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A LEADER’S ROLE IN A CRISIS: REPORT ON GENERAL ELECTRIC’S

ORGANIZATIONAL TRANSFORMATION CRISIS

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A leader's role when a potential crisis becomes Actual

Introduction

Organizational change is widespread today as many companies strive to adapt to the fast-

paced and volatile business environment. Such organizational adaptation involves shifting of an

organization's activities from one state of affairs to a different one and is usually focused on

professionalism, competition, demographics, and technological advancement. Sjostrand, (2016)

notes that for this purpose, organizations may modify set goals, develop new forms, and

restructure responsibilities and roles within their scope of operations. Notably, organizational

change is not always successful. This paper explores a planned organizational change within

General Electric Company that was not successful and analyzes the factors leading to the crisis.

The paper also presents channels of communication utilized by the firm's leadership and

recommends proactive leadership measures that could have prevented the digital transformation

crisis.

General Electric organizational change crisis

General Electric planned a digital transformation move that was aimed at dominating the

industrial internet. However, the initiative did not bring forth the expected results and resulted in

a financial crisis within the American conglomerate. The digital transformation initiative was

developed in 2015 and would see General Electric centralize all its Information Technology

("Why GE Digital Failed", 2020). By the year 2020, the change was projected to lift the

company to the world’s top ten software companies. To achieve this goal, the organization spent

billions in U.S dollars to set up a separate entity that was identified as General Electric Digital.

This step would potentially relieve individual units of their digital responsibilities since the new
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entity would centralize all the company's needs. The organizational change was rapid and meant

that the new unit would focus on cloud-based software solutions which differed from its primary

expertise in huge machinery production. The ambitious move failed against its expectations and

drove the company to a deep economic pothole. The profits and losses incurred quarterly

effectively barred the organization’s new unit from investing in a workable long-term plan and

limited it to short-term objectives that did not add value to the business.

As much as the intent for General Electric Digital was right, the organization failed to

align its priorities properly and attempting to undertake the big shift all at once. The

organizational change was not managed effectively based on its huge scale and the requirements

thereof. The business's need to generate income was not met despite investing heavily in

resources such as the best skills, which occurred as a result of poor balancing between the latter

and its capabilities. Besides, the change was very disruptive as it interfered with the existing

digital setup of the company and inhibited operations to that end.

A digital transformation of that magnitude ought to have been carefully and precisely

thought so that it would not only add to the technology already existent but also incorporate

workable means to achieve the desired results systematically. Further, for such an organizational

change to have succeeded there was a need to completely set it apart from General Electric's

operations, and run it as a separate unit until such a time that it was on the right track to get

incorporated into the larger company’s operations.

Channels of communication used by the firm’s leadership

The firm’s leadership employs various channels of communication that play an

instrumental role in meaningful teamwork and collaboration. It makes effective use of

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communication to keep the organization moving in the following ways: it integrates external

communications with internal communications for efficient brand storytelling. According to

Martin-Colby, the brand’s Senior Software Engineer, the company does not have any divides

between external and internal communications (2020).

Secondly, the organization aims at communicating with its workers about the big changes

first to enable them to grasp the personal impacts of any organizational change. In this regard,

the communication channels have been made transparent and consequently been translated to

the external domain. Thirdly, the firm’s leadership endeavors to deliver its messages to persons

where they are at-present seeking information (Guisbond, 2020). Such channels include social

media platforms such as LinkedIn which communicates cultural changes and offers insights to

potential job seekers in General Electric. Additionally, leadership utilizes emails to communicate

important messages to its employees. Finally, the firm's leadership makes use of its chief

executives as its primary spokespersons and employees as secondary spokespersons.

Recommendations

General Electric’s failure to sustain the digital transformation organizational change was

as a result of a combination of factors that could have been managed proactively by its

leadership. The following are recommendations that the firm could have implemented to prevent

the crisis:

The digital transformation need have been undertaken step by step, from a small scale

operation to a large scale operation. General Electric sought to complete the project way before it

was on its feet. The transition therefore could have started with a single business unit and if it

gained traction, it could be translated to the rest of the company.

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There was a need for honesty, transparency, and openness in the dissemination of

information. The General Electric leadership structure did not give enough allowance for the free

flow of information which resulted in the crisis. The limitation of information to specific persons

on a need-to-know basis prompted the employees to make various impactful decisions without

the bigger picture in mind. Limitation of information often leads to guessing and guessing to a

crisis ("Crisis Leadership", 2020). It is thus critical for the leadership to maintain an open

channel for communication.

The leadership of the organization should have distributed responsibility evenly to avoid

a potential crisis. Leaders must thread their power across the organization so that employees

across all levels are empowered to make decisions. Chatterjee et al, (2015) assert that the

distribution of responsibility enables the leadership to increase its adaptability, resilience, and

collective intelligence to propel large projects and limit damage in the event of a crisis.

Additionally, the recommendation enables the leadership to identify areas that need upskilling

the employees to drive more effective change for the organization.

The organizational transformation leading to the crisis could have been cushioned by

making the change safe to fail, and enshrining within the leadership the willingness to accept

failure at an early stage. General Electric was not sufficiently prepared for the task despite

having the economic resources necessary to try the change. Despite this, the leadership was not

able to limit the damages of the crisis since it did not admit failure early enough. Returns on

investment calculations are necessary for assessing the outcomes in a way that compliments the

goals of the planned change, including the risk factor.

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Conclusion

In conclusion, the financial crisis that General Electric experienced following an

organizational change prompts a leader to have in place a strategic mindset, coupled with a clear

orientation for details to enable him to perceive a problem comprehensibly. While steering an

organization as large as General Electric is a daunting task, a solid understanding of how all the

moving parts fit together is key in ensuring that any organizational transformation, regardless of

magnitude is workable, and its rewards outweigh the risks involved.

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References

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Empirical Findings. Routledge.

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