Ge’s Two Decades Transformation
Transformation: Jack Welch’s Leadership Answer 1 In April 1981 , when Jack Welch became the CEO of GE, US was in recession. There were high interest rates. Strong dollar resulted in country’s highest unemployment rates. In this rapid changing and uncertain environment it was extremely difficult task for him to handle a conglomerate as big as GE and ensure that general confidence among the investors is not lost. His predecessor, Reg Jones, had set the bar extremely high at the company leaving a legacy for Welch to compete with as the ew CEO.
Also, acquiring new businesses and ensuring that each business unit under the GE umbrella was one of the best In its field was another challenge. Welch was extremely effective in taking over the GE reins. He challenged each to be “better than the best” and planned radical changes across the company. under his guidance, the company expanded dramatically from 1981 to 2001. * He Instilled In everyone a culture of innovation and learning, and incorporated measures related to new product development, technological leadership, and rates of improvement. * He set he standard for each of business to become #1 or #2 or get out of business. Welch categorized business In 3 circles as core, high technology and services and sold off 200 businesses which all together contributed for 25% of sales. * Even budgeting process got radically changed and evaluation started against external competition rather internally. * Managers that did not fit into or who failed to embrace his strategy were let go. Anything and anyone that didn’t bring value to GE was eliminated. The most Important change he brought in was by eliminating the sector evel and reducing the hierarchical levels from 9 to 4. * Through downsizing, de- staffing and delayering, Welch modestly Increased revenues from $27. bn to $29. 2bn. * Welch made a varsity team where he wanted managers who were ready to accept change, have a strong commitment towards values and willing to break with old culture and most of all ready to take lead and bring changes. Answer 2 Welch’s objectives: To modify the culture of the company to match the needs ot the changing environment and to make sure that each employee embraces the new culture with ease. He created an environment of openness, speed, simplicity and self-confidence. * To get the fundamentals right. * To create a culture of a small company a place all felt engaged and everyone had voice.
A forum where employees could not only speak their minds about how their business might run more effectively but also get immediate response to their ideas and proposals. * To increase productivity beyond imagination. He made six sigma a part of the culture * He focused on locating and developing leadership at all levels of the company. GE employees were being developed, evaluated and compensated ased on a demanding evaluation process called “Session C * To incentivize stronger work ethics, GE revamped its compensation package by offering more stock options tied directly to individual performance for program initiatives.
Welch wanted ‘Of3 employees to Teel valued Tor tnelr contrlDutlons, ana nlgnly-compensatea Tor tnelr efforts. Welch based his proposed and implemented changes on proven tactics used by other successful. For eg. Implementation of Six Sigma first stared by Motorola. He realized it was important to develop leaders and break from the conventional to chieve extremely high standards and be at the top, undefeated. So he revolutionized the way GE worked. Answer 3 GE defied critics by implementing not Just strategies to combat the challenges faced but by implementing a long term sustainable strategy that will be a masterpiece for years to come.
Although GE had gone through a major reorganization that contributed to its successes, the changing business climate when Welch took over as CEO required more to be done. Welch realized that overcoming the magnitude of challenges would require unconventional leadership and bold strategies. In times of uncertainties and recession, the normal course of action for many businesses is to engage in cost cutting strategies, but he believed investments in the right places during hard economic times enables a company to perform better during and after a recession. Right investments at right time: He offloaded all the unprofitable or not so profitable businesses and acquired companies during the slowdown. This was a clever decision since companies can be bought really cheap during recession. GE had acquired firms that enabled it to expand globally and developed global operations hat resulted in the company almost doubling its international revenue to $42. 8billion * Adapting various strategies which included “Fix, Sell or Close”.
This strategy is an indication that Welch did not adapt cost cutting strategies like many of the companies during that time. Welch ‘s goal of making GE lean and agile resulted in de-staffing and reduction of bureaucracy, eliminating layers of hierarchical that were bottlenecks to growth. * Critics saw the company’s strategy of developing leadership and employee capabilities enhancement as being risky especially in times of ncertainties. However, through the determination of Welch and his team, and the desire for change; the risk paid off contributing to the value of the company.
Welch understood that strategy is not about doing things better, but it is about doing things differently through effective decision making and knowing where to compete and how to compete regardless of how radical and risky it may seem to critics. * Through the stretch target initiatives, all employees were asked to prove how good they can be by setting and reaching higher goals that were once deemed to be impossible to achieve. Another important value added to the company was the service business, which contributed to 2/3rd of the company’s revenues.
With Welch’s leadership GE ventured into new sectors, and did away with ineffective ones, developed a massive global market that out performed its domestic markets, created a service industry and an E-business. * Last but not the least, his introduction of the Six Sigma quality initiatives led to 62% in turnaround time, return of $750million over the investment exceeding expectations along with a forecast of additional returns of $1. 5 billion in 1999. Thus created a large complex diversified conglomerate that continues to defy the critics and grow in performance and profitability.
Answer 4 According to me Welch set the standard really high for the rest of the world. There was so much to learn from Welch’s leadership. He initiated a change in mindset and was successful in doing it, thanks to his commitment and rock solid attitude. Jack welcn’s mlsslon was to restructure tne company In order to Decome tne #1 or # the industry. He embraced change, expected his team to do the same, and challenged his team be “better than the best”. Furthermore team members had to have the willingness to take charge, to think outside of the box, and most of all to be team players.
Welch fostered open communication and created a culture characterized by “speed, simplicity, and self -confidence. ” Welch never rested on his last success; he continued to innovate and to look for ways to grow the business both internally and externally. He understood that GE’s assets were in fact their people and in turn had to be managed as a company resource. Welch’s unwavering involvement in every facet of the business was essential to all of these directives. Everything Welch did reflected his belief in his people and as he once stated. l own the people, you Just rent them. ” Without a doubt, Jack Welch’s leadership has left a lasting impact on GE and the business world. Welch’s has left a legacy for his successor. The successor will need to establish him/herself and make a name for themselves. This person will need to clearly communicate their vision and how they will go about accomplishing those goals. He/she will need to continue to foster open communication in an effort to continue to encourage teamwork. Innovation will be crucial if the company is to thrive under the new leadership.