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Any Crisis Calls for Constant, Candid Communication

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As the current crises at Toyota and BP highlight, how you respond to a problem or crisis is the ultimate test of your leadership character. Knowing how to step up your communications efforts to the right levels during disorder can be a powerful tool in managing a crisis. Here are seven key lessons for communicating during crises.

  • Be visible. Communicate and lead from the front. In a crisis, your key constituencies (your board, management, team, government, or the public) insist on hearing from the leader. Stay engaged and maintain consistency of purpose and action. Keep all the lines of communication open.
  • Communicate in real-time and explain your position. If you do not communicate frequently with your key constituents, somebody else will. In the absence of information, people will develop their own perceptions of the problem and its implications. Keeping your constituencies well informed diffuses many suspicions and uncertainties.
  • Be transparent and forthright right from the beginning. Face the realities of the problem and its potential consequences. Acknowledge what you know about the problem or crisis and go into detail about what steps you are taking in response. Proactive communication is reassuring and prevents perceptions of negligence and evasion from becoming realities.
  • Research thoroughly the challenges you face and your options for remedial actions. Be prepared to describe everything that matters at each moment. Carefully administer your communication plan with due consideration to possible litigations and penalties.
  • Be objective and calm. Avoid engaging in finger pointing and playing pass-the-parcel. Avoid criticizing and discrediting the victims or critics. Continuously verbalize empathy and responsibility, and announce plans for early resolutions and restitution.
  • Remember that your attitude sets the tone for the rest of your organization. If you take a defensive position, play victim or engage in finger pointing, the rest of your organization will react the same way. Through your communications, set a positive tone to build confidence within your organization and promote constructive responses.
  • As soon as the crisis dissolves, research and communicate opportunities to make fundamental changes to improve your organization. Reiterate your core values and missions. Revamp internal practices as necessary and follow through on all initiatives to rebuild your credibility. Consider organizational changes and new processes for managing future crises.

The Empathy Premium: Why Soft Skills Are the New Hard Skills

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The Empathy Premium: Why Soft Skills Are the New Hard Skills

For the better part of two decades, the career advice echo chamber has been deafeningly singular: “If you want to somehow contribute to society, earn to code.”

If you wanted any kind of relevance, if you wanted security, if you wanted to future-proof your paycheck, you learned Python or JavaScript. We treated computer science like the new literacy, or in other words, the barrier to entry for the middle class.

But as we slowly step into 2026, the wind has veered. The “hard” skills we prized are becoming the easiest to automate. If you can write a spec for it, an AI agent can likely code it faster, cheaper and with fewer syntax errors than a junior developer. The “technical moat” that protected millions of jobs is drying up.

So, what is left? What is the one asset that algorithms, for all their processing power, still cannot replicate?

The messy, inefficient, deeply complex understanding of human behavior.

The Rise of the “Human Engineer”

We are witnessing a peculiar inversion in the labor market. The skills we used to dismiss as “soft,” including empathy, active listening, conflict resolution, cultural competence are hardening into the most durable currency in the economy.

I call this the Empathy Premium.

In a world where logic is a commodity, understanding emotion is a luxury good. So what are the new supposed new “hard skills” of our future? Abilities such as reading a room, negotiation (understanding the other party’s fears), leadershop and management in an era of immense psychological heaviness. These are the new “hard skills” of our future.

This is why we are seeing a fascinating trend among forward-thinking professionals. Executives and managers aren’t just looking for MBAs anymore. They are looking for frameworks that help them deconstruct human systems. We are seeing a quiet surge in professionals pursuing an MSW degree online , not because they necessarily want to become clinical case workers, but because the curriculum of social work (systems theory, human behavior in the social environment and crisis intervention) is arguably the best management training available for the AI era.

The Algorithm Can’t Read the Subtext

Think about the last time you had a truly difficult conversation. Maybe it was firing a client, or mediating a dispute between two brilliant but ego-driven employees.

An AI can give you a script. It can tell you the legally compliant words to say. But it cannot tell you how to say them. It cannot detect the slight hesitation in someone’s voice that indicates they are lying. It cannot sense when “anger” is actually just “fear” in a cheap disguise.

That is the domain of the human.

The 20th-century economy was built on IQ: intellectual quotient. It was about processing speed and data retention. The 21st-century economy will be built on EQ: emotional quotient. It will be about connection speed and trust retention.

Navigating the “Care Economy”

We are moving from an economy of “production” to an economy of “care.”

As automation handles the logistics of our lives, value migrates to the experiences that make us feel seen and heard. This isn’t just about healthcare or therapy. It applies to sales, to leadership, to education and to design.

The best product managers in 2026 aren’t the ones who can write the best SQL queries; they are the ones who have the empathy to understand the user’s frustration before the user can even articulate it. The best financial advisors aren’t the ones who beat the S&P 500 by a percentage point; they are the ones who can talk a client off the ledge during a market correction.

The Trap of Local Optimization

There is a hidden danger in our obsession with efficiency: optimizing the part often destroys the whole.

AI is the ultimate tool for “local optimization.” It can make a logistics route 10% faster or a marketing email 5% more clickable. But it lacks the wisdom to ask if the route burns out the drivers or if the clickbait email erodes the brand’s long-term trust.

This is where the holistic mindset becomes non-negotiable. True leadership requires stepping back to view the ecosystem as a whole. Basically a skill intrinsic to the social work discipline known as ” systems thinking .” It is the ability to look at a problem and identify the root cause rather than just treating the symptom. It is the capacity to ask not just “Does this work?” but “What are the second and third-order consequences of this working?” In a world obsessed with speed, the person who can spot the systemic risk is the one who saves the ship.

Idea for Impact: Audit Your Skill Stack

Take a look at your own professional development plan. If it is entirely focused on technical certifications (new software, new platforms, new workflows) you might be optimizing for the past.

Consider diversifying. Read up on behavioral psychology. Study the principles of negotiation and mediation. Learn how to listen so well that people feel understood just by being in your presence.

In the age of artificial intelligence, being genuinely human is the ultimate competitive advantage. Don’t let your “soft” skills go soft. Sharpen them. They are the only things that truly belong to you.

Global Perspectives – How PMHNP Roles Are Evolving Internationally

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Global Perspectives - How PMHNP Roles Are Evolving Internationally

The Psychiatric Mental Health Nurse Practitioner role has grown tremendously over the last 10 years due to increased demand for mental health care worldwide and the recognition of nurses’ ability to lead psychiatric care. The issue of mental health needs has increased in diverse groups of people due to different factors like urbanization, social isolation, aging population, and the post-impact of the crisis around the world.

In turn, healthcare systems worldwide are adjusting their workforce models to benefit communities, and the PMHNP role is adapting as well. Individuals who consider pursuing a PMHNP degree will find a more interconnected, dynamic, and responsive landscape in terms of cultural context and healthcare policy.

With the countries reconsidering the way mental health care is provided, PMHNPs are gaining more responsibilities, both as they practice independently and collaboratively to provide care and those involving policy and education leadership. The perspective on the current evolution of the profession worldwide provides an opportunity to understand the profession’s next opportunities and challenges.

The United States – Expanding Scope and Autonomy

The PMHNP role has developed at an accelerated pace in the USA due to the broadening of the scope of practice legislation and the shortage of psychiatric practitioners. Various states have also given full practice authority to PMHNPs so that they can assess, diagnose and manage patients without the supervision of a physician. This has especially been evident in underserved and rural regions where proximate access to psychiatrists is inaccessible.

US education programs are growing their enrolments and include training in telepsychiatry to equip graduates to meet various care needs, regardless of the setting. With a lessening of mental health stigma and a growing number of services demanded, PMHNPs are becoming leaders in healthcare decision-making , influencing the standards of practice, and adding to interdisciplinary care models.

Canada – Harmonizing Practice Across Provinces

Canada provides an alternative regulatory arrangement in which provincial governments define the scope of practice in the nursing field. The PMHNP jobs are also growing, albeit at differing rates across the regions. Other provinces, like Ontario and British Columbia, have recognized the advanced role of psychiatric nursing, and nurse practitioners can therefore provide comprehensive mental health care and assessment.

Canadian PMHNPs work in co-operative care with physicians, psychologists and social workers, commonly in community health centers or integrated primary care teams. The focus on interprofessional practice has been part of a larger health system devotion to affordable, holistic care and PMHNPs are poised to be stakeholders in mental wellness initiatives.

Europe – Diverse Frameworks and Growing Recognition

The PMHNP is developing within a quilt of healthcare systems and educational standards across Europe. In other countries like the United Kingdom, the Netherlands, and Sweden, psychiatric nurse practitioners have been formalized as a part of the mental health system. Advanced nursing roles in the UK include mental health assessment, prescriptions, and case management, but the titles and functions can vary from the US model.

Collaboration across many disciplines is highly valued in European healthcare systems , and PMHNPs work with psychiatrists, psychologists, and rehabilitation professionals. The educational path differs: in some countries, preparation is at the master’s level, while in others, doctoral standards are adopted. The role of the PMHNP is still on the rise as countries address workforce deficits and improve access to mental health care.

Australia and New Zealand – Integrating Care in Diverse Settings

Other regions that have grown advanced mental health nursing include Australia and New Zealand, where nurse practitioners can assess, diagnose, and manage care, including prescribing medications under specified regulatory bodies. These nations have been focused on culturally responsive practice, especially with rural and indigenous communities, where PMHNPs are crucial for filling service gaps.

Clinical specialty training in mental health nursing is part of the educational paths usually followed for nurse practitioner credentialing. The introduction of PMHNPs into multidisciplinary teams helps promote efforts in youth mental health, trauma recovery, and community resiliency.

Low- and Middle-Income Countries – Innovation Amid Constraints

The development of the PMHNP role is also accompanied by systemic constraints experienced in many low- and middle-income countries, including scarce resources, workforce shortages, and inconsistent regulatory systems. Despite these issues, new strategies are being developed.

Asian, African, and Latin American countries are beginning to formalize advanced nursing roles, and some already offer postgraduate certificate programs or master’s programs specific to mental health. Models involving task-sharing practices, such as expanding the responsibilities of non-physician clinicians under supervision, are becoming increasingly popular, especially in areas experiencing shortages of psychiatrists.

Under such settings, PMHNPs and psychiatric clinical nurses could serve as frontline providers supported by telepsychiatry programs, mobile health initiatives, and the integration of community health workers. Although regulators differ in their recognition, pragmatic responses to unmet mental health needs are increasingly being implemented through more advanced nursing roles.

Telehealth and Technology – A Global Catalyst

One common theme across all regions is how technology has influenced the PMHNP role. Telehealth has expanded access to care, enabling PMHNPs to reach patients regardless of geographic or socioeconomic boundaries. Those nations with strong digital infrastructure have quickly adopted telepsychiatry and are expanding their capacity to accommodate remote service delivery.

Education and training are also affected by technology, as online courses, virtual simulations, and cross-border education increase access to PMHNP training. Such innovations help develop the workforce and build a more globalized community of professionals.

A Vision for the Future

The development of the PMHNP role at the international level is seen as an extension of changes in healthcare delivery, labor force planning, and societal expectations. In the United States, PMHNPs are driving the future of mental health care through autonomous practice; in Europe, through collaborative care models; and in resource-constrained environments, through innovative models.

For clinicians and learners considering the world of advanced practice, developments worldwide offer motivation and insight into how different health systems can use nursing leadership. The development of the PMHNP role is not just a response to existing demands but an idea of accessible, high-quality mental health care for everyone.

The High Cost of Too Much Job Rotation: A Case Study in Ford’s Failure in Teamwork and Vision

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Alan Mulally Dismantled Ford's Fiefdom Culture to Encourage Collaboration When Alan Mulally became Ford’s CEO in September 2006, the company was teetering on the edge of collapse. Ford had just posted a staggering $12.7 billion loss, was hemorrhaging market share to Japanese and Korean automakers, and was weighed down by outdated, inefficient products. Worse, the company was drowning in debt and facing a brutal liquidity crisis. Ford was desperate for a complete overhaul.

By the time Mulally stepped down in June 2014, Ford had staged a stunning turnaround. He unified global operations, streamlined brands, and standardized platforms across regions while refocusing on core markets. He slashed costs, restructured engineering, and poured heavy investment into fuel-efficient vehicles and cutting-edge technologies. Under his steady leadership, Ford weathered the 2008 financial crisis without a government bailout and returned to strong profitability. His tenure remains a powerful case study in corporate transformation.

One of Mulally’s most crucial changes was dismantling Ford’s toxic culture of internal rivalry and reckless short-termism. When he arrived, executives were shuffled through roles every two years, a system meant to create versatile leaders but one that completely backfired. Employees scrambled to make quick impressions rather than collaborate. Engineers routinely ignored predecessors’ work, even at the cost of losing smart, cost-saving innovations. The result was chaos—no continuity, no teamwork, no accountability.

'American Icon Ford Motor Company' by Bryce G. Hoffman (ISBN 0307886069) Mulally understood that leadership demanded stability. After joining Boeing as an engineer in 1969, he rose steadily through key technical and executive positions. He served as Senior Vice President of Airplane Development in 1994, President of Boeing Information, Space & Defense Systems in 1997, President of Boeing Commercial Airplanes in 1998, and finally CEO of Boeing Commercial Airplanes in 2001. Drawing from this deep experience, he extended leadership tenures at Ford, broke down fiefdoms, and fostered a culture of collaboration, discipline, and long-term strategic focus. His approach restored much-needed continuity and accountability, proving that constant job shuffling weakens leadership and that real impact takes time.

Idea for Impact: Exposing leaders to different departments builds broad perspective and prepares them for senior roles. However, they need enough time in each position to take ownership, build relationships, and drive real change. Rapid job rotations erode accountability and disrupt a deep sense of purpose.

People Work Best When They Feel Good About Themselves: The Southwest Airlines Doctrine

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When People Feel Good, They Work Best: Herb Kelleher and Colleen Barrett's Southwest Way Southwest Airlines didn’t rise to prominence through spreadsheets or sycophancy. It was built by a jolly, chain-smoking Texas lawyer named Herb Kelleher (1931–2019,) who believed that business didn’t have to be boring—or cruel. A maverick in pinstripes, Kelleher co-founded the airline in 1967 with a cocktail napkin sketch and a rebellious grin, determined to inject his irreverent spirit into every corner of the company. He didn’t just want to run an airline—he wanted to run one that laughed in the face of corporate pomposity.

Kelleher’s philosophy was as unorthodox as it was effective. He rejected the sacred cow of “customer first” and instead declared, “If employees are treated well, they’ll treat the customers well. If the customers are treated well, they’ll come back, and the shareholders will be happy.”

This wasn’t a slogan—it was a strategy. And it worked. He understood what too many executives still miss: the happiness of a company’s employees is vital to its business success. At the heart of this culture was Colleen Barrett (1944–2024,) who began as Kelleher’s legal secretary and rose to become president and COO. She was the steward of Southwest’s soul, and she made it her mission to ensure employees felt not just respected, but loved. When Southwest went public in 1971, it chose the stock ticker LUV—a nod to its home base at Dallas Love Field and a cheeky emblem of its people-first ethos.

We almost demand that you have fun and you enjoy yourself. I spend probably seventy to eighty percent of my time trying to assure that our employees feel good about their work environment, feel that we care about them as people, and feel that they are empowered and really encouraged to make decisions from the heart. We really want people to do the right thing versus doing things right. If you enjoy what you’re doing, you will probably do it better.

'Nuts- Southwest Airlines' by Kevin and Jackie Freiberg (ISBN 0767901843) Barrett wasn’t just a leader—she was “Mom” to the workforce. Her office was adorned with a “wall of hearts,” a floor-to-ceiling collage of photos, thank-you notes, and memories. The Dallas headquarters itself was a shrine to joy: walls plastered with snapshots of birthdays, barbecues, community service, and cultural celebrations. Parties weren’t distractions—they were doctrine. They reminded everyone that work could be human. The power of giving employees the freedom to be themselves wasn’t just tolerated—it was institutionalized. As Kevin and Jackie Freiberg wrote in Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success (1995; my summary):

Love conquers the defensiveness that closes people to influence. When people feel loved, the walls come down. When people look out for their colleagues’ interests, their colleagues are more open to accepting new ideas and behaving in prescribed ways.

A lot of people at Southwest Airlines believe that the reason Herb and Colleen have so much influence within the company has less to do with their positions than with the way that they consistently demonstrate their love for employees. Leading through love means you’ve got to care. Love is a source of influence.

But time, like altitude, changes perspective. In recent years, Southwest has begun to resemble the very industry it once mocked. The camaraderie remains, but the warmth has cooled. The parties are fewer, the policies more rigid, and the once-radical culture has been diluted by the gravity of scale and the pressures of Wall Street.

Still, the lesson endures: the happiest worker is not the one most surveilled, but the one most trusted to think. And in a world where most companies treat morale as a line item, Southwest’s early years stand as a reminder that a culture that celebrates its people will outlast one that merely exploits them.

That’s not sentimentality—it’s strategy. And it’s one worth defending.

Virtue Deferred: Marcial Maciel, The Catholic Church, and How Institutions Learn to Look Away

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Virtue Deferred: Marcial Maciel, The Catholic Church, and How Institutions Learn to Look Away Organizations often face a moral dilemma when confronting high-performing individuals—those rainmakers whose charisma and drive yield tangible results (Jack Welch’s ‘Four Types of Managers’ model.) They secure vital funding, lead winning campaigns, and appear central to the organization’s mission. Their value is clear. Their presence seems irreplaceable. Leadership, captivated by performance, may grow dependent on them.

Yet behind the brilliance, some of these figures violate core principles. They may cultivate toxic workplaces, breach ethical boundaries, or engage in outright abuse. This reveals a troubling paradox: the same individuals who fuel success may simultaneously erode the institution’s moral foundation. Fearing the loss of key assets, organizations may choose to look the other way—or worse, actively protect them.

Tolerance of this behavior extracts a steep cost. Morale withers. Trust deteriorates. Cultures of fear and duplicity take root. Behind a polished facade, core values decay. Integrity is sacrificed for short-term gain.

Few cases illustrate this more vividly than that of Marcial Maciel and the Catholic Church.

A Charismatic Predator Shielded by Power

In 2019, to mark the 80th anniversary of Pius XII’s elevation to Bishop of Rome, Pope Francis announced the opening of Vatican archives from his papacy. Scholars welcomed the decision, many of them drawn to longstanding controversies regarding Pius XII’s role during the Holocaust.

Included in this research were damning revelations about Marcial Maciel Degollado (1920–2008,) the Mexican priest who founded the Legion of Christ and the Regnum Christi religious order. Lauded as “the greatest fundraiser of the modern Roman Catholic Church,” Maciel transformed the Legion into a formidable spiritual, financial, and political force.

Beneath this polished image, however, lay systemic abuse.

Maciel was a chronic drug addict and serial predator who molested at least 60 boys and young men under his care. After his death, reports revealed that he had fathered multiple children—two of whom he allegedly abused—and maintained sexual relationships with several women, including one reportedly underage. His authorship of the book Integral Formation of Catholic Priests (1997) stands in grim contrast to the depraved reality of his life and actions, underscoring a profound institutional moral corruption.

The archives showed that senior Church officials, including Pope Pius XII, were aware of Maciel’s misconduct as early as the 1940s. Efforts to remove him began in 1956 but were halted following the pope’s death. Despite mounting evidence, Maciel remained in power for decades.

'Betrayal Crisis Catholic Church' by Boston Globe (ISBN 0316776750) Why was he protected? Because he was more than a priest—he was a rainmaker. His ability to attract wealth and influence made his misconduct inconvenient. The institution prioritized survival over accountability.

Even after repeated warnings and detailed accusations, the Church delayed meaningful action for over half a century. Only in 2006 did Pope Benedict XVI remove Maciel from public ministry, ordering him into a secluded life of prayer and penance. He died two years later. In 2010, the Vatican formally condemned his “reprehensible actions” and placed the Legion under direct papal oversight.

The Institutional Blind Spot: When Success Shields Abuse

Maciel’s story is not just a case of individual moral failure. It is a systemic cautionary tale. He turned the Legionaries of Christ into a financial and political juggernaut, directing millions toward Church coffers and gaining favor with powerful bishops and cardinals. In the institutional calculus of power, his sins were inconvenient, but his financial value was immense. He was shielded not despite his crimes, but because of them.

When institutions conflate prospering with virtue, they protect the golden goose—even when it lays rotten eggs. Often this happens not out of malice, but out of habit. In doing so, they risk betraying the very mission they claim to uphold.

Why New Managers Fail to Stop Unethical Behavior Among Subordinates

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Unveiling the Causes Behind Managerial Failure in Ethical Oversight Embarking on a new role presents a host of challenges, and discovering unethical or potentially illegal practices within the organization can be a pivotal moment. The real question that emerges is whether you will be the catalyst for change in the face of such issues.

Imagine stepping into the shoes of a new retail banking sales manager at Wells Fargo, where fraudulent accounts were the means to achieving targets. Picture yourself becoming a manager at Volkswagen, only to uncover the manipulation of emissions tests by engineers using software. In both scenarios, middle management failed to intervene as these unethical practices took root.

As individuals rise to positions of authority, they wield the power to address unethical practices, yet sometimes, they don’t. Personal character flaws such as greed, sexism, or an unwavering pursuit of self-interest can drive this inaction, fostering complacency. Preserving the status quo and maintaining their position may become a higher priority than confronting misconduct.

Another significant factor at play is group identification. This involves adopting the group’s values, beliefs, and behaviors, becoming intertwined with one’s self-concept. Higher-ranking individuals often intensify this identification, feeling a stronger bond with their group or organization. Their membership becomes a point of pride, and they are more motivated to contribute to the group’s objectives than their lower-ranking counterparts.

However, this deep identification with the group comes with an ethical downside. It can obscure a manager’s ability to recognize ethical issues within the group. In simpler terms, those in higher-ranking positions may fail to perceive unethical actions because their strong identification blinds them to ethical violations. Consequently, they may hesitate to take action or intervene due to a lack of awareness.

Idea for Impact: Companies need to explore strategies that instill a strong moral compass in future business leaders. These leaders must maintain their ethical integrity as they climb the corporate ladder. Creating a safe environment for whistleblowing is crucial, empowering individuals to report dishonesty without fear of retaliation. It’s time to foster ethical leadership and ensure that the ascent up the corporate hierarchy aligns with an unwavering commitment to integrity.

Innovation Without Borders: Shatter the ‘Not Invented Here’ Mindset

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Jack Welch's Solution to Innovation: Breaking Down 'Not Invented Here' Barriers at GE

Jack Welch’s leadership during his tenure at General Electric (GE) has faced fair criticism, particularly for his overemphasis on financial engineering and short-term shareholder value over long-term investments in research and development. This scrutiny has intensified in recent years, especially following the challenges seen in other companies like Boeing, evidenced by the issues with its 737 MAX product line. However, amidst these concerns, some aspects of Welch’s management playbook remain worthy of emulation by other managers.

From Closed Doors to Open Minds: Jack Welch’s Approach to ‘Not Invented Here’ at GE

Upon assuming the role of CEO in 1981, Jack Welch wasted no time in addressing deep-rooted cultural issues within GE. Drawing from his intimate understanding of GE’s internal dynamics and bureaucratic hurdles, Welch was determined to transform the company into an environment where meritocracy and innovation thrived, regardless of the source of ideas.

'Jack-Straight from the Gut' by Jack Welch (ISBN 0446690686) One significant obstacle was the pervasive “Not Invented Here” (NIH) syndrome, wherein GE teams believed that good ideas could come only from within. Across GE, managers disregarded external ideas, even from other divisions within the company, stifling innovation and teamwork.

To counteract this mindset, Welch advocated for a culture that welcomed external ideas. He formed teams tasked with studying successful strategies employed by companies like Ford, Dell, and HP, and sought input from leaders at other notable firms such as AlliedSignal and Cisco. One famous instance of this approach was Welch’s adoption of Six Sigma, a quality management technique developed by Motorola, which he seamlessly incorporated into GE’s practices.

Beyond Boundaries: Winning with External Ideas

Welch cultivated an environment at GE where employees were urged to observe and glean insights from competitors, fostering a culture of continual improvement and adaptability. He placed special importance on simplifying processes and making decisions swiftly.

Idea for Impact: Innovation isn’t about being a trendsetter just for the sake of it. Instead, embrace the idea of being a proud copycat! Swipe those great ideas from the top players in the game and don’t forget to give credit where it’s due. After all, success often comes from embracing the brilliance of others.

Our 10 Most Popular Articles of 2021

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Here are our most popular exclusive features of 2021. Pass this on to your friends; if they like these, they can sign up to receive our RSS feeds or email updates.

And here are some articles of yesteryear that continue to be popular:

We wish you all a healthy and prosperous 2022!

Easy Money, Bad Deals, Poor Timing: The General Electric Debacle // Summary of ‘Lights Out’

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The story arc of the unraveling of General Electric should be familiar to followers of business news over the last two decades. Wall Street Journal reporters Thomas Gryta and Ted Mann’s crisp Lights Out: Pride, Delusion, and the Fall of General Electric (2020) draws together the vital episodes in one impassive narrative. It’s brimming with lessons about the hazards of obsessively focusing on impressing Wall Street.

Decades of Bad Decisions and Careless Oversight Ruined GE

'Lights Out General Electric' by Thomas Gryta (ISBN 035856705X) The fall of General Electric is really the story of how long-time CEO Jeff Immelt got saddled with the doomed legacy of the previous CEO, Jack Welch.

In 2001, Immelt took over a ship that was in trouble but wasn’t sinking yet. Unbeknownst to many analysts and investors—and overlooked by Jack Welch-buffs,—General Electric had been spoiled by greed, lack of transparency, and “lax oversight and buried risks.”

As a rising star, Immelt was part of Welch’s apparatus, perhaps to a smaller extent, at the GE Medical Systems division that Immelt ran previously. Early in his tenure as CEO, Immelt realized the scope of a disaster in the making. However, he didn’t act quickly and decidedly enough to fix the ill-fated ship’s rotten bits.

To focus on the stock’s negative return during Immelt’s 16 years as CEO and pit it against the sixtyfold return over Welch’s 20-year term is myopic. This argument is definitely understandable, yet it is scarcely convincing.

Welch’s good times couldn’t last forever, and Immelt had a tough act to follow. Yes, Welch was a forceful numbers-obsessed management mastermind who transformed GE into the world’s largest, most profitable, and best-admired company during his tenure as CEO. However, many of the mistakes of his corporate strategy manifested years later.

Welch would argue that he pushed his underlings to produce results, not fraud. But even if the CEO didn’t bend the rules himself, Welch cultivated an environment of pressure that incentivized people to do just that.

Welch was fond of saying, “You reinforce the behaviors that you reward. If you reward candor, you’ll get it.” Welch’s playbook rewarded—and got—the worst traits of modern capitalism. In so doing, he sowed the seeds of the company’s tragic decline.

Jack Welch’s Playbook Was Long-term Destructive to GE

Welch had a take-no-prisoners attitude to running GE. He set overly aggressive targets for his managers. He engaged in accounting shenanigans and consistently “managed” the numbers to maintain the myth of consistency and limitless growth. Behind the scenes, Welch’s machination was made possible by crafty-but-legal accounting practices (with auditor KPMG’s blessings, nonetheless,) mazes of financial deals, and murky structures. Welch even underfunded reinsurance reserves by $9.4 billion, helping pump up profits from 1997 to 2001.

Managing financial results wasn’t unique to GE, but the degree of GE’s reliance on the practice was. Management, with its customary swagger, treated the frenzy of last-minute tweaks and transactions each quarter as entirely natural. GE executives have acknowledged that they worked to make sure earnings were always growing in a nice smooth trajectory.

Immelt knew—or came to comprehend—of all this tomfoolery but didn’t break GE’s bad habits swiftly. Specifically, Immelt didn’t dismantle the GE Capital unit, the company’s most significant liability, and it continued to haunt GE. Under pressure, the complex conglomerate structure that Welch had held together during the good times of the ’80s and the ’90s started falling apart towards the end of his tenure.

The winds were shifting on Welch. GE’s share price had soared for years, making it, for a time, the world’s most valuable company. [During Welch’s] final eighteen months, the share price fell 33 percent. … [Bond-market guru Bill Gross commented,] “Institutional investors have wondered why a company can continue to produce 15 percent earnings growth year after year, quarter after quarter.”

An Addiction That Was So Hard to Break

At the heart of General Electric’s fall is how GE Capital came to gain an outsized influence over the parent company and ruined it. Under Jack Welch, GE Capital’s business model of high leverage and “financialization” was resoundingly successful. Financial engineering, e.g., recognizing revenue from long-term service contracts for power-plant repairs and jet-engine maintenance, is not only suspect, but it cannot manufacture results beyond the short term.

GE Capital was the nonbank bank that was embedded in the company’s fabric. Everything that GE produced was leased, rented, or loaned by GE Capital. In other words, the industrial side was sustained by the rise of GE Capital. It was too interlinked to everything else, and that impeded Immelt’s “definancialization” plans.

In the ’90s, Welch embraced the notion that it’s a lot easier to make money in financial services than in industrial manufacturing. The Capital unit provided huge dividends (with enormous risks) while the industrial side was less profitable but more stable.

No wonder, then, that Welch made GE Capital a gargantuan part of GE. GE Capital became the vehicle for his headlong obsession with enhancing pure shareholder value.

Sadly, Welch bet the farm on the continued success of GE Capital. It misused GE’s high-quality credit rating and became a colossal lender and a major shadow bank. Welch’s bet went sour in 2008—GE Capital was the largest commercial paper issuer going into the financial crisis. It needed a $139 billion government bailout, and it has continued to drain the company’s bottom line ever since.

Jeff Immelt focused on pivoting GE towards core industrial businesses. He doubled GE’s investment in R&D. He sold off slower-growth, low-tech, and nonindustrial businesses, but not soon enough. He managed to keep revenues growing and delivered high margins until the financial crisis hit.

Cleaning Up the Mess Left by Welch

Even as Immelt went about restructuring the company around industrial products, he continued to rely on GE Capital “for smoothing out rough quarters and delivering easy profits.” It was a hard addiction to break.

Lights Out acknowledges that Immelt was “playing with a tough hand,” and he knew that “his success would be attributed to his predecessor but his failure would be seen as all his own doing.”

The authors reveal plenty of leadership blind spots. Immelt was a genial and assertive salesperson, and he didn’t like hearing bad news. He didn’t like delivering bad news either.

CEOs are expected to be optimistic, but Immelt was unfailingly overoptimistic. Perhaps his overconfidence was a manifest outcome of the company’s cultural dynamics. Sadly, when a company is doing well, such CEO attributes as optimism, audacity, and foresight that Immelt’s leadership personified are heralded as brilliant, but when things go wrong, they’re the first to get the blame. Results are all that matters.

Some board members … had … a poor impression of Immelt’s deal-making skills. The knock on Immelt was that he chased trends, arrived too late, and paid handsomely. One rival CEO joked that he was “fad surfing.”

Immelt Made Bad Decisions and Was Slow to Make Changes

Immelt spent over $100 billion on ill-timed share buybacks to shore up earnings-per-share and so the stock price. He had a history of overpaying for acquisitions. He was reluctant to back away from deals that he was dead set on, even when the deal’s prospects became dubious during the parleying.

Immelt tended to start negotiations too high, sometimes to the surprise of others involved in the deal, leaving little room for negotiation. It wasn’t uncommon for the board to approve one of Immelt’s deals, only to have him ask for approval to pay more in order to make the deal work. In some ways, this tendency simply reflected Immelt’s experience as a salesman. He’d always needed to close deals, and for a company like GE, paying a little more didn’t seem to cause any concern.

No decision could be more illustrative of Immelt’s fateful deal-making than the one for Alstom, the French power generating equipment company. Immelt set his reputation on that deal because GE Power would be “the centerpiece of his new GE.” Immelt didn’t walk out on the deal even after regulators forced General Electric to divest Alstom’s lucrative service business and take on 30,000 high-cost employees in Europe.

Worst of all, the deal was spectacularly mistimed. With the Alstom purchase, Immelt doubled down on fossil-fuel-fired turbines just as renewables were becoming more cost-competitive. Demand for GE Power’s products collapsed in next to no time, and that unit’s profit plunged 45% in 2017. The whole Alstom transaction turned out to be an out-and-out disaster. In 2018, General Electric took a $22 billion goodwill impairment charge for the Alstom acquisition.

Hope and Optimism Could Take Immelt Only So Far

It’s both easy and unfair to comment on what GE should have done. Immelt’s prospects were seriously encumbered by the September 11 attacks, post-Enron accounting rules, the 2008 financial credit crisis, and a substantial recession that hit the energy industry.

The world in which Jeff Immelt had thought he would be leading GE had been turned upside down. The recession and the uncertainty that followed the terrorist attacks had dampened the global growth on which GE’s industrial businesses depended. And changes to accounting rules in the wake of the Enron scandal, by requiring that the company now account for the vast financial holdings on its balance sheet at GE Capital, had eliminated an easy and reliable source of paper profits to smooth over rough periods.

Lights Out explains how, during the last five years of his tenure, Immelt’s misfortunes piled on. GE Healthcare took a pause (it’s innovative, high-profit machines had become increasingly commoditized.) The GE Renewables business rarely turned a profit. The GE Transportation unit’s sales stagnated. GE Power built an extensive inventory hoping for a return in demand for its large, expensive machines. The merger of GE Oil and Gas with Baker Hughes turned out to be untimely too.

For many investors, GE had lost its mojo. Its lackluster performance, fuzzy financials, and unknown risk just didn’t fit with a lot of investment portfolios.

Leadership Mismanagement, Self-Dealing, Collusion

The deplorable collapse of General Electric, and GE Capital, in particular, was fostered by the board’s abysmal stewardship.

GE’s board was dysfunctional. It comprised too many directors who owed their cushy positions to Welch and Immelt and merely rubber-stamped their strategic actions. As chairman of the board, Immelt promptly cast out Welch-appointed directors who objected to his plans.

As they’d done under Welch, the board usually tended to approve Immelt’s recommendations and follow his lead. Some felt that Immelt manipulated the board, and it was whispered that members were chosen and educated to see the company through his visionary eyes. There was concern that the board didn’t entirely understand how GE worked, and that Immelt was just fine with that. Like many CEOs who are also their company’s chairman, he made sure that his board was aligned with him.

Just last week, GE agreed to a $200 million fine to settle a Securities and Exchange Commission probe into feel-good accounting at its Power and Insurance units.

Too Steeped in the GE Culture to Effect a Major Transformation

Immelt was replaced by John Flannery, a finance specialist. Flannery had run the business development team when GE Power bought Alstom. He wasn’t likely to kick off any dramatic changes in GE’s business strategy. His proposals for GE’s transformation were consistent with Immelt’s strategy.

Flannery tried to stop GE’s hemorrhaging of money but wasn’t quick enough either. He showed reluctance—caution perhaps—to take risky and complicated actions that could have been costly or even impossible to reverse.

If Immelt was known for his vaulting optimism, Flannery soon became known for his indecision and endless analysis. Few decisions, even major ones, were final. A critical strategic move, like the separation of a major division, could be made, only to be reassessed at any time. Flannery’s style was quickly grating on top executives who worked with him.

The board got insecure quickly because of widespread public criticism that it had waited too long to remove Immelt. “After sixteen years of Immelt, Flannery thought that he had more time to turn the ship around, but when he looked for support from the board, there was none there.” Fourteen months into his term, Flannery was forced out.

For the first time in its 126-year history, GE, which prided itself as a talent factory, handed the leadership baton to an “outsider” to bring a fresh perspective.

New CEO Lawrence “Larry” Culp is generally admired for his stellar record of accomplishment at Danaher, a smaller industrial conglomerate. “Culp had more experience, and he also had no emotional attachment to GE.” Culp had joined GE’s board six months before and had started questioning the wisdom he’d received from Flannery and his team.

Having an outsider take charge of a storied company marks how much change the board desired. GE may not reclaim its once-celebrated footprint. But it’ll continue to be one of the great American business stories.

Jack Welch’s GE: Everything Worked Until It Didn’t

Recommendation: Must-Read Thomas Gryta and Ted Mann’s excellent Lights Out: Pride, Delusion, and the Fall of General Electric. It’s a great reminder that even America’s most iconic companies—and the world’s leading businesses—can go off the rails if things go wrong.

It wasn’t Immelt’s fault that the entire oil sector had turned south. But he was responsible for GE investors being so openly exposed to the collapse. … He had spent sixteen years at the top and, regardless of what Welch had left for him; he’d had plenty of time to fix it.

Lights Out is a revealing, reasonable, and accessible narrative of how a thriving company was humbled by sheer misfortune and poor leadership.

Jack Welch’s razzle-dazzle capitalism party could last only so long.