General Electric(GE) - Two decades of Transformation

under Jack Welch

The Summary that follows concentrates the challenges that Jack Welch of General
Electric(GE) encountered during his tenure, and outlines his approach to strategic
corporate leadership and taking charge. It is followed by a breakdown of Welchs
objectives with respect to his innovation and his strategy on creating value. It also gives
an evaluation of Welchs approach to leading change with emphasis on the overall impact
that Welch had on GEs success.

GE created in 1878 by Thomas A Edison gradually developed into highly

centralized and tightly controlled model by 1930s.It had a shift towards
decentralization in the 1950s and started developing strategic planning system by
the 1960s.But actual reorganization of GE started by Reg Jones 1973 New Chief
Jones raised strategic planning to an art form, and GE again became the
benchmark for hundreds of companies thereby GE found itself at the leading edge
of management practice.Jones devised Strategy-SBU based structure and
planning processes in GE that consisted of 10 groups, 46 divisions, 190
departments, and 43 strategic business units. He did a proper succession
planning by replacing him with Jack Welch who is described as a live wire .

Jack Welch did his BS,MS and PhD in Chemical Engineering and joined GE as a
chemical engineer Before Becoming the 8th Chairman and CEO of General Electric
in 1981 he was elected GEs youngest VP and Vice Chairman. 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.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.

He had 3 important concepts or ideas in place and executed them succesfully to

retain the competitive position.Fix,Sell or Close concept :Setting standard for
each business to become the #1 or #2 competitor in industry Three circle
concept : Businesses were categorized as Core-reinvesting in productivity and
quality ,High Technology-Investing in R & D to stay on the edge. Services-add
outstanding people and make continuous acquisitions. Restructuring Concept:
He restructured the entire hard drive and challenged the status quo. He
challenged everyone to be better than the best Some of them were taking old
decisions to sell more than 200 businesses and made over 370 acquisitions
Insisted GE become more lean and agile resulting in Delayering: elimination of
the sector level, Downsizing: elimination of about 123,450 jobs. Divestiture:
elimination of an additional 122,700 jobs. Replaced 12 of his 14 business heads.

He implemented a process called Work-out to get unnecessary bureaucratic work

out of the system while providing a forum in which employees and their bosses
could work out new ways of dealing with each other. 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. 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.

Welch continued to injecting his ideas about globalizing business units within GE
and in lines of that Welch hired Paolo Fresco, a proven negotiator, to head the
International Operations position and as a result 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.He was very keen in developing leaders by giving best training and
development resources for personal and professional growth to make employees
loyal and to rebuild the trust lost in 80s due to layoffs.He wanted to make G.E the
best place to work for which the best people compete to get into and to inculcate
a set of values which every manager should follow.

In 90s he wanted the company to be rebuilt in a more rapid manner by Boundary

less behaviour. So to enhance integrated diversity i.e an open and friendly
environment for exchanging new ideas and was done by setting a set of standard
principles that to be followed by G.E managers all over the world.It also included
removing barriers between marketing, sales, engineering, manufacturing etc for
easy flow of work .It was followed by Six Sigma Quality Initiatives aimed at
increasing productivity , lower costs and improve quality. Stretch : Achieving the
impossible involved setting higher stretch goals for business to achieve much
higher targets which look impossible to achieve and to invent better
methodologies and set new standards in the in the process. Service Business
was to explore new opportunities and supplement the slowing growth in product
domain and to win huge customer base by delivering adding value to their
products

He started to focus on quality of organisation while he was about to leave the

organisation. He wanted employees with 4 Es where 4 Es stand for: Energy :
excited by ideas, Ability to energize others Edge: ability to make tough calls
Execution: turning vision into implementation and Enthusiasm and to spread the
enthusiasm to everyone

GE is still on the path of continuous innovation. Welch made GE a success during

his tenure and implementing many new strategies which were criticized by many.
His idea of restructuring and downsizing was criticized but it set a strong base for
company, these decisions had their own price. He took many initiatives to set a
new culture which was sustainable in long term.

He was not only a leader but a model for companies , who invented new measures
and strategies which were adopted by others. He was criticized for selling
businesses when they were in loss ,but he took decisions which proved to be fruit
full in long run. He brought GE to the heights where it is now with his wise
calculated decisions and risk taking ability
Conclusion :

Jack Welch stepped out into altogether different territory with high 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 throughout the company. Although some of his chosen
methodologies were deemed by critics as radical and risky, the results of Welchs
actions serves as a testament to his strategic leadership at the GE. The agility,
responsiveness, productivity and ultimately profitability realized as direct
results of Jack Welchs 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 Welchs leadership has
left a lasting impact on GE and the business world.