21 months ago, I published
Immelt on hitting Wall Street quarterly numbers. That posting was about the way Jeffrey Immelt, the GE's CEO, understands the relationship between a CEO and Wall Street. The CEO communicates the company strategy, and then follows-up, every quarter, with the numbers. It sounds simple.
Over the past two years, communications is what Mr. Immelt has done. And I am not talking about his addressing as much Wall Street through some dedicated channels as the public at large (customers and potential investors alike). Indeed, chances are you've seen Immelt's positions on
ecomagination or
US executives pay.
On the other hand, the year of the large cap stocks, as the investment analysts dubbed 2006, is coming to an end, yet few large caps have done as well as predicted.
GE stock price returned to $35, where it started the year, after it reached a low of $32. So, not counting the dividends, GE would have been in business for itself had one considered only its stock price.
From an interview with Mr. Immelt, recently published in Financial Times, we learn more about his perspectives on the world as it relates and surrounds GE. This is the type of statements that we seldom learn from CEOs for it says little about here and now. Moreover, his opinions may well indicate, even if indirectly, what has been going on at GE over the past year or two. Here they are, followed by my comments:
"If you put globalisation to a popular vote in the US, it would lose. It is anissue on which business has to find better ways to present its case."
I don't think it's about presentation alone since the real wages of the US workforce have gone down over the past few years amidst growing corporate profits. Some people hint at the need for better re-distribution or protectionism, I think it's about the need for better education and a more trade/investment-open, and copyright respectful, China.
"If we didn't have access to global markets we would lay people off in Cincinnati and Milwaukee, so [globalisation] is real."
This is presented as markets only, I would also add, especially from the perspective of GE- or Microsoft-like businesses, the need for qualified workforce.
"If the US continues on the current trend towards a service-based economy, it could easily end up with wealth concentrated on the two coasts and bigger discrepancies between rich and poor."
What a refreshing perspective on the state of clothing of the emperor (read: services based economy.)
"People think that running GE is like driving a stagecoach: if horse number three breaks down, take it out and shoot it. This way you develop a management team that would rather be bought than stay to fix things and build businesses for the long term."
If this is how things are in reality at GE, Mr. Immelt is to be commended, regardless of the perceived lack of performance registered by the stock price. If it's only a matter of perception or investors' taste, give it some time and reality will take over. It should also be noted that GE lost one of its top managers to a hedge fund, so even GE management can be bought.
"Private equity funds are the conglomerates of this era. Strategic buyers have not seized the moment in terms of doing deals they could have done to build their companies for the long term. The vast majority of them only add value through financial, rather than operational improvements. If you took any of GE's top managers and told them that you have to bring the [profit] figure from 4 to 7 in three years, and then they could drop the reins, almost any of them could do it."
Considering how the hedge/private funds seek to raise money in the public markets, and the frenzy ensuing the pursuit of better
alpha, the time of reckoning is closer than the image in the mirror. GE thus becomes the safe bet.
"There are people who like thematic work, who build their careers two years at a time, but I want to hire people who are curious to see stuff through to the end."
Most any hiring manager would say the same thing. GE, by being so diverse, large and keen on accountability, may offer a unique chance for the individual employee to grow professionally without leaving the company.
"I would not tolerate anybody in the company being satisfied with being number four."
This is just to make sure that not everything has changed since Jack Welch retired--the individual and operational entity measures of success have been kept. One thing Mr. Immelt changed was to dispose of the insurance business that made Jack Welch look so dear with the investors in the late nineties.
As if to match words with personal commitment, in the last 12 months, Mr. Immelt has bought GE stock in the open market for which he paid over $2M. Statements and actions like the ones above should make GE the favorite supplier and employer of most, which in turn will translate in great financial returns. A big question mark remains though. In a June interview with HBR, Mr. Immelt said:
"If we can create a sales and marketing function that is as good as finance at GE, I'll change this company."
Hm, not knowing more details, this reads like the GE wildcard. Statements identical to this abound, and so do failures. A relatively recent casualty of this type of failure is Carly Fiorina, who could have well said, to paraphrase GE's CEO, If we re-create a sales and marketing function for HP-Compaq that is as good as engineering at HP, I'll ...
All in all, GE might not have been, and will not be in short term, one's best bet, yet come some crisis and you wish it were.
