Since the early 1990's I have enabled my clients to integrate strategies with leadership and human resources. In 1993, I wrote "Risktaker,Caretaker,Surgeon, Undertaker- the four faces of strategic leadership."

The basic premise of my consulting practice and the book was that there was "no one type of leader for all times" or to challenge the premise of St. Thomas More's biographers, there is no one leader for all seasons.

I used the simple life cycle to describe my theory. There are four stages of the life cycle:

• Embryonic stage, birth and childhood, and this requires "risk taking, missionary leaders".
• Teenage and early adulthood/ growth stage, that needs Caretakers..who will care for and grow the organization systematically;
• Then there is middle age and maturity and this requires the surgeon, a leader that will focus on the best and growth and prune the declining or dying.
• Finally there is the decline, fall and death stage and this requires an Undertaker.
  
  Like all categorizations, they are simple but don't cover all situations. But this simple relationship to the right type of leader and the stage of a business enables organizations to spot the mismatches. It is clear that you don't want a risk taker when the company needs major surgery or when it is time to divest or liquidate the assets.
  
  In a company like GE... which has businesses in all stages, the message is that the company needs a portfolio of leaders and the willingness to place the right type for the right situation. Historically, GE has had a "portfolio of leaders" and was able to match the type with the strategies. This was part of the strategic system when I was Corporate Planner in the early 1980's.

However, in my book and subsequent articles I concluded that GE's CEO's since the mid 1970's have been skilled surgeons. Borch started the pruning, Jones did some more and Welch was a great deal maker. I wrote an article several years ago called the "College of Surgeons" and described how most GE alumni were surgeon leaders when they left GE.

Now we have the Immelt era. Jeff started as a traditional surgeon and pruned many businesses, but as his years progressed he has become a very unique leader, which I have concluded is a RISK TAKER/SURGEON.

Risk taking Ventures...Immelt and his team have worked hard to focus on moving GE back to its traditional innovation, systems, solution role, which Welch had de-emphasized and even negated.This was achieved primarily by acquisitions and some internal innovations, but he has further increased the complexity and risks by making these global and increasingly moving into unstable, but potentially long term profitable areas like China, Middle East etc. He has bet billions on these ventures and even was willing to open research labs in countries that are not secure. In short, he has the missionary zeal and attributes of a "risk taker" leader.

Surgeon...but Immelt and his team have also continued the pruning. In fact, it has been greater and more pervasive than any of his predecessors. The latest surgery is demonstrated by his willingness to prune the "traditional GE" businesses, like appliances, lighting, motors etc. He clearly willing to to get out of businesses which he believes are not fast growing and global.

Complexity, confusion and unpredictability are the results. Since most leaders fit one of the four categories, they are easier to understand and predict. The stakeholders, investors and the media understand what a risk taker or surgeon is and so they begin to feel comfortable with them, even if they don't agree.

However, when you have a compound/ split leadership personality it gets very complicated and difficult for the key stakeholders to understand and support. This is even worse when the leader says one thing one day and then does something different the next. This was the problem Immelt demonstrated when he promised a 13% growth and only delivered 5% in the first quarter of 2008.

I am not sure the combination of "risk taker" and "surgeon" really works and can be successful in the long run.

Bill Rothschild...author of The Secret to GE's Success and Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership.

I just received the Annual Meeting summary and am now completely convinced that Immelt and his team have no reservations about their game plan and its ultimate success. They have rationalized that the first quarter "miss" was a fluke and that what they are doing is right and it will make GE even greater.

Immelt accepts that the investment community and he stakeholders, reaction to his miss was justified, but they are "continuing looking in the mirror and asking the tough questions". He asserts " we will not let others define our future". He continues to stress his great results and that he has a great team that will do the job. He emphasizes the significant opportunities in Infrastructure ($10 trillion investments in the next decade) and takes great pride in "Ecomagination".

In short, Immelt appears to be totally convinced that he will win.... I hope he is right and that he doesn't repeat the first quarter surprise. Only the results will tell the total story...

Bill Rothschild, author of The Secret to GE's Success" now available in Korean, Chinese, Japanese, Indonesian, Spanish and English print and multimedia versions.

Edison started General Electric to provide total electrical solutions and to "light up the world". In 1893 his Edison General Electric merged with Thomson Houston to become General Electric. Up until the 1950s... the GE game plan was simple... create increasing demand for electricity by providing electrical products like light bulbs, irons, refrigerators, cooking products, etc. so that electric utilities required more generators, transformers, switchgear equipment and total systems. This was called the BENIGN CYCLE and it was the essence of GE.

In the 1950's GE moved into other products, primarily those that were by- products or offshoots of their electrical and chemical technologies, such as plastics, jet engines, locomotives etc. It added financial services to help provide financing to consumers and industrial/ commercial customers. Again this worked and GE grew.

In the 1960's, because of the Great Electrical Conspiracy (price fixing) GE's growth plateaued at $5 billion and so it created its GROWTH COUNCIL to identify markets growing faster than the GNP that GE has some expertise...this was the beginning of the massive diversification of the company. Diversification moved to "portfolio management" in the 1970s and it was the underpinning strategy of Welch and Immelt.

Interestingly today, GE is returning to its roots as a global leader in electrical systems. Even though it has spun off many of its consumer products and is in the process of selling home appliances, GE now offers a full array of generation products and systems and in recent months has received billions of dollars of orders to produce electrical systems in Iraq, Middle East and has become a leader in wind turbines.

GE is likely to benefit from the current need for the United States to reduce its dependence on oil since it is one of the leaders in Nuclear Energy and Wind Turbines, as well as being able to supply complete electrical systems. In addition, most of the electrical utilities have been harvesting their facilities and now need to invest in new generation, transmission and distributions systems.

This is a great illustration of history repeating itself and shows that it is beneficial to stay the course even when markets are down and out of popularity.

If you want to get the complete story of GE's successes and failures and the genius of GE's early leaders, read my book: The Secret to GE's Success.



Bill Rothschild, CEO of Rothschild Strategies Unlimited LLC and author of GEWatcher blogs.

Pope Benedict XVI visited the United States during the later part of the week and over the weekend. I have never been impressed with "spectacular events" because they are often so over publicized and promoted that by the time they happen the reaction is "why?".

Americans love the theatrical and so this even makes things worse, and often have very HIGH EXPECTATIONS that are difficult to achieve.

Pope Benedict was the surprising exception. He never promised anything and delivered a very inspiriting result. In fact, many Americans, including me, wondered why he was coming in the first place. Let me outline why I am so impressed with his visit and its potential positive results on the American Catholic Church and maybe society in general:

• First of all, he was willing to confront one of the greatest scandals and embarrassment in the recent history of the Catholic Church...the pedophile scandal. He didn't hesitate to confront and even say he was scandalized and that it was MANAGED badly by the American Hierarchy. Which is true...some of the American Cardinals and Bishops should have been removed from their leadership positions for their inability to admit mistakes and then to try and hide the reality, which has spanned many decades.
  
• Second, the Pope met with some victims of the scandal...this was a sign of REAL leadership and especially for someone who could have avoided the embarrassment of such an event.
  
• Third, he went and participated in a Jewish celebration, a clear sign of reaching out.
• Fourth, he invited the youth to become more involved. His visit to St. Joseph's Seminary and the over 25,000 enthusiastic youth was inspiring, especially when you could see so many young women in religious habits and young men in "roman collars". ( I believe that one of the reasons for the lack of vocations is that American women's religious orders stopped wearing their habits and many priests stopped wearing the roman collar, and so became part of the crowd and not different from the crowd. It is like the military when soldiers wear civilian clothes, they stop being soldiers and just become like every one else).
  
• Fifth, the Pope, is multi-lingual, included a Spanish element to his homily and made it clear that the Latino/ Hispanic population is a key element of the religion in the United States and will continue to increase their leadership in the church
  

In short, Pope Benedict, did what all leaders should do: NOT OVER PROMISE and EXCEEDED ALL EXPECTATIONS. I think this is the model of JESUS CHRIST... Pope Benedict, like his predecessor, John Paul II, is a clear strategic leader in his own right and built on his own unique talents.

Pope Benedict has said on many occasions he was not John Paul II is not trying to emulate him, but be himself. This visit demonstrated he was truly his own man and demonstrated that he too, like his predecessor, is the RIGHT LEADER FOR THE RIGHT TIME.

Since I am an enthusiastic Roman Catholic, it just demonstrates to me that the Holy Spirit has again enabled the Church to have the right leader for this time of crisis. Benedict is what I describe in my book, (Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership), a missionary, risk taker.

I wish him well and congratulate him on his ability to stimulate and challenge the American Catholics and the church. I wsh him a long and productive life.

Bill Rothschild, author of Risktaker, Caretaker, Surgeon, Undertaker- four faces of strategic leadership.

It has been an amazing GE week...for people like me who are alumni and investors.


In my book, The Secret to GE's Success, I emphasize that among GE success factors, has been their ability to make their numbers and never over promise...

But on Friday, April 18, 2008... Jeff Immelt had to apologize because GE was unable to meet the income targets that he had just two weeks before said were "in the bag". Even worse he missed badly and had to blame more than one business unit for the miss. This caused a major sell off of the ENTIRE DOW since the most reliable company missed and everyone thought that things were bad and getting worse.

To make matters worse Jack Welch, the GE legend, went on CNBC (a GE owned cable network) and its competitor FOX NEWS... to say that Immelt's miss was irresponsible. This unprecedented action made things worse... and it was compounded when Jack..ate humble pie.. and said he was miss interpreted.

One of GE's great strengths in the past was that its CEO's retired and then disappeared. Unfortunately Jack has not disappeared and continues to promote himself. He has columns in Business Week, is a frequent guest on news programs, and even leads expensive, executive session.

This is what I wrote in my book:

"Leave and Get Out of the Way. This is another critical piece of GE’s leadership success. GE leaders have been required to leave when they retired and not permitted to hang around either as members of the board of directors or as advisers. This practice has enabled the new leader to take command without being second-guessed by his predecessor."

It is clear, that even if Jack Welch meant well, he appears to unable to leave GE behind and not continue to play the role of CEO. Unfortunately, he made the situation worse and has caused many to question Immelt's game plan and abilities. This is not positive.

I will continue to comment on the GE strategy and its ability to create and meet realistic expectations.

Welch said that Immelt can't surprise everyone again... I agree and Immelt and his team must be able to make the numbers with no excuses.

Bill Rothschild, author of The Secret to GE's Success and the most unique strategic thinking software and tutor available, StrategyLeader(tm). This software is available for a 10 day trial on www.strategyleader.com.

During my 25 year GE tenure and my subsequent 23 years as a consultant to major corporations, I stressed two leadership tenets

1. Set minimum expectations and always meet or even slightly exceed them. This demonstrates that you are credible and can always be counted on.
2. Never surprise your “key stakeholders”, especially customers and investors and most of all YOURSELF. This shows that you have done your homework and are prepared for uncertainty.

Last Friday, Jeff Immelt and his GE team violated both of these leaderships tenets.

In my recent book: The Secret to GE’s Success, I ended my 127 year strategic history of the company with concerns about Immelt’s ability to “meet high expectations and avoid surprises”.
I cited four concerns:

"Ability to “Go Big”, which was the theme of the 2005 annual report. In this area, I applauded his “missionary zeal”, but didn’t believe that he could grow organically, at a 8% compounded rate, because of the size and complexity of the company ( adding $14 billion of revenues each year and even a higher rate of earnings can’t be achieved forever… it is simply the “law of BIG numbers”).

“Selling Solutions Globally” - highlighted the complexity of selling to developing nations, like China and India, who are not willing to “repatriate earnings and even nationalize companies” if they are too profitable and big.

“It Always Takes Longer Than You Think”, focused on how difficult it is to get large, infrastructure orders and maintain strong competitive positions.

“Maintaining a Strong and Deep Bench” focused on GE’s willingness to invest in people and even allocate a month of the CEO’s time to evaluating key people. When you have over 300,000 employees with a wide variety of cultures, religions and skills, this is almost impossible. GE has been and continues to be the prime source of executive and professional talent by headhunters and companies who have a “just in time” staffing philosophy.

Chief Executive Article. In June, 2007, I published an article in Chief Executive magazine, entitled: “Decision Time for Buffett and Immelt”, in which I contrasted the “GO BIG” simple approach of Warren Buffett with the complex approach GE’s Immelt. In this article, I stress three actions for Immelt to consider: Make the company less complex.
Continue to Prune the Portfolio.
Create “tracking stocks”- that would allow investors to invest in sectors of the company, while allowing GE to remain in control and one company.

Blogs on Amazon and Google. Since November, 2007, I have been writing a series of blogs, entitled GEWatchers, to keep my readers and clients up to date on what Immelt and his team are doing strategically and how their actions compare to what made GE successful in the past. These are indexed on this site, along with blogs on other major topics.

Bill Rothschild author of five key books on strategic leadership.

In the past few days I have read a number of articles which reinforces my belief that things have gotten so complex that many major organizations and even governments really don't know what is going on and how much risk they have undertaken.

The first article dealt with the mess on Wall Street. It is clear that the "GO BIG/ GO GLOBAL financial institutions, have become so complex that no one really knows what is going on and even the degree of risk they have taken.

The standard, but dull" "debit and credit" logic, got lost in the ingenious ways of booking income and profits, often,"off their balance sheets", so that their leaders really didn't know they were vulnerable. This is a reflection of our times and just bad leadership and management.

Warren Buffet has said it repeatedly, "if you don't understand it then don't invest in it". He christened this type of creative bookkeeping as "weapons of mass destruction" and I agree.

Another article described, how one of Rupert Murdock's affiliates, Harper Collins, is going to establish a new "imprint" that will refuse to allow the bookstores to return books and will not give authors large advances. The article pointed out that publishers print too many books because they get huge orders from the book chains, who then send them back (30-40% of the books are returned).

The book publishing and selling business has also followed the "GO BIG", "Be all things to all people if it sells" and has become complex, it is hard for an author to get published and a reader to find a good book to read. The mass merchant, "all things to all people" mentality has destroyed the small "mom and pop" bookstores where you could go and be waited on by "book lovers" and even find a book that wasn't just being hyped. Today you enter the superstore and it is not clear what it is... it has thousands of books, but often you can find what you want.

I continue to believe that one of the major problems with GE's ability to get its stock price where it should be ($50 a share versus $38) is that the company is so complex and has the obsession to "Go Big/ Go Global" that the investors would prefer to invest in simple companies like Warren Buffet's Berkshire Hathaway and not have to make a career out of finding out what is really going on, as well as the company's real assets and liabilities. This was one of my key points in my book: The Secret to GE's Success (page 249) and in many of my "GEWatcher blogs".

It is clear that even the Federal Reserve is confused since there are so many creative, often financially unsound, instruments. They still have no idea what Bear Sterns is really worth and what its real assets and liabilities are.

I think the world should adopt the Warren Buffet school of management: "keep it simple, invest in what you understand and avoid complexity". It has worked for him, so why would it work for others... maybe the MBA programs should have a "Buffet strategic thinking and investing course or even program."

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC... who specialize in logical and effective business strategies and implementation programs and consulting...author of Putting It All Together- a guide to strategic thinking and decision making. Recently updated and available on http://www.strategyleader.com/

I enjoy the NCAA basketball March madness. It is fun to watch a real playoff where all of the conferences, large and small, have a chance to compete and see you is really the best. Every year there is always a "Cinderella" team or two, who upset the higher ranked, more publicized teams. But normally it is the highly seated teams that win it all.

Every year the same names appear at the top. This is not a matter of chance but a clear reflection of the college's commitment to being the best. These teams reflect the spectrum of giant state universities, to smaller but committed institutions.

There are several lessons that we can learn from these institutions.

1. They are committed to being winners and not just competing. I am always amazed when I hear coaches say they just want to be competitive and not that they want to win it all. The same is true in the business world. The leaders are focused on being the best and not just showing up.
2. The teams have long tenured coaches. Some of the coaches have been in their jobs for over twenty years and have moved up gradually, but consistently and when they are on the top they know how to stay there.
3. Many of the successful programs have had a strong succession plan. When the coach leaves or retires, they have assistants really willing and able to take their place. This is a strong contrast to the losing programs, who have no continuity and no succession planning.
4. The coaches build teams to fit their strategies and the really good ones, adapt to change. The great coaches are flexible, but highly demanding and if the players, regardless of their talent, don't follow the game plan, they either don't play or even are dismissed from the team.
5. The colleges commit the resources to attract the players and the fans. Their facilities are "second to none" and they are continually investing in them. They provide supporting staffs to recruit, train and provide academic support.
6. The winners have a loyal fan base, who show up even when things are not going well and support the coach and team players.

These are just a few of the positive lessons we can learn from March Madness. They are similar to what I learned from my study of General Electric...that I summarized in one word, LATIN, in my book: The Secret to GE's Success.

• Leadership- the universities have committed, long tenured leaders who want to win and allocate what it takes to consistently do so. They have a strong succession plan in place.
• Adaptability-good coaches, like leaders in all institutions, must adapt to change and not have one "cookie cutter" approach.
• Talent- the winners learn how to recruit, motivate and retain the talent. This has become increasingly difficult since many of the recruits are just "passing through" on their way to the professional ranks.
• Influence - they winners influence the policies of the NCAA to assure that the sport remains a sport and is not overwhelmed and influenced by the money that is spent. The college presidents work to retain "student/ athlete" and not hired guns. Of course this is a continuing challenge, as it is for any institution.
• Networks- the winning programs create strong networks with alumni to provide funding, as well as to help to find jobs for their graduates.

The lessons are the same, whether it is a winning basketball team or a giant company.

Winners have long term strategies and invest in providing the resources to be successful over the long term.

Bill Rothschild, author- The Secret to GE's Success.

One of the most critical jobs of any leader is to make converts and keep the loyalty of the flock. They must believe deeply in their mission, have positive vision and take actions that are consistent with both. I have been very fortunate to have worked with several successful missionary leaders.

These individuals had several unique characteristics:

• They were true believers and their faith was based on a combination of analysis, intuition and decisiveness.
• They did what they said and when they were wrong they admitted their mistakes and tried to do better.
• They were willing to bet their career and personal wealth to execute what they believed.
• They were willing to share the wealth and were not greedy.

Though I have some disagreements with what GE's CEO, Jeff Immelt's "go big/ go global" strategy, I am impressed with his personal dedication and missionary zeal. It is clear that he believes that he has selected the best strategy, has the best team and will succeed.

He has personally sacrificed to do what he believes is right. This included being willing to give up a $7.1 million bonus because the stock didn't do what he expected and recently investing over $5 million in purchasing GE stock at a time, when most would not have recommended that he do so. He believes that "ecomagination" will work and that GE can grow its organic businesses. He truly believes that size and diversity are critical for GE's continued success.

Immelt is a TRUE MISSIONARY LEADER.

In the past few days, the investment community appears to have listened to his continuing assertion that GE stock should sell at a premium and the stock has moved strongly.

I still have many concerns about his strategy and vision and will continue to comment on them, as well as those areas I agree with, but I admire his conviction and wish him well.... I too believe GE is a good long term investment and is undervalued.

It appears that Warren Buffett has "reluctantly discarded the notion of continuing to manage the portfolio after my death" and has embarked on finding three successor to fill his job. This is consistent with my June 2007 Chief Executive Magazine article entitled: "Decision Time for Immelt and Buffett." In this article, I contrasted the GE succession planning system with Buffet's lack of concern and lets wait until it is necessary approach.

"Trust Me vs. Obsessive" was the title of one of the paragraphs.

• This is what I wrote: " General Electric has gained a reputation as an innovator in management systems and practices. it succession planning system is complex, time-consuming and expensive, In some ways, it has become an obsession. Reginald H. Jones, Jack Welch's predecessor as chairman and CEO, even reorganized the company to select his successor. Immelt spends a month a year performing the process."
• "Buffett is the other extreme. He is 75 and "he is Berkshire Hathaway" he makes it clear that he has a successor in mind. He doesn't plan to leave and asserts "trust me" that everything is under control".

In a recent March 13, 2008 Business Week article, Rick Wartzman quoted one my favorite author's and management scholars...Peter Drucker: "we tend to pick people who remind us of ourselves when we were 20 years younger". First, this is pure delusion. Second, you end up with carbon copies and carbon copies are weak".

In my book: The Secret to GE's Success"; I emphasize that one of the reasons that GE is still alive and vibrant is that it has had only ten CEOs in its 127 year history and each one was different than his predecessor. Jones was a financially trained executive and different than his predecessor the risk taking Fred Borch; the aggressive Welch was very different from statesman Jones. And it is clear that Jeff Immelt is not a carbon copy of Welch.

There are those in GE, that will tell you that the reason that GE has been able to have internal candidates to succeed its leaders, is because of its elaborate manpower system. But it is important to point out that Borch succeed Cordiner and Jones Borch BEFORE the current elaborate system was in place and both were the right leaders for the right time. In fact, the only two CEO's that were selected with this type of system were Welch and Immelt.

I agree the current system may help but is not the only reason and in fact, it may inhibit the company's growth, which I believe happened under Reg Jones' tenure. (page 185 in my book: "The Secret to GE's Success")

I strongly believe that the reason GE has had this ability is because it has had a commitment to developing people from its beginning and it has been able to recruit, develop and motivate people because of training programs at all levels. I joined GE out of college and became a very committed GE employee because I knew that if I did my job, the company would provide opportunities for me to grow and develop. I also knew that I had to earn my strips and it was not just because of I had friends in high places.

Another key to GE's successful CEO and senior management successions is that it has recognized that different leaders and professional skills are required for different business situations and places on the life cycle. In my book: "Risktaker, Caretaker, Surgeon Undertaker- the four faces of strategic leadership", I describe the different types of leaders and teams required and explain how GE and a few other companies have recognized this fact and have been able to select different types of leaders and professionals to fit its market and competitive environments.

In conclusion, I am pleased to see that Warren Buffett now recognizes the need to select a successor but it is also important to emphasize that his successor will have a very difficult time succeeding a legend and will never have the acceptance as he has had. This is what I wrote: " But it is clear that his successor will not be placed on the same pedestal as Buffett, and if expectations are not met, the investors will not be as kind in their response".

I totally agree with Peter Drucker's quote in his 1999 book: "Management Challenges for the 21st Century" : "Succession has always been the ultimate test of any top management and the ultimate test of any institution"... In my book I put it this way: "Avoid Cookie Cutter succession planning".

The Business Week, Interactive Case Study of March 4, 2008 describes the dissent that Immelt faced when he introduced the concept of "ecomagination" in 2004. The article portrays Immelt's surprise when only six of his 35 senior officers approved of the concept and approach. This is not a new situation for GE leaders.

Ralph Cordiner had to move the GE headquarters out of Schenectady in 1953 because there was so much negative reactions to his introduction of decentralization. GE had been a highly centralized organization and dominated by the electric utility businesses in Schenectady. Cordiner's new organization and leadership system was a threat to their power and they resisted. But Cordiner's approach proved to be the right change and GE prospered from it.

Fred Borch and Reg Jones also had a similar near revolution when they introduced Strategy Planning. This new system was not welcomed by the senior management. In fact, Borch insisted, like Cordiner did before him that everyone go to Crotonville to learn about the new system. I led all of these sessions and personally saw the resistance and resentment. Again Borch and Jones was right and the company benefited.

Over the 126 years there were many situations where the CEO and his senior officers had to take stands and introduce changes that were not welcome and resisted. And in each case the company was better because of these changes and, in fact, if they didn't happen, GE may be like its traditional competitor, Westinghouse and just a memory.

I am not sure that "ecomagination" is in the same category of the previous major strategic and organizational changes, but I am happy that Immelt has had the conviction and courage to make it successful. He has displayed the same strategic skills of his highly successful predecessors.

If you want to learn more about the unique GE leadership and how they changed the company at the right time, read my book: "The Secret to GE's Success" and continue to read these blogs.

Bill Rothschild, author of "The Secret to GE's Success"

Not Home grown and not strategic...
In my book, The Secret To GE's Success, I emphasize that one of the five reasons that GE has been able to continue to prosper, while most of its peers have disappeared, is that GE has been able to "home grow" its own leaders and not hire them from the outside, and the company has had a very disciplined strategic thinking and review process, that had identified " potential problems" and worked to prevent or minimize their impact.


But it appears that this is not as true today in GE, as it was in the past.


In the October 29, 2007 Business Week, the headline reads: Adventure of a Sub prime Survivor. The story describes Amy Brandt and how she was able to sell her company "WMC Mortgage" to GE, become the General Manager, have the complete support of Jeff Immelt to move GE into very high risk "sub-prime" markets.

Amy became one of GE's highest- profile young women and even given a Jeff Immelt "high-five" after her Boca Raton presentation in January 2005.


"Today, Brandt is gone and GE is struggling to contain its mortgage mess." says the article. Since January 2007, "GE has sold off more than $ 4 billion of loans ($375 million is left" and closed down operations, taking a $1.4 billion charge in the third quarter and a discontinued Japanese loan operation.


But Brandt is living well.. She lives on a 30 acre ranch is starting a new career... she still thinks Immelt is "very charismatic" but recalls she hated the GE power point presentations.. "she was a kid who didn't like to go to camp".

It is clear that GE didn't do its traditional disciplined strategic thinking and evaluation process and doesn't have the internal auditing systems that made it successful in the past and its suffering the consequences.

Discipline, comprehensive thinking and challenging was a reason for GE's past success and GE must be sure that these skills and processes are still alive and well, even it inhibits some of its "dreaming sessions".

In my last blog, I emphasized that "strategy is what you do and not what you say" and raised concerns that GE's actions are not consistent with its words about organic growth and decreasing its dependence on financial services.

Obviously, it is important that successful leaders believe in what they are doing and will often have different perceptions of what is happening.

In his annual outlook presentation to investors and analysts, Jeff Immelt provided his perception of what what happening and the health of the company.

THIS IS JEFF's PERCEPTION...

• "It has been a good year...our portfolio is better... our financial strength and discipline have helped us deliver strong results in a tougher environment"
  
• "GE will deliver what we said we would...$172 billion in revenue (up 13%) and $22.5 billion in earnings (up 16%)..earnings per share growth of 18%.
  
• "We improved our business mix. We were able to exit slower growth businesses and make new investments in Oil & Gas, Avionics, Healthcare IT, and cable services..."
• "We returned $26 billion to investors through a dividend and buy-back program."
  
• "In 2008, we will face a more challenging environment that we have seen in several years." BUT, " our strategy and themes for 2008 will not change".... "even in challenging markets, we have set a target to grow earnings by at least 10% in 2008".
• "We expect Infrastructure to sustain its strong global growth"
• "Financial services- both Commercial Finance and Money- will need to closely manage the transition in those markets and may require some portfolio changes.
• "Healthcare needs a turnaround year
• "NBC's turnaround is well underway"
• " Industrial needs to drive growth with innovation and pricing"

It is clear that Immelt continues to be committed to his global "go big" strategy and believes that the major focus must be on managing and executing and not on strategic changes.

As a continuing GE fan, stockholder and alumnus, I hope that Immelt's positive perceptions and forecasts are right and that he is able to continue double digit earnings growth in a very uncertain, even chaotic, environment.

But I have different perceptions about GE's businesses and ability to compete globally in some of the key markets. I am still concerned about their dependence on financial services and highly opportunistic acquisitions.

In short, I will continue to be interested in seeing if the words, actions and results are realistic and hope, that the company will be able to increase Shareholder value in 2008.

Over the last year, I have become a student of the genius of Warren Buffet. This led to my article, in Chief Executive Magazine, comparing the simplicity of Warren with the complexity of GE. Both have a "go big" vision...but how they got there in entirely different.

Warren, only invests in businesses that are simple and he understands. This is my logic and so I agree with what he is doing and how he does it. Though he is a BILLIONAIRE and could buy the world, he has elected to lead a simple life and place his estate in the hands of other billionaires, the GATES to invest to benefit of the less fortunate.

My admiration for Warren, whom I have never met and never will, is his opportunistic purchasing of assets that fit his portfolio and make economic sense. The Forbes article of February 11, 2008 about his "super investor" Walter Schloss... who is 91 years young...still has Warren's attention is recommending "unloved stocks"....

The only issue, I have with Warren is succession planning... but he probably has already selected a competent successor and his "virtual company" Berkshire Hathaway may continue even after the legend is only just a legend.

The message is clear:

• know what you like,
• be consistent,
• do what you say
• keep it SIMPLE
• and let the competent, acquired business management run their own businesses...
  
  WHY ISN'T THIS BEING TAUGHT IN OUR BUSINESS SCHOOLS, rather than the art and science of being creative financial geniuses.
  
  Take a look at my Chief Executive article: "Decision Time for Buffet and Immelt". It can be found on my website and BLOG: www.strategyleader.com
  

Over my forty years as a GE student, I have concluded that in the past 30 years GE's leaders great skill is being able to do "sound surgery" of sick businesses. In some cases, the surgeon moved from the "emergency operation" to "plastic surgery"...

When Bob Nardelli took over Chrysler, I concluded that he would have trouble pulling off this transition... but the November 26, 2007 Fortune article had made me reexamine by first conclusion. Bob is clearly following the "surgeon" course.

The article describes that he has segmented the company into winners and losers. This is sound GE tradition... "he started immediately poking his nose everywhere."..he drives a different car every day to work...When sales started to decline... he closed six plants...In November, he announced over 10,000 additional layoffs... He took the short term financial hit.. which is a GE tradition designed to set the expectations low and then easily exceeding them. Wall Street always seems to believe that upward moves are the best, and they often forget that if the base is low...multiple growth rates are easier, than if they are high... it is the "numerics" game.

If his predictable "surgery" is success... Bob will be a "savior".

If it fails he will carve up the company into pieces and sell off each piece separately. Most often the pieces of any company are worth than the total, especially if the company is too broad and has tried to be "all things to all people".. one of the reasons that the US auto companies are having the trouble they are experiencing.


Bob is a "honor student" of the best College of Surgeons- GE and we will see if he can pull off this major challenge of turning around the #3 and most often the LOSER of the US auto game.

Stay tuned... your comments are welcome...

When I was GE Corporate Strategist, I created a number Strategic competitive teams to learn about the key multi-business companies that competed against GE in numerous sectors. These included: Siemens, AEG, Hitachi, Toshiba and Westinghouse. Each team was to create the competitor's corporate plan in the same format as the GE corporate plan.

The CEO at the time was Reg Jones. He used these evaluations to assess the GE Corporate Plan and to anticipate major competitive moves. The teams met quarterly at GE's Crotonville and then gave presentation annually to Reg.

Over the past few decades, GE have moved out of many of its traditional businesses and Welch had little interest in this type of evaluation.

Recently, Siemens has had major problems, including a scandal in its telecommunications business, which forced the resignation of its CEO Klaus Kleinfeld...the new CEO is a GE alumni, Peter Loescher...who has made major moves to streamline the company and improve its earnings. Since Peter held a major executive position in GE's Health care...he continues to use GE to demonstrate that GE has a major earning advantage. Bloomberg reported on November 29, 2007 that Siemens earns $7850 per employee compared to GE's $65,290 per employee. However this may be not a good measure since Siemens is still an "engineering company", which GE is half financial services.


In my book, The Secret to GE's Success, I point out that GE's success includes having the right home grown leaders and talent... this has been a tradition of Siemens as well. Siemens and GE still compete in several markets, including Power Systems and Health care... it will be interesting to see how successful an "outsider" can be in this highly conservative and traditional German company.

Since most CEO's and their executive team are only on their jobs for an average of 4.7 years... it is obvious that they will take a short term view of the organization they lead. Thus they will look for solutions to key issues that have strong positive short term impact and they let their successor worry about the consequences.

This is very apparent when you compare General Electric's labor costs with those of General Motors and Ford. GE is not burdened by excessive labor costs and benefits. This difference can be traced to the mid 1950's. GE's management took a strong stand against labor unions and BIG government and drew a line in the sand..they told the Union and Governments what they could afford, based on in-depth studies including their long term competitive impact. They were willing to take strikes and went public to fight the governmental tax and "give a way" stands. This included the willingness to move entire plants from the expensive Northeast and Mid West to the less expensive South and even to Korea, Taiwan and other lower labor, non-unionized locations. The also hired and trained a future president, Ronald Reagan to be their spokesman. Reagan admitted that many of his ideas and actions were strongly influenced by GE's Lem Boulware and Ralph Cordiner. Lem was the head of human relations and Ralph was his boss and CEO.

General Motors and Ford took the easy way out. They gave the unions high wages, and expensive retirement and health benefits. GM and Ford were the market leaders and didn't anticipate the invasion of the Japanese into their markets. They had INDUSTRY wide settlements and therefore assumed that their give a way programs would impact all of the competitors equally. In addition, health care was very cheap at the time and their workforce was young.

Today, GE is in a strong competitive position and the auto companies have been on the verge of bankruptcy. In fact, GM and Ford were forced to set up separate organizations to operate their underfunded pension and health care programs, just to survive. It is not clear whether Ford and Chrysler will even make it.

Leaders must have a long term horizon and think about the impact of their strategies and actions for the long term and not just take easy way. However, this also means that the leaders must be on the job long enough to do the job...4.7 years is not sufficient, I recommend a ten year reign...long enough to have a long term horizon, but not long enough to become the czar.

In my book, "The Secret to GE's Success" I describe the GE labor relations and leadership strategies. Though GE's strategies also have some pitfalls, it is one of the best models we have and it is worth studying and adapting what makes sense.

The message is clear...never take the short term, easy actions that can mortgage the organization's future.