It was Jeffrey Immelt’s fate to follow Jack Welch — the 20th century’s highest-profile corporate boss — as chief executive of General Electric, the company that was for decades a bellwether for corporate America.

One common defence of the affable Immelt, recalled in Lights Out, is that he was dealt a difficult hand. GE’s reputation with investors rested on preternaturally smooth earnings growth, buttressed by the financial operations of GE Capital, which Welch had expanded.

Welch’s hard-nosed managerial approach, including ruthless pruning of underperformers, earned him the nickname he hated, “Neutron Jack”. By the time of his departure, the group relied on a spread of activities running from NBC, the broadcaster, via fridges to the manufacture of aircraft engines and vast power turbines.

Immelt then had to cope with the shocks of the 9/11 terror attacks (just after he took over) and the 2008 financial crisis. And all the time, there was Welch, sniping away at his successor via regular television interviews.

GE chairman and chief executive John Welch, left, with his successor Jeffrey Immelt in 2000 © Getty Images

Yet in this study of the Immelt era and its aftermath, Wall Street Journal reporters Thomas Gryta and Ted Mann make the case that whatever hand Welch dealt in 2001, by the time Immelt stepped down in 2017 he had picked or played so many poor cards of his own that he nearly sacrificed the entire game. Under pressure, the complex conglomerate structure, which Welch had held together through the good times of the 1990s and Immelt had struggled to restructure for the more turbulent early 21st century, came close to disintegrating.

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After Immelt’s departure, GE spat out his chosen successor, John Flannery, when he had spent barely a year in post, and dropped out of the historic Dow Jones Industrial Average. For the first time, GE, which prided itself on building and shaping top managers, had to appoint an outsider as chief executive: Lawrence Culp, successful ex-CEO of a smaller industrial group, Danaher. He is trying to extricate the group from structural and financial distress, triggered, with grim appropriateness, by costly liabilities contained in the “unwanted detritus in the basement of GE Capital”, which Immelt was unable to clear.

Despite its sometimes wearying, choppy, short-chapter style, and occasional diversions into numbing accounting detail, Lights Out is a hard-nosed, well-written analysis of what went wrong (albeit one disputed by some of Immelt’s defenders).

The authors point out, rightly, that if Culp succeeds, it will “undermine a central tenet of GE’s oldest and most precious belief: that it knew how to manage any business and could teach any of its own to do so”.

In truth, this belief always looked hard to sustain. Flannery discovered when he took over from Immelt that a multinational of the size, scope and complexity of GE was very hard to manage: “[Flannery’s] three decades inside the company . . . were not enough to make the workings of the whole intuitive — or its biggest problems obvious.”

Line chart of GE market cap ($bn) showing Decline of an American conglomerate

I think this analysis of the overarching challenge of running GE invites a little more respect for Immelt’s 16-year plate-spinning feat than the authors allow.

Like many chief executives, including Welch, he certainly outstayed his welcome, and grew to believe his own publicity as the man modernising and streamlining the company for the digital and eco-friendly age. GE directors must take some blame for not challenging him sooner or more aggressively.

He also mis-hit with an ill-structured and overpriced deal for France’s Alstom and a mistimed expansion into oil and gas services before energy prices slumped. “The knock on Immelt was that he chased trends, arrived too late, and paid handsomely,” the authors claim. His attempt to turn the group into a “124-year-old start-up” as one laudatory Bloomberg Businessweek cover story described it — and to market it as such — looks lame in retrospect.

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Immelt was not unique, though, among chief executives of history-freighted industrial incumbents in trying to stay ahead of the digital revolution. Few of his peers running large multinationals will be so publicly punished for trying to adapt. Plenty will lie awake after reading this account wondering if they really know what is going on in their sprawling empires — or ever can.

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Lights Out makes clear that by the end of the 20th century, GE had built a reputation as “a capitalistic meritocracy, a locus not just of success but of a certain version of virtue — the virtue of targets made, goals surpassed, earnings earned, markets won”. Retail investors, pensioners, employees, executives and whole communities in turn relied on GE. If nothing else, the past 20 years have demonstrated that such corporate virtue is sometimes built on fragile foundations. When they crack, it is not only the stock price that suffers.

In one well-told scene late in the saga, the newly appointed Flannery addresses senior GE managers in 2017 about the scale of the problems he has uncovered. He hands over to Jeff Bornstein, a “muscled, nicotine-gum-chomping, weightlifting, hard-driving” executive and former aide to Immelt, who had taken over as chief financial officer. “I love this company,” Bornstein tells the group, before fighting back tears. It was a telling sign that GE’s “well-bred hubris”, in Gryta and Mann’s fine phrase, was finally crumbling.

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Lights Out: Pride, Delusion, and the Fall of General Electric, by Thomas Gryta and Ted Mann, Houghton Mifflin Harcourt, RRP $28, 368 pages

Andrew Hill is the FT’s management editor

Via Financial Times