Succession at GE: What’s Next?

by James Heskett

Summing Up

It was announced today (November 27) that Jeffrey Immelt, 44-year-old president and CEO of GE Medical Systems, will succeed Jack Welch as CEO of GE. A CNN online news flash stated that he is "a natural leader," "ideally suited to lead GE for many years," possessing an imposing "physical presence," "intellectual strength," a "natural sense of humor," and the "ability to present himself well to both Wall Street and the average worker."

Given this, you may conclude that our discussion of the past several weeks about the important qualities and capabilities to be sought in a successor to Welch is moot. But as in any good Harvard Business School case discussion, hindsight provides neither a guide to the future nor necessarily the best response. With that as background, what was your advice (very timely, as it turns out) concerning GE's choice of a possible successor to Jack Welch?

In your responses there was little of the talk heard in the media about whether it will be possible for someone to successfully succeed Welch. The prevailing opinion was that the kind of leadership that Welch has provided and the values he has instilled in GE's management—speed, simplicity, self-confidence, and boundarylessness—are uniquely suited to the preparation of a successor who can take GE in new directions under the umbrella of the same set of values and the behaviors they inspire.

It was assumed that the successor would be named from within the organization. Only one respondent, who for some reason chose to remain anonymous, suggested that "new talent offers new perspectives and insights that insiders cannot see."

As for qualities and capabilities sought in Welch's successor, the discussion yielded mostly the usual suspects. For example, qualities cited (other than the ability to listen, learn, and teach; a vision of the future; and the ability to inspire confidence, which were mentioned in the article) included "energy, dynamism ... tremendous stamina ... a sound understanding of the principles of 'change,'" and a working knowledge of "new" economics, in the opinion of Devdip Ganguli. Roberto Rodriguez added "global thinking" and "entrepreneurial spirit" to the list.

While citing the need for qualities such as "a primal understanding of human nature" and "an intensely human soul that champions dignity and freedom of spirit," Arjun Balakrishnan also pointed out the need for someone with "a solid grasp of big-picture forces ... the ability to understand gender (and) generational diversity ... (who) seeks to surround herself/himself with competent people who are smarter than her/him ... (and who) wields power ... with responsibility and not ego."

In total, that's a tall order. Jeffrey Immelt, are you up to it?

Original Article

GE will have a new CEO soon, regardless of whether Jack Welch keeps the job of chairman a bit beyond April 2001. With that in mind, questions arise about what capabilities GE's board should seek in Welch's replacement.

Are there clues in the way Welch was selected in 1980?

At the time, GE was led by Reg Jones, by any measure a tough act to follow. The company's performance had been strong and Jones—suave, dispassionate, and an accountant by background—had been named in several polls as the most outstanding CEO in America as well as a true business statesman in his efforts to build bridges between government and business.

He chose a novel and peculiar way of selecting his successor, asking each candidate in turn whom they would recommend as CEO if the candidate and Jones were both killed in a plane crash. In a second round of interviews, he gave the candidates the opportunity to name themselves as well as other candidates.

As a result of these double rounds of interviews, Jones chose Welch, someone who could not have been more unlike Jones in demeanor and background, someone who had made his name in one of GE's lesser ventures, plastics, and yet someone who obviously had the qualities to lead GE through massive change to the top of the world in terms of corporate value.

Last year I completed a case series on GE, titled "GE ... We Bring Good Things to Life," in which the issue of CEO succession was raised in the last of the two cases. In classes in which I've used the materials for discussion, executive participants have proposed many criteria for the selection of a new CEO. They include personal qualities such as stamina; the abilities to listen, learn, and teach; a vision of the future; and the ability to inspire confidence.

And they include what we might call capabilities, such as comfort with "new economy" ways of doing business; a global outlook; a willingness and ability to partner; and familiarity with various types of businesses, particularly in the service sector. Too often, they have reflected what GE (and other organizations) needed in the past, not the future.

If you were a member of GE's board, what two or three personal qualities and two or three capabilities would be at the top of your list in selecting a successor to Jack Welch? Because GE has had only eight CEOs in its proud 122-year history, beginning with Thomas Alva Edison, you should probably assume that this person will be around awhile.

    • Erich Almasy
    • Vice President, Mercer Management Consulting

    Despite his patrician exterior, Reg Jones was a very pragmatic individual. When he put the three vice chairmen "in play," Jack Welch ran the less-than-desirable Consumer Sector. I was one of dozens of consultants hired to look for growth opportunities and generally create a higher level of activity (Hawthorne Effect, anyone?). One of Jack's pet initiatives was a Sector Venture program that funded a slew of new programs and directly resulted in the creation of what became GE Capital. Jack's motivation was the impending economic downturn of 1981, and his multi-pronged efforts delivered what was thought to be impossible — profit and revenue growth in a recession. Reginald Jones was impressed with Jack's one-on-one performance and the board was impressed with his financial performance.

    • Devdip Ganguli
    • Student, Sri Aurobindo International Centre of Education (India)

    To say that the next CEO of GE—with a market capital of $600 billion, 20 businesses, and 340,000 employees—will have to be a leader is an understatement. The prospective successors obviously have leadership qualities firmly rooted in them: Jeffrey Immelt, president of GE Medical Systems; W. James McNerney, president of GE Aircraft Engines; and Robert Nardelli, president of GE Power Systems. However, to take over the reins of GE, once held by the exceptionally innovative Edison, Mr."Future CEO" needs more than just exceptional leadership qualities. He has to go a step further than just that.

    An amalgamation of what represents GE best also seems to be the answer to what Welch's successor should have. And what does GE represent for us? Energy, dynamism, innovation, and a frightfully (to competitors, at least!) strong will to move ahead of the rest—to progress.

    I believe that Mr."Future CEO" will need these qualities/capabilities...

    A) A tremendous stamina not only to manage, but also to ensure growth in the diverse sectors in the increasingly competitive markets.

    B) A strong insight and sound understanding of the principles of "change." (Unnecessary changes in the strategy of very healthy 'GE Capital' is not the need of the moment, yet a prolonged hibernation of the board will lead to disaster.)

    C) He will have to be up to date with "new" economics, yet have a firm grasp of the age-old principles of commerce.

    D) Have the qualities already discussed (i.e., the abilities to listen, learn, and teach; a vision of the future; and the ability to inspire confidence).

    Ultimately, whomever the chosen one is, let's hope the headstrong and never-give-up spirit of Thomas Alva Edison spearheads him (& GE) into the future.

    • Anonymous

    I believe that GE would have greater success in filling Welch's position from outside the organization. Any one of the top three guys may do a good job, but living in the shadow of Welch—having to prove their knowledge, skills, and strengths, where others already know their weaknesses—can be difficult as an insider. The organization will have its inherent difficulties with the pick. Bringing in new talent offers new perspectives and insights that insiders cannot see. This person would have to meet Jack's profile to an extent, with strengths in areas of future growth. If the outsider failed, then a look inside could be worthwhile.

    • Roberto J. M. Rodriguez
    • Business Development, Ingenio Creativo

    I believe that GE's future CEO will need these qualities and capabilities:

    This person should be a leader capable of global thinking, possessing a nature of entrepreneurial spirit. He or she should have the ability to create knowledge about the business and take advantage of it, reinvent the business faster and smarter than the competition, promote and reward product innovations, and act on foreknowledge.

    • Arjun Balakrishnan (HBS MBA '98)

    The subject of succession at GE is intimately related to the kind of leadership that led to the creation of flourishing empires and civilizations in history. A discussion solely on leadership criteria opens the field to a flood of views that are valuable but difficult to weld together.

    To increase the value of the discussion, it may help to establish the fundamental premise on "what is leadership." With views differing on the subject, we will be in a better position if we define and correlate the qualities and capabilities that make up such a leader. It is often said that the world faces a crisis of leadership in our times. Given that, we will be remiss in not spending time understanding the meaning of leadership. I offer one interpretation here, as a starting point to our discussion.

    The essence of leadership: The art of rallying together a flock of humanity towards a common endeavor. It reflects our higher quest for purpose, meaning, identity, expression, and dignity in our lives, the realization of which is the liberation of our human spirit from any and all forms of bondage, thus enabling the collective blossoming of the flock.

    The ultimate consequence is greater strength, stability, harmony and prosperity that can endure the ravages of time and overcome the weaknesses of fear, insecurity, and everything destructive to our spirits. The attainment of this will lend itself to more universal appeal, and thereby self-selection by a larger sphere of humanity, to constitute a new order of consciousness in a world of decreasing boundaries and increasing interdependence.

    The leader merely serves to orchestrate (in an effective manner) the convergence of the diversity of the flock towards the solution of issues that impede the collective evolution of the flock in their unraveling future. It is an act of harnessing the synergy of diverse energies in a single unified direction for the fulfillment of the greater causes. A greater mission still is that of keeping the group integrally united through daunting times, under any or all circumstances.

    As in all positive and far-reaching change, addressing the issues is a constructive intellectual war on the prevailing system of beliefs. To that extent the leader herself or himself must be a consummate warrior to catalyze that change.

    In the final analysis, there are only two kinds of leaders: those who assume power by the suppression of others, and those who are thrust into power by their ability to make others grow to their fullest. The latter is greater and rarer, but is precisely the nature of all true leadership.

    In my humble view, the economic engine of GE ultimately seeks the same end results of strength, stability, harmony, and prosperity, and therefore will benefit from a leader with a similar essence.