Leadership Of Jeff Immelt At General Electric

Improving customer-oriented decision making through the customer interaction approach. Journal of Decision Systems

The paper discusses and analyses the leadership of Immelt during his time as CEO of the world’s largest multinational conglomerate, General Electric. We look at strategies, decisions, capabilities, and core competencies of Immelt as well as their impact on the company’s improvement during his 16 years tenure in office. The leadership styles and management approach of Jeff Immelt his intelligent decision making and strategic management are as well discussed. Also in this report, we look into bold options that Jeff made as the CEO of GE that helped it to diversify its business operations. Also, alternative business ventures for General Electric in the future have been suggested in this report.

General Electric (GE) is an American company that has a presence in more 180 countries globally. Its principal offices are at Boston. The company has different businesses which include aviation, healthcare, energy sector, manufacturing of additives and financial services (Ngoie, 2012). The company has been in existence for the last 125 years and boasted as one of the biggest companies in the world due to its revenue turnover and leadership on the market. General Electric has more than 300000 employees worldwide. 

Jeffrey Immelt was the 9^th chief executive officer of General Electric and was appointed in September 2001. Immelt went on to serve as a CEO for 16 years before retiring in August 2017. Jeff’s management journey began on a low note as he took over the management of the company just four days after the infamous 9/11 attack which cost the company’s insurance business about 600m dollars, killed two of its employees and directly affected the aircraft engines business (General Electric, 2018). There were also immediate challenges that arose as soon he assumed office like the high profile corporate scandals WorldCom and Enron. Also in 2008, the company’s primary source of growth, GE Capital was severely impacted by the financial crisis. The resulted in GE Capital accumulating bad debts and several assets disposals. This led to slow economic growth of the company, investor’s confidence in the company was affected and the company faced more global competition like never before ((Pomerantz & Dusen, 2017)). Due to this, the company’s revenues were significantly affected. Hence Immelt quickly had to find solutions to these critical issues. According to Pomerantz and Dusen, Immelt decided to spinoff the real, estate, media segments, and financial services, including the NBCUniversal’s stake for billions of dollars a move that stabilized the company following the financial crisis it was facing. Also due to the rapid change of business environment, Immelt identified primary areas where he had to focus exploring new opportunities that were to be the core for the overall future growth of the business (Whittington, Cailluet, & Yakis-Douglas, 2011). His idea was to make the company adaptable to the environment and shift the focus from deal-making and cutting costs to the production of new products, services, and markets. He began by redirecting GE’s strategy to focus on the customer, innovation, and organic growth. Early 2002, Immelt devoted the company to 8% organic growth rate per year (Immelt, 2017). He also identified a number world trends such as an increase in population growth of aging people, the necessity to improve infrastructure, the high demand for energy, the climatic change and various opportunities in the future markets. He aimed to direct GE into producing superior, high-quality customized products and services to customers in the rapid-growth markets.  The primary feature of his strategy was to develop a new Growth platform for the company that could be either entirely new businesses or extensions of the existing commercial areas. By doing this, the new growth platform would then be implemented through strategic acquisitions of a stake in potentially high growth sectors. Immelt restructured and was keen on diversifying the company’s portfolio to venture into new businesses other than just manufacturing. During this time he narrowed down on this four areas to seize new opportunities for the company;

Working capital management, corporate performance, and financial constraints

Immelt analyzed the Asian and Middle East markets growing development which could act as a hub for the General Electric business in a move to increase revenue growth.

General Electric as well predicted massive growth in the infrastructure sector, therefore, began to position itself more in this sector as well as the financial services sector. The company also realized opportunities in technology, energy, rail transport, aviation and other infrastructure related areas.

General Electric also predicted population growth of old people that translated to increase in demand of healthcare facilities and services that presented new opportunities for venturing in healthcare services provided. The company also realized there was an increase in population in developing countries hence this also offered a chance to venture into the entertainment business.

General Electric also analyzed various global problems such as scarcity of water, climatic changes affecting the world and global warming in which Immelt realized opportunities which could be converted into lucrative business.

These four areas formed the basis upon which Immelt focused his strategies to re-establish the company’s market leadership. To help him seize these opportunities, Immelt had to restructure the company’s management operations (Baños-Caballero, García-Teruel, & Martínez-Solano, 2014). Therefore, he decided to do away with his successor’s model of management whereby major business sectors were subdivided into units which worked independently with defined goals and objectives but enabled the company to be more responsive. Contrary to this, Immelt preferred the cross-business integration approach whereby business sectors were divided into smaller segments that worked cross-functionally to achieve their milestones. Furthermore, he cut down the number units reporting to him to five to make it easy for him to strategize on how the company will convert the opportunities seized into businesses.

According to Whittington, Cailluet, and Yakis-Douglas (2011), core competence is a concept of management utilized in leadership to formulate and examine crucial factors of business strategy. The primary importance core competency in the direction of the business organization is to help CEOs in linking skill with policy hence coming up with a plan that propels the business agenda allowing utilization of the company’s capacity and abilities to maximize revenue. Immelt’s leadership considered technological innovation, customer focus, innovative product development, and global presence as the core competencies (Hinterhuber and Llozu, 2014). The other capacity of GE during Immelt’s tenure were performance, excellence, human resource management, diversification and push for adaptation.  The company has succeeded in relying on core competencies as the form of skills and abilities to deploy resources.  Currently, GE operates as a competitive advantage company against other competition companies that have failed to utilize resources. Most importantly, other companies have been unable to imitate the company’s skills and abilities on how to use limited resources.

Customer-focused and service-focused orientation in organisational structure

For example, the company relies on critical leaders at the company to assist in identifying skilled employees as well as utilizing their abilities to identify unique resources. For example, Jeffrey Immelt created a personal identity that differentiated his style of leadership from his successor owed to the core competencies that he formulated upon becoming the CEO of General Electric. These competencies helped him to achieve the company’s goals and objectives through proper research, development, and investment (Delen, Kuzey, & Uyar, 2013). Kajalo, Rajala, and Westerlund (2007) reiterate that a company that does this is always in a position to use unique resources to underpin sustainable competitive advantage that others in the same industry find it hard to imitate.

During the past 16 years, Immelt was in charge; his attention to the organizational ability of the company was evident and is viewed as the most crucial developments done to management field. As a strategic capability, the company has succeeded in relying on qualified leaders to create sustainable competitive advantage through unique strategic capabilities (Kajalo, Rajala & Westerlund, 2007). The current leadership through Immelt has succeeded in building strong competitive advantage because it has fulfilled three criteria outlined by Sautner (2013). For instance, leadership relates to processes that help create value in all the products that the company sells to target customers. Second, they have managed to develop high levels of performance that are better than what other competitors can record within the same sector (Grinblatt &Titman, 2016). Third, other competitors that have tried copying what the leaders do, they have failed in their activities.

Most importantly, it is critical to point out that the robustness of GE strategic capability of its leaders comes from what Brigham and Ehrhardt (2013) categorize as complexity, causal ambiguity, and culture and history of the company.

When an organization has the capability, it means it can venture into a specific business process within specified timelines, space, and resources (Simon, 2016). General Electric under Immelt’s leadership focused on global presence, technology innovation, research and development, customer value and culture, financial services and the collaborative workforce (Connelly, Ketchen, & Slater, 2010). These capabilities helped him differentiate from the GE’s competitors and develop the organization. According to Immelt sound leadership, innovative and robust governance was seen as the primary capability of GE during his tenure (2017). GE reached realized its vision through his creative competency that oversaw product development (Jackson, 2005).

Table 1. VUCA Analysis

The CEO of General Electric on sparking an American manufacturing renewal.

Companies have to be prudent and adaptive enough to the demands of the market so to retain their market value. They have to implement changes, modify their products to fit the market trends and come up with new ways of doing business to remain relevant on the market. This in turn roots to the core competencies discussed earlier such as innovation and customer focus. For GE to understand it external marketing environment, it has to perform PESTLE analysis that monitors factors that have an impact on the company (Kissinger, 2017). Results of this PESTLE analysis are in turn used to identify the strengths and weakness to be used in SWOT analysis.

GE is a conglomerate of several companies with business operations in energy, electric lighting, oil and gas, healthcare, aviation, and transport industries thus has as well several macro environments. Therefore, GE has to consider all these external environments relevant to various sectors within the company and managers have to have to address the factors affecting the company in general while also considering industry-specific factors affecting the business as well (Kissinger, 2017).

Table 2. PESTLE Analysis

Therefore, the external factors looked into the above PESTLE analysis developed massive opportunities for that necessitated GE’s business operations growth. For instance, GE’s chance to boost penetration in developing countries, expand its operations in the renewable energy sector, the opportunity to venture into the technology industry.

Jeff Immelt took over General Electric at the time when the Market value of the company on a downward spiral but the market presented more opportunities than threats. Due to this condition, Immelt faced a challenge of determining probable future opportunities from which the company would benefit. Under his predecessor, most of the business opportunities had been utilized therefore in the view of Immelt he realized that momentum on the market was to be sustained through other new ventures. So putting in mind the hard economic times in which Immelt inherited the office, he was to distinguish where greener pastures were for business.

 He recognized some patterns worldwide such as an increase in the population of old people, growth in developing countries, climatic changes and shifts and saw a chance in this developing markets. He immediately started to position GE for these opportunities which meant taking bold decision to change the business operations of the company to be more diverse. He began by allocating budget and resources where there were business prospects and development to seize the opportunities the rising world patterns presented. His methodology was to advance the new growth platform that the company was investing (Breznitz & Zimmermann, n.d)

Approaches to strategic alignment of business and information systems.Alignment of internal and external business and innovation domains.

In this new business ventures, GE targeted a meeting of clients’ needs by providing the items they required. But the market demands kept on evolving. As time passed by, Immelt examined the market and went through clients’ needs over time and actualized the strategy of developing a client-centered business. This way the company better addressed the client needs by offering to the market client-satisfying products. This strategy helped improve client self-esteem. This strategy as well helped GE establish control on the markets worldwide.

Resources of a company include all the assets, organizational processes, organizational attributes, knowledge, and information which help the organization to perform effectively in its activities and gain a competitive edge over its competitors (Lin & Wu, 2014). Capabilities are the items that a firm requires to execute its strategies (Wójcik, 2015). GE is a huge company it had enough resources and capacity to operate its businesses and pursue its policy. The company was under the excellent and able leadership of Jeffrey Immelt, a unique organizational structure of five large units, the capital capacity of billion dollars, and assets. These VRIN resources were the main components of GE competitiveness on the market.

Based on the PESTLE analysis, the results could then be used in SWOT analysis to help understand the strengths and threats of GE that helped Immelt formulate the most suitable strategies to employ.

Strategies

Table 3. SWOT Analysis

From the SWOT analysis details, TOWS analysis can be developed which is the analysis of the external and internal environment of GE which helps on deciding the strategy that Immelt would utilize to determine the direction of the organization. In summary, SWOT analyses the external environment of the business and TOWS examines the internal environment of the organization. In TOWS analysis, four variables are derived which are; Strength-Opportunity SO), Strength-Threat (ST), Weakness-Opportunity (WO) and Weakness-Threat (WT). It is from this TOWS analysis that helped Immelt decide on GE to have five large businesses headed with managers reporting to him. Through this diversification and venturing into new markets, GE growth under Immelt was evident.

Table 4. TOWS Analysis

Therefore, the foundation of GE’s prosperity is based on its capacity to adjust to the ever-evolving 21^st-century business environment. During Immelt’s tenure, GE successfully adapted its two business portfolios to fit the demands of the ever-changing market and business environment. This was realized through a 100 million dollar deal through the creative energy leaps forward innovative venture (Weil, Schipper & Frnacis, 2013). Immelt’s ability to evaluate the inconsistent business environment showed his understanding of the macro business environment as well as the microenvironment (Hiekkanen, Helenius, Korhonen, & Patricio, 2013). The energy initiative has turned into the most critical business portfolio for General Electronic. While technical leadership has proven to be the competitive advantage for General Electric, it has equally been a potential hindrance to General Electric’s entrance into other potential markets. For instance, General Electronic is the only company in the United States that has the capabilities to set up a nuclear plant. This illustrates how General Electric can interconnect technology and industrial into a business system with the ability to turn scientific discoveries into profitable products (Delen, Kuzey, & Uyar, 2013).

Impact of Jeff Immelt’s leadership at General Electric

Immelt’s management placed greater emphasis on organic growth, innovation and customer focus. He realigned the structure of the business to be more business oriented than just manufacturing. This was to be achieved through diversification of the company’s portfolio as well restricting the general operation of the company at the human resource level. His great focus was on cross-integration whereby different sectors of the company worked together to achieve a common goal by enhancing efficiency and performance. He also cut down the number of units that reported to him in a move to bring more focus on the individual performance of the employees (Immelt, 2012). By 2008, the company had five broad sectors and each operating its market share. Through scaling down the number of divisions to five in the company, it made it easier to locate connections between various businesses. General Electric’s five broad markets were made up of industrial, healthcare, technology, commercial and General Electric Capital.

He also made GE become a customer focus business with customers’ needs at the center stage of their production (Gebauer & Kowalkowski, 2012). By the company concentrating its focus on the customer, there was a great impact on the company’s marketing function as it was revitalized. Immel formed customer-oriented programs like the General Electric’s Commercial council whose main purpose was an analysis of the customer attitudes and satisfaction (AlHarbi, Heavin, & Carton, 2016). The whole process of realizing this new phase of customer focus business required the managers to be more of marketers than operators. Immelt’s restructuring of General Electric’s business portfolio by inventing new platform required acquisition and high standards of cooperation across multiple company units. While doing this, the organizational complexity of the General Electric’s increased and performance in management became difficult because trying to join people’s incentives and the people’s work performance is difficult to realize. So many issues arose due to these organizational changes brought about by Immelt’s new strategy.

Furthermore, since there was more emphasis and focus on the customer, the marketing department became more concerned with looking for new opportunities for General Electric other than how they initially focused on a particular business, for instance, General Electric’s medical systems. As the company continued to look for new business opportunities to boost the energy and technology sectors, as the organization became more complex regarding structure (Jaber, Elkarmi, Alasis, & Kostas, 2015). So it is clear that Immelt was so determined to reshape the structure of the organization and at the same time to try to deal with the challenges that came with its complexities while maintaining his strategy of looking for new business opportunities to be able to impact the company’s growth.

Business ventures for General Electric in the future

Immelt’s strategy was successful, and he continued to push forward his agenda of putting more emphasis on technical, logical production, customer-centered business, and integration of activities at GE. He was disciplined and focussed on the point of view, and his initiatives were as well interconnected. His significant effort was to transform GE into one of the most valuable technology-driven industrial company of the 21^st century. sIn this century, his emphasis was more on taking risks and penetrating into new markets through innovations and production of new products. Immelt continued to divest into companies with small revenues and growth while focusing on those that shared their competencies with General Electric as platforms for growth in the future. To deal with the issue of organizational complexity, Immelt introduced a system called competitive based pay which enabled employers from junior workers to senior ones to link at all levels. This was a move to encourage cooperation through all levels of management. Immelt’s successful strategy of combining efficiency in the organization structure as well as innovation allowed General Electric meet the demands and seize the opportunities of the ever evolving and changing world. In his years as CEO, Immelt enabled General Electric was setting trends on the market and playing a leadership role on the market as well (Katz, Louw, & Du Preez, 2016).

As much as GE is a very successful company, there are still other alternatives that they can explore. The company requires significant spinoff the business portfolio and geographical redistribution of focus and resources. Introduction of current business in emerging markets will be more strategic than venturing into a new industrial breakthrough altogether. While doing this, the shareholders’ profit maximization principal must not conflict with these internal strategies altogether. One of the alternatives that they could consider is to invest in the alternative energy sector (wind and solar) in India because the energy sector is untouched in India and gain the advantage of the first venture in the industry (Fannin, 2016). There will be a little competitive rivalry as there are few Indian players in this industry (Titan, Mosarbaer, and HVV). This alternative has all the advantages to consider such the energy sector in India is government protected; there is no real threat for substitute products and continuous innovation and breakthrough in IT is required for the better of the world. In short, in India, the total size of the energy industry is about 1380 million dollars and is expected to exceed 11300 million dollars by 2022. Due to the low competition intensity, forecasted high profitability, and core competencies are the only thing the company would be required to create, this alternative is worth the company investing.

General Electric’s presence in different countries

The other alternative the company can explore is considering to break up. There are many advantages of General Electric splitting up. The breakup will enable General Electric to focus and reinvest in innovation and technology through resources acquired from the other business sales (Leary & Roberts, 2014). This would also reduce the organization’s structural complexities and enable General Electric emphasized one division of the business. Over the years the competitive advantage General Electric possessed was its integration of many companies into one portfolio. General Electric capital alone produces over 30 percent of the total revenue, therefore, removing it from the collection means the funding of the other initiatives will stall. This will play as a disadvantage because such a move would reduce the competitive advantage of the company significantly. However, the company may still be looking to split up in the future. The company is targeting to break up as early is the spring of 2018 (Kim, 2018). This reports came after a review of the company’s capital insurance revenues after tax that stood at 6.2 billion for the fourth quarter of 2017.CEO John Flannery said that he was convinced than ever that General Electric required reshaping (Kim, 2018).

Conclusion

The report discusses and analyses all the leadership styles and strategies utilized by Immelt as well as the management decisions he made during his tenure as the CEO for GE. Being a highly influential business organization, Immelt experienced various downfall due to natural disasters and attacks, destabilizing the company’s business from the past decade, and how he managed to retain their past glory steadily. For the 16 years Immelt was in charge he managed to restructure the management operation of the company to make it possible to achieve its goals and objectives. He made bold decisions such as leading the company to venture into other businesses that were later a success. Despite the progress the company is enjoying, they still have to divest of unprofitable business would add to their success in the years to come. It remains to be seen if the company will continue as a conglomerate of companies or will split up. From the signs that are being witnessed, there is a possibility of them breaking so that each company can focus on its businesses. On the other hand, it remains to be seen if they do break up, how each of the companies will survive

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Challenges faced by Jeff Immelt as the CEO of General Electric

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