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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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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"You don't get succession candidates if you don't start with a pipeline."1

- Gestrude G. Michelson, an outside director, GE, in April 2002.

The Successor

In November 2000, General Electric Inc. (GE) announced that Jeff Immelt (Immelt), the president and CEO of GE Medical Systems, would be the successor to Jack Welch (Welch), the Chairman and CEO of the company. Welch was to retire in September 2001, after a successful 41-year stint at GE. According to GE sources, Immelt would become the president and chairman-elect of GE, and a member of GE board and Corporate Executive Office, with immediate effect.

The announcement ended the battle that was viewed on Wall Street as the hottest corporate succession race of the decade.

The three candidates for the top spot at GE were Immelt, W. James McNerney (McNerney), CEO of GE Aircraft Engines, and Robert L.Nardelli (Nardelli), president and CEO of GE Power Systems.

Neither GE nor Jack Welch revealed exactly why Immelt had been preferred over the other two. Welch himself went on record to say that the other candidates were equally capable of running GE.

Welch wrote in his autobiography, that choosing between the final trio "was the most difficult and agonizing [decision] I ever had to make….All the three exceeded every expectation we set for them.

Their performance was off the charts. Any one of the three could have run GE."2 According to Welch, it was his nose and his gut, which prompted him to select Immelt. Analysts believed that the fact that Immelt was younger than the other two aspirants at 44 years of age, contributed to his selection.

GE is known to favor steady leadership over a long period. Since Immelt was six years younger than his rivals, he would have an opportunity to plan for a further 20 years at GE, like Welch who became CEO about the same age, and stayed at the company to implement his plans. Welch too characterized Immelt as "a natural leader, and ideally suited to lead GE for many years," adding weight to this view.

As soon as Immelt was selected to take over as CEO, the media began to make comparisons between Immelt and Welch, and some expressed doubts as to Immelt's ability to match Welch's charisma or impeccable record.

Many Wall Street analysts believed Welch was one of the most important and influential business leaders of the 20th century, and clearly Immelt would have to work hard to match the performance of his predecessor.

Succession Planning at GE - Next Page>>


1] "Grow Your Own CEO," www.boardmember.com, March/April 2002.

2] "Jack: Straight from the Gut," written by Jack Welch with John A. Byrne.

 

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