GE’s Two-Decades Transformation: Jack Welch’s Leadership Analysis

INTRODUCTION

General Electric is a company which was founded in 1878 by Thomas Edison. The company started with generation, distribution and use of electric power. As time went by, the company diversified in different industrial areas to become among the world’s leading companies. General Electric has been involved in several businesses such as power generation household appliances and lighting as well as dealing with aircraft engines, medical systems, and diesel locomotives.

General Electric has over time been under going change in its management practices. Initially at around 1930 management at GE was highly centralized and took the form of a tightly controlled corporate structure. Later by 1950’s some changes had been introduced and delegation of authority was being done to many of departmental managers and thus giving signs of decentralization. In the period of 1960’s which was characterized by “profit less growth” and this enabled GE to fortify its corporate staffs and develop advanced strategic planning systems.

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General Electric has had a number of CEO’s among them being Reg Jones who became CEO in 1973. At this time the GE had just completed a major reorganization. The organization had several group, division, and departments in its structure. There were about 43 strategic business units intended to facilitate strategic planning. This helped General Electric a great deal but later Jones was unable to handle all information generated from the various SBUS.

Later on in 1981 Jack Welch became the CEO at a time when the US economy was in a recession. He beat the odds and lifted the company to great heights of success. This paper will first discuss the role of Jack Welch’s leade4rship in strategic planning and corporate success. Secondly, it will address the success of the company. Finally, the paper will give recommendations, and a conclusion bearing a plan of action for the company.

Issue Definition

The case being studied depicts how good leadership can result in transformation of a company from unperforming to a very viable and enviable state leadership by definition is a process through which a person influences others to achieve an objective and direct the organization in a manner that allows it to be more cohesive and coherent (Allen, K., and Cherrey, C. 2000). It is through various attributes of leadership such as values, ethics, believes, character and knowledge that success in organization can be witnessed. Jack Welch had most of these attributes and this made him to be termed a great leader in the industrial world.

The CEO created trust and confidence in top leadership and this impacted on employee satisfaction and improvement and performance. Communication is key to success in the organization. Effective communication by leadership of Jack Welch proved beyond any doubt how it can contribute to the success of the organization.

The issue of transformation leadership is inspirational motivation where the leader becomes a figure which inspires and motivates the employees. The other is intellectual stimulation i.e. encouraging innovativeness and creativity. The other skills are individualized consideration where leaders diagnose employee’s individual needs, wishes, values and abilities in the right way. A combination of these made Welch’s term at the helm of General Electric a success.

ANALYSIS

Restructuring

When Jack Welch took over the leadership of General Electric it was in bad state and he embarked on the process of restructuring the company. To do this, a SWOT analysis had to be done in order to come up with a strategy that would see GE become great leader in America.

SWOT Analysis

Strengths: the company had a strong financial power as it was a big company and restructuring could be done to realize growth. Another strength was able leadership of Welch who believed that he could bring the desired change.

Weaknesses: the company could face some resistance from within i.e. those against de-staffing, downsizing and de-layering. There were also high levels of bureaucracy within the organization.

Opportunities: the company could restructure or reinvent and sell the uncompetitive businesses and purchase/acquire firms with potential of doing well.

Threats: there was recession characterized by high interest rates and a strong dollar. Another threat is in the form of competition on the global scene especially from Japanese competitors.

Welch’s SWOT analysis gave an understanding of the current situation at the time and several strategies were formulated based on the analysis. These strategies included that of eliminating the sector level in order to do away with bureaucracy which had persisted in the organization. The other strategy which involved downsizing, de-staffing and de-layering which resulted in increased revenues and operating profits also rose by a big margin.

Cultural change

Cultural change is important to organizations that embraced restructuring of their operations and structures (Bardwick, J. M. 1991).  Welch introduced two practices namely wore-out and best practices. There were discussions on the problems the GE managers were encountering in implementing change at their respective working units. An idea was proposed where employees were to have forums where they could talk their minds on best ways of doing or running business effectively. The idea was to create a “small company” where all felt engaged and given change to talk their mind (Bartlett, A. C. and Wozny, M. 2003).

The results of these forums were increased in productivity as these grew at a rate of 2% for the period between 1981 and 1987 and further doubled to 4% between 1988 and 1992(Bartlett, A. C. and Wozny, M. (2003). Best practices, a movement was started and embarked on developing of effective processes and customer satisfaction was used to measure their performance. The best practices also were concerned with production of high quality new products.

Globalization

Going global is the meaning of globalization. Globalization in other terms means national companies becoming multinationals by investing in other countries (Finnemore, M. 1996). Welch first concentrated on nationalization of the GE operations in US. The reason for concentrating in US first is seen because for one to go out into the world one has to solidify his base at home. Welch’s globalization initiatives were a step-by-step by process. GE took the advantage o Europe’s economic down turn and invested large amounts of money i.e. $17.5 billion in Europe between the period of 1989 and 1995 both on new plants and acquisitions. General electric also invested in acquisitions in Japan.

The results of globalization for GE were evident as the company reaped $42.8 billion from international investment (Bartlett, A. C. and Wozny, M. 2003).

Leadership

General electric had to deal with complaints of staff who found working in hard new demanding environments like those working in other parts of the world. The other problem was that they had to deal with mistrust created by previous layoffs of the 1980’s. To deal with those problems Welch had to come up with strategies for developing leaders. Leaders are people who give direction to the others in the organization and as such these are very vital. To develop leadership Welch introduced employee performance appraisal systems and reward systems. These enabled the company to identify training needs, coaching opportunities, and aid in career planning.

Super Performance

This is performance beyond expectations. In 1990’s Welch decided to introduce the notion of super performance. There was need then to set targets and how performance could be achieved. Overtime this concept was put into application and ore realization results.

In as much as this practice or concept performed well there was a drawback in that it could be seen to mean forcing workers to work for long hours to achieve sometimes impossible goals. Despite this drawback the “super performance” goals have been observed to help perform tasks faster and improve the overall performance of the organization (Luke, J.S. 1998).

Six sigma quality initiative

With dissatisfaction in the quality of GEs products among the GEs employees Welch sought for a solution to the problem. He borrowed the six sigma quality initiative from the CEO of Allied Signal Inc. the six sigma quality initiative was a kind of a slogan which helped companies to improve quality, lower costs and increase productivity. According to Bartlett, A. C. and Wozny, M. (2003), real example of the effect of six sigma quality initiative is 62% reduction in turn around time at its repair shops. The plastics business also said that the initiative resulted in 300 million pounds of new capacity.

E-business

Welch discovered another initiative which is the impact of internet. Internet has had great impact on businesses in the present day and General Electric’s CEO; Welch did not want to be left behind by other companies. To support e-business GE had the necessary assets such as strong brands, product reliability, great fulfillment capability and enviable service quality. Although e-business was supported by some in General electric, there were also a few opponents of its introduction arguing that it was likely to take long to pay off.

Recommendations

The general view of Welch’s leadership saw great transformation in many spheres of the organization. This was through restructuring the organization structure, bring a cultural change, taking General Electric to the global scene, improvement of performance, improving leadership at all levels within the organization, improvement of quality and introduction of e-business.

However, the company is known for large-scale environmental pollution through waste emission (Department of Justice news release, October 7, 1999). It is time that the organization also took a firm step in addressing the problem by committing to the search of long term solutions.

Other that what Welch did, General Electric can follow the commendations such as: Empowering the organization managers to make key decisions and lead by example. Improving both vertical and horizontal communication within the organization in order to minimize bureaucracy. Diversifying operations into new promising ventures like hospitality and tourism. Continually review how businesses are performing and sell out non-performing ones or integrate them with others which are doing better.

With the downsizing strategy in place the remaining employees may feel very insecure and as such they need to be motivated through incentives and rewards for good performance. The health of workers at work place is of great importance and should be maintained at best levels so as to improve on productivity. When the organizations operations both locally and internationally threaten to be running out of control, general electric can streamline their operations and end up doing well

Conclusion

George Welch’s leadership has been exemplary in many ways. He led the way in embracing change and innovation as well as excelling in making the right decisions at the most appropriate time. The policies implemented during his time saw the company become the leader in innovation. His bold decisions could be termed as too risky by a less aggressive CEO.

However, the results of his restructuring bore fruits and stunned even his worst critics. With the success achieved during his time, GE ought to ensure that it implements decisions and policies that help to consolidate the gains of Welch’s leadership. The company should continue to invest in research and development in order to discover newer ways of increasing productivity, efficiency, and at the same time reducing all costs. The company should move conclusively in an effort to have more environmentally friendly policies.

With increased competition the current CEO should ensure that the operations of the organizations both locally and internationally are streamed lined to ensure efficiency. Outsourcing of services that are not core to the business of the organization would be important in making sure that all the departmental heads are able to concentrate on becoming the best in their co-businesses. This together with ensuring that the organization stays ahead in innovation will make it possible for the organization to maintain its leadership position both locally and internationally.

Reference

  1. Allen, K., and Cherrey, C. (2000). Systemic Leadership: Enriching the Meaning of Our Work. Lanham, MD: University Press of America.
  2. Bardwick, J. M. (1991).  Danger in the comfort zone. New York: American Management Association.
  3. Bartlett, A. C. and Wozny, M. (2003). GE’s Two-Decades Transformation: Jack Welch’s Leadership. Harvard Business School.
  4. Finnemore, M. (1996). National Interests in International Society Ithaca, N.Y.: Cornell University Press.

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GE’s Two-Decades Transformation: Jack Welch’s Leadership Analysis. (2016, Dec 15). Retrieved from https://graduateway.com/ges-two-decades-transformation-jack-welchs-leadership/