GE’s swift and dramatic corporate meltdown … and the failure of leadership
You may have read my recent articles here and here about the precipitous decline of General Electric. Now comes an insightful article by Fortune Magazine Senior Editor at Large Geoff Colvin. If you are interested in learning more about GE’s problems and the impact of bad leadership, I highly recommend that you read Colvin’s piece. Colvin minces no words in his criticism of Jeffrey Immelt’s leadership during his tenure as CEO, pointing to a pattern of “inept capital allocation,” not only in the acquisitions that GE made but also in stock buyback and dividend payout decisions. Colvin cites numerous examples of bad acquisitions, including:
- Ion Track and InVision (which were combined into a homeland security unit and subsequently sold at a substantial loss),
- nine or more Oil and Gas businesses (when oil prices were around $100 a barrel before they plummeted two years later),
- subprime mortgage company WMC (when US home prices were skyrocketing … only to sell the company three years later after a $1 billion loss), and of course
- the French energy company Alstom (GE’s largest industrial acquisition ever, which underperformed almost from the start and resulted in GE’s most recent “shrink to fit” move).
I won’t go into the article in great detail here. You can read it. But I was struck by one comment that is worth repeating:
“Immelt followed fads … paying top dollar to acquire the hot businesses of the moment.”
There is often a tendency on the part of leaders to pursue the “next great thing” that comes along … you know what I’m talking about … that one deal that’s going to be a game changer … the next hot business … the best thing yet. More often than not this is done outside the context of an overarching business strategy. Following fads. I call it the “shiny object syndrome” and wrote about it in a recent issue of my weekly newsletter.
I continue to be concerned that this is symptomatic of something much deeper, of a “collective ADD” or what has been referred to as a “disease of distraction.” It can be bad in any situation, but it can be particularly devastating when it impacts leadership decisions in a Fortune 500 company.
My intent here is not to indict Jeffrey Immelt, although Colvin’s points specific to GE under his leadership are worthy of consideration.
The goal here is to help glean lessons in leadership from GE’s situation that we can learn from as we endeavor to be better leaders ourselves, whether we run a large corporation, a medium-sized or “mom and pop” business, a non-profit or even simply our personal lives.
Does your company have the leadership in place to take it to the next level of excellence? Are your decisions shaped by an overarching strategy, a roadmap and a set of principles that ensure you don’t get sidetracked by what may seem like a great deal at the moment?
I’ve spent thirty years helping business leaders do great things. If there’s ever an opportunity for me to help you, please don’t hesitate to contact me. You can learn more here.
For over thirty years, Mike has been actively involved, as a coach, entrepreneur, scientist, business executive and management consultant, in the areas of executive leadership, organizational development and change management, strategic planning and execution, and financial analysis. He has provided strategic, operational and financial leadership to small and medium-sized firms, as well as Fortune 500 companies and large government organizations, in a broad range of industries. Mike holds BS and PhD degrees from the Georgia Institute of Technology and has had additional training in finance and accounting, strategic planning and management, leadership development, and succession planning, from various top-tier institutions.