The Worst Day at General Electric

Question: What was one of the most difficult days at GE?

Ben Heineman: One of the most difficult days was a Sunday in the early 90's when I got a call saying that the Israeli press had a story that the head of procurement for the Israeli Air Force, a General, a former fighter pilot/hero/general, and our foreign sales manager in Israel had a joint bank account in Switzerland with about $8 million in it, which suggested there was some embezzlement and fraud going on. It turned into a very large scandal. So that day, when I got the phone call on a Sunday, I knew that we were in for a long journey as we tried to investigate discipline, change the processes and systems and then go to the government and work what turned out to be, because it was a very serious case, both a civil resolution with the SEC and a criminal resolution with the Justice Department.

As leaders, our job is not to deny the facts; our job is to file the facts. So, the first thing we did was create both an inside and outside investigative team and when we got into it, we discovered that certain people in the company had done bad things. Rather than put our head in the sand, we had to confront those directly and deal with them. And I'd like to think that we did.

Question: How did you communicate the crisis to the public?

Ben Heineman: Well, we first had to investigate and we had to work things out with the government. But once that happened, we made this showcase in the company about candor, about how things can go wrong and about what the consequences were.

Let me give you two ways in which that happened. It’s a good question because the communication of these things is often as important as the resolution of them.

One way we communicated when it was all over was that Jack Welch at the time, asked me to present this case at the annual meeting of the senior managers of the company. I have spoken to groups many times in my life, I've never been in front of a group that was a quiet as this because what happened was the senior manager in the military engines business was fired. So, the senior managers were tremendously attendant to what I was saying. So, that's one way of communicating, explaining what happened, how we fixed it, what went wrong to the senior managers.

A different way we did it was that we developed a training film that was shown to every single employee when they started. We are fortunate in that a part of GE is NBC. So we had a NBC crew do a short video on integrity with Ann Curry, who was then and I think still is the News Reader on The Today "Show." Presented a very high production value and we began with the Israeli case explaining what went wrong. And what I thought was good about the film, which I obviously had a lot to do with was we didn't dwell on our virtues, we dwelled on our problems. And that created a sense among the employees that we were serious about this, that we were candid, that we were talking about things that were going wrong, that were ugly, that were messy. That training film, which actually won some awards, was remarkably effective in dealing with the situation and talking about it candidly.

Recorded on November 3, 2009

When the Israeli press uncovered a scandal at America’s largest company, former general counsel Ben Heineman was on the case. The first lesson he learned: take your head out of the sand.

Related Articles
Playlists
Keep reading Show less

Five foods that increase your psychological well-being

These five main food groups are important for your brain's health and likely to boost the production of feel-good chemicals.

Mind & Brain

We all know eating “healthy” food is good for our physical health and can decrease our risk of developing diabetes, cancer, obesity and heart disease. What is not as well known is that eating healthy food is also good for our mental health and can decrease our risk of depression and anxiety.

Keep reading Show less

For the 99%, the lines are getting blurry

Infographics show the classes and anxieties in the supposedly classless U.S. economy.

What is the middle class now, anyway? (JEWEL SAMAD/AFP/Getty Images)
Politics & Current Affairs

For those of us who follow politics, we’re used to commentators referring to the President’s low approval rating as a surprise given the U.S.'s “booming” economy. This seeming disconnect, however, should really prompt us to reconsider the measurements by which we assess the health of an economy. With a robust U.S. stock market and GDP and low unemployment figures, it’s easy to see why some think all is well. But looking at real U.S. wages, which have remained stagnant—and have, thus, in effect gone down given rising costs from inflation—a very different picture emerges. For the 1%, the economy is booming. For the rest of us, it’s hard to even know where we stand. A recent study by Porch (a home-improvement company) of blue-collar vs. white-collar workers shows how traditional categories are becoming less distinct—the study references "new-collar" workers, who require technical certifications but not college degrees. And a set of recent infographics from CreditLoan capturing the thoughts of America’s middle class as defined by the Pew Research Center shows how confused we are.

Keep reading Show less