In the 1960’s and 70’s General Electric had a very robust business in nuclear power generation. In 1979, the Three Mile Island accident occurred in Pennsylvania and it dramatically changed the world of nuclear power. Public support plummeted and governments suspended plans for future expansion of nuclear energy.
In spite of all the negative publicity, the management of the Nuclear Power Division (NPD) at GE continued to be very enthusiastic about the future of nuclear energy. They believed the Three Mile Island backlash would be temporary and hence, they assumed there would be three new orders for nuclear reactors each year going forward. In 1981 when Jack Welch was a fairly new CEO at GE, he held a two day review of GE’s NPD. As Jack started his review, the first thing he uncovered was there were no new orders for nuclear reactors since 1979, generating big losses for GE’s NPD in 1980 and 1981. Jack stated that he believed that there would be new reactor orders for many years, given the incredibly negative publicity.
After debating that issue, Jack asked the team to put together a plan based on the assumption that there would be no new orders for the next seven years, requiring the organization to come up with a completely new business model. He pointed out that they did have a fairly robust services and fuel business serving the 72 active reactors that were in operation at that time.
After doing a thorough analysis, the Division realized that by downsizing and reconfiguring their organization they could develop quite a profitable fuel and services business. Jack liked the proposal and had them implement it and by 1983 that team had net earnings of $116 million.
This example provides three valuable reminders for leaders:
1.) Success Breeds Bias – Once we start to achieve some success with a particular plan, we tend to lose our objectivity, and become protective of that plan.
2.) Fresh Perspectives are a Necessity – We should seek out people who can provide an untainted look at a set of facts and give us an objective assessment. Don’t wait for it to be your big boss!
3.) Put Adequate Attention Against the Worst Case – Constantly revisiting your situation and evaluating the worst case is a must. Most importantly, we need to research the factors that might put us in that situation.
The lesson is clear; strong leaders constantly push for objectivity in judging the future alternatives.