General Electric should have given ousted CEO John Flannery at least six more months to make his turnaround plan work, Yale management guru Jeffrey Sonnenfeld told CNBC on Monday.
“How long do you let somebody twist on the vine? But 13 months is a pretty short window, I’d have given it a year and a half at least,” Sonnenfeld, who is also a CNBC contributor, said on “Squawk on the Street.” “What difference would six more months have made? I actually think it might have made some difference, especially if he had divested health care.”
GE’s board of directors removed Flannery after he was on the job for just over a year, due to reported frustration with the pace of his turnaround plan for the embattled industrial conglomerate. Former Danaher CEO Lawrence Culp has been named as his successor.
Culp, 55, was named to GE’s board in April. He was president and CEO of Danaher from 2000 to 2014, during which time he quintupled the size of the science and technology company.
Flannery, 56, was appointed CEO in August 2017, taking the helm from Jeff Immelt as the conglomerate’s stock fell steadily. But GE’s value had continued to erode, setting new lows as investors remained unconvinced about Flannery’s turnaround plan. Despite Flannery’s efforts, GE’s stagnant power business has hit new roadblocks, such as a failure of a turbine blade at the Colorado Bend power plant in Wharton County, Texas.
Sonnenfeld defended Flannery, saying he likely had a perception problem at the company.
“After every public address, after every earnings address, we saw this already crushed stock taking bigger hits. And you had to feel sorry for Flannery that the message didn’t seem to be the problem — the messenger wasn’t lighting torches of excitement,” said Sonnenfeld, a senior associate dean at the Yale School of Management.
Flannery comes across as “sluggish, almost kind of academic seeming,” rather than the “charismatic, back-slapping sort,” Sonnenfeld added. Flannery’s successor, Culp, is more dynamic, he said.
Former GE Vice Chairman Bob Wright agreed, saying Flannery was just as qualified as Culp or Tom Horton, who was appointed lead director. He said his removal was likely driven by “something we don’t know about.”
“Flannery has never appeared to me to be a guy who people don’t like … it has to be something that we don’t know about here, that was in that boardroom that took this action,” Wright said.
Flannery’s removal was driven by the board’s frustration with the slow pace of change under his leadership, and not driven by the power business woes, sources told CNBC.
“I think they picked two really good people to be heading up the company, but then Flannery was a good person himself, so there we go,” Wright said.
Motivation aside, Wright said it is important to consider the turbulence Flannery’s ousting will likely cause for GE staff, who have already been through a lot in recent years.
“A lot of people have left [GE], but the people that are there are some of the very best people in the world in engineering, science and math. This is a jolt to them now — they’ve had enough issues,” Wright said in the same “Squawk on the Street” interview as Sonnenfeld.
“They’re going to need to be feeling that they’re valued, really valued and that they’re not going to be taken advantage of in any way,” Wright added.
Flannery’s turnaround plan may have been a “huge disappointment,” Sonnenfeld said, but he said he still would have waited a bit longer to see if it all worked out, because “it’s a shame to have this kind of disruption” at the company.
“If they didn’t pick the right guy 13 months ago, it’s a shame,” Sonnenfeld said.
Shares of GE surged after the announcement and were up 8.2 percent to $12.22 per share midafternoon Monday.
GE did not immediately respond to a request for comment.
— CNBC’s David Faber , Andrew Ross Sorkin and Michael Sheetz contributed reporting.
