immelt

Because Jeff Immelt was pegged from his first day working at GE as one to watch and cultivate for executive opportunity, he was on the fast track to responsibility. Jack Welch was personally involved in GE’s assessment of its top managers, and by the mid-1980s, Immelt’s marks, based on criteria including results and the integrity upon which those results were achieved, were consistently high. GE Plastics was a solid proving ground for Immelt a good fit in many respects considering he was natural in the sales role, able to motivate employees and invigorate customers. GE Plastics is also where Immelt met his future wife, division employee Andrea Allen, a customer service representative.

Andrea moved to Chicago on a GE job transfer not long after they met, but she and Immelt kept dating despite the distance; they married in 1986. A year later they had a daughter, Sarah. Soon afterward, Immelt’s career would vault from that of a young and promising MBA hire to a high-potential executive candidate. By 1987 Immelt was among 150 young, high-potential managers being closely watched by Welch and the human resources team for advanced company leadership opportunities. Under an appointment approved by Welch, Immelt also attended that year the executive development course (EDC) at GE’s leadership training center at Crotonville, New York. Immelt was the youngest of anyone there.

“Beyond the knowledge you gain (at EDC),” Immelt said, “the best part is just absorbing the culture and the values. And the networking makes you feel that you’re part of something great.”

Immelt assumed that a bigger job assignment was coming relatively soon after the leadership training, expecting it to be in a GE division outside of plastics. In 1989 he got an unexpected call, however. Jack Peiffer, GE’s senior vice president for human resources, told Immelt that he was being offered a job in the company’s consumer appliance division in Louisville, Kentucky.

At first, Immelt thought the offer might not be a promotion at all. In the 1980s, plastics were big, and few markets were bigger and more exciting than the plastics market in Dallas in the midst of its heyday. Immelt was an Ivy League man working for one of the world’s most respected companies. He was earning good pay in an emerging city with a distinct touch of flair. Louisville, for the moment, was hardly in its heyday, a part- Midwestern, part-Southern river city that boomed in the early twentieth century on manufacturing but was struggling and in need of reinvention in the latter part of the twentieth century.

Initially, Immelt was not terribly excited about going to Louisville, even as the head of customer service for GE Appliances—the number two producer of consumer appliances in the United States behind Whirlpool. The division was in the midst of a massive product recall, and Immelt knew nothing about appliances. His assignment involved compressors for consumer refrigerators, and GE faced massive recalls resulting from faulty manufacturing. With one of the biggest appliance divisions in the United States, a recall for compressors in consumer refrigerators resulted in a significant challenge. He would have to oversee some 7,000 employees scattered across multiple disciplines when previously he had managed only several hundred in mostly sales and marketing functions.

“You’ve got to be kidding me,” said Immelt, when told he was expected to move from plastics in Dallas to consumer appliances in Louisville. “It was like being sent to the far side of the moon.”

Immelt was told that Welch wanted someone from outside of appliances to handle the recall situation, so he made the move to Louisville, understanding that the invitation was not one he could turn down if he wanted to continue rising in the ranks at GE.

The assignment was a test. Welch had given Immelt the challenge to see if he could fix the ailing business and survive professionally. Immelt immersed himself in the job, seizing opportunity and turning it into a career-vaulting experience.

(Continues…)

Excerpted from JEFF IMMELT – AND THE NEW – GE WAYby DAVID MAGEE Copyright © 2009 by David Magee. Excerpted by permission of The McGraw-Hill Companies, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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