Meet John Flannery, the next CEO of GE
The person who holds the top job at General Electric has long held one of the most pre-eminent positions in all of American business — whether they were statesmen-like figures for Corporate America, management icons or advisers to presidents. But the CEO who will replace 16-year veteran Jeffrey Immelt come Aug. 1 hasn’t yet had that kind of star profile.
John Flannery, 55, who has been CEO and president of the company’s health-care unit, has spent 30 years at General Electric, a longtime insider in a company that has long promoted them. But he has been relatively new to media speculation around who might succeed Immelt as his tenure passed the 15year mark and as GE’s stock continued to underperform.
Yet Flannery has a broad and diverse background at GE that includes some two decades as part of the company’s financial arm, corporate experience working on mergers and acquisitions, as well as a successful tenure running one of GE’s operating units. He will aim to use that as he tries to win the support of investors, revive the company’s long flagging stock price, and decide how to lead one
of the last major conglomerates, a simplified but still sprawling company that makes everything from jet engines to light bulbs.
“I have a long history of looking at things from an investor’s perspective by training and background,” he said in a conference call last week with investors, during which Flannery and Immelt mentioned his focus on capital allocation and his background in the company’s finance business. “So as an orientation and discipline that’s something I’m very steeped in.”
That could help counter concerns some analysts say Wall Street had earlier in Immelt’s tenure about overpaying for acquisitions or over-exposing the company’s bottom line to financial services leading up to the financial crisis. Much of Immelt’s tenure has been marked by a dramatic overhaul of the conglomerate’s disparate businesses — divesting things like GE Appliances or GE Plastics, largely exiting the company’s finance arm, and making huge mergers or acquisitions in its industrial and oil and gas businesses.
But following a top-tobottom review of GE that Flannery has promised, there could be more to do. “If there’s a need for further portfolio optimization, has as good a handle as anyone on how to do this in GE’s business,” said William Blair analyst Nicholas Heymann, who has an outperform rating on GE’s stock.
Heymann described Flannery as a “pragmatic, wellrespected guy,” noting his performance at GE Healthcare, where he jolted organic revenue growth from around less than one percent, he said, up to five percent in shorter than two years.
Jack Brennan, GE’s lead independent director, Flannery’s combination of operating and investment skills — the “ability to think like an owner and operate like an industrialist” — were a big part of the choice the board made. “John brings a set of financial skills and a mind-set around returns and returns on investment that is very strong.”
Flannery, 55, got his start at GE Capital evaluating risk for leveraged buy-outs, then moved to its corporate restructuring group before going on to hold global roles in Latin America, Asia, and India.
At GE’s corporate headquarters, he led business development — its name for mergers and acquisitions — which included the acquisition of Alstom, the largest industrial acquisition in the company’s history. While there, he also worked on shrinking GE Capital, divesting GE’s appliances business, and spinning off its private label credit card business before turning around GE’s healthcare business.
Though he has touched many parts of the company, Flannery said “in fairness, I really need to spend the next period here doing a comprehensive review,” noting that Immelt had “asked me to take a fresh look at the company from angles, and that’s where I’m going to spend my time, doing a deep dive into all aspects of the company.”
What that will result in seems unclear, but Flannery said he planned to continue Immelt’s strategy of adding digital capabilities to GE’s industrial products while acknowledging that the company needs to change. “There’s many areas in which we’ve excelled,” he said in a call with investors, but “at the same time there’s clearly areas we need to be better and we need to address those areas with urgency and with purpose.” He said he would conduct his review of the company’s business with “no constraint.”