What Business Leaders Can Learn from GE’s CEO Succession Plan

What Business Leaders Can Learn from GE’s CEO Succession Plan

Earlier this month, Jeffrey Immelt was replaced as CEO of General Electric after 16 years at the helm of the company. Much of the coverage has depicted Immelt’s stepping down as a result of investors losing confidence in his leadership after GE’s stock underperformed in the past year, as in this Bloomberg report, for example:

Amid mounting pressure from activist investor Trian Fund Management, GE said Monday that Immelt will be replaced by John Flannery, a 30-year company veteran who oversaw a jump in profits at the health-care unit. In a sign of just how great opposition to Immelt had become in the investing community, the stock soared the most in more than a year and a half after the announcement was made.

This was not a snap decision by GE’s board of directors, however. In fact, the planning for Immelt’s succession began not in 2016 or 2015, but all the way back in 2011. Susan Peters, Senior Vice President for Human Resources at GE, shared the company’s strategy in a LinkedIn post, illustrating a thoughtful process befitting a giant corporation responsible for hundreds of thousands of employees and hundreds of billions of dollars in assets:

First, we knew it would take years to move potential candidates through the leadership roles that would develop them. We began intentional moves of key leaders to give them new, stretch experiences with ever increasing exposure to complexity.

By 2012, we wrote the job description and then continuously evolved it. We focused on the attributes, skills and experiences needed for the next CEO, based on everything we knew about the environment, the company’s strategy and culture.

We did research; studying over 100 external leaders and articles to get the best understanding of the attributes needed today and in the future. We pulled our internal and external research together to create our “enterprise leadership capabilities,” a list of competencies essential for GE’s next great CEO. Our process reflected the recognition that CEO success is less about what they know going in and more about how fast they learn, experiences they have had, and their resilience.

The board went on to carefully evaluate a slate of internal and external candidates before deciding to promote from within, Peters explains, and gave the internal candidates exposure to increasingly complex roles to test their abilities and determine who could best fill the large shoes of the CEO. While media reports suggest that the timing of the succession was influenced by recent investor pressure, Peters adds that this, too, was carefully planned, with Immelt and the board agreeing on a target date of this summer four years ago.

Planning the handoff of a company—especially a large one—from one CEO to another is among directors’ most important responsibilities, and at CEB (now Gartner), we’ve done a lot of research into the right way to do it. According to Peters’ account, GE’s succession followed all of the key steps recommended in our 2015 study, Succession Strategies for the New Work Environment (which CEB Corporate Leadership Council members can read here): They started the planning process years in advance of the expected transition date, looked closely at how the role was likely to evolve in the future, and created a job description for the new CEO.

This kind of forward-thinking strategy is absolutely essential for the succession of a CEO, but it is just as useful for other leadership positions. One company we’ve profiled that is taking an innovative approach to succession planning across the board is MTS India, which prototypes critical roles its HR and strategy leaders believe the company may need in years to come, ensuring that leadership pipelines are regularly re-aligned to match MTS’s constantly evolving needs.

(CEB Corporate Leadership Council members can read the full case study on MTS India here. Members can also use our step-by-step ignition guides to sourcing and selecting successors for HR and to developing and deploying successors across the organization.)