Running Head: CASE STUDY of JACK WELCH’S TRANSFORMATION

OF GENERAL ELECTRIC - GE

Reyte On Publishing

Copyright 2010
How difficult a challenge did Welch face in 1981. How effectively did he take charge?

The types of challenges faced by Jack Welch after coming on board in 1981 is extremely

excessive interest rates, this caused any investment strategies to require careful

consideration of costs. The fact that unemployment was also extensive made sales

revenue less than projected for many products. Also the nation was experiencing a

recession which means investors were not buying as much stock and inventories were

high(Bartlett & Wonzy, 2005).

Welch moved decisively to invest his attention in taking advantage of proven

performance products and services due to a very hefty portfolio of business options. He

then challenged his managers and teams to be proactive and look for ways to improve the

business using the phrase for GE to become “better than the best”. Some of the goals

established involved totally restructuring the company from the top down in five years.

Jack was effective in that his changes resulted in reclaiming $11 billion in capital from

selling off businesses. The result was a reinvestment in $21 billion of more technology

based, leading edge business during a time of recession (Bartlett & Wonzy, 2005).

What was Welch’s objective in the series of initiatives he launched in the late 1980?s and

early 1990s?

The objective of initiatives was to charge leadership with the task of “Fix, sell, or close”

down any business effort that did not conform to core business, technology advances, or

serve to position GE in the top two positions in the individual industries the product

represented (Bartlett & Wonzy, 2005).

Welch also wanted GE to become less top heavy and begin to reduce the levels of

management in order to make the company leaner and less bureaucratic in structure.
This allowed for decisions to be implemented faster and solutions to come from those

closest to the process. He added several new strategies for managing processes including

Best in Class, comparing sales figures against the competition versus past performance,

and by the mid 80s he had eliminated thousands of supervisory positions and ineffective

layers of management.

Additionally he implemented organizational developmental strategies designed to change

the culture from management driven to more open and collaborative. So that a free flow

of ideas and problem solving approaches can produce faster time to market solutions.

Work Out sessions allow managers, and teams of workers to share information and make

decisions together.

What was he trying to achieve in the round of changes he put in motion in that period? Is

there a logic or rational supporting the change process?

Welch was attempting to reduce waste, lower costs, build into the organization

efficiencies and stay ahead of the competition by implementing these strategies. In order

to restructure the huge 404,000 bureaucratic organization into a much leaner and modern

300,000 (Bartlett & Wonzy, 2005). It was necessary to remove barriers to performance

including leadership. 12 of the top executives were also replaced in the need to reinvent

the organization. Welch wanted people that embraced change and were willing to step up

and take charge.

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?

The way to growth is through streamlined processes and lean management. Best in Class

systems for inventory, production, training, financial, and every phase of the business has
led to record profits. By the late 80s operations were experiencing a $2 billion dollar

profit margin and sales revenue was on the increase.

Now GE is known not so much for products as services. The In-Site Medical Service

diagnostic tool allows GE to remotely give customers information on medical equipment,

for example (Bartlett & Wonzy, 2005). This became a model for reinventing the service

industry.

Six Sigma process improvement developmental project management tools and services

allow GE to choose only the best (Black Belt) leaders and most promising new ventures

and count the cost prior to getting involved. Then after implemented, the metrics will

allow the new business to be monitored and tweaked to remain efficient and productive.

What is your evaluation of Welch's approach to leading change?

The advances in technology, the supplier chain, the global telecommunications

expansion, and the Internet make traditional brick and mortar companies look archaic.

GE has managed to stay at the cutting edge by incorporating the latest methods in

remaining at the forefront of its industries. While many companies consider mergers,

joint ventures, and some even have had to close their doors. GE has remained at the top

of its game due to the vision of Jack Welch along with the ability to implement not

simply discuss goals and objectives. His desire to be the best with his 4 E’s energy,

enthusiasm, edge, and execution allows him to achieve any level of success that is

pursued.

How important was he to GE's success?

Welch was central to GE’s success. Without his vision, the company may have folded like

so many others, or at least become less competitive. Instead they got rid of products and
entire businesses that were non-productive and reduced cumbersome processes and

outdated systems. He was also instrumental in introducing bold new initiatives in

organizational behavior and development such as capitalizing on the strengths of

diversity. He begin to challenge his people to stretch themselves in new and innovative

ways from research and development to global expansion. As the company begin to

implement its methods globally, GE was able to keep abreast of the competition in the

majority of its core businesses. With the wealth of experience and knowledge at GE the

service business was one of the results of the stretch initiative.

What are the implications for his replacement?

Welch’s replacement will have the task of moving the company to the next level which is

e-business and Internet expansion. This is a monumental task for a company with so

many businesses (350) under one umbrella (Bartlett & Wonzy, 2005). However, if they

can continue to look forward and remain united, there is only one direction the company

can go, up.

 References

Bartlett, C.A. & Wonzy, M. (2005). GE Two Decade Transformation: Jack Welch’s

Leadership. Harvard Business School.