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GE’s Two-Decade

Transformation: Jack Welch’s

Patricia Robledo
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
 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
 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
Leaders & Managers
Key Behaviors

 Challenge the process  Don’t rock the boat

 Inspire a shared  Deal with ongoing day-
vision to-day
 Enable others act  Monitoring activities

 Model the way Planning and

budgeting routines
 Encourage the heart  Short-term profits
 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
Leaders, Managers, Followers
 An individual can exemplify both processes
(leadership, management), one or the other or

 It is vital for a company to have both, leaders

and effective managers

 How well followers follow is also key for success

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

Commercial Industrial

Healthcare 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
 One of the world’s most diverse
 Cornerstone of GE’s commitment
to technology

A History of Innovation
1909 Ductile Tungsten
1913 Medical X-Ray
1932 Langmuir Nobel Prize in
1942 First US Jet Engine
1952 LEXANTM Polycarbonate
1955 Man-Made Diamonds
1973 Giaever Nobel Prize in Physics
1983 Magnetic Resonance Imaging
1995 GE90®, The World’s Most
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
GE –a Bellwether of American
Management Practices
1930s, highly centralized, tightly
controlled corporate form

1950s, decentralization

1960s, strengthen its corporate staff

and develop sophisticated planning

1970s, SBU-based structure and

sophisticated planning processes

1980’s-2001, three waves in Welch’s

Reg Jones -1970’s
Strategy-SBU based structure and planning 
 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”
 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.
 Shareholders: What are your concerns
regarding the new leadership and the financial
success of GE?
 Employees: 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,
 1957: BS in Chemical Engineering
 1960: MS and PhD in Chemical
Jack Welch and GE

 1960: Joined GE as a chemical

 1972: Elected GE’s youngest VP
 1979: Vice Chairman
 April 1, 1981: Became the 8th
Chairman and CEO of General
Taking Over GE
 Challenges from outside of GE
 Economic recession
 High interest rates
 Highest unemployment rate since the
 Challenges from GE
Massive information and inefficient macro-

What is Welch’s reaction to these 
Welch’s Vision

“A decade from now, I would

like General Electric to be
perceived as a Unique, high-
spirited, 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”
 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
 Coercive Power
 Control over punishment
• Implementation of policies and administration of disciplinary 

 Expert Power
 Has expertise or knowledge over the business
• Had been with the company for 20 years when he became CEO
 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 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
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
-Jeff Immelt, CEO
Letter to Investors
2005 Annual Report






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.