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Leadership : The Immelt Era, Five Years Old, Transforms GE
posted by admin on 11/09/06

The CEO spends at least two days a month traveling to meet with GE salespeople, investors and customers.

When Jeffrey Immelt became chairman and chief executive of General Electric Co. in the days before Sept. 11, 2001, it was the house that Jack Welch built. Today, GE is beginning to look less like his predecessor's company and more like his own.

It's more focused on increasing revenue through new technology. Mr. Immelt stresses marketing and customers while pulling back on some internal processes, such as the Six Sigma quality program.

It's more global. GE expects nearly half of its $163 billion in revenue this year to come from outside the U.S., up from 40% in 2001. Mr. Immelt moved the headquarters of the health-care unit to near London, the first time a big GE division has been based outside the U.S.

It's more collaborative and less transient. Mr. Immelt keeps managers in jobs longer, to take advantage of their expertise. He has broadened his circle of key advisers and describes GE's culture as "aggressive but nice."

The changes highlight Mr. Immelt's departures, in both style and substance, from the legendary Mr. Welch. Inside GE, the atmosphere is so different, "I can cut it with a knife," says David Calhoun, who resigned last month as vice chairman to become CEO of Dutch market-researcher VNU.

Yet Mr. Immelt says GE needs to change more. He told 600 senior executives at an annual gathering in Boca Raton, Fla., in January that they still "do too much of this out of some old playbook."

The 50-year-old Mr. Immelt is reshaping the company for a different era than that of Mr. Welch, who in 1981 inherited a bloated conglomerate in need of discipline and cost-cutting. GE managers say he is approachable and reaches deep into the ranks for advice. Mr. Immelt expanded the core executive team to 41 people, from 33.

"I try to draw them out of as diverse set of people as I can," Mr. Immelt said in an interview. "I never started out in this job to be the imperial CEO." He declines to compare himself to Mr. Welch, leaving that to others.

Ron Pressman, the head of GE's asset-management group and former head of the reinsurance unit, agrees. "He seeks out different views and is collaborative, " Mr. Pressman says. "His view may win the day but not without a good discussion."

Mr. Immelt faced a big challenge in succeeding Mr. Welch, whose management style was emulated around the world. But the job got tougher in the next few days, when terrorists flew planes into the World Trade Center and the Pentagon. Over the succeeding year, three of GE's biggest businesses suffered big blows: years of poor underwriting in the Welch era contributed to $10 billion in losses in the reinsurance unit; the downturn in air travel wounded the aircraft-engine unit; and the collapse of Enron Corp. prompted utilities to cancel orders for GE gas turbines for new power plants.

Over time, Mr. Immelt stabilized GE's financials and changed its profile. He sold the insurance business and some older industrial units, while expanding GE's presence in health care, financial services and entertainment, to name a few. This year's projected revenue would be up 50% from $108 billion in 2001. But GE's shares have fallen 14% since Mr. Immelt took over, prompting frustration among investors and employees.

Robert Wright, a vice chairman and head of GE's NBC Universal, says Mr. Immelt is facing a stock market that examines GE business by business instead of evaluating the company as a whole. Despite that, Mr. Wright says, "He's in a good dynamic for a guy who has a lot of weight on his shoulders."

With all the changes, much about the 128-year-old Fairfield, Conn., conglomerate remains the same. Like his predecessor, Mr. Immelt holds executives to rigorous financial targets. Earlier this year, he dumped his own handpicked head of GE's water business, one of Mr. Immelt's key growth initiatives. The new team has been in place for only seven months, but Mr. Immelt has already told executives that they don't have much time to produce improved results, according to people familiar with the matter.

At the NBC network, which fell to fourth place last year, chief executive Jeff Zucker says Mr. Immelt has been more patient and sympathetic, relating stories about his own struggles at the plastics unit in the early 1990s. "He's given us two years," Mr. Zucker says, referring to the ratings falloff after popular shows "Friends" and "Frasier" left the air in 2004. But, he says, Mr. Immelt has told him plainly that "he expects to see a turnaround. He expects us to get out of fourth."

Mr. Immelt has maintained Mr. Welch's policy of weeding out poor performers among GE's more than 300,000 employees. Under Mr. Welch, employees ranked in the bottom 10% were let go. Managers say the 10% rule is less strict but that underperforming employees are still encouraged to leave if they don't improve.

And while Mr. Immelt seeks advice from far and wide, he still makes the final call, even when it's unpopular with his own lieutenants. Last December, he wouldn't ante up enough cash to buy DreamWorks SKG, saying it was too expensive, and Viacom Inc.'s Paramount Pictures ultimately prevailed. The decision is still being questioned among the ranks, with DreamWorks set to release what appears to be a strong crop of films over the next year.

Mr. Immelt rose through GE's ranks as a sales and marketing pro who could also produce results on the bottom line. As CEO, he has honed GE's marketing and placed more emphasis on customer care. He spends at least two days a month traveling to meet with GE salespeople, investors and customers in town-hall-style meetings and smaller groups.

Michael Morris, chief executive of American Electric Power Co., Columbus, Ohio, says Mr. Immelt checks in periodically on the progress of a new cleaner coal-burning power plant AEP is building with GE technology. "He is truly customer-focused," says Mr. Morris, who has also met with Mr. Immelt several times. "That's one of those skills that not every one of the large vendors have."

Mr. Immelt is also trying to bolster the expertise of GE's sales force and operating executives, so they can better understand customers. In 19 years as a GE manager, he changed jobs every 18 months to three years, on average. Now, he is committed to keeping managers in place for around three years, though it can be longer: Joseph Hogan has run the health-care unit for six years.

Mr. Immelt says GE's aircraft-engine unit made it through the Sept. 11 fallout because its aviation veterans knew their customers. "They had knowledge. They had gut feel. They had intuition," he says. "The businesses that work best here were businesses that had real deep roots in the industry they were in."

Just as Mr. Immelt himself has done, he is urging employees to make bigger bets without fearing for their jobs if they fail. "Make it personal," he tells them. He is backing them up, putting money behind projects like a high-speed imaging diagnostic machine that captures multiple images of the heart and coal-gasification technology aimed at reducing emissions that contribute to global warming. GE expects to generate about $7 billion in sales from these and other new pet projects selected by Mr. Immelt this year.

Simultaneously, Mr. Immelt is pushing GE to be a more global company. He travels at least twice a year to both China and India. Revenue from outside the U.S. is estimated to nearly double to $80 billion this year, from $44 billion five years ago. Globalization also means creating a more diverse work force. The number of non-U.S. citizens among GE's top 500 managers has tripled since 2001.

Write to Kathryn Kranhold at


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