GE’s Two Decade Transformation Review Example

1. )How difficult a challenge did Welch face in 1981? How effectively did he take charge? – Mychal Upon coming onboard with GE, Jack Welsh accepted an enormous uphill battle of completely restructuring such a huge and vastly industrially diversified conglomerate. Not only in recognizing the paramount importance for drastic organizational change in how GE conducted its business, but systematically carrying out detailed approaches to build value and make GE more competitive and profitable for the future was a tremendous undertaking.

To compound difficulties, former CEO, Reg Jones passed the torch to Welch during trying economic times for the U. S. Welsh wasted no time in challenging each of GE’s divisions, departments, and SBU’s to be “better than the best”. This mindset shook GE and challenged its employees with gaining the competitive advantage through creativity and innovation. Like any leader, Jack Welsh experience resistance to the changes he imposed; however, his vision was clear and resolute. Between 1981 and 1989 he eliminated over 100,000 positions within GE.

In addition, he made decisions to rid GE from negativity by eliminating 100 people and cutting the strategic planning staff group in-half. This decision was made to help reinforce how critical it was to have a positive attitude going forward. These difficult decisions transformed the company’s functionality and as a result productivity rose 2% annually, revenues increased, and profits nearly doubled. His relentless push for a better GE continued as he began even challenging scopes of control, other business models, and organizational efficiency theories.

•High interest rates, unemployment – challenging economy (unfavorable exchange rates) •Global competition, particularly Japanese •Came in after complete reorg (strategic planning) and following strong leader •Coming in after strong leader arguably harder than coming in with a complete opportunity to revamp •He addressed the company through #1 & #2 “Fix, Sell, or Close” Strategy oInitial attempts in recessionary economy led to close oAlso made strategic (and a lot) of acquisitions •He addressed the people/structure through “lean & agile” through destaffing process oEliminating layers & bureaucracy oUsed a highly disciplined, somewhat “hard”, approach oInitial attempt and communication style was awkward and not well received.

Eventually abandoned GE Business Engine name to GE Social Architecture •Relentless to sticking to HIS strategy ? no “fair process” in terms of human capital •Neutron Jack •Obsessive about what he wanted, 1 dimensional •Did what he felt was necessary to maintain business results in recession, but the “flattening”/”breaking of the structure” had a significant impact on morale & managerial overwork lending to his name Neutron Jack 2.)

What is Welch’s objective in the series of initiatives he launched in the late 1980s and 1990s? What is 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? – Tim “Neutron Jack”. Welsh had aspirations of transforming GE to be the most diverse, profitable, and innovative company in the world, and identified several fundamental objectives that he considered crucial to success.

The primary objective was to change the fundamental culture of GE to the culture of a small company, where everyone had a voice and their ideas and proposals got an immediate response. He also knew that he would have to cultivate leaders that were aligned with his new vision of GE and create an environment where people could be their best. He understood that people were his greatest resource and competitive advantage. To achieve this he launched several initiatives to free the organization from bureaucracy and restructured the organization entirely.

“If you don’t have a competitive advantage, don’t compete. ” Welsh realized that in order to achieve his vision he would have to tear down GE to its core competencies. Only businesses that were “#1 or #2” in their market would be retained. All other businesses would be sold or ultimately closed, “fix, sell, or close”. This restructuring built a base that would enable solid increases in revenues and profit. Once a firm domestic foundation was in place, Welch new he would need to expand global operations to compete on the world stage, and in fast growing emerging markets.

He also knew he could not achieve his goals by depending on just the revenue from GE’s traditional industrial products alone; he would need to grow the more profitable services business. “You measure your people and you take action on those that don’t measure up”. There was a strong logic and rationale supporting Welsh’s change process. His objectives were not always crystal clear, but once they were well defined he pursued them with a relentless passion. All new initiatives had well developed programs with detailed plans for their implementation and comprehensive metrics to measure success.

After positioning the corporation for success by streamlining GE, he was restless, insatiable, and was absolutely unyielding in making GE better—A true capitalist. He launched several initiatives in the late ‘80s and ‘90s that he believed would achieve global success across a multitude of GE’s divisions. Furthermore, he knew that to devise and execute these plans it would require a strong and motivated team. He shifted his focus on transitioning into a more collaborative and efficient organizational culture. Welsh fostered creativity and championed excellence.

He strongly held the notion that the employees of GE were the key to the business’ success. He rolled out creative methods for identifying whether an employee shared GE values such as the 360 approach—“Smile up and Kick down. ” While building an extremely competitive work atmosphere while fostering an open and trusting environment. There is strong evidence substantiating this style of management across manufacturing, service, and knowledge based industries is prevalent in this case and others.

•Metric based culture/system

•Wanted to transform GE into the most profitable, energetic, entrepreneurial business in the world with the best leadership operating a diversified portfolio of business •Internationalization (topline sales) & Service Business (drove profits) •Change the fundamental culture of GE to the culture of a small company where everyone had a voice and their ideas and proposals got an immediate response •Developing Leaders – Cultivate leaders that were aligned with the new GE culture •Create an environment where people could be their best

•Boundaryless Behavior – demolish the silos separating engineering, manufacturing, marketing, etc. •Stretch – Trying to inspire people to think of creative ways to increase productivity •Work-Out & Best Practices •Trying to achieve: #1 or #2 in the world, rebuild on more solid foundations, environment where people can be their best & only the best are “welcomed” per se (openness, fairness, allow creativity, followed by compensation & promotion for those exemplifying those traits) •Logic/Rationale to Change Process: Rapid Change – Failure did not stall moving forward.

No standard process, never had a full vision, but when he went after it (immediacy & impulsion), he went after it relentlessly & then set up a program with defined metrics for how “success” could be measured. If a program didn’t measure to success, he got rid of it. He had a psychological shift with the culture from “lifetime contract” to the best jobs go to those who will compete ? 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?

– Whitney Against great odds Welsh was able to conquer huge barriers and overcome doubt and resistance within GE as well as externally of the manufacturing giant. The initiatives that Jack Welsh put into motion in no inarguably saved the company from economically troubling times, but also dramatically shaped GE for what it is today. Welsh was successful because he challenged everything and everyone to be better. And did this by evoking simple yet radical changes to the fundamental aspects of how GE does business such as planning, budgeting, and breaking hierarchical order.

Furthermore, he served the people of GE and held them accountable to be the very best by adding value. •Innovating & reinvention. Move quickly and able to manage change effectively. •General skills with ability to pivot quickly and move throughout the organization (boudaryless) •He set up a culture where they could employ the best and then empower them to be better •Benchmarking for success & diversification (open environment allowed GE to bring in other companies) Used their size to an advantage.

Shared “Best Practices”. On both sides of the equation •Change criteria to reward idea seeking & sharing •Look at Sales Growth, etc •Internationalization: 15% vs 6% for domestic (Avg Annual Growth Rate) • 4. )What is your evaluation of Welch’s approach to leading change? How important is he to GE’s success? What implications are here for his replacement? – Kevin Welsh’s style was extraordinary influential and highly motivating to his team.

His contagious attitude and unflinching confidence to building a better GE was extraordinarily powerful and absolutely crucial to the organizational change he led. Jack Welsh was a powerhouse never letting up and never becoming comfortable in all of the great work he and his team had accomplished. He continually made efforts to improve and wholeheartedly believed that his work, as well as the evolution of GE was continually changing and could never be entirely fulfilled. I find his attitude, commitment, and methods to be incredibly inspiring.

Similar to Jack himself and arguably to a higher degree, his replacement confronts colossal barriers in building upon and extending the direction of General Electric. Upon his retirement, stakeholders naturally shared a deep concern about the financial well-being and long-term security of GE. Leading a company into ultimate and perpetual success using someone else’s model and vision is possibly even more challenging than inventing an original direction because things can feel imitated and even apathetic.

•1st decade break the system, 2nd decade rebuild on foundations oFair process missed at the beginning, morale loss, Neutron Jack o2nd decade focused on building the RIGHT people (A Players), he embraced open communication and found ways to achieve commitment by tying human resource system to their goals. Recognized the value of human capital •(Exemplifying the 4E’s) His ability to pivot/adapt his style as a leader allowed him to be successful in this endeavor. Also, his relentless passion, impulsiveness, and service (Steward vs Agent) to the organization attitude let him lead change and drive through results.

Failure was not a bad thing, if it was, that would kill creativity (a pillar important to Welch) •If he did not address the morale challenges, he may be in a similar situation as GM or US Steel. •The new leader has to use self-assessment to understand if the current culture matches their purpose (the why? ) if it does, run with what’s in front of you while making improvements and putting your own “fingerprint” on it, if not, the company must change to continue driving success (people buy the why, not the what or how) ? power of transformative leaders