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 ³crazy.´ 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 ³collector 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 ³mission´ 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

Key Behaviors

Challenge the process

Inspire a shared vision  Enable others act 

Deal with ongoing dayto-day  Monitoring activities Planning and budgeting routines 


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

Infrastructure Commercial Finance 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 1932 1942 1952 1955 1973 1983 1995 1999 2003 Ductile Tungsten Medical X-Ray Langmuir Nobel Prize in Chemistry First US Jet Engine LEXANTM Polycarbonate Man-Made Diamonds Giaever Nobel Prize in Physics Magnetic Resonance Imaging GE90®, The World¶s Most Powerful Jet Engine Digital X-Ray H Turbine

Innovation-Key of GE culture 

³At GE, we consider our culture to be among our innovations. Over decades our leaders have built GE¶s culture into what it is today ² 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 decentralization 

1950s, 1960s,

strengthen its corporate staff and develop sophisticated planning systems SBU-based structure and sophisticated planning processes three waves in Welch¶s 

1970s, 

1980¶s-2001,

period

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 ³management 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 

What are your concerns regarding the new leadership and the financial success of GE?

Shareholders: Employees: 

What are your concerns regarding the culture, benefits, work environment under a new leader? What challenges do you see coming into a successful corporation? 

Potential CEO:

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  

Challenges from GE
Massive information and inefficient macrobusiness

What is Welch¶s reaction to these Challenges?

Welch¶s Vision
³A 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

³Restructuring the Hard Drive´ 
 

Challenged everyone to be ³better than the best´ Sold more than 200 businesses and made over 370 acquisitions Insisted GE become more ³lean and agile´ resulting 
 

Delayering: elimination of the ³sector´ level Downsizing: elimination of about 123,450 jobs Divestiture: elimination of an additional 122,700 jobs 

Replaced 12 of his 14 business heads
³Willingness 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

³We 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 ³Manager 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, ³Jack, 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

³Followership´ 

Success depends on how well followers follow Not just Jack¶s Company
³GE¶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

³GE 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

³Whole 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
³At 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, ³Case study: Jack Welvh¶s Creative revolutionary Tranformation of General Electric and Thermidorea Reaction (1981-2004), V15 no.1, p74.