A candid conversation with the CEO of General Electric about leadership, creativity, fear -- and what it's really like to run the world's most influential company The year Jeff Immelt's career almost blew up was 1994. He was vice president and general manager of GE Plastics Americas, and his division was caught in a classic profit squeeze -- the crunch that comes when raw-material costs rise and a company is locked into fixed-price contracts with customers. Instead of making his 20% profit-growth goal, he delivered earnings growth of just 7%. The upshot: Immelt missed his net-income number by $50 million.
At General Electric's annual leadership meeting in Boca Raton, Florida, in January of 1995, Immelt arrived late for dinner each evening and went to bed early -- hoping to avoid a tough talk with his legendary boss, Jack Welch, about his poor performance. But on the last night of the meeting, he felt a hand on his shoulder just as he was rushing off to the elevator and his room. It was Welch.
"Jeff, I'm your biggest fan, but you just had the worst year in the company," Welch said sternly. "Just the worst year. I love you, and I know you can do better. But I'm going to take you out if you can't get it fixed."
"Look," Immelt answered, "if the results aren't where they should be, you won't have to fire me because I'm going to leave on my own."
The story, of course, has a fairy-tale ending. And that's probably why Immelt often tells it. "It was definitely the most painful period of my career," he says. "Even though I came close to being fired, I never considered quitting. I knew the issues were my fault, and I didn't want to let my people down." Besides, he adds, "surviving a failure gives you more self-confidence. Failures are great learning tools -- but they must be kept to a minimum."
Immelt clearly redeemed himself, gaining a crucial promotion in 1997 to president and CEO of GE Medical Systems and winning the race to succeed Welch three years later, at age 45. Welch would have been a tough act to follow under any circumstances, but the timing of Immelt's ascension was particularly bad: He became CEO four days before September 11, 2001. The terrorist attacks, the bursting of the stock-market bubble, and a recession depressed some of GE's key markets. Both revenue and earnings growth slowed, and the stock slumped.
Now, four years into the job, with the company showing much stronger performance, Immelt is stepping out of Welch's shadow and developing a leadership vocabulary of his own. He speaks about creating "growth leaders," holding "dreaming sessions" with customers, developing "imagination breakthrough" teams and projects, and the importance of "simplification" in a big-company environment. And Immelt has won favorable reviews for a new and bold environmental initiative that will double the company's research on clean technologies.
Immelt recently sat down for a talk with Fast Company editor-in-chief John A. Byrne in the CEO's conference room at GE headquarters in Fairfield, Connecticut.
What have you learned so far in the job?
One of the things Jack said early on that I think is totally right is: It's a marathon. It's not a sprint. All these books about the first 90 days are kind of rubbish in many ways. You have to have a plan. You have to stick with it. You have to modify it at times, but every day you've got to get up and play hard. Jack used to see me running around, even after he left, and he'd say to me, "Remember, it's a marathon. Ten years. Fifteen years. You've got to get up every day with a new idea, a new spin, and you've got to bring it in here every day." I always kind of knew that, but until you're right in the middle of it, you never get it. His advice was right. It's the sustained ability to change that really counts.
Have you ever been scared?
Yes. Right after September 11, and during periods of 2002, the world around us was exploding. I never had a fear about the company, but I would say to myself, "My God, what else can happen next?" Because when you run a company the size of GE, sometimes there's collateral damage from an Enron or a WorldCom. There were times when the credit markets were going crazy, and then WorldCom happens, and you wonder, "Holy shit, are people going to lose their confidence in the broad market?"
Do you ever wake up and say, "What am I doing here?"
Never. I'm an optimist. I've always believed the future is going to be better than the past. And I also believe I have a role in that. The great thing about human beings, myself in particular, is that I can change. I can do better. If you can get up every day, stay optimistic, and believe the future is better than the past, those few things get you through a lot of tough times.
Your father, Joe, spent 38 years working for GE Aircraft Engines. You once said that you always knew when your dad had a good or bad boss at GE, because you saw the difference it made in your family. How so?
I always tell our leaders that they're GE to the people in this company. When I would sit around the kitchen table with my dad, I never knew who the CEO of GE was. I knew my dad's boss. And this has a tremendous impact on the 300,000 people in this company. I say my job isn't to manage 300,000 people. It's to manage you. If you have the values, the ambition, if you're able to create excellence, this is going to be a great company. The 300,000 people may see my face in an annual report, or they may go home one night and see me on CNBC, but that is too abstract in a company of our size. We've got to bring our company to life in the faces of the people sitting around a table. This is a company where we want people to make a difference. We want them to be proud of where they work.
But when your dad had a bad boss, did he behave differently at home?
Yeah. He came home in a bad mood, uncertain about the future. And when he had a good boss, he was pumped. The frontline folks are critical to how the company does.
So how do you get those people pumped?
People want to win. And if people think they've been given the capability to win and are with winners, that's how you get people in the game. People who want to build things and like who they work with will stay with us. We lose people who just want to make a lot of money, or just want to be powerful. They tend to be successful at other places. But if you like building stuff, and you like who you work with, this is a pretty energizing place to work.
It was said in the hallways of GE when you were named CEO that if there was any concern, it was that you trusted people too much.
I'm less trusting than you think I am, and Jack is more trusting than people think he is. So I would say we're in the same street. We may be on opposite curbs. Look, I was never a dupe. But I also want to believe the best in terms of what people can do. And if you want to make a growth culture, you've got to have a way to nurture people and not make them fight so goddamn hard to get any idea through the door.
What parts of your ordinary life have you had to give up for this job? Do you ever get to watch The West Wing or ER?
You have to have different ways to interact with the world. What I'll do is get a bunch of tapes of TV shows and watch them when I fly. I still protect working out every day. I get up at 5:30 in the morning, work out for an hour at home, doing the treadmill, the stair stepper, and the elliptical trainer. I flip between CNBC, Imus, and ESPN during the hour of cardiovascular. At least half the nights, maybe 60%, I'm away from home. Probably the one thing I've tried to hold on to is a relationship with my family, particularly my daughter, Sarah. When I got the job, she was a freshman in high school. She's graduating this year and going to Boston College. As best we could, we gave her a fairly normal life. Beyond that, there's nothing that is normal. You're on 24 hours a day, seven days a week. I'm thinking about the company all that time. My wife and I are great friends, so it's something that both of us have adjusted to. But there is nothing typical. It's constantly about being on.
Is there a certain time at night you try to get to sleep?
When I'm at home, I'm usually asleep by 10:00 or 10:30. If I put my head down at your feet right now, I'd be asleep in 30 seconds. I can sleep anywhere, anyplace, anytime.
What do you try to read in a day?
I typically read The Wall Street Journal, from the center section out. I'll read down the middle and pick what I want to read. Then I'll go to the Financial Times and scan the FT Index and the second section. I'll read the New York Times business page and throw the rest away. I look at USA Today, the sports section first, business page second, and life third. I'll turn to Page Six of the New York Post and then a little bit on business. And I probably get 40 journals a week. I'll read everything from Fast Company and Business Week to Aviation Week, Chemical Week, and Modern Healthcare. I take them with me when I travel.
Do you ever go to a supermarket or walk into a Wal-Mart?
Yeah. Yeah. I do it for two reasons. One is I like the freedom of it. I like having a life as best I can, but I also go to see how the lighting section is shelved, particularly Wal-Mart's. There is one in Norwalk and one in Wilton, and I'll hit both those, and occasionally on the road, I'll go to a Wal-Mart as well. I savor as much normalcy as I can get.
Bring me through some of the experiences that were formative and that helped you get to this office.
The first real break I got was in the late 1980s. I got home one day from my job in plastics and was told I was going to Louisville [Kentucky] in the [consumer appliance] service business. I was in the go-go business of all time, building my career, and I said, "You've got to be kidding me." But I was told that Jack wanted somebody from outside the business to go in and fix this quality problem with compressors in refrigerators. It was like being sent to the far side of the moon. It was a very tough business going through a very tough cycle. And I went from running an organization of a couple hundred sales and marketing people to having 7,000 employees in consumer service, most of whom were union members fixing 3 million compressors in the middle of the biggest crisis that business ever had. That was just pure survival. It was an incredibly good test for me.
What did you learn from that experience?
It was, how do you manage a tough business at a tough time? Operationally, I became very good, in terms of attention to detail. But I also became a very good communicator. Coming here to see Jack, for two and a half years, I didn't have one good thing to say. I never said, "Wow, things are great." Instead, I said, "We fixed another million compressors this year. Here's how much it cost." The business lost money for two years. Every line was going straight down. You learned how to motivate people during a tough time, and you learned how to keep your own wits and not to panic. If you panic, everybody goes with you pretty fast.
And how do you motivate people through a tough spell?
It's a combination of dealing with the reality while communicating the road out: "Here's what we've got to do, but once we do, there is a road out of here." When I came up here, it was all about telling the truth. I was 32 years old at the time and came to see Jack, and believe me, the meetings were brutal. But I learned to tell the truth all the time. I had only bad news. I'd say, "Here's the Weibel curve, Jack, it's going like this." And he would say, "No, it isn't. You can't be right. You can't possibly be right." And I would tell him, "Well, actually, Jack, I am right, and it's going to cost us a couple of hundred million bucks." And he would say, "That can't possibly be true." And I would say, "Well, it actually is true." That was a great experience. Thank God I got it. Only a guy like Jack would have had enough faith in a guy like me. Seeing that has made me understand the need to take chances on people.
Of course, you're probably exhibit A on getting through a tough spell. How did you survive the warning from Welch in 1995 that you could be fired?
I believed in myself. There was only one person at that time who thought I had a future at GE, and it was me. It's like you see people in a meeting looking at you and covering their eyes quickly. They're thinking, "Dead man walking." I recognized that I had made a few mistakes in the whole thing, and I recognized that the only person who could get us out of it was me. I also knew I was a good guy. What I tell people is, "Don't let me define your success." I learned at that moment that Jack wasn't going to define who I was. In business as in life, sometimes bad things happen to good people, and sometimes good things happen to bad people. But over time, if you play long enough, everybody gets what he deserves -- good and bad. I was able to play through it, fix it, and it gave me a lot more confidence to face other things.
From what I've heard, it got pretty hairy, though. At one point, you nearly got into a fistfight with the sourcing manager of General Motors at a Shoney's restaurant, right?
[Immelt laughs out loud.] That was 1994, and I was trying to get pricing up in not always agreeable terms. We had a small disagreement. Let's put it that way.
In your latest letter to GE shareholders, I felt that for the first time you've begun to develop your own leadership vocabulary. It conveyed ideas and thoughts that are starting to form what might be called the Immelt Era. Where did that stuff come from?
It takes time. When I got the job, I knew I wanted the company to be more innovative, more global, and more focused on the customers. But it does take a year or two or three to really put ideas into initiatives and get the team aligned. And you've got to get enough results in the pipeline so that when you talk about the things, people aren't going to say, "You know, that's a bunch of you-know-what." I can say, "We're doing imagination breakthroughs, and, by the way, here are 20 examples that closed last year." It does take time to get there. But again, one of the things I learned from Jack is that when you're running GE, it's your job to pick ideas, pick people, and spread those ideas across the company. It's not as much a question of confidence as much as it is a combination of confidence and actually seeing the pathway you want to follow -- not just for a year or two but for a long period of time.
If you had to carve up how much time you spend with customers, on people development, and other things, what would that pie look like?
You can't delegate growth or customer satisfaction. I'm spending four or five days a month with customers. Twice every month, I do town-hall meetings with several hundred customers to share ideas on GE's direction and listen to their thoughts on what we can do better. And we're doing what I call dreaming sessions with key customer groups, trying to think about where our business and their business will be in 5 or 10 years. I'm probably spending 30% of the time on people, teaching and coaching. I'm using 10% of my time on governance, working with the board, meeting with investors. The rest would be time spent on the plumbing of the company, working on operating reviews and strategy sessions.
Describe a dreaming session.
We had the railroad CEOs in with their operating people. We spent half a day, grounding ourselves on where the industry is, where we are, what their trends are, and then said, "Okay, here are some things to think about: higher fuel, more West-East shipments because of imports from China." We would have four or five boundary conditions. And then we'll ask, "If you had $200 million to $400 million to spend on R&D at GE, how would you prioritize it?"
So you're actually asking your customers to help you decide how to spend your R&D money?
Exactly. Because at the end of the day, particularly in the industries that we're in, like health care, rail, and aviation, our interests are aligned with our customers. As we develop a more fuel-efficient locomotive engine, they benefit. It helps us prioritize between rail movement planning, which is basically information technology that helps them get more out of their assets, and fuel efficiency. And if I show up, we'll get six CEOs to show up. So you don't have to cut through anything else if we all do it together. We can make some high-level trade-offs that way.
How do you get customers to not limit their dreams? The general rule on asking customers what they want is they think only in short-term fixes and solutions to problems they're grappling with today.
That's really true. I've spent my lifetime working with customers, and I love customers. I get great insight from them -- but I would never let them set our strategy for us. But by talking to them, I can put it in my own language. Customers always pay our bills. But they will never pick our people or set our strategies.
What's the worst thing you've heard a customer say about GE since you've been CEO?
I've heard a lot of really bad things. We didn't deliver on time, blah, blah, blah. But one of the things that is toughest for us [to hear] is we're just too inflexible. We're too legalistic. One of the things I worry about at a company like GE is that we have to have unbelievable standards of compliance. But we have to find a way to do that without being so legalistic. That is a trick and a real challenge. The thing customers say that makes me most upset with our team is that we are just too inflexible.
Is that also a result of size and the complexity that comes with scale?
It's size. It's arrogance. It's not listening hard enough. There are probably six or seven different things. I'm constantly coming back and saying, "Look, we're going to change our measurements and the way we compensate people." But ultimately, it's attitude. We've got to have different leaders, different people who can say we will find ways to do this. When I talk about inflexibility, I view it as an easy thing to change. It's a lot about attitude.
What's the idea behind imagination breakthroughs?
We had to have some way to pull ideas out of the pile, make sure they were funded, and really try to redefine what it meant to innovate in a big company. We started two years ago. We tested the time-honored tradition of pulling things out of the pile, putting good people on them, and finding ways to share ideas. In the beginning, we said, "Let's start with ideas that could generate more than $100 million of incremental revenue." We had 30 ideas. It was almost nothing for a company of our size. About 20 of them turned out to be good projects, from a dual card for consumer finance to a hybrid locomotive for GE railcars. What's magical about them? We picked who would lead them, and every penny is funded. Our leaders know they have to pony up. So I now have 80 projects inside the company that are fully funded with the best people we can find. The big difference is that the business leaders have no choices here. Nobody is allowed not to play. Nobody can say, "I'm going to sit this one out." That's the way you drive change.
What makes a growth leader today, and how does that differ from the sort of leader who was effective at GE in the past?
GE has always been a believer in leadership development. When the economy was growing 5% a year, when oil was $14 a barrel, and when the world was at peace, the science of management was all about the how-to. That was the how-to generation. You didn't have to think about the what. Instead, there were management initiatives such as Six Sigma, which was the how.
So most of management literature, certainly for the past 10 years, was all about the how-to. I think we're now in the what-and-where generation. Global economies are slow and more volatile. Oil is at $50 a barrel. So this ability to pick markets, growth trends, customers, and to do segmentation -- that is management today. We have a generation of people who know how to do process flow charts. We have a generation of people who know how to do quality function deployment and things like that, but don't necessarily know why we're doing them. What's the what and the where? I believe that wholeheartedly. Nothing is completely black and white, but we are in a completely different cycle of what good managers know how to do.
It would seem a hell of a lot harder to develop foresight in managers than a simple how-to.
It's a challenge, but it's the pervasive challenge of the business world, this company, and this country. Almost every personal friend I have in the world works on Wall Street. You can buy and sell the same company six times and everybody makes money, but I'm not sure we're actually innovating. I'm not sure that taking a chemical company from an AA-rated balance sheet to junk is innovation. Our challenge is to take nanotechnology into the future. We've got to do personalized medicine. We've got to do renewable energy. And that's what GE can do with its great people. In this generation, this company can do what it did in the last generation. But it's going to take different skills.
And the assumption of different kinds of risks. Do you make it easier for GE leaders to take those risks?
At [GE's training center in] Crotonville, you'll hear me talking about risk taking. I'll ask people, "How many of you think it's just BS?" And half the people in the room will raise their hands. They say, "It doesn't exist in my business." So it gives you a great chance to hone your message.
Do you worry about our country's ability to innovate?
I do. We have a great ambience of entrepreneurial spirit. We've got capital markets that support it. But we've lost our love of technology. You can look at the number of engineers who are going to school here versus outside the country.
Have we also lost our desire?
I worried about that in the presidential election when you hear one candidate going after another, saying every American deserves a job, no matter what. You watch us run up debt as if there is no consequence to having a low savings rate or a budget deficit. Look, there are consequences to all that. But when I see a 22-year-old graduating from the University of Wisconsin, I see someone who wants to see the future and make a real contribution.
Do you think outsourcing is killing America?
I think it's a ruse, a complete and total ruse by people who don't want to face what the real problems are. The real problem is that 30% of the people getting a college degree in China and India are getting an engineering degree. That number in the United States is 4%. The fact is, we don't value engineering, and that is how manufacturing jobs get created.
Are you concerned about your daughter Sarah's future?
I'm not, because I think the United States has a resiliency that is amazing. At some point, in the next 5 or 10 years, this country will decide whether it is a manufacturing or a service economy. That is very much in the balance in the next 5 or 10 years. She may be a lawyer, a banker, work on a TV show, or something like that. Whether she works in an industrial environment is not so sure. And I'm not so sure it matters. When I travel in Europe, the best economy by far is the UK, and there is zero manufacturing there.
If you weren't CEO, what would you really love to be doing?
In some next life, I want to do something where I could give back. Teaching is one way. I would probably teach business, somewhere, someplace, somehow. I'd love to say I could teach math, but I can't even help my daughter with that.