Jack Welch joined General Electric (GE) in 1960 and became vice president (1972) and then vice chairman (1979). In 1981 he became chairman and CEO of GE; at 45, he was the youngest person ever to have held that position. Having taken GE with a market capitalization of about $12 billion, Jack Welch turned it into one of the largest and most admired companies in the world, with a market value of about $500 billion, when he stepped down as its CEO 20 years later, in 2000. (Reference for Columbia Encyclopedia) Welch took bold actions to improve GE’s ability to compete globally before it ran into serious difficulty.
Welch leads two different “revolutions” in his tenure as CEO. The first revolution had to do with hardware: what businesses GE should be in and what businesses it should divest. Welch quickly changed GE’s approach to strategic planning. The matrix approach developed under Reginald Jones was replaced with Welch’s Number One Number Two strategy. If a GE business wasn’t first or second in its markets worldwide, or couldn’t be made’ so, it would be sold. At the start of Welch’s tenure GE administration was built around three hundred separate businesses, a recipe for inefficiency.
Welch tore into the ossified corporate structure with a vengeance and by the mid-1980s had overseen nearly 120,000 layoffs and earned the nickname “Neutron Jack. ” The name was derived from the neutron bomb, a weapon designed to minimize heat and blast effect but maximize dispersal of lethal neutron radiation—in effect, eliminating people but leaving buildings and equipment intact. (Reference for The New GE) By 1985, billions of dollars had been made or saved through sales and layoffs. Welch sought opportunities for growth by reinvesting those billions and considered possible takeover targets.
Indeed, there were more than 200 acquisitions in his first five years as CEO, the largest being the $6. 3 billion acquisition of RCA in 1985. RCA’s assets included not only its electronics and defense businesses, but also the NBC television network. This resulted in its becoming the world’s largest manufacturing, technology, and service company, with 1999 revenues of over $110 billion. (Reference for Jack Welch & The G. E. Way) The second revolution has to do with software: how to run GE’s existing businesses better. Jack Welch firmly believed that top performers deserved to be handsomely rewarded.
He established a performance-review program to identify the top 20 percent of employees, who were accorded bonuses, as well as the bottom 10 percent, the “lemons,” who were typically fired and replaced. (Reference for The New GE) Welch instituted the Six Sigma program at GE. Initially implemented at Motorola and Allied-Signal, the program was developed to maximize the efficiency of manufacturing processes through the minimization of production of defective units. When applied at General Electric it became the largest quality-control measure ever adopted in corporate America.
The program required a huge investment in training and tracking but ultimately led to great gains in profit and productivity. (Reference for Jack Welch & The G. E. Way) Welch is seeking productivity gains by involving GE’s workers as well as its managers. In September 1988, Welch said to Jim Baughman, the former Harvard Business School professor in charge of Crotonville, “Jim, we have got to capture what happens here at Crotonville and push it across the whole company. We have to create an atmosphere where people can speak up to somebody who can do something about their problems”.
The result was the development of an ongoing series of what GE calls Work-Out sessions, a sort of town meeting for workers and managers to work out problems at the plant or facility level. The key idea is that for employees to become more productive, they must be empowered to make the changes themselves, not to refer problems endlessly upward in the bureaucracy. (Reference for The New GE) By the end of the 20th century GE had developed an electronic-business program; another of Welch’s initiatives, the system electronically tied the company directly to suppliers and customers.
The e-business was just one aspect of what Welch dubbed the “boundaryless company,” a company without administrative walls between separate business units and where knowledge applied to one area could be applied companywide. At the time of his retirement Welch had only begun to see his vision of a boundaryless company come to fruition. (Reference for Jack Welch & The G. E. Way) Lessons learned * Education-The essential element of organizational success is having educated and well trained individuals that make up the organization. * Change is good. -See Change as an Opportunity.
* Get good ideas from everywhere. -New ideas are the lifeblood of business. * Eliminate Boundaries-In order to make sure that people are free to reach for the impossible, you must remove anything that gets in their way. References: Robert Slater. 1993. The New GE: How Jack Welch Revived an American Institution. Mountain View, CA: Business One Irwin Robert Slater. 1998. Jack Welch & The G. E. Way. New York: McGraw-Hill Reference for the Columbia Encyclopedia. 2008. Jack Welch. http://www. encyclopedia. com/doc/1E1-Welch-JF. html (Retrieved as of October 12, 2011)