Provocative annual letter sets up a year’s executive communication

“Let’s face it,” G.E. CEO Jeffrey Immelt began the annual letter to shareholders in the 2008 annual report, “our Company’s reputation was tarnished because we weren’t the ‘safe and reliable’ growth company that is our aspiration. I accept responsibility for this. But, I think this environment presents an opportunity of a lifetime. We get a chance to reset the core of G.E. and focus on what we do best. We can reset expectations for our performance. And we can participate in the changes required in the broader economy.”

Quite a tall order—both for a struggling corporation to achieve in a year and an executive communicator to achieve in 750 words. The company’s year remains to be seen; but let’s see how well the communicator did.

G.E. has enormous and enduring strengths that are underestimated right now. We have leadership businesses and a dedicated team. We have outperformed the S&P 500 in earnings over the long term, including 2008.

Immelt establishes that there is only so much ground he’ll give. And after all, he had already taken a personal hit, forgoing his own bonus, issuing a statement, “Earnings came in well below where we expected. The broad equity markets, and G.E.’s stock price, declined significantly in 2008. In these circumstances, I recommended to G.E.’s Board of Directors that I would not receive a bonus for 2008.” But how would he transform the company to improve its results?

One important reset is in financial services. Earlier this decade, our financial services earnings received a valuation similar to our industrial earnings; today, it is lower. In the end, having financial services as 50% of our earnings was too high. We intend to reset this business to be smaller, less volatile and more connected to the “G.E. core.”

Now he begins to lay out specific, newsworthy plans for change.

In addition, we determined that this was a good time to rethink how we communicate about the Company and to provide only an annual framework on our operations, instead of detailed quarterly guidance. We’ve always tried to be transparent, to offer a lot of detail and data, and describe the Company externally the way we run the Company internally, and we will continue to do so. As a long-cycle business, we want our investors to focus on long-term results.

This paragraph could be a little more direct, but it couldn’t be much more bold a statement. It basically tells investors, “We’re through jumping through your hoops every quarter. Check back with us in a year.”

For 2009, we have sharpened our strategic processes and scenario planning. We have increased the frequency and changed the agendas of our operating meetings. Each of our businesses has set up a process to identify the “naysayers” in each of our industries to make sure their voices are heard inside G.E. From top to bottom and across G.E., we must and will listen more critically and respectfully to each other.

Again, the above paragraph is a wee bit cryptic, but what it seems to be saying is powerful. That is: “We’ve had our head in the sand. It’s time to listen to our critics, who in the recent future have been right.” We shouldn’t have to translate this stuff—but it’s remarkable G.E. is even trying to get these kinds of messages across in the annual report.

I have also learned something about my country. I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation.

You won’t find a more provocative idea or a better paragraph in a CEO’s letter this year. Or a better line: “Real engineering was traded for financial engineering.” CEOs usually shrink from social or economic criticism, but Immelt is stepping up to the plate, and he’s not finished.

To this end, we need an educational system that inspires hard work, discipline, and creative thinking. The ability to innovate must be valued again. We must discover new technologies and develop a productive manufacturing base. Our trade deficit is a sign of real weakness and we must reduce our debt to the world. G.E. will always invest to win globally, but this should include a preeminent position in a strong U.S.

Okay, what are you going to do about it?

G.E. plans to play an important role in this process. We are, first and foremost, a technology company. And we will continue to invest increasing amounts in R&D to develop innovative solutions for our customers. In addition, we will continue investing to improve the education system, around the world, to produce more competitive students.

Asked and answered—at least in sufficient detail for the annual letter.

People come to G.E. because they understand there is more to life than making a buck. People come here because they want to make a difference, and never has this been more important than it is right now.

This guy is talking about restoring G.E. to its once-mighty position as a player in U.S. culture as well as in the economy. What is your guy talking about?

The current crisis offers the challenge of our lifetime. I’ve told our leaders at G.E. that if they are frightened by this concept, they shouldn’t be here. But if they’re energized, and desire to play a part in transforming the Company for the future, then this is going to be a thrilling time to be a part of G.E..

Each one of the above paragraphs could be the introduction to a detailed speech on the subject—and in fact could make up Immelt’s executive communication agenda for the year.

G.E. will be a better company winning through this crisis. Your G.E. teams have dug in and are dedicated to the tasks ahead. My thanks go out to all investors who continue to support our efforts. If you are a prospective investor, let me say, now is the time to invest in G.E.!

And if you’re an executive communicator, now is the time to apply for a job at G.E.


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