Succession Planning Ge

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A Case Study Presentation

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The case examines the succession planning process at the US-based

GE, the leading diversified business conglomerate in the world.

The case details the growth of GE under its various leaders from its

inception, and examines GE's commitment to succession planning

through the decades.

It discusses in detail the succession planning and leadership

development processes at GE, and also examines the CEO succession

planning under Jack Welch, GE's CEO and chairman in the period

1981-2001.

The case examines the differences between the management stylesand ideologies of Welch and Jeff Immelt, who succeeded Welch as

chairman and CEO of GE.

Finally, the case examines the future of GE under the leadership of

Immelt.

Abstract:

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General Electric*Established in 1892, Thomas Alva Edison merged hisEELC with Thomson-Houston Electric Company toform General Electric.

*Business Structure of GE : Commercial Health EnergyTransportation Infrastructure Finance Care

*Forbes ranked GE as the world's largest company. Thecompany has 323,000 employees around the world.

*In Fortune Magazine's 2005 "Global Most AdmiredCompanies" list, GE ranked first overall.

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*succession planning

*Definition

Identification and development of potential successors

for key positions in an organization, through a

systematic evaluation process and training. Unlike

replacement planning (which grades an individualsolely on the basis of his or her past performance)

succession planning is largely predictive in judging an

individual for a position he or she might never have

been in.


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The Successor

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In November 2000, General Electric Inc. (GE) announced that

Jeff 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.


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The three candidates for the top spot at GE wereImmelt, 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.

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Welch wrote in his autobiography, that choosing

between the final trio "was the most difficult andagonizing [decision] I ever had to make.All the threeexceeded every expectation we set for them. Their

performance was off the charts. Any one of the three

could have run GE."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 ofage, contributed to his selection

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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 becameCEO 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.

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.

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Given GE's record of effective leadership, and the care

and intensity of its succession planning program, mostindustry 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'sconfidence in leaders groomed by GE.

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Q:Do you think Welch was right in deciding against

retaining final CEO candidate, who failed to make it to

the job? Justify your answer.

A: Yes, Welch was right.

Each candidate are equally enough to run GE

They could easily become CEOs of any leading

company Retaining candidates may results into personal as

well as business conflicts

Work efficiency may reduce after retaining


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Advantages of involving the top management in

the succession Planning:

Better Assessment Ability

Employees will be trained under experts

Personal attention to key candidates Build a health relationship between top

management and employees

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CEO succession planning process Welch

followed.

In 1994, Welch created a list of essentialqualities, skills and characteristics an IdealCEO should posses.

Submitted a list of 23 candidates to GE Board Organized informal events to look at potential

CEO candidates

By 1998, The original list narrowed down to 8serious candidates.

Developed Eight Basic Objective forSelecting CEO Successor.

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Immelts Performance at GE

During the first two years as GE's CEO, Immelt had to face many

problems on account of September 11, 2001 attacks, the Enron

debacle, and the global economic slump during the early 2000s,

which affected the company's earnings severely. As a result, GE

for the first time in ten years, failed to report double-digit

earnings growth in the fiscal 2002 .

Measures opted by Immelt: Cut costs through layoffs

Restructured GE business

Introduced a Customer Service program ACFC He focused on Customer Centric strategy.Invested $100 million in R&D to form Global ResearchCentre

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Comparison between Welchs and Immeltsleadership styles and ideologies.

Money making machine Customer centric company Focus on Acquisition

Focus on Innovation Focus more on Job Rotation Retain managers to make them

Focus on Short term demand specialist Focus on Long term strategies Charismatic Natural Leader Jack Welch,Jeff.R.Immelt

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Need for succession planning

To have a ready pool of deserving candidates to fillthe leadership positions when need arises.

Opportunities for internal employees increases

Build a healthy relationship between Top

Management & employees Problems due to lack ofsuccession planning

Affect business performance and reputation

Moral of the companys staff is affected Severance pay, In case external employee is hired

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Q: Many companies appoint CEOs from outside, rather

than from within the company. Do you support this

practice? Justify your answer, citing reasons.

A: No, Reasons are explained below:

Non-Familiarity

They dont understand norms and rules of the

company Increases cost

Demotivate employees

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Leadership Development in GE

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Succession planning is an on going, rigorous and challenging

process at GE. GE adopted succession planning right from themid-1900s. At GE, succession planning was not confined to only

the top management, but was applied across all tiers of

management.

The managers of GE's various businesses were encouraged to

identify potential candidates and fulfil their development needs,

and transform them into efficient leaders ready to take up top

jobs at the company. As part of CEO succession planning, GEshifted its key candidates from one business to another to

enable them to gain experience across all its businesses.


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The company used mainly annual performance reviews

for identifying potential candidates, until the early

1980s. However, after Welch took over as the CEO, thesuccession planning process at GE became a more

systematic process, with the use of various analytical

tools and the involvement of the top management in

leadership development and succession planning.

Since early 1980s, the annual Human Resource Reviews

(popularly called Session C) had been at the heart of

succession planning at GE. The Session C process wasreportedly given as much importance as financial

monitoring in GE...

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Conclusion

Preparing future leader Building-up the performer

Creating healthy working

environment Overall cost saving.

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Succession Planning Ge

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