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Week 3

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List of Topics and Sub-Modules for Week 3
Week 3 Creating Value through Business Level Strategy and Leading Change
Week 3 Readings, Multimedia and Assignments
Reading
o Bartlett, Christopher & Wozne, Meg (2000). GE's Two Decade Transformation:
Jack Welch's Leadership. Harvard Business School Press. HBS 9-399-150 (For
information on purchasing this case study please see announcement and links
in your News section of the classroom)
o Collins, James, C. and Porras, Jerry I (1996). Building Your Company’s Vision.
(HBSP)
o Neilson, Gary L., Martin, Karla L. and Powers, Elizabeth (2008). The Secrets to
Successful Strategy Execution. (HBSP)
Multimedia
o YouTube - Choosing Your Strategic Objectives
o YouTube - What is Good Corporate Strategy?
MBA Reference Guides
o SWOT Analysis
o Competitive Advantage
o PEST Analysis
Assignments:
Individual Case Study Paper (10%):
GE’s Two Decade Transformation: Jack Welch’s Leadership.

Analyze the case study based on the questions given below. As in earlier weeks, this case
study assignment is also tightly integrated with the readings for this and previous weeks.
You will need to acquire a good understanding of key ideas from the readings before
starting to analyze the case study.
Case Analysis Questions
1. How difficult a challenge did Welch face in 1981? How effectively did he take charge?
2. What was Welch’s objective in the series of initiative he launched in the late 1980’s
and early 1990’s? What was 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?
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?
4. What is your evaluation of Welch's approach to leading change? How important was he
to GE's success? What are the implications for his replacement?
Place your Individual Case Analysis Paper in your Assignment Folder. This
assignment must be submitted to TurnItIn and the results submitted along with
your paper.
Discussion Assignments: For all Discussion assignments you must post a response
covering all questions listed below. Initial posting should be made by Day 4 of the
week. A minimum of 2 quality interactions with your classmates is required. Use and
refer to the assigned readings and multimedia to support your views. Your discussion
participation will be graded using the Discussion Rubric which you can review under
Course Content. Discussions assignments will be graded as follows: Week 1 - 10%,
Week 3 & 4 – 10%, Week 8 & 10 – 10%.

Executive Summary
Team Globalization has conducted an in depth analysis on General Electric's (GE) two
decade transformation achieved by the company’s former Chief Executive Officer (CEO) Jack
Welch. This report consists of a reflective examination performed by the team, incorporating
perspective gained through professional experience and key concepts gleaned from selected
course reading selections. As CEO of GE, Jack Welch's management skills became legendary,
with little tolerance for bureaucracy and archaic business processes. Acquiring new businesses
and ensuring that each business unit under the GE umbrella was one of the best in its field was a
primary concern for Mr. Welch. Under his guidance, the company expanded dramatically from
1981 to 2001 (GE, 2012). The culture of innovation and learning, which included incorporation
of measures related to new product development, technological leadership, and rates of
improvement, aided Welch and the company in defying the critics as the company continued to
profit.
Introduction
Surviving in today’s challenging business environment necessitates innovative thinking
in terms of crafting strategies to enable the establishment and sustainment of a competitive
advantage. Through an established strategy, structured options and decision making processes,
organizational leaders will be able to facilitate organizational development and growth.
Overcoming the odds and competitive pressures sometimes requires defying critics and popular

views to develop initiatives that not only streamline the organization, but create profitable
business operations and human resources to add value to the organization. The analysis that
follows identifies and defines the challenges which Welch of GE encountered during his tenure,
and outlines his approach to strategic corporate leadership and taking charge. The report is
followed by a breakdown of Welch’s objectives in regards to innovation and his strategy on
creating value. The authors will also provide an evaluation of Welch’s approach to leading
change with emphasis on the overall impact that Welch had on GE’s success. Finally, this paper
will take a look at the implications of Welch’s replacement.

How difficult a challenge did Welch face in 1981? How effectively did he take charge?
Welch faced a very difficult challenge taking over the position as CEO of GE. His predecessor,
Reg Jones, set the bar extremely high at the company leaving a legacy for Welch to compete with
as the new CEO. Jones had been considered a “management legend” and had been voted CEO of
the year three times for his brilliant accomplishments with GE. Jones was also labeled CEO of
the Decade two years before he retired. Needless to say, Welch had some big shoes to fill once
named as CEO. During this transition, the business world was highly competitive, with the
economy, environment, and political climate in constant flux. If not handled properly, the
transition could be detrimental to the company. Welch was up for the challenge and knew that a
successful transition would mean developing a team that would make GE even more prosperous
earning stakeholder trust. This required assessing the current environment to accurately
determine a way to improve it. Welch convinced his team to buy into his new vision of where the
company should go and challenged employees to be “better than the best”. In order to
accomplish this enormous task, Welch placed executives and management in key places to could

assist his efforts to redirect overall company culture. 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. Hierarchical organizational levels were dramatically reduced, enabling the company
to operate as a “lean and agile” business. From the moment he took over the business, Welch
went full force into implementing a “real time planning” strategy. At the time of his appointment,
the United States economy was in a recession. To combat this situation, Jack Welch had to
develop a plan of action aimed at keeping the company thriving in the business world. In order to
accomplish this, GE sold many of their businesses, which represented 25% of their sales.
However, during that time, Welch simultaneously and strategically invested in other businesses,
increasing their revenue and operating profits. How effectively did he take charge? Welch was
extremely effective in taking over the GE reins. Although his predecessor was quite successful
during his reign and the business thrived, there was still the need for change. The business world
was evolving and competitors attempted nonstop to stay ahead of GE. Fortunately, Jones had left
the company in a “good place” during the transition, allowing Welch to come in with his new and
innovative ideas to take the company even further in the business world. What was Welch’s objective
in the series of initiative he launched in the late 1980’s and early 1990’s? Jack Welch repaired the structure
of GE with his initial changes, but now had to manage the human resources aspect to “rebuild the
company on a more solid foundation (Bartlett & Wonzy, 2005, p. 3).” GE’s employees had been
sufficiently shaken by the preliminary changes made, and were subsequently worn-out due to
upheaval within the company’s core. Welch hoped to create an environment which optimized
“openness, candor, and … reality (Bartlett & Wonzy, 2005, p.4).” Additionally, “speed,
simplicity and self -confidence (Bartlett & Wonzy, 2005, p.4)” were the characteristics he
expected to dominate the culture. Welch had always been a teacher often leading sessions at the

Management Development Institute. These sessions afforded managers with an open-forum,
allowing them to vent concerns about change implementation and resulting complications. With
the help of James Baughman, Director of Management Development, Welch decided to
institutionalize these open forums, giving every employee the opportunity to become part of the
discussions, honestly and openly. Employees gathered in groups to respond to their unit bosses’
challenges and agendas in general. Facilitators were empowered to walk these groups through a
process wherein problems were laid out, discussed, potential solutions identified, and final
presentations produced for presentation to unit bosses. This process was dubbed the “Work-Out”.
When the bosses returned, they were required to listen to the proposals and make a decision in
front of the group to at least 80% of the total proposals. As a result of these standardized
processes, productivity increased two-fold. The “Best Practices” program was assigned to the
Business Development department. As head of the Business Development department, Michael
Frazier and his team studied nine companies who had higher productivity rates than GE. The end
result was a tool kit of key techniques and identification of core characteristics that made these
companies successful. For example, process efficiency, customer satisfaction as their Key
Performance Indicator (KPI), well-developed supplier relationships, and consistent innovation of
high quality products and manufacturing efficiencies with little to none unused capacities were
all discovered as “ingredients to success”. A new training program emerged which helped
managers see the error of existing measurement practices. Managers were further trained to look
at larger-scale opportunities for improvement, and broaden their vision of what success actually
looked like. Welch continued to subtly injecting his ideas about globalizing business units within
GE. He looked for opportunities within each business unit to not only increase success levels
within United States markets, but to benchmark GE against competitors on the world stage. To

prove his steadfastness, Welch hired Paolo Fresco, a proven negotiator, to head the International
Operations position. GE took advantage of global economic downturns in countries like Mexico
and Japan to increase their acquisitions, doubling revenue from international operations within
the first five years. Welch dug even deeper into the fabric of GE with an initiative focused on
locating and developing leadership at all levels of the company. GE employees were being
developed, evaluated and compensated based on a demanding evaluation process called “Session
C”. Welch had employed this process with his top team members and was now drilling down to
other business layers in search of the next wave of GE leadership. Now, everyone in the GE
professional corps could expect detailed feedback on their performance, a clear plan for
developing their skills, and with successful completion of their training and development plan,
knowledge about what future positions they might hold within the company. 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 employees to feel
valued for their contributions, and highly-compensated for their efforts. Welch used Crotonville,
the management development facility, as his incubator. Crotonville was re-designed and outfitted
with new buildings for example. Teams of managers focused on real-time issues facing GE’s
business to produce action plans for achieving results. Welch was so committed to this concept
that he taught and talked with managers at Crotonville two times per month. He practiced what
he preached, leadership development through active mentorship and teachable moments. Once
Welch’s commitment to developing internal leadership was fully in play, he made it clear that
everyone would need to commit to GE’s values, or risk being let go. He knew that some
managers made the cut based on numbers, but failed to inspire and motivate their employees. To
further demonstrate his seriousness about having thoughtful leaders, he implemented the “360

review”. Everyone was evaluated by their peers and subordinates in addition to their leadership.
This process “… [identified] training needs, coaching opportunities, and eventually career
planning-whether that be up, sideways, or out (Bartlett & Wonzy, 2005, p. 8).”

Is there a logic or rationale supporting the change process?

When analyzing Welch’s rationale for the changes made, it is important to identify the
benefits of incorporating Porter’s five forces model to analyze competition within an industry.
Welch based his proposed and implemented changes on proven tactics used by other successful
companies to achieve his strategic organizational goals. Realizing that bureaucratic models
of organizational structure were prone to promoting sluggishness, Welch opted to depart from
this model and implement a more flat organizational structure to assist in meeting his defined
objectives. Although unpopular at the time, Welch’s decisions and actions have through time
become renowned as revolutionary exposing sheer genius in executing changes within an
organization.

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?

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. The
complex diversified conglomerate consisting of overlaying groups of 46 divisions and 190
departments all supporting 43 business units were faced with a recession, an economy of high

unemployment, high interest rates, and an overvalued U.S Dollar. These uncertainties and
climate of continuous change and increased competitions led Welch to the realization that
overcoming the magnitude of challenges would require unconventional leadership and bold
strategies. He understood that in turbulent times, strategy was not just about building a position
of sustained competitive advantage but rather formation and implementation of a strategy
centered on the development of timely responses and flexibility to create successive temporary
advantages (Grant, 2011, p. 16). To successfully achieve such objectives required the
reconfiguration of organization’s resources and competences (Grant, 2011, p. 16). In times
of uncertainties and recession, the normal course of action for many businesses is to engage in
cost cutting strategies, but studies demonstrate that such strategies are not always sufficient.
Investment in the right places during hard economic times enables a company to perform better
during and after a recession (Anonymous, 2009, p. 9).GE defied critics and the prevailing
convention of multi business break up by adapting various strategies which included but was not
limited to restructuring through what Welch called “Fix, Sell or Close”. Through this strategy,
the company was able to analyze the 43 businesses under its umbrella and only those businesses
that were number one and two in their industries were maintained. Those that were not
maintained were either sold or closed down. Businesses that were maintained became the center
of strategic focus in terms of developing those units through additional investment and
developing efficiency and effectiveness procedures and operations. This strategy is an indication
that Welch did not adapt cost cutting strategies like many of the companies during that time but
his goal was as he said: “I would like General Electric to be perceived as unique,…with world
quality leadership in every one of its products line” (Bartlett, 2005). Selling and closing of some
businesses was about doing away with those businesses that were under performing, and did not

add value to the company. By doing so, the company became more efficient and a value building
culture permeated the GE workforce. Evidence of this is shown when considering the fact that
that Welch divided the remaining businesses into three categories known at The Three-Circle
Vision (See Exhibit 2). The businesses were not the only component of the company to go
through restructuring, but 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 and
operational, personal and production efficiency. The underlining principle in the transformation
is that in order to operate an effective and efficient world class business, and sustain number one
or two positions in an industry, GE had to invest in the right businesses and develop staffs that
are the best at what they do. Individual employees were empowered to lead in their own capacity
by finding ways to contribute to the value system of the company. Leaders were challenged to
find ways to make their people more effective and competitive. Open forums were created to
find avenues of improvement at all levels of the firm’s business, operations, human resources and
employee morale. Critics saw the company’s strategy of developing leadership and employee
capabilities enhancement as being risky especially in times of uncertainties. They also viewed
the removal of boundaries through what was known as Work-Out best practice and the creation
of the boundary less as being radical and risky. 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; as emphasized by Porter (Gant, 2011, p. 18) regardless of how radical and risky it may
seem to critics. GE had acquired firms that enabled it to expand globally and developed global
operations that resulted in the company almost doubling its international revenue to $42.8billion.

The company became lean and agile, with increased efficiency and organizational culture
transformation. 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 two-thirds of the company’s revenues
(See Exhibit 9). These and other initiatives are examples of how Welch endeavors, initiatives and
ideas contributed to the value of GE. With Welch’s leadership GE ventured into new sectors, and
did away with ineffective ones, developed a massive global market that outperformed its
domestic markets, created a service industry and an E-business; thus increasing it revenue and
increasing its value by 60%, and most importantly surviving the recession and creating a large
complex diversified conglomerate that continues to defy the critics and grow in performance and
profitability. Values added include but not limited to the reduction of bureaucracy which resulted
to more expedient processes, and effective operation. Welch extended his Fix, sell or close from
the national level to the international level. He also saw the challenges in other countries and
economic difficulties as opportunities for new investments and expansions. Values added also
included the transforming of GE culture to a more learning, knowledge sharing and demanding
of excellence, commitment and service to the goal of the organization. Welch introduction
of business service contributed to two-third of the company’s value. 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. In addition to this the program also contributed 300 million
pounds of new capacity.

What is your evaluation of Welch's approach to leading change? How important was he to GE's success?
What are the implications for his replacement?

Jack Welch’s mission was to restructure the company in order to become the number one or
number 2 competitor in the industry. He embraced change, expected his team to do the same, and
challenged his team be “better than the best” (HBS, p.2). He employed different management
reporting structures at different points of the transformation. For example, he felt as though there
were too many layers at all large headquarters groups, as a result he spearheaded a de-staffing
process which resulted in a vertical reporting structure with major department heads reporting
directly to him. In addition, his team of managers shared the same commitment to management
values. Furthermore team members had to have the willingness to take charge, to think outside of
the box, to push the envelope and most of all to be team players. In return Welch compensated
those employees with generous bonuses and incentives. Welch fostered open communication and
created a culture characterized by “speed, simplicity, and self-confidence.” (HBR, p.4). In order
to show his commitment he launched the “Work Out” program which created a forum where
employees and managers could work out new ways of interacting with each other. Welch never
rested on his last success; he continued to innovate and to look for ways to grow the business
both internally and externally. For example as “Work Out” began he began to think of additional
ways to increase productivity. As a result the “best practices” program was created in an effort to
learn from other companies and to identify the reason for their success. Welch believed in
developing leaders and provided the tools for them to do so. He adapted a human resource
department that would be in line with his goals. He challenged his managers to identify future
leaders, and then developed a training program and a developmental plan for all key jobs. 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 incentives, and directives. His philosophy was not a “do as I say not as I do”
mentality. In addition he never rested on his last success. He created the “Stretch” program in an
effort to push people to be the best they can be, to test boundaries, and to get “people to think of
fundamentally better ways of performing their work.”(HBS, p.10). Ultimately Welch’s strategy
was to look at the external factors that affected GE’s success, while implementing a bottom to
top approach. Ultimately he realized that the success of GE relied on the strength of his team. To
that end he was relentless in ensuring that his team was set up for success. Everything Welch did
reflected his belief in his people and as he once stated. “I own the people, you just rent them.”
(HBS, p.7). Welch’s replacement 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 foster teamwork. Innovation will be crucial if the company is to thrive
under the new leadership. Welch’s replacement will need to make a name for himself by creating
new programs that continue to foster employee/employer relations, and by understanding the
importance of looking at the external factors that affect the overall business

Conclusion

As stated throughout this analysis, Jack Welch stepped out into uncharted territory with
lofty aspirations of making dramatic change within the GE organization for positive growth.
These efforts were achieved through several unprecedented means and reorganization of the

existing organizational structure to facilitate discussion, communication, and constructive
criticism unilaterally throughout the company. Although some of his chosen methodologies were
deemed by critics as “radical” and “risky”, the results of Welch’s actions speak for themselves as
a testament to his strategic leadership at the GE helm. The agility, responsiveness, productivity
and ultimately profitability realized as direct results of Jack Welch’s actions while operating in
the office of GE CEO are key indicators of the lasting impact that his legacy leaves for future
officers tapped to fill the position. Programs and processes established under his watch leave an
impressive standard for successors. Without a doubt, Jack Welch’s leadership has left a lasting
impact on GE and the business world.

References
Anonymous. (2009, p. 9). Beware: Cost cutting can be deadly. Principal's Report, 9 (6), 89Bartlett, C.A., & Wozny, M. (May 3, 2005).
GE's two-decade transformation: Jack Welch's Leadership. Harvard Business School. GE, 2012.
Past Leaders. Retrieved fromhttp://www.ge.com/company/history/bios/john_welch.html
Grant, R.M. (2010). Contemporary strategy analysis (7th Ed.). Malden, MA: Blackwell.