Succession Planning at GE


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Case Details:

Case Code : HROB056
Case Length : 14 Pages
Period : 1996-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : GE
Industry : Diversified
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Successor Contd...

During Welch's tenure of two decades as CEO, GE transformed itself from a manufacturer of light bulbs and appliances into an industrial conglomerate, with annual revenues increasing from $27.9 billion to $130 billion.

Given GE's record of effective leadership, and the care and intensity of its succession planning program (Refer Exhibit I for an overview on succession planning), most industry observers expressed their confidence in GE's choice of Immelt.

The fact that McNerney and Nardelli were taken on as the CEOs of 3M and Home Depot, respectively, within weeks of their losing out to Immelt, was in itself taken by observers as testimony of corporate America's confidence in leaders groomed by GE.

Background Note

The roots of GE can be traced back to Thomas Alva Edison (Edison), the inventor of the incandescent light bulb. Edison set up The Edison Electric Light Company (EELC) in 1872, to conduct experiments on electricity, and in 1879, he invented a carbon-filament lamp and direct current generator for incandescent electric lighting.

The EELC was comprised of a number of smaller companies involved in different businesses ranging from power stations and wiring grids to electrical appliances. The EELC merged with The Thomas-Houston Electric Company3 in 1892, to form General Electric (headquartered in Schenectady, New York).

In 1894, Charles Coffin (Coffin) replaced Edison as CEO of GE. Coffin brought about a number of changes in the company by creating a rigid hierarchy and organizing the company around different individual "works," or units dealing with specific product lines or jobs.

He also imposed rigid financial controls to keep the different units on track. By the end of the century, GE was able to consolidate its position by licensing its electric bulb technology to other companies.

Gerard Swope (Swope), who succeeded Coffin in 1922, played an influential role in making positive changes in industrial relations at GE.

He introduced many schemes such as group insurance, profit sharing, bonuses, pensions, home-mortgage assistance, and stock-purchase plans, which were widely appreciated. He consolidated GE's position in the industry further. GE also became the first company to establish unemployment pension plans, which guaranteed its laid-off workers a stipend of $7.5 per week for a period of 10 weeks after layoff.

Charles Wilson (Wilson), who became CEO in 1940, undid most of the changes that Swope had brought about in industrial relations. After the Second World War (1939-45), GE faced a major crisis in industrial relations due to the increasing clout of the trade unions...

Excerpts >>

3] In 1879, Elihu Thomson and E J Houston formed the Thomson-Houston Electric Company. The company was involved in producing electrical equipment and building electrical power stations.

  

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