Bob's Gutsy Leadership Blog

GE Leadership: Seduced by Success

Seventeen years ago, in November 2000, GE named a new CEO.  GE had just completed a highly successful ten-year period where the stock price went from $5/share to $55/share.  The person who got the job was highly regarded by everyone, and given the enormous success of GE, he was obviously very positive and confident about the future.

Seventeen years later, as that GE leader retired 3 months ago, the company is in very bad shape.  GE recently announced their quarterly financial results and earnings per share came in at $0.29 while Wall Street had expected .49/share.  It also slashed its full-year profit guidance to $1.05-$1.10 per share, down from earlier promises of $1.60-$1.70 per share.  The new CEO who replaced the retiring leader commented “our results are unacceptable, to say the least.  Things will not stay the same at GE.”

Being more specific, the new CEO indicated he plans to streamline its business portfolio by more than $20 billion in the next 1-2 years.   He also outlined the fact that he has already begun cutting jobs, research operations, and executive perks like corporate jets.  In fact, the fleet of corporate jets has been grounded and many of the financial analysts smiled because they knew the previous CEO would travel around the world with two corporate jets; one was a spare in case his primary plane encountered mechanical problems.

From a shareholder perspective, the performance of General Electric has been downright poor.  As mentioned above, when the outgoing CEO was put in place 17 years ago, the stock price was at $55/share.  It now trades at $21.  During that 17-year period, the S&P 500 Index gained 95%.

Stepping back, historically, General Electric has been an industrial giant in every sense of the word.  How can such a very successful company over recent years get itself into such a huge mess?  Said another way, how can such smart successful people, such as the retiring CEO, turn in such weak performance?  Here are three core reasons why successful people often screw it up:

1.) Lack of Urgency – Success seems to lead to the avoidance of any kind of major change or stress in favor of basking in the glory of prior times.  Individuals, companies of all sizes, government agencies, non-profits, and education groups are all vulnerable to this kind of behavior.  GE has surely exhibited it over the last 17 years.

2.) Proud and Protective – Success and stability seem to breed a loss of curiosity and a defensive attitude toward any kind of new thinking that is critical of the current approach.

3.) Entitlement Mentality – Once you have achieved some degree of success, the world does not owe you lifelong success.  Many individuals and organizations are so impressed with themselves and their achievements that they can no longer imagine a world where they are in decline.

The wise leader understands these three traps and consistently works to remain adequately paranoid, very curious, and constantly driving for change and improvement that will lead to further success.

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