GE’s Two-Decade Transformation: Jack Welch’s Leadership

Amanda Rodriguez Patricia Robledo Brittany Culberson Yue Jiang

Leader or Manager?
              

1. TRUE or FALSE: I think more about immediate results than I do about mentoring others. 2. TRUE or FALSE: People will be motivated if you pay them enough. 3. TRUE or FALSE: It’s nice to know about people’s long-term goals, but not necessary to get the job done. 4. TRUE or FALSE: If you have a consistent recognition system that rewards everyone in the same way, then that is enough. 5. TRUE or FALSE: The best way to build a team is to set a group goal that is highly challenging, maybe even “crazy.” 6. TRUE or FALSE: My greatest pleasure in my job comes from making the work process more effective. 7. TRUE or FALSE: I spend more of my time and attention on my weaker performers than I do on my top performers, who basically take care of themselves. 8. TRUE or FALSE: It’s better not to know anything about the personal lives and interests of the people who report to me. 9. TRUE or FALSE: Sometimes, it’s almost as if I’m a “collector of people” because I’m always recruiting and getting to know new people. 10.  TRUE or FALSE:  I like to surround myself with people who are better at what they do than I am. 11.  TRUE or FALSE:  I am a lifelong student of what makes other people tick. 12.  TRUE or FALSE:  People talk about “mission” too much – it’s best just to let people do their work and not try to bring values into the conversation. 13.  TRUE or FALSE: It’s my job to know everything that goes on in my area. 14.  TRUE or FALSE: I pay close attention to how and where I spend my time, because the priorities I put into action are the ones that other people will observe and follow. 15.  TRUE or FALSE:  I’ve worked hard to get along with or understand people who are very different from me.

What it takes to be a Leader
     

Drive Leadership motivation Integrity Self-Confidence Knowledge of the business Ability to perceive the needs and goals of others and to adjust one’s personal leadership approach accordingly

Leaders
 

&
 

Managers
Don’t rock the boat Deal with ongoing dayto-day  Monitoring activities Planning and budgeting routines
 

Key Behaviors

Challenge the process

Inspire a shared vision  Enable others act

Model the way Encourage the heart

Short-term profits

Followers
 

 

Capable of independent thinking Are actively committed to organizational goals instead of their own interests Willingness to tell the truth Hold performance standards higher than required

Leaders, Managers, Followers

An individual can exemplify both processes (leadership, management), one or the other or neither It is vital for a company to have both, leaders and effective managers

How well followers follow is also key for success

Innovation=Imagination

Six businesses, each with a number of business units aligned for growth

Commercial Finance

Infrastructure Industrial

Healthcare

Consumer Finance

NBC Universal

GE Global Research: First Industrial Lab in the U.S.

Began in Schenectady, New York in 1900 Founded with the focus to improve businesses through technology One of the world’s most diverse industries Cornerstone of GE’s commitment to technology 2006

1900

A History of Innovation
1909 1913 Ductile Tungsten Medical X-Ray 1932 Langmuir Nobel Prize in Chemistry 1942 1952 1955 1973 1983 First US Jet Engine LEXANTM Polycarbonate Man-Made Diamonds Giaever Nobel Prize in Physics Magnetic Resonance Imaging

1995 GE90®, The World’s Most Powerful Jet Engine 1999 Digital X-Ray

Innovation-Key of GE culture

“At GE, we consider our culture to be among our innovations. Over decades our leaders have built GE’s culture into what it is today — a place for creating and bringing big ideas to life. Today, that culture is the unifying force for our many business units around the world”-GE

How important is innovation for leadership? If leaders don’t have innovation, what happens to the company?

GE –a Bellwether of American Management Practices
1930s,

highly centralized, tightly controlled corporate form
1950s, 1960s,

decentralization

strengthen its corporate staff and develop sophisticated planning systems
1970s,

SBU-based structure and sophisticated planning processes
1980’s-2001,

period

three waves in Welch’s

Reg Jones -1970’s
Strategy-SBU based structure and planning  processes 
  

10 groups, 46 divisions, 190 departments, and 43 strategic business units Develop a constructive business-government dialogue Wall Street Journal proclaimed him as a “management legend”

Success
  

Sales more than doubled ($10 billion to $22 billion) and earnings grew even faster ($572 million to $1.4 billion) A major thrust into international markets Expansion of world trade and restoration of U.S. competitiveness

Questions

Shareholders: Employees:

What are your concerns regarding the new leadership and the financial success of GE? What are your concerns regarding the culture, benefits, work environment under a new leader?

Potential CEO:

What challenges do you see coming into a successful corporation?

Who is Jack Welch?
1935: born in Salem, Massachusetts  1957: BS in Chemical Engineering  1960: MS and PhD in Chemical Engineering

Jack Welch and GE

  

1960: Joined GE as a chemical engineer 1972: Elected GE’s youngest VP 1979: Vice Chairman April 1, 1981: Became the 8th Chairman and CEO of General Electric

Taking Over GE

Challenges from outside of GE
Economic recession  High interest rates  Highest unemployment rate since the depression

Massive information and inefficient macrobusiness

Challenges from GE

What is Welch’s reaction to these  Challenges? 

Welch’s Vision
“A decade from now, I would like General Electric to be perceived as a Unique, highspirited, Entrepreneurial enterprise…the most profitable, highly diversified company on the earth, with world quality leadership in every one of its product lines”. -- Jack Welch

Three-Circle Vision for GE

“Restructuring the Hard Drive”
  

Challenged everyone to be “better than the best” Sold more than 200 businesses and made over 370 acquisitions Insisted GE become more “lean and agile” resulting
  

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
“Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while.” ~ Jack Welch

Initiatives - Objective
     

Work-Out Best Practices Going Global Boundaryless Behavior Six Sigma E-Business

“We bring together the best ideas – turning the meetings of our top managers into intellectual orgies.” ~ Jack Welch

Did it work?

Revenue

 Culture?

Jack Welch
 

 

1999: Named “Manager of the Century” by Fortune named one of the three most admired business leaders in the world by Financial Times September 7, 2001: Retired as CEO Published autobiography, “Jack, Straight from the Gut”

Leadership Styles

Autocratic

Makes decisions alone
• Yields higher performance

Democratic

Solicits input from group for decisions
• Yields positive attitude

Laissez Fair

Absence of managerial decision making
• Yields negative attitudes

Type of Power

Authority

Legitimate Power
• Was CEO: Position to tell others what to do

Reward Power

Control over Rewards:
• Performance reviews, pay increases, bonus
-foxnews.com

Coercive Power

Control over punishment
• Implementation of policies and administration of disciplinary  action

Expert Power

Has expertise or knowledge over the business
• Had been with the company for 20 years when he became CEO

“Followership”

Success depends on how well followers follow Not just Jack’s Company
“GE’s 100-year-plus track record is simply about having the very best people at every single position. That is its number one core competency. No one has better people. When you get the best people, you don’t have to worry about execution, because they make it happen.” -Larry Johnston, CEO of Albertsons
Former CEO of GE Appliances (1991-2001)

Passing the Torch
 

Retirement – September 2001 Lengthy process of succession
   

Internal candidates only Never named candidates No strategic vision No common measure for candidates

Long list of candidates

The New Guy

Jeff Immelt
  

-ge.com

GE Corporate Marketing - 1982 Plastics, Appliance, Medical President & CEO, GE Capital Board - 2000

“GE hit a home run with Welch and wanted to try again. More profoundly, [Immelt] demonstrated a superior capacity to grow, which was the most important criterion in the choice…They just knew he would have to rethink and reinvent GE” -Geoffrey Colvin (Fortune)

The End of an Era

Reg Jones era (1981)
Built up immense financial strength  Saw profits and growth

Jack Welch era (1981-2001)
Superior leadership  Profitable and immense growth

Challenges for Immelt?

Jack Welch and Jeff Immelt -USA Today

“Whole New Levels”

New Values
   

Imagine Solve Build Lead

New Businesses

Energy Customized Medicine

-rollingstone.com

GE Now
    

Operates in 100+ countries worldwide 300,000+ employees worldwide 2006 revenue - $163.4 billion 2006 earnings - $20.8 billion One of original six companies still listed on Dow Jones index

Success Continues
   

Continually finding ways to improve Accountability of managers Developing leaders Rewarding leaders

Leadership Continues
“At the top, we don’t run GE like a big company. We run it like a big partnership, where every leader can make a contribution not just to their job, but to the entire Company.”
-Jeff Immelt, CEO Letter to Investors 2005 Annual Report

Bibliography
http://www.schulersolutions.com/leadership_self_test_answers.html http://money.cnn.com/magazines/fortune/fortune_archive/1989/03/27/7183/index.htm http://www.ge.com http://money.cnn.com/magazines/fortune/fortune_archive/2001/01/08/294478/index.htm http://www.cnnmoney.com http://www.nni.nikkei.co.jp/FR/TNKS/TNKSHM/welch/index.html Abetti,

P,(2006), Creativity and innovation Managerment, “Case study: Jack Welvh’s Creative revolutionary Tranformation of General Electric and Thermidorea Reaction (1981-2004), V15 no.1, p74.

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