Ge’s Two-Decade Transformation
GE needed to be restructured and this entailed the modernization and streamlining of operations, downsizing the organization, reduction of payrolls and stringent efficiency measures. Welch Early Priorities: GE’s Restructuring 1 or 2: Fix, Sell or Close Each business needed to be 1 or 2 competitor in industry. It had to be a broad strategy because it was a broad corporation. Circle Vision: ? Services (acquisition), ? Technology (leading edge), Core (re-invest in productivity)? Support, Outside, Ventures.
Internally wanted company “lean and agile,” chip away bureaucracy example laborious strategic planning system or budgeting process (targeted towards competitors), reducing hierarchical levels from 9 to 4 ensured all business reported directly to him Downsizing, de-staffing, de-layering 123,000 staff cut, operating profits rose dramatically, and set base for strong increase in sales and earnings for second half of decade (exhibit 5) Replace 12 of 14 business heads, called “Varsity Team,” all strong commitment to new management values, and willingness to break old culture, and ability to take charge and bring change. 2.
What was Welch’s objective in the series of initiatives he launched in the late 1980’s and early 1990’s? What was he trying to achieve in the round of changes he put in motion in that period? Is there a logic or rationale supporting the change process? In the late 1980’s GE’s restructuring was complete. But still culture shock and management exhaustion where common. GE needed more solid foundations?. A series of “Software” initiatives where implemented. These software changes led to cultural change. Welch wanted to create a culture of small company?. Forums where created for employees to speak their minds and get immediate response?.
He designed a process ride of unnecessary bureaucratic work out of system?. 24 outside consultants were hired and productivity increased after reinventing a company-wide program? similar to New England town meetings. In order to increase productivity, Welch studied other firms? and focused on developing effective processes rather than controlling individual activities. Customer satisfaction was GE’s main gauge of performance. Suppliers were treated as partners, and there was an emphasis in the need for constant stream of high quality products designed for efficient manufacturing.
Going Global? – During early-mid 1980s, this initiative was left on back burner?. Welch did not want to impose corporate globalization on the corporation, but allowed each business to decide?. However, in the late 1980’s he looked at ranking 1# or 2# on global level?. An ongoing effort was launched?. For example, during Mexico downturn, w/in 6 months GE bought 16 companies, positioned for country’s rapid recovery. This same strategy was implemented for Asia?. GE’s 1998 international revenues were $42. 5B (doubled in 5 yrs) Developing Leaders?.
Welch embarked in a huge task of realigning skill set and mindset of 290,000 employees?. Many of which felt overworked and there was a residual distrust left from layoffs?. Welch wanted to change focus outwardly to competition. He wanted staff willing to compete and in exchange get professional opportunities. He made a commitment to developing people?. He adapted GE’s human resources system to fit his goals. Overhauled GEs compensation package, stock options became primary component of management compensation and expand stock option from 300 to 30,000 people (more aggressive bonus awards)? Create environment in which people could be their best? – Priority to develop a generation of leaders aligned with GE’s new vision and cultural norms, training center? – Discussion leaders, Welch meet with employees twice a month (exhibit 7)? – Not all managers were able to achieve Welch’s ideal leadership profile (exhibit 8)? – Top level managers were rated on performance against targets plus how the “lived” GE values? – Introduced 360 feedback process 3. How does such a large, complex diversified conglomerate defy the critics and continue to grow so profitably?
Have Welch’s various initiatives added value? If so, how? Into the 1990’s: The Third Wave Foundation had been laid, now task rebuilding company at an even more urgent pace Boundaryless Behavior? – Initiatives aimed at strengthening GE individual business, create “integrated diversity”? – Open, anti-parochial environment… sharing ideas… remove the barriers among engineering, manufacturing, marketing, sales etc? – Be as comfortable doing business in Budapest as Louisville, and erase group labels as “salaried”? Wanted to quickly learn from each other, “integration model,” develop a model guided the actions of managers, realigning the organization and remove blockers Stretch: Achieving the Impossible? – Reinforce his rising managerial expectations, new assault on GE cultural norms? – “Stretch” to set performance targets and described it as “using dreams to set b. targets, with no idea how to get there”? – Targets not replace traditional forecasting, managers still had to hit these basic targets, Stretch goals were set higher but not held accountable… wanted to keep a positive attitude? Mid-1990s stretch goals were established part of culture? – Increased operating margins from 91’ to 95’ 10% to 15% Service Business? – 1994 launched a new strategic initiative designed to reinforce one of his earliest goals, reduce GE dependence on traditional industrial products? – 1980s initiated an initial tilt towards service business, acquisition of financial service companies? – Now push for product services… needed to supplement slow growth products with added-value services, example medical business “In Site” for CT scanners and MRI equipment? Believed they had a strong platform to build off of (ex 9000 commercial jet engines, 10,000 turbines)? – “turning the pyramid upside down”? – 1997 GE made 20 service-related acquisitions and joint ventures (exhibit 9) 4. What is your evaluation of Welch’s approach to leading change? How important is he to GE’s success? What are the implications for his replacement? Closing Out the Decade: Welch’s Final Chapter Closing in on mandatory retirement, wanted to keep adding value… said he was not willing to split up company 6 Sigma? – 1995 company survey showed employees were dissatisfied with quality of its products and processes? Learned from Motorola Six Sigma quality program which improve quality, lower costs, and increase productivity? – GE operating at error of rates 10,000 times the 6 Sigma level (cost $8-12 M)? – Well developed program with detailed implementation, linked series of management meetings “operating system” series of planning, resource allocation, review and communication? – 40% of bonus were tide, returns to company $750 M (exhibit 11)… rapid “A Players” with “Four E’s”? – Continued to focus on quality of team, wanted to continue to upgrade quality depth ? “A Players” vision, leadership, energy, courage? – 4 E’s energy, able to energize, edge, execution? – Appraisal system every manger ranked employees 5 categories, only top ones received stock? – Believed continuously upgrading was key to success Toward Retirement: One More Initiative – 4th strategic initiative- e business, “biggest change I have ever seen”? – Knew they were late, but felt well positioned with strong brands, top ranked product reliability, great fulfillment capability, and excellent service quality… thought dot com would have a hard time challenging them? Debate on how quickly and effectively GE could pull it off He always wanted and did remove all the redundant processes and extra employees. He also removed the extra layer of management and started to communicate with the businesses directly. Then he also introduced the relative rewarding system, which states that top people will get stock options and bottom people will be fired. Due to this system everyone started to work harder as no one wanted to be in the bottom ten percent and to be fired.
He also believed in training the successors and making future leaders who can replace the old leaders and put new energy into the businesses. He also believed in giving his people the best as reward and recognition. He used to say that give all the resources and power that are needed, and also give best rewards to the best people. He knew that people’s voice is very important to he arranged such a system that every single employee can be heard, his suggestions are taken seriously and his issues are resolved. This created a sense of ownership in all the employees and they felt as being important and part of the company.
All these actions prove that Jack Welch was a true leader and a great manager. Due to his strong leadership, he transformed the company in to a giant Jack Welch’s management and motivation approach included three main areas: 1. Goal setting and preparing the company on a corporate level for its competitive challenges; 2. Empowering employees at all levels of the organization; and 3. Communicating his new goals and visions through the entire organization, using such tools as extensive training programs, newly formed teams and 3600 review processes.
Different aspects of Jack Welch’s management tactics, in terms of motivating employees to bring about change. How difficult a challenge did Welch face in 1981 ? How effectively did he br take charge When Jack Welch assumed as CEO of GE , he had the challenge of br revitalizing the competitiveness and productive competency of the br company . This entailed the modernization and streamlining of operations br downsizing the organization , reduction of payrolls and stringent efficiency measures .
Though there was significant criticism and br resistance to Welch ‘s management in his early years as CEO , he was able br to earn the support and respect of not only GE managers but other br companies as well 6. p What is Welch ‘s objective in the series of initiatives he launched in br the late 1980s and early 1990s ? What is he trying to achieve in the br round of changes he put in motion in that period ? Is there logic of br rationale supporting the change of process His management decisions were motivated by his opinion that leadership of the industry was the only option for the company.
Like many other American companies in their industry , GE was not associated with modern management practices and considered conservative . With the entry of stiff competition from Asia , GE was being challenged not only to assert to protect its existing markets and at the same time develop new competitive competencies . Welch believed that GE needed to mitigate these advantages by implementing its own efficiency measures What is your evaluation of Welch ‘s approach to leading change ? How br important is he to GE ‘s success ?
What implications for his replacement For a large company such as GE , the implementation of these measures need to be universal but at the same responsive to unique requirements of individual business interests . Critics of Welch point out that the br degree of success of the measures was distorted since Welch would often br opt to sell or to shut down operations when outcomes did not suit his br measures . When Welch turned over the reigns of the company , there was br great deal of expectation that his replacement , Jeffrey Immelt , to be br continue Welch ‘s success