The Analysis: In Immelt We Trust

GE's CEO was armed with reams of data to back his proposal for "ecomagination." But only the trust he'd built with his team allowed him to override their objections

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When a CEO has earned the trust and support of his team, he has more leeway to go against majority opinion on big strategy calls. That's what General Electric (GE) Chief Executive Jeffrey Immelt banked on in late 2004 when he went forward with his "ecomagination" proposal despite the skepticism evinced by most of his senior executives and advisers, according to Noel Tichy, a former head of GE's Leadership Center.

"Jeff has been very careful to build a trustworthy, aligned team around him," says Tichy, who is now a professor of organizational behavior and human resource management at the University of Michigan Business School and the author of Judgment: How Winning Leaders Make Great Calls (Portfolio, 2007).

Cultivating a Base

Immelt began to form his base of support at GE as early as 1981, when he joined the company. As he climbed through the ranks, he began to impress his leadership style on key players. In 2001, Immelt was tapped by then-CEO Jack Welch as his successor, and Welch helped to ease out his fellow top contenders, and . "All too often the politics of succession carries over into the new administration," points out Tichy. "Welch made it clear to all three finalists that as soon as the winner was selected, [the] other two needed to leave GE so as to politically free up the new CEO."

In 2004, Immelt was three years into his tenure as chairman and CEO and his support among top executives within the company was stronger than ever. That would be vital in each of what Tichy defines as the three phases of the judgment process ahead: preparation, alignment of stakeholders, and execution.

After hitting on the idea of a companywide environmental initiative, Immelt set about delegating preliminary steps to various teams within the company: researching greenhouse legislation, conducting customer surveys, prototyping new products, formulating metrics, drafting cross-company guidelines. And when GE's resources weren't sufficient, Immelt didn't hesitate to bring in an outside consultant, GreenOrder.

Persuading a Reluctant Team

By December, Immelt was prepared for the next decisive, and difficult, step: aligning key stakeholders. Immelt met with his top management team to outline his environmental initiative, which was received negatively by a majority of the senior managers. Among the criticisms leveled: that it was costly, hypocritical, and uncharacteristic of GE.

Immelt acknowledged the legitimacy of the concerns raised. But instead of backing down, he drew on the trust he had earned from his team and made a call to go forward with the initiative, which became known as "ecomagination." "He wouldn't have been able to do it if he didn't already have the aligned people at the top of the organization," says Tichy.

What were Immelt's other options in the face of such strong opposition? "Some weak leaders would back off and tell [the team] he would not go forward," acknowledges Tichy. Alternatively, he says Immelt could have put the initiative on the back burner, hoping to win support and allow the controversy to die down. Or he could have proceeded even more confidently than he did—without acknowledging the criticism raised by his team. Any of these tactics, says the management guru, "would have been an abdication of his role as the leader charged with making the ultimate judgment calls for GE."

Following Through

A CEO can make such overrides from time to time, but Tichy warns that they have a limit: "If he or she keeps making calls against the majority, even though you're the CEO of the company you begin to undermine the people, alignment, and support."

When is the right time to pull rank? That depends. According to Tichy, Immelt is known to solicit input from those around him before making a decision. But he's also earned a reputation for trusting his instincts, as best articulated by the catchphrase used to describe him in Leadership: "Boom, then I make the decision."

The final step of Immelt's judgment was execution. "Jeff understands that his job in the judgment process is not only to make the call, but to make certain in the execution phase that the [appropriate] adjustments are made, the learning happens, and that there's a payoff," says Tichy.

Since GE is a company of many unique businesses, most adjustments rely on cooperation among the heads of each business unit. This was one of the toughest parts of the execution process, according to GE spokesperson Peter O'Toole: "Ecomagination had to enable our business leaders to work better with their customers," O'Toole says. "It couldn't be an 'unfunded mandate' from corporate. So there had to be give-and-take with our top leaders to ensure we were helping our customers."

By Douglas MacMillan