Hot Seat: Jeff Immelt’s Epic Battle Against The Forces of Chaos
The real story behind the former CEO’s tenure at GE.
General Electric was the most storied company in history. But as former CEO Jeff Immelt makes clear in Hot Seat: What I Learned Leading a Great American Company, after a series of crushing blows, storytellers were looking for a villain.
What better ogre than the departing CEO?
In Hot Seat, Jeff Immelt walks us through the multiple crises that took GE from most — to among the least — admired companies of the decade while shining a harsh flashlight on himself: “I’d learned some tough lessons — But my tenure ended badly.” It is one of many reasons this is the most unusual and fascinating business memoir you’ll ever read.
When a company loses hundreds of billions of market value, you can be sure there is plenty of blame, and Immelt doesn’t mince words, “My legacy was, at best, controversial.” He writes insightfully, ominously, and with brutal candor about the lessons learned as he takes us through the once-in-a-hundred-year storms of 9/11, the financial crisis, and a government crackdown after Enron. As the world turned snarky, Immelt looked to Google and Apple for inspiration, changing GE's business model to industrial digital leader from an industrial dinosaur. But while pushing the Sisyphean boulder, not all was quiet on the homefront. He faced a mischievous board of directors, ravenous wolves of Wall Street, tone-deaf policymakers on Capitol Hill, and not least of all, his team of rivals.
Although Immelt’s decisions have been second-guessed more often than a baseball umpire, the evidence suggests the critics don’t have a clue. As Tom Kelly, former manager of World Series champion Minnesota Twins, once told a reporter why he persisted in using a certain pitcher, “I think,” the Twins manager said, “I know my players better than you do.
And then there was the problem of Jack Welch.
Becoming chief executive of General Electric was Immelt’s dream since Harvard Business School. His predecessor, Jack Welch, was as close to a celebrity as a chief executive gets. Still, he built GE for that era and wanted a trophy for turning GE into a perpetual earnings machine — the kind that keeps on ticking and gives competitors a licking.
“Fix or get fired,” Welch barked to his senior team in 1994. That same year he announced GE businesses would be either #1 or #2 in their sectors. The goal was to do whatever Wall Street wanted. If analysts assigned a multiple, it became a paint by numbers exercise. Welch changed businesses the way Rockettes changed outfits across his office tower at NBC. As a result, GE became the best company in the world and could take on any challenger — for that moment. Wall Street was happy. Shareholders were delirious. But the moment wasn’t going to last.
The Welch era came to an abrupt halt four days after September 7, 2001, as Immelt took the reins. Like most Americans, Immelt fretted, worried, and feared for his colleagues in the World Trade Center who may have perished on 9/11. But as GE’s boss, he had to think about the future of the aviation business in Lynn, MA. Was GE responsible? Would airplanes stay grounded? Would people stop flying? It was one of those times that shifts the zeitgeist. What made the tragedy even more memorable, Immelt was in the CEO’s job only four days.
After 9/11, Immelt realized the thing he needed was to predict the future. As good as he was, he was not a fortune-teller. But he did foresee it would decimate the aviation business. At least he could rely on financial services?
By 2008, that washed up. During the global financial meltdown, the GE Capital profit machine took a direct hit as government regulators looking to cover their behinds labeled it “systemically important.” It was an albatross, not a compliment. It meant the SEC watched every move.
The Power business was in the doldrums for economic reasons and a binge of upgrading before taking the job. No luck there either. It meant GE was running out of places to hide.
Tail Risk
As Immelt describes, tail risk is the chance that an improbable event actually happens. If you are a casino, you lose a large amount on any single spin of a roulette wheel. But over time, gamblers try their luck and results return to the mean. In that case, the game’s underlying rules continue to play out. When the spinning stops suddenly, as if the casino has a blackout or, more ominously, like the Titanic’s final roll of the dice in the frigid waters of the North Atlantic, you have run out of second chances.
Fatal “tail risk” refers to an existential crisis, the kind that Immelt repeatedly faced during his nearly 20-year tenure. At no point did he have the luxury of executing a single strategy long enough to make it work, as his predecessor had. It felt more like ten two-year stints in which the world changed, and each time he was forced to reshape the company before it crashed into the next iceberg. When judged by that measure, he did an astounding if thankless job.
As Hot Seat also reveals, the real problem for the rest of us is that now icebergs lurk everywhere.
One of Immelt’s hallmark traits was asking his team’s opinion. He would tell someone like CMO Beth Comstock, “I have half an idea.” It meant asking a team member “to take the idea and run it to the ground. Getting fresh eyes on something I’d been noodling over gave me valued feedback on whether the idea was worth more of our time.” In hindsight, as Hot Seat makes clear, few people have the foresight or stomach to say the time is wrong for what we do.
The 21st century is turning out to be a fierce competitor.
When Immelt finally announced his successor on June 12, 2017, he must have felt as Winston Churchill did when he gave Anthony Eden the Prime Minister’s scepter: “He will praise me for two days until he realizes I have left him with a job in which no one can succeed.”
