‘G’effery ‘E’mmelt...

...atleast that name has GE written on it!

Here’s a quick test: Which amongst the following three (who were his top three generals) did Jack Welch choose to succeed him – Jeffery Immelt (GE’s CEO since 2001), Bob Nardelli (current CEO, Chrysler) and Alan Mulally (current CEO & Chairman, Ford)? Immelt, of course! That seemed obvious; and the brackets did help; but what about this one? Who has been the worst-performing CEO for GE in its history of over 100 years? Well, the answer’s simple again – Immelt! Alright, but here’s the biggest surprise, while Welch is arguably touted as the most successful CEO in the history of corporate America, he chose the worst performing CEO for GE, ever!

Of course, many wouldn’t agree to this hypothesis upfront, but how about this one? Welch himself criticised Immelt during a recent interview. These were his words: “Here’s the screw-up: you made a promise that you’d deliver this and you miss three weeks later. Jeff has a credibility issue.” Even in the most recently announced Q1, 2009 results (announced on April 11, 2009), GE disclosed a ghost-scaring 44.41% fall in its net income (that stood at $2.07 billion) as compared to Q1, FY2008. But wait! That’s not why Immelt makes it to the list of the top blunders in capitalism this century... The real reason is here – since Immelt took charge about eight years back, GE’s share price has fallen by a gut-wrenching 70.39% (from $40.83/share in June 2001 to $12.09/share as on April 28, 2009; NYSE) destroying about 95% of GE’s shareholder wealth. What’s worse, Immelt still feels that, “Amid a continued weak economy, we’re performing well and our backlog remains strong.”

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
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TOYOTA & HONDA: SUCCESSION

Toyota & Honda are in trouble... And now, they have new leaders too! But really, have the batons been passed onto the right man? Will they deliver?

Moreover its product-mix includes two-wheelers, which is serving it well in emerging markets. Yes, it’s also true that the company is not immune to global environment, and that it has to delete names from its rolls and curb production for months to come; but having said that, the job ahead for Ito appears less rougher than his Toyota counterpart, and the fact that Honda still expects to close FY2009 with a profit of $860 million (an 86% drop as compared to 2008) stands allibi. And this is where we come to the ‘third-gen descendant’ Toyota President.

Research has proven it in the past – appointing a family CEO isn’t the best solution during times of trouble! To quote just two such works – the 2004 paper by Villalonga (HBS) & Raphael (Wharton) proved after an analysis of Fortune 500 firms that “when descendants of founders serve as CEOs, firm value is destroyed!” Then there was the 2005 report by Hillier (Leeds) & McColgan (Aberdeen) that revealed how family CEO successions are “almost always followed by dramatic declines in not only stock performance, but dangerously, even in operating results.” Indeed, besides the fact that Toyota has reduced its global sales target for 2009 by more than a million units, and that its losses would continue to mount, forcing it to shut plants in US and cut manpower further, it might just have made a succession planning bungle!

Times will get tougher for all in the industry as even Christian Breitsprecher, Analyst, Sal Oppenheim opines, “The scenario for the industry will only worsen in 2009 & I don’t see the industry making a comeback before end-2009.” The coming weeks will surely test the experience of both leaders and while you still wouldn’t want to complain about the powerless Honda engine or about your broken-down Toyota, do plan to pray; these men would surely need it. 

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM - FLP (Flexi Learning Program)