After only a year on the job, John Flannery is out. The former chairman and CEO of General Electric was removed on Monday, October 1, 2018, as a result of the board’s dissatisfaction with “the execution that was taking place under John Flannery’s leadership,” CNBC’s Andrew Sorkin said on “Squawk Box,” citing sources. According to CNBC, Flanner’s removal was largely driven by the “slow pace of change” under Flannery, and not driven by the power business woes,” which many would infer was the reasoning. Early last week, GE’s shares had fallen to a nine-year low last week, trading at $11.27 per share.
Flannery was appointed as CEO in August of 2017, taking over for Jeff Immelt. Regardless of this leadership change, GE’s value continued to depreciate, setting record lows as investors were “unconvinced by Flannery’s turnaround plan.” While Flannery made countless efforts to shift the tide that was driving the industry conglomerate onto shore into rocky waters, these attempts failed.
Perhaps the largest blip on Flannery’s career as CEO took place several weeks ago on Thursday, September 20, 2018, when GE Power Chief Executive Russell Stokes shared, in a letter posted on LinkedIn, thattherer were multiple issues with its newest line of natural gas-fired power turbines. Stokes explained the issues found with the “HA turbines” in a blog titled, “Making the Best Turbines is Hard Enough. At GE, We Never Stop Making Them Better.”
“More recently, we identified an issue that we expect to impact our HA units. It involves an oxidation issue that affects the lifespan of a single blade component”
- Russell Stokes, President and CEO of General Electric Power
Stokes post is less about giving excuses for failed attempts at revolutionizing power generation and more so about leveling with consumers and stakeholders. He begins his post by saying that GE power came to life with two key notions, the first of which being “innovation is hard, but it is the lifeblood of what we do. One rarely arrives a significant breakthrough without taking on seemingly insurmountable obstacles that might make others give up.” I applaud his efforts, not because he is trying to strengthen his arguments for his department’s failures, but because he is trying to connect with his readers, and moreover because Stokes humanizes General Electric. To err is human, but rarely do we associate corporations with humanism. If anything, perhaps this softened the blow, or at least, allowed Stokes to still have a position at GE Power.
“One rarely arrives a significant breakthrough without taking on seemingly insurmountable obstacles that might make others give up”
John Flannery’s fate was not as bright. While this incident relating the HA turbines occurred during John Flannery’s holding of the CEO position, according to CNBC’s Andrew Sorkin, his removal “was not driven by the turbine issue.”
Following his removal, GE installed former Danaher CEO Lawrence Culp as his successor. After GE made this announcement on Monday, October 1,2017, GE shares shot up 13 percent in trading.
According to the Wall Street Journal, “Mr. Culp is expected to continue with the strategy to spin off GE’s health-care business and sell two other big units, these people said, leaving the company focused on its power and aviation units.” Lawrence Culp is the first person, not hired from within the company, to run GE. The company is known for its extensive history of homegrown executive leadership. Former CEOs Jack Welch and Jeff Immelt both served for over fifteen years each.
Culp comes to General Electric after serving as CEO of Danaher from 2001 until 2015, having led the company through multiple acquisitions. During his time as CEO, “total shareholder return was 465 percent.” He joined the GE board in April and has spent time cultivating relationships with other board members.
The Wall Street Journal reports that the CEO spent his first day on the job “ in the company’s Boston headquarters, calling investors” and getting settled.
