DOCSLIB.ORG

The Cult of the Charismatic CEO by CRAIG LAMBERT

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Cult of the Charismatic CEO by CRAIG LAMBERT FOCUS ON RESEARCH RAKESH KHURANA The Cult of the Charismatic CEO by CRAIG LAMBERT In 1997, one of the blue-chip icons of corporate America, him astride his Harley Davidson motorcycle, a knight on an iron AT&T, was in trouble and seeking a new leader. The company steed riding in to save the telecommunications giant. was operating in a deregulated industry and facing declining “The selection of a celebrity CEO can drive up the market profit margins in its core business—long-distance telephone ser- value of a company’s stock,” says assistant professor of business vice. After a three-month search, the board of directors passed administration Rakesh Khurana, Ph.D. ’98, whose new book, over a well-regarded insider, John Zeglis, who was intimately fa- Searching for a Corporate Savior: The Irrational Quest for Charismatic miliar with the complexities of the deregulated business envi- CEOs (Princeton University Press) explores the messianic mania ronment, and instead hired C. Michael Armstrong as CEO. After surrounding such hires. Indeed, the day Armstrong was se- a 31-year career with IBM, Armstrong had headed Hughes Elec- lected, the market value of AT&T stock went up $4 billion. The tronics, a defense contractor with interests in satellite television, AT&T board also lavished money on Armstrong; in 2000, his with great success for four years. Business magazines showed compensation was reportedly $21.8 million, and perks included 40 September - October 2002 Photograph by John Soares Reprinted from Harvard Magazine. For copyright and reprint information, contact Harvard Magazine, Inc. at 617-495-5746. a $10-million guaranteed price on a block of his restricted stock. of corporate stock. In the 1980s, dismayed by declining Armstrong embarked on an aggressive program of acquisi- profitability, these big investors sought to dislodge entrenched tions—cable TV, cellular telephony, and Internet delivery sys- management corps, which were seen as an insular, self-satisfied, tems—as part of his vision of remaking AT&T into an omni-In- underperforming group. These major stockholders financed ternet corporation. That strategy has tanked, and AT&T is now leveraged buyouts by private equity firms like Kohlberg Kravis selling o≠ those acquisitions at huge losses. The stock, which Roberts (KKR) and threw out previous management. When peaked at about $64 per share in 1999, is currently priced at states passed anti-takeover laws, the investors shifted their focus around $10. “The company today looks very much like it did to boards of directors. when Mike Armstrong walked in—a formerly regulated com- Using the business media, investors pressured boards to moni- pany with declining margins in its core long-distance telephone tor CEO performance more diligently. They publicized lists of the business,” says Khurana. “Except this: four years ago AT&T had “Ten Worst Corporate Boards” and took out full-page ads in the $6.7 billion in debt; today its indebtedness is $67 billion. Its bal- Wall Street Journal criticizing specific boards and companies. “The ance sheet, which had been one of the healthiest in the country, message was: ‘We will shame you,’ ” says Khurana. “The hot and is now one of the worst.” (On July 17, AT&T announced that searing kind of shame that makes people at the country club look Armstrong is leaving to become chairman of the corporation at you askance.” Investors worked together to elect their own di- formed when Comcast Corporation bought AT&T’s cable-tele- rectors, and at places like Kodak, General Motors, and Westing- vision business; AT&T took a $13-billion charge for the sale.) house, boards began firing CEOs with a vengeance. At the largest Yet AT&T is far from the worst case. The 200 to 300 companies, up to 50 percent of unravelings of Enron, Tyco, and WorldCom CEOs were discharged. have raised searching questions about cor- The trend toward The trend toward charisma may have porate leadership and even shaken in- started when “the idea took root that if a vestors’ faith in corporate America. These hiring “charismatic” firm was doing poorly or well, it was be- debacles have revealed incompetent, uneth- cause of the CEO,” Khurana explains. “Pre- ical, and massively self-serving individuals CEOs may help viously, CEOs were about as well-known atop corporations. Is this a group of bad ap- as their chau≠eurs. But something hap- ples who all went rotten at once, or—more explain the anguish pened when Lee Iacocca was credited with worrisome—do these executives typify single-handedly saving an American icon. leaders at Fortune 1000 companies? Khu- Most people forgot about the $2-billion rana, who earned his doctorate in organiza- that now afflicts federally guaranteed loan to bail out tional behavior, studying under a joint pro- Chrysler, or the United Auto Workers’ gram of the sociology department and so many firms. givebacks. Iacocca made other CEOs look Harvard Business School, suggests that a bland—there was even talk of drafting corporate trend toward hiring “charismatic” CEOs, rather than him for president. The image of a CEO changed from being a ca- competent executives with relevant skills, may help explain the pable administrator to a leader—a motivating, flamboyant leader anguish that now a±icts so many firms. with a new task. In the late 1980s and early ’90s, business tried Drawing on interviews with CEOs, board members, and exec- to redefine itself; it was no longer about the profane task of utive search consultants, plus extensive data on the country’s 850 making money, but concerned with vision, values, mission—es- largest public corporations, Khurana—who was himself a man- sentially religious terms.” ager with Cambridge Technology Partners for four years—asserts This meant “importing the sacred into the profane,” explains that the CEO labor market “is not really a market. A genuine mar- Khurana, who uses the German sociologist Max Weber’s works ket means many people transacting anonymously and e∞ciently, on charisma as a touchstone. Charismatic leadership, which with the guiding factor that no single actor has enough power to grows from a personal magnetism that inspires devotion, reaches set the terms of the exchange. But CEO jobs are a small-numbers its apotheosis in religious cults. Its ascendance in corporate life market: there are only a few positions, and only a small number of is “a throwback to an earlier form of authority that proved to be candidates perceived to have the skills needed to run a large corpo- very unstable,” says Khurana. “Weber said that charisma and ra- ration.” In a typical year, 90 to 140 CEO positions open up in the tionality cannot coexist. The progress of Western civilization largest 850 companies, the vast majority due to normal retire- has been a movement away from charismatic leadership toward ments. One-third of new CEOs hired are outsiders. rational authority invested in laws and institutions. After Hitler But the path to the top has changed. In the past, management and Mussolini, Americans were rightly skeptical of charismatic controlled the succession process: the new top dog was almost leaders. Separating the individual from the o∞ce is one of the always promoted from within the kennel, typically hand-picked great victories of Western society.” by the outgoing CEO with a rubber stamp from the board of di- Yet in corporate America, the personalities of CEOs have been rectors. (In fact, the CEO often chose the membership of the conflated with the success or failure of the companies where they board, which became a highly self-replicating group.) work. “The only explanation needed for General Electric’s perfor- Then, gradually, the structure of corporate ownership mance is Jack Welch,” says Khurana, noting that GE’s 300,000 changed, as stock became increasingly concentrated in the hands employees in hundreds of divisions within many subsidiary com- of institutional investors. In 1950, less than 10 percent of U.S. eq- panies are omitted from the equation. “Under Jack Welch, GE had uities were owned by institutions (such as mutual funds and a stunning run of profit growth—almost 80 straight quarters,” he pension funds), but today, institutions control about 60 percent continues. “Given the complexity of (please turn to page 97) Harvard Magazine 41 95-5746. print information, contact Harvard Magazine, Inc. at 617-4 Reprinted from Harvard Magazine. For copyright and re he enthusiasm for TESTING TRAP (continued from page 37) performance- face in improving the quality and inten- Tbased accountability plays to the sity of teaching and learning. Similarly, students’ ethnic and economic back- worst weaknesses of the American educa- we can hope that the technical failures of grounds. But such measures are highly un- tion system. After World War II, most in- testing will trigger a response that fo- reliable for populations the size of a typical dustrialized countries nationalized their cuses more on broad assessments of stu- elementary school, and they are particu- education systems, but not the United dent learning. larly unreliable for even smaller sub-groups States. Because decisions about content The worst that can happen is that test- of students. Schools are often misclassified and performance were left to states and based accountability will widen the gap as low- or high-performing purely because localities for so long, they never developed between schools serving the well-o≠ and of random variation in their test scores, un- the capacity to monitor the quality of those serving the poor, thus confirming related to any educational factor. teaching and learning in schools, to sup- the public’s suspicion that expecting high The standards and accountability port the development of teachers’ and ad- levels of learning from all children is un- movement is in danger of being trans- ministrators’ knowledge and skill, or to realistic.
Load more

Recommended publications
  • The Board's Role in Monitoring Strategy – Lessons Learned from GE
    The Board’s Role in Monitoring Strategy: Lessons Learned from General Electric By Michael J. Berthelot, Natasha Lasensky, and Paul Somers January 14, 2019 THE BOARD’S ROLE IN MONITORING STRATEGY The Board’s Role in Monitoring Strategy: Lessons Learned from General Electric Michael J. Berthelot, Natasha Lasensky, and Paul Somers Rady School of Management University of California, San Diego Author Note Natasha Lasensky and Paul Somers are M.B.A. candidates in the Rady School of Management, University of California, San Diego. Natasha Lasensky is a Project Manager in Software and Web Development at PINT Inc. Paul Somers is the Head of Programs for GKN Aerospace EPW, and responsible for program performance, profits and losses, customer satisfaction, and commercial function. Michael J. Berthelot is a lecturer in the M.B.A. program at the Rady School of Management, where he teaches the course, “The Board, the CEO, and Corporate Governance.” Berthelot has served as chief executive officer for two publicly-traded companies and on more than thirty boards over the course of his career. He currently serves on the board of a New York Stock Exchange-listed consumer products company. Correspondence concerning this article should be addressed to Michael J. Berthelot, Cito Capital Corporation, P O Box 5005 PMB #5, Rancho Santa Fe CA 92067. E-mail: [email protected]. THE BOARD’S ROLE IN MONITORING STRATEGY 1 History Thomas Edison founded General Electric (GE) in 1878. During its early years, GE primarily focused on the generation and application of electricity, expanding into plastics and radio broadcasting in the early 1900s.
    [Show full text]
  • GE's Talent Machine: the Making of a CEO
    9-304-049 REV: NOVEMBER 3, 2006 CHRISTOPHER A. BARTLETT ANDREW N. McLEAN GE's Talent Machine: The Making of a CEO For more than a century, General Electric (GE) had been recognized as one of the world’s leading diversified businesses, and regularly found itself at or near the top of America’s and the world’s most admired corporations. From its founding in 1878 by Thomas Edison, the company grew to be a titan in the world of electrical generation, distribution, and use—and a widely followed model of modern management practice. GE was a pioneer of centralized corporate control in the 1930s, an exemplar of the decentralized multidivisional organization form in the 1950s, a leader in strategic planning in the 1970s, and a model of the lean and agile global competitor of the 1990s. Throughout its history, GE always promoted its top leaders from its own ranks. The company’s much admired executive development practices were rooted in the cultural values put in place by Charles Coffin, the CEO who succeeded Edison in 1892. Over the next 20 years, Coffin’s commitment to creating a meritocracy based on measured performance became the foundation for a culture that was to make GE “a CEO factory” as one observer called it.1 Throughout the 20th century, this machine produced a pool of skilled managers that not only met the company’s own needs, but also became a major source of CEO talent for corporate America. So powerfully enduring was Coffin’s accomplishment that a 2003 Fortune Magazine article named him “the greatest CEO of all time.”2 On September 7, 2001, when 44-year-old Jeff Immelt was named the company’s twelfth leader after Edison, he faced a daunting challenge.
    [Show full text]
  • Jack Welch, Former GE CEO, Is Dead - CNN
    3/3/2020 Jack Welch, former GE CEO, is dead - CNN LIVE T V Jack Welch, former GE CEO, is dead By Chris Isidore, CNN Business Updated 2:49 PM ET, Mon March 2, 2020 New York (CNN Business) — Jack Welch, who led General Electric through 20 years of its greatest financial success, has died. He was 84. Welch became CEO of GE in 1981 and led it until his retirement in 2001. "Today is a sad day for the entire GE family," GE CEO Larry Culp said in a statement. "Jack was larger than life and the heart of GE for half a century. He reshaped the face of our company and the business world. Jack was a strong and constant influence throughout my career despite never having worked directly for him." Welch, who was named "Manager of the Century" by Fortune magazine in 1999, massively increased the scope and financial might of GE (GE) during his time at the top of the company. The market value of the stock rose from $14 billion to more than $400 billion, an increase of more than 2,700%, during those 20 years. "He had a tremendous focus on shareholder value," said Je Sonnenfeld, a Yale business professor and founder and president of the Chief Executive Leadership Institute, who taught Welch in the early 1980s. Sonnenfeld noted that Welch also pushed GE into new lines of businesses, with mixed results. For instance, Welch presided over GE's 1986 takeover of NBC-owner RCA. GE sold the business to Comcast (CMCSA) in 2013.
    [Show full text]
  • Jack Welch and the Ge Way
    Vol. 21, No. 1 (3 parts) Part 1, January 1999 © 1999 Soundview Executive Book Summaries* Order # 21-01 FILE: MANAGEMENT STRATEGIC ® Key Management Techniques of General Electric’s CEO JACK WELCH AND THE GE WAY By Robert Slater THE SUMMARY IN BRIEF Jack Welch had his eye on the horizon when he took over GE in 1981. What he saw there concerned him. The previous decade’s high inflation rate and encroaching competition from Japan were changing the rules of the game. Welch knew that while GE looked healthy enough to outsiders, it had to “get a lot better, faster.” That meant change — a lot of change. Welch slashed the size of the work force, delayered management, and reduced the number of business units. For this, he earned the name Neutron Jack. Welch also tore down internal boundaries, improving communication and speeding up operations. He implemented programs that cultivated ideas and rewarded quality. He expanded the corporation’s global reach. For this, Fortune magazine voted GE the most admired company in America in 1998 and credited Welch for having “rewritten the book on management while keeping GE huge, nimble, and immensely profitable.” Management guru Warren Bennis added that Welch raised GE from “big and good” to “big and great.” INSIDE . Welch molded GE into the powerhouse it is today, raising its revenues Understand Your Role to record levels by the late 1990s. And he did it his way. As Leader 2 By understanding his role as a leader. By unloading the bureaucracy that weighed it down. Decide What You Do Best By looking for new ideas inside and outside GE.
    [Show full text]
  • Essay 6 Unemployment: the Jack Welch Tweet & Fake Jobs Numbers
    Essay 6 Unemployment: The Jack Welch Tweet & Fake Jobs Numbers Please open, read, and refer to the following articles: Jack Welch https://twitter.com/jack_welch/status/254198154260525057 October 5, 2012 Jack Welch sets Twitter Ablaze with Obama Job Jab https://www.reuters.com/article/us-usa-economy-jackwelch/jack-welch-sets-twitter-ablaze-with- obama-job-jab-idUSBRE8941CR20121005 https://unemploymentdata.com/employment/jack-welch-unemployment-twitter/ October 10, 2012 Jack Welch defends his jobs report comments (again) http://www.cnbc.com/id/49358414 Was Jack Welch right on Twitter? https://unemploymentdata.com/employment/jack-welch-unemployment-twitter/ Donald Trump March 10, 2017 19 Times Trump called jobs numbers ‘fake’ before they made him look good https://www.washingtonpost.com/news/wonk/wp/2017/03/10/19-times-trump-called-the-jobs- numbers-fake-before-they-made-him-look-good/ Sean Spicer, Former White House Press Secretary March 10, 2017 https://www.cnbc.com/2017/03/10/white-houses-spicer-trump-says-jobs-report-may-have-been- phony-in-the-past-but-its-very-real-now.html Management of individual companies and of the broad economy requires data upon which to base decisions and plan a course of action. It is vitally important, then, that this data is consistent, reliable, and unbiased. One of the more closely watched and most relevant sets of data is that regarding the labor market. The Congress is interested in this data because it is responsible for the fiscal policy that can help or hinder the labor force in finding or keeping a job and in receiving rising or stagnant wages.
    [Show full text]
  • GE Mini-Case
    Firms and Markets Mini-Case Jack Welch and General Electric Revised: August 31, 2001 Jack Welch and General Electric have garnered almost cult-like followings on Wall Street, illustrated by Welch’s $7.1 million book deal. But what has made GE so successful under Welch? Why has its performance been so consistently good over more than a century? A Short History of Leadership at GE General Electric was incorporated in 1892 as a combination of three existing companies. It was an original member of the Dow – in fact, the only one still in existence. Its stock has consistently outperformed the market for a century and its leaders have been routinely praised for their insight and ability. See Exhibits 1 and 2. James Surowiecki in The New Yorker (December 18, 2000) notes: In the twentieth century, GE was the industrial equivalent of the New York Yankees. Regardless of who ran the team, it just kept on winning. … Charles Coffin kept GE afloat during one of the worst depressions in American history. … [H]e essentially created the country’s electricity infrastructure and outmaneuvered a competitor, Westinghouse, whose technology was superior early on. Gerald Swope and Owen Young reinvented GE as a consumer-goods powerhouse, then had to find a way to make money during the Great Depression. Ralph Cordiner made GE a space-age giant and masterminded its widely imitated decentralization. GE is also well known as a source of successful leaders at other companies. GE Under Welch In December 1980, Jack Welch was announced as the successor to Reginald Jones, himself a highly regarded executive, after an extensive internal search.
    [Show full text]
  • GE Case Study
    GENERAL ELECTRIC, NEW YORK Case Study : Succession Planning at GE M.S.Ramaiah Management Institute, Bangalore | MBA (PRIST-A) | HRM Case Study Presented By : Team Members Introduction : Succession Planning Succession Planning is the process of insuring a suitable supply of successor for current and future senior or key jobs arising from business strategy, so that the career of individual can be planned and managed to optimize the organizationǯs needs and individual aspirations. It encourages DzHiring From Withindz. Introduction : General Electric Established in 1892, Thomas Alva Edison merged his EELC with Thomson-Houston Electric Company to form General Electric. Business Structure of GE at a glance: Commercial Health Energy Transportation Infrastructure Finance Care Forbes ranked GE as the world's largest company. The company has 323,000 employees around the world. In Fortune Magazine's 2005 "Global Most Admired Companies" list, GE ranked first overall. By June,2010 The Ecomagination Revenue of GE will reach upto $25 Billion Case Study : Succession Chart at GE Thomas Alva Edition (1892) Charles Coffin (1894) Gerard Swope (1922) Charles Wilson (1940) Ralph Cordiner (1950) Fred Borch (1964) Reginald Jones (1972) Jack Welch (1981) Jeff R Immelt (2001) Case Study : Summary Succession Planning Process at GE ȂThe leading diversified business in the world Growth of GE from inception and GEǯs commitment to succession planning It explains succession planning and leadership development at GE It examine CEOǯs succession planning under Jack Welch (GEǯs CEO 1981-2001) It shows differences between management style and ideologies of Immelt and Welch Finally, the future of GE under the leadership of Immelt Case Study : Discussion Session Question:1 Critically examine the importance of leadership development and succession planning at GE and explain how it is undertaken at the company.
    [Show full text]
  • Welch-Winning-Engl-Orig.Pdf
    CONTENTS Original Version in PM Bücherei Nr =O-4011 und auf INTRODUCTION P:\ALLE\LITERAT\FREMDLIT\Eingelesen\Welch\Winning Englisch\Welch- Winning-engl-orig.doc "Every Day, There Is a New Question" 1 UNDERNEATH IT ALL ONLY FOR INTERNAL USE! 1. MISSION AND VALUES So Much Hot Air About Something So Real 13 2.CANDOR The Biggest Dirty Little Secret in Business 25 3. DIFFERENTIATION Cruel and Darwinian? Try Fair and Effective 37 4. VOICE AND DIGNITY Every Brain in the Game 53 Jack Welch YOUR COMPANY with Suzy Welch 5. LEADERSHIP It's Not Just About You 61 To the thousands of men and women 6. HIRING who cared about business to raise their hands What Winners Are Made Of 81 7. PEOPLE MANAGEMENT You've Got the Right Players. Now What? 97 WINNING 8. PARTING WAYS ISBN: 0-06-075394-3 (hard-cover) Letting Go Is Hard to Do 119 ISBN: 0-06-079742-8 (soft-cover/Taschenbuch) 9. CHANGE 2005 Harper Collins Publishers New York Mountains Do Move 133 The authors’ profits from this book are being donated to charity. 10.CRISIS MANAGEMENT From Oh-God-No to Yes-We're-Fine 147 YOUR COMPETITION Introduction 11. STRATEGY It's All in the Sauce 165 "EVERY DAY, THERE IS A NEW 12. BUDGETING QUESTION" Reinventing the Ritual 189 AF T E R I F I N I S H E D my autobiography-a fun but crazily intense 13. ORGANIC GROWTH grind that I wedged into the corners of my real job at the time-I swore So You Want to Start Something New 205 I'd never write another book again.
    [Show full text]
  • Jack Welch's Leadership Style
    Jack Welch’s Leadership Style KBS Kumar * Needless to introduce a person of the stature of Jack Welch, but certainly, there is a need to share the contributions of his leadership and versatility to the organization, General Electric Corp. Jack Welch transformed a $13 bn company into a $280 bn multinational conglomerate by the dint of his unique leadership traits. This case discusses the leadership qualities of Jack Welch that made him the world's most admired CEO, who made General Electric the most admired corporate. Introduction Dr. John H Welch, better known as Jack Welch, was the Chairman of the General Electric Corp. from 1981 to 2000. Jack was adjudged as the most admired CEO in US by the Fortune. In an Industry Week survey, his peers rated him the most admired CEO three times in four years. In two decades of his Chairmanship, Jack elevated the market value of GE from US$13 bn in 1981 to a US$280 bn in 2001 by the dint of his leadership qualities (Exhibit 1) and innovative strategies. Under his leadership, GE delivered more wealth to shareholders than any other company. Value Based Management said “Whatever his tactics, the fact that Welch is one of the most successful business leaders of all-time is indisputable. He has swelled the market value of the company to a degree unmatched by any other CEO, an accomplishment not even Bill Gates, Michael D Eisner or Warren Buffett could lay claim to”. GE was the only company in which Jack Welch worked for his entire life.
    [Show full text]
  • GE Annual Report 1999 Financial Highlights
    e GE Annual Report 1999 Financial Highlights General Electric Company and consolidated affiliates (Dollar amounts in millions; per-share amounts in dollars) 1999 1998 1997 Revenues $111,630 $ 100,469 $ 90,840 Net earnings 10,717 9,296 8,203 Dividends declared 4,786 4,081 3,535 Per share Net earnings 3.22 2.80 2.46 Dividends declared 1.46 1.25 1.08 GE ongoing operating margin rate (a) 17.8% 16.7% 15.7% (a) “Ongoing operating margin” here and elsewhere in this report excludes unusual charges in 1999 and 1997. Contents 1 Letter to Share Owners 8 Introduction to GE Businesses 10 Business Reports 27 Community Service 28 Board of Directors 30 Management 33 Financial Section 77 Corporate Information This entire Annual Report is printed on recycled paper. To Our Share Owners, Customers and Employees The final year of the century was our finest, as 340,000 GE people around the globe posted the strongest results in the Company’s 122-year history. ▪ Revenues rose 11% to $112 billion, a record. ▪ Earnings increased 15% to $10.7 billion, the first time GE has broken the $10 billion mark in earnings from operations. ▪ Earnings per share were up 15%. ▪ Free cash flow was a strong $11.8 billion, up 17%. Chairman and Chief Executive Officer John F. Welch, Jr. (center) ▪ Our ongoing operating margin rate grew to 17.8%, and Vice Chairmen and Executive Officers John D. Opie (left) and Dennis D. Dammerman (right) form GE’s Corporate Executive Office. a gain of more than a full point from ’98 and the third straight year of more than a full point improvement.
    [Show full text]
  • Jack Welch and the 4E's of Leadership EXECUTIVE
    JackEXECUTIVE Welch and BOOK the 4E’s SUMMARIES of Leadership convenenow.com/executive-summaries Jack Welch and the 4E’s of Leadership THE Summary McGraw Hill 2005 Introduction In his 20-plus years at the helm of General Electric, Welch transformed a mature manufacturing company into an outstanding products-and- services juggernaut. He increased the value of the company more than ABOUT THE 30 times over. He achieved all of this by defying some of GE’s most AUTHOR venerated traditions (for example, by making hundreds of acquisitions), by making the “tough calls” (he laid off more than 100,000 workers), and Jeffrey Krames by transforming GE’s insular, hidebound culture (he fired the strategic Jeffrey Krames is a bestselling author and frequent guest on CNN, CNBC, planners and made sure that managers listened to workers). and Fox News Channel. He has written for the New York Times, the Wall Street Journal, and The Los But most of all, Welch selected and developed leaders. During his tenure Angeles Times. at the helm, GE turned out more Fortune 500 CEOs than any other company in history. He once said, “The smartest people in the world hire the smartest people in the world,” but the truth is that he looked for far more than smarts. The discipline of the 4E’s helped him to find and develop leaders who would fit into GE’s high-octane, performance-based culture. Those who scored high on all four “E” categories were the ones who ultimately helped him fulfill his goal of building the world’s most competitive organization.
    [Show full text]
  • Case 18 Jeff Immelt at General Electric, 2001–2006
    CTAC18 4/17/07 14:04 Page 313 case 18 Jeff Immelt at General Electric, 2001–2006 When Jeff Immelt took over as chairman and CEO of General Electric on Septem- ber 7, 2001, he had no doubts that his predecessor, Jack Welch – “living legend,” “best manager of the past half-century” – would be a tough act to follow. But little did he realize just how tough it would be. A few days after occupying the chairman’s suite, two hijacked airliners ploughed into New York’s World Trade Center, setting off a train of events that would profoundly affect GE’s business environment. A month later, Enron’s collapse precipitated a crisis of confidence over corporate governance, executive morality, and financial reporting. The scandal at Tyco International – a company that had explicitly modeled itself on GE – reinforced suspicion of conglomerates and their management. It was not long before GE’s own financial structure and financial reporting were under fire. After being lauded by analysts for its smooth earnings growth, rumors of earnings manipulation by GE circulated among the investment community. More specific criticisms were directed at GE’s alleged dis- guising of the true risks of its businesses by consolidating the financial statements of its industrial businesses and its financial services business, GE Capital. In March 2002, Bill Gross, of the IPCO fund management group, argued that GE was primarily a financial services company but, with the support of GE’s industrial businesses, GE Capital had been able to operate on a narrow capital base while maintaining a triple-A credit rating.
    [Show full text]