Do you remember the controversy a few years ago when certain individuals tried to claim that it was their brilliance that made their companies great? “You didn’t build that” was the catch phrase. Because most of us know that to be successful, we need viable infrastructure (which means government investment) and dedicated employees- under the guidance of competent (hopefully- even inspired) management.
One of the leaders the world thought was most inspired was Jack Welch of GE. I would add Bob Goizuieta of Coca Cola and Andy Grove of Intel to the list of management wizards.
I should explain that I am at least a mite biased. All of these inspired leaders were Ph.D. chemical engineers. From an era when Chem E’s were required to take more courses in financial management than MBA’s and develop a broad knowledge of finance, science, and engineering. I’m not saying that’s why they excelled- but their psyches, coupled with their years of training- certainly provided a strong recipe for their future success.
Now, Jack Welch clearly was in the right place at the right time. He took over GE when the world’s economy was booming and plowed GE’s involvement in businesses that the economy would employ as engines for continued growth. Jack also extracted profits from each division and managed (perhaps even over-managed) costs to keep operating margins high. Jack also played the tax game, found the loopholes to exploit and to accumulate capital at advantageous rates that was also a critical component of his reign at GE.
Other companies studied his techniques and learned how they could obtain cheaper capital, manage costs, and exploit tax loopholes. Which meant that the business playing field had risen substantially.
Unfortunately, Jeff Immelt probably lacked the acumen of Jack Welch. But, Immelt’s biggest problem was his “luck” in taking over GE four days before 9-11. An event that squelched commerce around the world.
It put the airline business in a tailspin- eradicating one of the big drivers of GE income and profits. GE Power had also bet big on conventional energy plants and big turbines- and missed the boat completely for alternative fuels. Moreover, GE spent vital capital to acquire firms in this diminishing business sector.
All told, GE spent billions on (ill-fated) acquisitions over the past decade, including the mega acquisitions of the French energy firm, Alstom and of Baker-Hughes (as oil prices cratered).
Now, that Immelt is gone, he won’t be rewarded by the fact that electric demand should increase dramatically soon. Nor will the push Jeff made into digital technology, providing GE the foundation to be a world leader in this new discipline provide him any kudos, despite the fact that this may be one of the primary driving forces for GE profits over the next decade or so.
No. Jeff Immelt, as have many of us, made acquisitional and operational errors. Simultaneously, many of his prescient moves have not been recognized as such- yet. Unfortunately for his legacy, those changes will probably be attributed to his successor.
Tick-Tock! This Friday you won’t be able to add Medicare Advantage and/or Medicare Part D (for those over 65))- so make sure you make your choices by Thursday night! And, if you are younger, make sure you obtain health coverage, PPACA (Obamacare) choices expire in eleven days (15 December).