GE’S TWO-DECADE
TRANSFORMATION:
JACK WELCH’S LEADERSHIP
APURV MOGRA – FT201016
ASHWATH RAM – FT201022
BHAVYA SRI INTI – FT201029
GARIMA GAUR – FT201035
JENIX R – FT201041
MADHUMITHA S – FT201048
CHALLENGES FACED BY JACK WELCH
• The US economy faced a recession in 1981
• Recession lead to high interest rates and an inflated dollar value
• Unemployment in the country was the highest since the depression
• The company was under attack from global competitors
MEASURES TAKEN TO TACKLE CHALLENGES
3 circle concept: Core, High Technology, Services
#1 or #2: Fix, Sell or Close
• Strategy of becoming #1 or #2, else closing down the business unit
• GE sold more than 200 businesses and freed up $11B of capital
• The company strategically made 370 acquisitions, investing $21B.
MEASURES TAKEN TO TACKLE CHALLENGES (CONT)
De-staffing, Delayering, Divestiture and Downsizing
• Welch’s insistence of ‘lean and agile’ structure lead to de-staffing process, leading to a 50%
reduction in the 200 person strategic planning staff
• Replaced the strategic planning system with a 5 page strategy playbook
• Budgeting process redefined: Results evaluated against external criteria instead of internal past
performance
• Reduced hierarchical levels from 9 to 4
HOW EFFECTIVELY DID JACK TAKE CHARGE?
Revenues increased from $27.2B to $29.2B
Operating rose dramatically from $$1.6B to $2.4B
It set the base for strong increase in both sales and earnings in second half of the decade
Welch continued the restructuring and kept pushing the organization for more change.
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 RATIONALE SUPPORTING THE CHANGE PROCESS?
• Welch’s priorities were shifting towards bringing a cultural change in the late 1980’s.
• Two closely linked initiatives – “Work out” and “Best practices” were launched in the next few years.
• Workout was a forum aimed at bringing employee’s business ideas and proposals to the table , whereas
Best practices was an initiative to train the employees about the different practices adopted by
successful organizations in achieving efficiency in their processes.
• Welch focused on going global after GE’s efforts to rationalize its US operations.
• GE spent a huge sum of money to develop leaders who were trained in GE’s cultural values and vision.
• Employees were encouraged to take up challenging business targets to push themselves beyond limits.
… CONT
• In the early 1990’s , Welch envisioned a “boundary less organization” for the flow and share of new
ideas across all functions.
• In 1994, Welch started concentrating on expanding the business into Product services that brought in
enormous growth opportunities.
• These initiatives by Welch were started to bring about a change in the culture of the organization.
Welch’s ideas were clear and unique which helped in the success of the above said initiatives.
HOW DOES SUCH A LARGE, COMPLEX DIVERSIFIED
CONGLOMERATE DEFY THE CRITICS AND CONTINUE TO GROW
SO PROFITABLY?
GE was able to defy critics and continued to grow by achieving the below:
The company has completely understood and lived by the concept of ‘Change means
opportunity’
He eliminated sector levels by reducing hierarchical levels from 9 to 4, thus making it simple to make
and implement decisions.
He made the company lean and agile, through de-staffing process. This resulted in downsizing, de-
staffing, delayering.
Series of planning, resource allocation, review and communication meetings were constantly done to
ensure growth.
Initiatives such as Six Sigma helped drastically cut down costs and improve quality than the competition.
HAVE WELCH’S VARIOUS INITIATIVES ADDED
VALUE? IF SO, HOW?
• Due to introduction of Six Sigma, the company earned returns amounting to $750M
and was forecasting additional returns of $1.5B
• Within a year of introducing the concept of stretch, the company was reporting
progress.
• In 1992, Overall, the productivity was growing at and average rate of 4%
• By 1996, GE achieved operating margins of 14.4% and inventory turn over of 7.
• By 1998, international revenues were $42.8B
Thus, Welch’s initiatives did seem to add value to the company.
WHAT IS YOUR EVALUATION OF WELCH’S APPROACH TO LEADING
CHANGE? HOW IMPORTANT IS HE TO GE’S SUCCESS?
WHAT ARE THE IMPLICATIONS FOR HIS REPLACEMENT?
• Jack Welch promoted internal communication and introduced flatter and transparent means to conduct
operations and feedbacks
• He focused on performance and strictly quantifiable results
• Promotion from within organization – zero bureaucracy, more accountability
• Focused on production – lean and agile | FORCE model: Flexible, Organizational, Result Oriented,
Communication and Education
• He was demanding and intimidating and put organization ahead of employees but also respected his employees
– don’t punish failure concept
• Practiced effective strategic leadership: Effectively managed firm’s resource portfolio, Sustained an effective
organizational culture driven by values, emphasizing ethical practices.
• He was a visionary. Believed that every problem gives rise to an opportunity eg. Europe economic downturn,
Mexican peso crash
• Challenges ahead : Build the e-business, growth from emerging economies, use energy, healthcare and aviation
to drive growth, more product and service launches.
THANK YOU
