How General Electric’s Former CEO, Jeff Immelt, Is Missing His Greatest Opportunity

Jeff Immelt recently published an article offering advice on leadership. The article was stunning, largely because it fails to acknowledge the dismal results posted by General Electric under his leadership. Nowhere does he show the slightest recognition that his advice is hollow when viewed next to GE’s performance (the worst of the Dow stocks) while he was the leader.   

Much fair criticism can be heaped on Immelt, including what Scott Davis, CEO and lead analyst at Melium Research described as “an abysmal M&A history” and what others have described as “murky accounting.” Compounding bad decisions, or failing to make needed decisions, factors outside of his, or anyone’s control, played a role. Rarely do shareholders consider the limitations of a leader, headwinds they face, or alternatively, sheer luck that leads to positive returns. Indeed, communicating results in context can read as either excuses or that success was accidental.

Investors prefer to believe that if a leader is good, so too will be the results. It’s not that simple. GE had major headwinds including the financial meltdown associated with the housing crisis, the unforeseen losses in long-term health insurance (who knew that providing for care would lead to longer life and greater overall costs). The financial tides went out and GE’s weaknesses were exposed.

Academics will study, write and lecture about the rise and fall of GE, as they should. When Welch retired from GE, the succession captured the attention of the business media, analysts, shareholders and academics. The contenders were known and the two who were not selected each landed a CEO role in major companies (Bob Nardelli at The Home Depot and Robert McNerney at 3M). Immelt was chosen by Welch and confirmed by the board in what appeared a rational process. Sometimes a good process leads to poor outcomes. Boards and executives cannot afford to defend a bad decision because so much effort went into making it.   

The perfection trap

CEOs of major companies are scrutinized in a way that other leaders are not. Their scrutiny is public, often in real time and devoid of context. Many give in to the pressure to be careful, guarded and incomplete in their comments. They issue communications that don’t say anything substantive, authorize annual reports that are vacuous marketing documents and divert attention from bad news. Observers interpret this avoidant behavior as an indicator of untrustworthiness.  

Contrast evasiveness to frankness. How much trust do Berkshire-Hathaway shareholders have in Warren Buffett? Of course, sometimes a leader can’t be open and forthcoming. If they give a reason why, they can maintain trust. Joe Lee, former Chairman and CEO of Darden Restaurants would sometimes say that he couldn’t answer questions for competitive reasons. He didn’t lose trust points, he gained them.

Robert Cialdini, the leading expert on influence, talks about “giving people access to a laudable trait.” Cialdini offers the example of Buffett’s letter, which accompanies each Berkshire Hathaway Annual Report. Buffett talks about losses first and admits error. This is important because, as Cialdini says, “It allows you to exhale. You are no longer on guard.” When leaders communicate in a forthright manner, it frees us up to listen to what else they have to say. When leaders hide bad news, such as burying it in the fine print of an annual report, the audience is preoccupied. Conscious of it or not, they are on guard.

Immelt’s Value

Rather than publish advice about leadership, without any mention of GE’s poor results, Immelt could offer far more useful commentary. He has the opportunity to teach. Here’s how:

• Tell the big story.
• Talk about how leaders must make decisions in context, not mechanically.
• Illuminate the assumptions and corporate habits that helped or hindered the ability to make good decisions. Yes, he will need to mention his predecessor.
• Admit mistakes. Quoting Cialdini, credibility is enhanced by “giving people access to a laudable trait.” Honesty is at the top of the list of laudable traits.
• Opine about the role of luck, misfortune, human limitations (perceptual, cognitive, emotional), and missed faint signals.
• Teach leaders and future leaders that while trust, itself, is intangible, the loss of it is a precursor to crisis.
• Build a legacy that is about learning, trustworthiness, and results that will make your successors proud.

Immelt has an opportunity but if he doesn’t use it, it will evaporate.