Online Extra: Q&A with Jeff Immelt
Jeffrey R. Immelt is slated to become the next chairman and chief executive of General Electric Co. (GE ) when Jack Welch retires on Sept. 7. Associate Editor Diane Brady recently sat down with the new chief in GE's Fairfield, Conn., headquarters to discuss the challenges of replacing an icon and leading the company through tough economic times. Here are edited excerpts from their conversation:
Q: Why did you want this job?
A: I have to honestly say I never put it on my internal resume. I've never measured my self-worth by whether or not I got this job. But I do love the company. I like the people in it. And I love to learn. If you love business and you love to learn and you like people, this is just about the best gig you can have.
Q: What are the gaps you have to fill in your education?
A: Because of the way Jack has run the company, I've known a little bit about every business here.... I've never thought about my job as replacing Jack. My job is to lead GE. But I am replacing a guy who has been around 20 years, so he has an incredible depth of relationships. Every employee identifies with him personally. Every customer feels like he is their sales rep. Every investor invests in him personally. It's not like I'm going to have every piece of experience he's had, but I can pick that up. The biggest gap is the relationships. It's being able to pick up the phone and call Phil Condit [chairman and CEO of Boeing] when you have an issue. It's being able to call Lee Scott [president and CEO of Wal-Mart].
Q: They'll probably take your calls.
A: Sure, but the trust -- and things like that -- is what you have to fill in.
Q: Jack led GE for 20 years. And now people talk about a 20-year curve for you -- where you get 10 years to basically screw up and 10 [more] to leave your mark. Do you feel like you have that much time to really ripen in the job?
A: From a performance standpoint, I have no time. You're expected to perform from day one. But this is one of those jobs where you learn every day. In addition to knowing Jack for 20 years, I've known a lot of CEOs. A certain group thought the top job was the brass ring, and others say that's the first day of their life. I'm in the first-day-of-my-life camp, and that's how you survive. You survive by being on edge all the time and by knowing you have to learn. Jack learned every day he was here, and that's the trajectory I'll be on.
Q: What have been some of the more challenging moments since being chosen to run GE?
A: [The unsuccessful acquisition of] Honeywell (HON ). I was involved from day one, but the way we divided the work was that I focused on how to integrate and run the businesses while Jack focused on regulatory approval. He never made a decision without talking to me, and vice versa. It didn't go the way we wanted it to.
Q: There were no quiet sighs of relief when the deal was nixed?
A: None whatsoever. I liked the deal. I spent a lot of personal time on it. The GE team liked it. We were very disappointed when it didn't go through. But in a place like this, the disappointment lasts seven seconds. You wake up the next morning and move on.
Q: Has Jack given you any advice?
A: Not specific pieces of advice, like "Go do this after I leave." Jack's advice is things like "deal with reality, love people, be involved with the public image of the company." Those were the pieces that were re-emphasized during my time with him. His other advice is "Be yourself. Be true to yourself." He knows I'm going to do it my way.
Q: Is your way going to be different?
A: Other people are going to judge that. My way won't be different on purpose.
Q: But surely your styles are different. Isn't Jack the one who says, "Kick ass, break glass!"?
A: You made that one up! My style is that I look at every business from the outside in. My framework is very much the customer and outside market. I'm decisive. I'm accountable. I have good discipline. I believe in people. I know the difference between a good one and a bad one. A big job is how you pick people. I love change. I love trying new things. I really bring to the job a complete growth headset. I've had great experiences in technology and globalization, running sales forces and doing acquisitions, and I bring all those things to the job.
Q: When Jack came in 20 years ago, everyone thought GE was in good shape. But he implemented a lot of change. Do you plan to do the same?
A: The company is going to look completely different in three or four years. We're going to be shaped differently in terms of where the resources are going to be. With the Internet and digitization, the back room and administration are going to be smaller. There will be more emphasis on engineering and selling and what I consider to be front-room activities. That means staff transformation.
My priorities are technology, to continue to expand services, to globalize the company in places like China and Europe, to drive the front end of customer-centricity and to continue to look at the portfolio. I don't look at it as big stone tablets coming down from the mount. We will focus on the initiatives that can deliver growth.
Q: Speaking of stone tablets, do you feel any need to have a Next Big Thing? Something to distinguish yourself from Jack?
A: No. I can take the four initiatives broader and deeper. What I'm doing is putting my imprint on Jack's four initiatives -- linking them on the front end with more customer-centricity. To me, that means three things: reputable processes or things like deliveries on time; your proposition makes your customer more money; and the third part is sales-force capacity. On our best day, one of our salespeople might spend 30% of their time in front of the customer. We're working on tools that make that 70% or 80%, so they can really deliver value.
Q: Is customer service an area where GE is weak?
A: It's an area we can be a helluva lot better in. One thing that always shocks me is why anyone would buy from any of our competitors. When someone comes and says, I bought from Siemens (SI ), I want to faint. We have so much more to offer. The day I stop thinking that, I should look for another job.
Q: Let's talk about another area where some think GE is weak. You look at the senior ranks and it's filled with a bunch of white guys. Is that going to change?
A: That will change because we have a lot of great talent in the company. The fact is, we've got a great pipeline of people in place, and it's my job to make sure they get where they can get. Right now, we've got diverse people running $30 billion within the company, so it's not small. We've got women running $2 billion businesses. We've got Lloyd Trotter. We've got Fuji running plastics. What haunted everybody at GE was that picture [of faces at the top] in The New York Times. It haunted all of us. So that's got to change. I think it's going to happen quickly.
Q: Does that factor into your definition of globalization?
A: There are three things with globalization. The first is being No. 1 with the customer everywhere in the world -- having a local face everywhere in the world. No. 2 is globalization of the intellect. It's designing products in India that you can ship around the world. And the third thing is people. We need more global leaders in GE -- and that doesn't mean Americans with passports.
Q: The question for a lot of investors is how you'll continue to get double-digit growth through the next few quarters with the slowdown at home.
A: The diversity of businesses is even more important right now. This is an unbelievably tough, short-cycle economy right now. We're in a real industrial recession. About 25% of the company is having a very tough time. But our medical business, our Power Systems business, and other parts of the company are doing exceptionally well. This is a good time for GE Capital in terms of acquisitions, asset growth, and delinquencies being low. So we're seeing opportunities in this economy, and we're driving them forward. Back in 1995, we couldn't get an order for Power Systems if our life depended on it. Plastics carried the day. NBC carried the day. That diversity helps.
Q: So can you deliver the double-digit growth?
A: Give me the economy! This economy could get worse. We could go into a real global slump. I hope it doesn't, but if it did, there are scenarios in which GE earnings would be very tough. What I will say is that GE will always outperform any market that we're in. I don't see anything today that says the U.S. economy is getting better. Over the long term, do I think the fundamentals in the U.S. and the need for the U.S. to grow are very profound? Yes, I do. What we see, if things don't get any worse, is we'll continue on a path that's comparable to this year.
Q: GE Capital. If it gets too big, GE starts to feel like a bank. Is that a concern?
A: Not really. We have explained the company as having GE Capital at 40% to 45% of our earnings. As I look forward in the next three to four years, it's going to stay in that range even if we do acquisitions.
Q: On the industrial side, where are the opportunities for acquisitions?
A: Medical continues to be a huge industry, and we're relatively small in that business. We ought to be growing at least in double digits. Our Power Systems and Aircraft Engines businesses have great opportunities to grow their portfolios and grow their service businesses. I'd like to add technology businesses within our industrial and materials businesses. And, for the right opportunity, we'll do more in broadcasting.
Q: What about the lesser cousins -- Appliances and Lighting?
A: We'll stay in those businesses. They both return their cost of capital. I'm not going to acquire more businesses in those industries.
Q: Any chance of divestitures? Jack Welch is on the record saying he tried to sell Appliances at one point.
A: Will the portfolio look different in three or five years? Sure it will. As I sit here today, I don't need to sell those businesses. They generate cash. They're great places to train people. They build the brand.
Q: Are they the weakest links?
A: You know, it's like picking between children. I love all my children. Some will go to soccer camp, others will go to football camp. It's not appropriate to talk about that right now. But we differentiate where the investments go and where the acquisitions go, and we will not do any acquisitions in Appliances or Lighting.
Q: Tell me about research and development. Will that take a higher priority?
A: I know the value of what technology can bring to products and services, and I like it. It's very important to the company to have leading products in all of our businesses. I'm going to take the research center, which is in Schenectady [N.Y.] and has a location in India, and do with that what Jack did with Crotonville [N.Y.]. He made Crotonville a "go to" place -- where a culture was established, where ideas were exchanged. I want to make sure all the programs are CEO-focused and business-focused, making a place where people come to discuss best practices and a place where GE could create a reputation for high-tech products and services. We have that reputation now, but it's not universal. Any time we have great products, we grow faster than the market.
Q: Jack managed to trim more than 100,000 people from GE's payrolls during his tenure. Are you going to make it an even smaller company in terms of raw numbers?
A: Not as a strategy, but every business each year looks for ways to drive productivity. In the Internet age, it even becomes more profound. That means people ought to be in different places.
Q: People assume you've been a star since you joined GE. Have you ever had a tough time here? Did you ever think Jack might give you the boot?
A: Sure. I've spent an extended time in his doghouse. In 1994, I was in the plastics business, running about half the business. I didn't move fast enough to get prices up. It was a wacky time with inflation. I knew what I had to do, and I didn't get it done.
Q: Were you just green?
A: Yeah, I'm not perfect. I'm not here today because I was perfect. I had a crappy couple of months. At the end of the year, we had this management meeting in Boca [Raton, Fla.]. I'm trying to hide from Jack for three days. He grabs me from behind. He said, "Jeff, I want you to know, you had one of the worst jobs in the company. I think you are great. I love you. You're going to get this right. If you don't, you're going to have to go." That was great.
Q: Great? Some would go home and weep after that.
A: You know when you're doing well or not. The best leaders have been through cycles. I was a thousand times more valuable to the company, having gone through that. I had 10 times more self-confidence because I knew I could work through issues of my own creation. Besides, I already knew when he chewed my butt out that it was going to turn it around.
Q: It didn't bother you that Jack might take you out?
A: The beauty of GE is consequence. Good is good, and bad is bad. That's real clear. Standards are absolute. Effort is encouraged, but results are what count. He wasn't telling me anything I didn't know.
Q: Have you had any career disappointments en route to the top?
A: Sure. Before I went to Medical, there were some jobs that opened and closed that I thought would be great for me. The Appliances business came open. Dave Cody went to that job. I thought, s**t, that was one I could have had. You don't know when the next one is. I wanted to run a business. Six or eight months later, Medical came open. And that was a great fit. I never complained.
Q: You've inherited stewardship of what's been called the world's most valuable company. Have you sat back, staring out to sea, thinking "where do I take this thing"?
A: You've got to get "growth" and "customer" in the DNA of everybody here. No. 2, you've got to take each new technology or initiative and drive it to its conclusion through the company. In this case, it's digitization. It will be something else three or four years from now. You've got to continue to attract and retain the world's best people. GE is always a study in how you make big small: how you make size an advantage and never let it become a disadvantage?
Q: You mean, how Jack likes to compare GE to a corner store?
A: That's the analogy Jack uses. Jack took something he thought was wildly bureaucratic and turned it into something that moved faster. Twenty-four-year-olds who join GE today think it's wildly bureaucratic. They want to turn it into something faster. Every generation, to keep GE on edge, has got to make the company small. That means communicating, getting new businesses. We win one customer. One employee at a time. It means getting in touch with people on a frequent basis.
Q: Do you think it's better to be feared or loved?
A: I don't really think about it. I think it's better to be yourself.
Q: When Jack introduced you as the head of Med Systems, I hear he joked that you were too soft. Do you think you were too soft?
A: At various points in my career, Jack may have thought a number of different things about me. Sometimes, maybe I was too hard. Sometimes, maybe too soft. I was always me. I never changed during the transition. I never changed during succession. I am very comfortable with how I lead. I focus on results and motivate people to get there. The best people get promoted, and the others go somewhere else.
Q: So what do you do when you're not working?
A: I'm a golfer, though I'm not as good as Jack. I've got a 14-year-old daughter, so I really like spending time with my family. I read a lot. When you're on an airplane at 9 or 10 at night, it's a perfect time to read. I read a mixture of novels and biographies, not much business stuff. I just read the Adams biography by [David] McCullough. I thought [McCullough's] Truman was better, but it was pretty good. I bought another book on the founding fathers [Rise to Rebellion] by that guy [Jeffrey M. Shaara] who wrote [two parts of] The Killer Angels [trilogy]. I like learning stuff.
Q: You've spoken very highly of Jack in the past. Is he really one of the greatest human beings you've ever met?
A: If you look around GE, you have a bunch of ordinary people who, together, have done extraordinary things. We never thought we'd get this far. We've done it because we worked hard, but also because someone pushed us. I've always felt life is a journey to get the most out of yourself. What motivates me is not so much title -- this is going to sound like bull -- but to be the best I can be.
Jack changed our lives. It doesn't mean he's perfect or that I loved him every day. He made me better. He made me reach higher and farther. That's why we all like him. It's not because we're all weirdos and drinking the Kool-Aid. It's because a lot of us never thought we'd do this. He changed the dimensions of who I thought I could be.