Abed Ramadan

Case 2

Case Study Questions:

GE’s Two Decade Transformation (SMALL SUMMARY)

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 readings elections. 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.

1) 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.

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. 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 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.

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.

2) What is Welch’s objective in the series of initiatives he launched in the

late 1980s and early 1990s? What is 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?
The objective of initiatives was to charge leadership with the task of “fix, sell, or close” down
any business effort that did not confirm 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 allows
managers, and teams of workers to share information and make decisions together.

What is he trying to achieve in the round of changes he put in motion in that

period?
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. Welch
wanted people that embraced change and were willing to step up and take a change.

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.

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?

The way to growth is through streamlined processes and lean management. Best in Class system
for inventory, production, training, financial, and every phase of the business has led to record
profits. By the late 80s operations were experiencing at $2 billion dollar profit margin and sales
revenue was on the increase. Now GE is known not so much for the products as services. The
In-site Medical Service diagnostic tool allows GE remotely gives customers information on
medical equipment, for example (Bartlett & Wonzy, 2005). This became a model for reinventing
the service industry.
Six sigma process improvement development 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.

4) What is your evaluation of Welch’s approach to leading change? How

important is he to GE’s success? What implications for his replacement?

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 remaining 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 is 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 got rid of products and entire
business 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
experiencing and knowledge at GE the service business was one of the results of the stretch
initiative.

What 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.
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.