The Issue: Immelt's Unpopular Idea
When it comes time for a business leader to make a tough judgment call, it's helpful to have the consensus support of aides and top managers—but it's not essential. As Jeffrey Immelt learned just three years into his tenure as chief executive of General Electric (GE), sometimes the boss has to make unpopular decisions and expect his team to get in line.
During an annual strategic review meeting in 2004, the CEO was surprised to learn how many business units of GE were pursuing environmental initiatives independent of one another. GE Energy had just acquired AstroPower, the largest American-owned maker of solar panels. The previous year, it picked up a wind turbine business from Enron. GE Water & Process Technologies was formulating plans for the largest water desalination plant on the African continent. GE factories overseas were dealing with new regulations on carbon dioxide emissions. And nearer to the company's Manhattan offices, GE dollars were working to rid the Hudson River of pollutants it dumped there decades ago.
It occurred to Immelt that all of these initiatives could be rolled up into a program of green practices and technologies and pushed more aggressively. They also could be made more effective if they had a common platform for communicating with one another, setting goals and measuring performance against one another, and presenting a more unified marketing message to customers.
So he set to work building out this notion into a detailed plan he could sell to his team. He spoke with the chief executives at 30 of the largest utility companies in the country, some of GE's most important customers. He created an in-house team to study greenhouse legislation and conduct customer surveys.
And he enlisted New York-based environmental consultant GreenOrder to help create and audit green scorecards—a checklist for measuring the environmental impact of new products developed in the company. "We're a numbers-oriented company, so we wanted to have real metrics," Immelt says. He set both long-term goals for the company—growing its spending on clean tech R&D to $1.5 billion in 2010, reducing its absolute greenhouse gas emissions by 1% before 2012, and generating $20 billion in revenue from green products—as well as short-term targets. If and when his plan took effect, GreenOrder would also act as a third-party auditor of the scorecard.
The campaign still needed one final touch: a marketable name. In ecomagination, Immelt found a brand identity that emphasized new products and services, and a new, innovative direction for the company.
Follow the Leader
In December, 2004, Immelt put his plan to a vote with the top 35 executives in the company. The result: The strategy was shot down dead. "They resoundingly voted no," he recalls. "They said, 'This is stupid.'" Only five or six people in the room went with Immelt on the idea; the rest argued ecomagination would cost too much or that it would be undermined by GE's many Superfund sites and other environmental issues that weren't so easy to fix. "I think some people thought it was too soft. GE's an edgy company; this is a little bit of a soft initiative," he says.
But where Immelt's salesmanship fell flat, his pedigree in hard-nosed GE management won the day. He overrode the decision of his executive committee and told them to prepare for the 2005 launch of ecomagination. This was where the company was going, and his team had to trust him.
"There's about five times a year with that group that I say, 'Hey guys, here's where we're going, get in line.' If you did it six times, they would leave. And if you did it three times, there'd be anarchy," Immelt says.
Immelt believes Jack Welch, his predecessor at GE, had to make a similar decision after receiving little executive support for Six Sigma, an efficiency program the company has relied on since the 1990s.
"We've got a good team that knows when to lead, and they also know when to follow, and that's a real trick," Immelt says.
Since that fateful meeting, his decision to go forward with ecomagination despite his team's objections has paid off. According to GreenOrder, GE is on track to reach its long-term environmental goals. Thanks in part to the marketing of ecomagination initiatives, the value of the GE brand has grown 16.9%, to $51.6 billion, according to brand consultancy Interbrand. And Immelt estimates shareholders have benefited about 5¢ to 10¢ per share as of 2008.
By Douglas MacMillan
GE's CEO was armed with reams of data to back his proposal for "ecomagination." But only the trust he'd built with his team allowed him to override their objections
When a CEO has earned the trust and support of his team, he has more leeway to go against majority opinion on big strategy calls. That's what General Electric (GE) Chief Executive Jeffrey Immelt banked on in late 2004 when he went forward with his "ecomagination" proposal despite the skepticism evinced by most of his senior executives and advisers, according to Noel Tichy, a former head of GE's Leadership Center.
"Jeff has been very careful to build a trustworthy, aligned team around him," says Tichy, who is now a professor of organizational behavior and human resource management at the University of Michigan Business School and the author of Judgment: How Winning Leaders Make Great Calls (Portfolio, 2007).
Cultivating a Base
Immelt began to form his base of support at GE as early as 1981, when he joined the company. As he climbed through the ranks, he began to impress his leadership style on key players. In 2001, Immelt was tapped by then-CEO Jack Welch as his successor, and Welch helped to ease out his fellow top contenders, Jim McNerney and Bob Nardelli. "All too often the politics of succession carries over into the new administration," points out Tichy. "Welch made it clear to all three finalists that as soon as the winner was selected, [the] other two needed to leave GE so as to politically free up the new CEO."
In 2004, Immelt was three years into his tenure as chairman and CEO and his support among top executives within the company was stronger than ever. That would be vital in each of what Tichy defines as the three phases of the judgment process ahead: preparation, alignment of stakeholders, and execution.
After hitting on the idea of a companywide environmental initiative, Immelt set about delegating preliminary steps to various teams within the company: researching greenhouse legislation, conducting customer surveys, prototyping new products, formulating metrics, drafting cross-company guidelines. And when GE's resources weren't sufficient, Immelt didn't hesitate to bring in an outside consultant, GreenOrder.
Persuading a Reluctant Team
By December, Immelt was prepared for the next decisive, and difficult, step: aligning key stakeholders. Immelt met with his top management team to outline his environmental initiative, which was received negatively by a majority of the senior managers. Among the criticisms leveled: that it was costly, hypocritical, and uncharacteristic of GE.
Immelt acknowledged the legitimacy of the concerns raised. But instead of backing down, he drew on the trust he had earned from his team and made a call to go forward with the initiative, which became known as "ecomagination." "He wouldn't have been able to do it if he didn't already have the aligned people at the top of the organization," says Tichy.
What were Immelt's other options in the face of such strong opposition? "Some weak leaders would back off and tell [the team] he would not go forward," acknowledges Tichy. Alternatively, he says Immelt could have put the initiative on the back burner, hoping to win support and allow the controversy to die down. Or he could have proceeded even more confidently than he did—without acknowledging the criticism raised by his team. Any of these tactics, says the management guru, "would have been an abdication of his role as the leader charged with making the ultimate judgment calls for GE."
A CEO can make such overrides from time to time, but Tichy warns that they have a limit: "If he or she keeps making calls against the majority, even though you're the CEO of the company you begin to undermine the people, alignment, and support."
When is the right time to pull rank? That depends. According to Tichy, Immelt is known to solicit input from those around him before making a decision. But he's also earned a reputation for trusting his instincts, as best articulated by the catchphrase used to describe him in Leadership: "Boom, then I make the decision."
The final step of Immelt's judgment was execution. "Jeff understands that his job in the judgment process is not only to make the call, but to make certain in the execution phase that the [appropriate] adjustments are made, the learning happens, and that there's a payoff," says Tichy.
Since GE is a company of many unique businesses, most adjustments rely on cooperation among the heads of each business unit. This was one of the toughest parts of the execution process, according to GE spokesperson Peter O'Toole: "Ecomagination had to enable our business leaders to work better with their customers," O'Toole says. "It couldn't be an 'unfunded mandate' from corporate. So there had to be give-and-take with our top leaders to ensure we were helping our customers."
By Douglas MacMillan