A Better Way to Measure Jeff Immelt's Performance

He was no Jack Welch. That's not a bad thing.


Photographer: Chris Hondros/Newsmakers

With the announcement this morning that Jeff Immelt is preparing to end his nearly 16-year run as chief executive officer of General Electric Corp., you'll probably be seeing a lot of charts today that look like this:

The Immelt Years

Total return, dividends reinvested

Source: Bloomberg

That's not very impressive! Especially not when you compare it to what the company did during the 20-year tenure of Immelt's predecessor, Jack Welch.

The Welch Years

Total return, dividends reinvested

Source: Bloomberg

GE's stock was, as you can see, already faltering in the late Welch years. There was really no way a performance like Welch's could be replicated by his successor, and there were nagging questions over how much of that performance was real and how much could be attributed to financial engineering, especially at the company's financial arm, GE Capital. The crisis of 2008 seemed to answer those questions when GE Capital threatened to drag the whole corporation into the abyss. Since then, Immelt, who was already trying to definancialize GE before the crash, has divested almost all the GE Capital operations that were left.

Still, Immelt has been in charge for a long time now, and the company's stock performance has continued to underwhelm. The metaphorical vultures had begun metaphorically circling, with veteran activist Nelson Peltz's Trian Fund Management pressing hard for changes in recent months.

I'm one of those softies, though, who argues from time to time that we shouldn't accept the stock market's verdict as the only one that matters. Companies exist for reasons other than just to maximize return for shareholders. They exist, for example, to employ people.

General Electric's Headcount

Number of employees, end of year

Sources: Fortune 500 lists (1980-1985), company reports (1989-2016)

GE's overall employee count has held pretty steady during the Immelt years. Its U.S. employee headcount has trended steadily downward, but that makes a certain amount of sense for a company that specializes in big-ticket industrial products and services whose growth markets have in recent years been mostly outside the U.S.

That overall steadiness in employment contrasts sharply with what happened during the reign of Welch, who hated the nickname "Neutron Jack" (after the neutron bomb that left buildings standing but killed all the people inside) but undeniably presided over a steep decline in employee headcount: from 402,000 just before he took charge in April 1981 to a low of 233,000 at the end of 1993. 1 That decline in headcount may well have been necessary, as Welch's defenders argued, to enable GE to thrive in future. The company did begin adding people again in the late 1990s.

In any case, though, Welch was amply rewarded by the stock market for the decisions he made. Immelt wasn't, so it seems appropriate to at least take notice of other things GE accomplished during his tenure. And no, that jobs performance isn't super-impressive -- flat lines generally don't excite. But it does indicate that Immelt preserved a key American institution that's been around for 125 years now, 2 enabling it to fight another day. There are worse things he could have done.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. I get that 402,000 from GE's entry on the 1981 Fortune 500 list. The 500 list uses data from corporations' annual reports for the previous year, so that should represent the headcount as of the end of 1980.

  2. Its roots go back even further than that, arguably to the creation of Thomas Edison's Menlo Park, New Jersey, laboratory in 1876. But 1892 is when the company called General Electric was founded, so I'm going with that.

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Justin Fox at

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Brooke Sample at

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