Cover Story April 15, 2010, 5:00PM EST

Can GE Still Manage?

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At GE, more time-intensive means more valuable. Consider Session C, GE's months-long performance review process. The cycle starts around the beginning of each year and ends with full-day visits to every business in April; Immelt is present at each one. There's a wrap-up in May, a review with board committees in June, a teleconference in August, and another meeting in November—at which point the exercise essentially starts again. One former HR executive at the company, who requested anonymity because he values his friendships at GE, recalls the process with dread. "It felt like your entire team was spending all of December and all of January on this, instead of focusing on the business and on customers," he says. "It was such a time suck." And despite all that energy, despite the famed ranking of GE's top and bottom 10% of performers, it was 2008 before the people in the middle started to learn where they stood relative to their peers. "We were in a 'don't ask, don't tell' environment," says Peters.

FORESTALLING INSULARITY

Immelt says the calamities of the past 18 months prompted him to pause. He wants to experiment with new approaches, accelerate the evolution of GE's processes, and make sure his team has the right tools to "look around corners." Current and former executives notice the effort he has made to forge stronger connections, and they say it's welcome. Whatever the rank-and-file thought of Welch, they never doubted his passion for his people. He knew their names, argued with them as equals, and could reach down several layers to find out what was going on. Immelt looks at the world through a different lens. He likes to test a range of ideas instead of settling on a few and spends much of his time reaching outside GE. Through his monthly dinners and biweekly sessions, though, he now feels he's "able to hit the top 175 people every year in virtually every setting." He has learned something about them. "One of the interesting things in having done this is that you discover—and I'm not sure if this is a good thing or a bad thing—that there really is a GE type. People have different backgrounds, but there is a type of person who tends to do best in the company." The hallmarks, in his words: overachiever, working-class roots, resilience, the ability to be challenged and to learn, a tendency to be self-reflective, and a desire to grow. All good stuff, he says, "but there's always this impediment of 'Why do we have to change if we're good?' "

Thus his openness to reversing the rule that GE employees can't serve on boards. "I want to make sure our leaders have every opportunity to get different inputs so we don't become too insular. It's a danger with every old, big company." Thus, too, an experiment with decentralizing operations in India so that employees there report to a country chief instead of to headquarters. "It's a place where I thought we underachieved. China, we get. We're big. China's big. We know who to talk to. I don't have problems there. India requires more nuance. From a market standpoint, we're not where we should be."

Immelt has always been "a believer that management ideas have almost no shelf life," he says. "By the time an idea gets thought of and in a book and broadly disseminated, it's already two years into a five-year life or a three-year life." Yes, he wants change. But he has come to appreciate all that is good about GE—the attention to nurturing excellence, the constant evolution as a company, the pride it takes and the investments it makes in producing leaders. He points to the processes that have saved the company, not the ones that may have impeded it. "This was the sixth-biggest financial services company in the world the day that Lehman Brothers went bankrupt. Guess what, guys? We're still standing. We didn't take TARP. Everybody has written about commercial real estate and stuff like that. We've taken our shots, many of them deserved. Who did GE Capital compete with? It wasn't JPMorgan (JPM) and Goldman Sachs (GS). It was CIT (CIT), AIG (AIG), GMAC."

Immelt knows that stereotypes die hard. He doesn't talk about cutting the bottom 10% or many of the other aphorisms that became famous under Welch. "Some of the conversation about GE is just street lore. It's just things that were written that aren't really true," he says. "It really speaks to what a backwards art management education is. I still hear 'Be No. 1 or No. 2 in your market.' Not even Jack was doing that past 1990. It's like 20 years old. C'mon. The statute of limitations is up."

EXPERTISE: GO DEEP OR GENERAL?

Immelt and his team aren't the only ones raising questions about how to build a better leader for the post-crisis world. Some of the other people on the hunt, however, question whether it is desirable to take top people out of their day jobs for weeks to teach them new skills. Should companies build deep expertise, as GE now prefers to do, or shape more general managers? Does it make sense to talk about a standard set of leadership traits? If GE begins to replicate its India experiment elsewhere or evolve into a collection of autonomous businesses, what's the value of being GE? "People need to see the value proposition of putting all this together," says leadership consultant Gary E. Hayes. "They need to understand what it means for their own careers and futures. What's the magic sauce?"