Tuesday, April 28, 2009

Immelt's GE: Reset's Poster Child

Jeffrey Immelt, the CEO of General Electric, is fast becoming the poster child for Reset in the US corporate community.

My friend Jon Hoch from Connecticut was the first to point this out to me. He sees Immelt's GE (and Ford Motor Company as well) as looking at the current turmoil and uncertainty as an opportunity for adaptation and Reset, rather than hunkering down and waiting out the storm.

If you are wondering what Reset looks like in practice, look at Immelt and GE.

In February, he refused an $11.7 million bonus to which he was contractually entitled.

Then, he cut the treasured annual GE dividend, a symbol of GE's consistent growth and stability, for the first time since 1938. The next day, as the stock dipped to its lowest point since 1993, Immelt personally invested in the company buying 50,000 shares.

He has shrunk GE Capital (GE's finance unit) by 30%, both to reduce volatility in the company and in recognition of the fact that the financial industry will be much more highly regulated than it has been in the past. He has made it clear that more cuts are coming.

In his letter to shareholders, dated early February and released with the GE Annual Report in March, he took full responsibility for the bad news, but also challenged his GE colleagues to be energized, not frightened by the challenges facing them. If they are frightened, he told them, they should leave. If, however, they are energized, the opportunity to transform GE should be "thrilling." He also confirmed that the company would be pumping $10 billion into technological research and development.

Then in his mid-April speech at the annual shareholders meeting, Immelt predicted that GE would Reset, but so would capitalism with government permanently playing a more robust role as industrial policy advocate, financier,and partner.

So, let's tease out the Reset principles here.

First, Immelt has recognized that the future is unknown and unknowable, except that it will be very different from the past.

Second, he has chosen between the expendable and the essential. Reset is a time to make hard decisions about what to preserve of all that is valued and created success(i.e. manufacturing), and what to leave behind in order to survive and thrive in the new world (i.e. GE Capital and the 50 years of never cutting the dividend). All this while taking responsibility for each decision and for the pain they are causing those involved.

Third, model the behavior you are asking of others, so that people see you, too, feeling pain and taking risks (ie invest your own money).

Fourth, be simultaneously brutally realistic and unflaggingly optimistic.

Fifth, run some experiments, make some big bets, invest in the future.

Sixth, practice interdependence by challenging and inspiring own own people to take responsibility for joining you on the journey and reinventing the future.

These are ideas that can be applied to any business, non-profit, or government agency. What is required is courage and skill.

Immelt is making big bets and taking big risks. If he is right more often than he is wrong, GE will be even stronger in the future than it has been in the past. If he is wrong more often......


P@ola said...

An interesting and clarifying example: thanks
I appreciate.

Rodrigo Silva Ortúzar said...

Awesome example!!!
I will follow his case.

Franklincovey said...

The article is ver good. Write please more