General Electric_Leadership

Jack Welch’s Leadership

GROUP 5, SECTION C, STRATEGIC MANAGEMENT-2

Anand Kumar12P127

Ankush Singla12P129

Bhoomi Ashwin12P131

Aditya Chadha12P132

Siddharth Bharadwaj12P170

Soumyajit Sengupta12P171

GE’s Two Decades Transformation

General Electric: Background

Reg Jones (1973-1981) 10 groups, 46 divisions and 190 departments

were 43 strategic business units to support strategic planning

Benchmarked strategic planning and other companies imitated its SBU – based structure

Unable to review & approve information from 43

New Organizational Layer of “Sectors” introduced to cap the various departments, divisions & groups

The GE Heritage1878 - 1981

1878

Founded by Thomas Edison

1930

Centralized,Tightly controlled firm 1950

Decentralization1973

Reg Jones became CEOSBU Structure 1977

Firm restructured toSectors 1981

Jack Welch Replaces Reg Jones

Jack Welch1981 - 2001

1981

Three Circle Vision <Core, Technology, Services>

1983

1988

1995

2001

First Wave Second Wave Third Wave

Change Initiatives-Work-out-Best Practices-Going Global-Developing Leaders

Initiatives- Boundary less behaviour- Service Business-Six Sigma

Internet

<destroyyourbusiness.com>

History Founded in 1878 by Thomas Edison.

Focus on Generation , Distribution, and use of electric power to become.

1978 – Power Generation , household appliances, lighting + Aircraft engines, medical systems and Diesel Locomotives.

Strategic Context & 1st Restructuring Wave Internal Issues

Massive information

Inefficient macro-business

Bureaucracy

External Environment

Economic recession

High interest rates

Highest unemployment rate since the depression

Strong Dollar

Restructuring of General ElectricWelch’s “Three Circle Concept” Vision

Services

GECC InformationConstruction & Engineering

Nuclear Services

Technology

Industrial Electronics

Medical SystemsMaterial

AerospaceAircraft Engines

Core

LightingMajor Appliance

Motor Transportation

Turbine ConstructionEquipment

SupportLadd PetroleumSemi ConductorGE Trading Co.

Utah Mining

VenturesCalma

OutsideHousewaresCentral Air-

ConditioningTV&Audio

CableMobile

Power DeliveryRadio Stations

Going about the job, the Welch Way

•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

• De layering: 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

2nd Wave of Restructuring

Work Out Best Practices

Going Global Developing Leaders

A process designed to get unnecessary bureaucratic work

out of the system while providing a forum in which

employees and their bosses could work out new ways of

dealing with each other.

•Focused more on developing effective processes than controlling individual activities.• Customer satisfaction was main gauge of performance.•Treated their supplier as partners•Emphasized the need for a constant stream of high quality new products designed for efficient manufacturing

•Appointed Paulo Fresco, a key negotiator on the Thompson swap• Continued to broker numerous international deals• Joint venture with German-based Robert Bosch• Partnership with Toshiba• Acquisition of Sovac , the French Consumer Credit Company

• Focus on employees on competitive world rather than life time employment

•Changed salary structure with stock options

•Crotonville Management Development facility to harness cultural change and make leader

Productivity increased from 2% in 1981 to 4% between 1988-1991

For Example: Head of Corporate Audit told “ When I started 10 years ago, the first thing I did was count the $5,000 in the cash box. Today, we look at $5 million in inventory on the floor, searching for process improvements that will bring it down”

By 1998, international

revenues doubled in 5 years

Global revenues were growing at

almost three times the rate of

domestic sales

Crotonville Management Development facility : Key Institution for management

training focus : “Work-Out”

Concept emerged from here

3rd Wave of Restructuring

Boundary less Behavior

Stretch: Achieving the

Impossible

Service Businesses

The Boundary less company we envision will remove the barriers among engineering, manufacturing, marketing, sales, and customer service; it will recognize no distinctions between domestic and foreign operation

•In 1990 , Welch Introduced the notion of “stretch” to set performance targets and described it as “using dreams to set business targets, with no real idea of how to get there.”•Stretch Targets did not replace traditional forecasting and objectives-setting process.

•In 1994, Welch launched a new strategic initiative designed to reinforce one of his earliest goals: to reduce GE’s dependence on its traditional industrial products

• Biggest opportunity is to provide services to customers

•Making existing assets of customers more productive

•Making a shift from – selling products to customers towards – Helping our customers win - approach

Closing the Decade

E – Business Initiative

‘ A Players’ with ‘ Four

Es’

Six Sigma Quality

Initiative

destroyyourbusiness.com for each division in order to redefine business model

Each division had its own DYB team which helped in digitizing the company and added to its success

“A – Players” - Individuals with vision , leadership, energy and courage“4 E’s”•Energy i.e. excited by ideas•Ability to Energize others •Edge , the ability to make tough calls•Execution , the consistent ability to turn vision into results.

•In 1996 – Boca Raton- Welch announced a goal of reaching Six Sigma quality levels company – wide by the year 2000, describing the program as “the biggest opportunity for growth, increased profitability , and individual employee satisfaction in the history of our company

Green Belts - 4 weeks training5 Months implementation

•Black Belts - 6 weeks of instruction in statistic , data analysis and other six sigma tools

•Master Black Belts - Full time six sigma instructors – mentored the Black Belt candidates through the two –years process

Strategic ControlBalanced Scorecard Approach

• ROE increased from 18.1% in 1981 to 28.7% in 2000• Revenues increased by 376.7%• Net Earnings increased by 670.88%

Financial

• Best Practices : Aim of moving focus on to Customer Satisfaction• Change on Internal mind-set from selling products to “Helping our

customers win”Customer

• Three Circle Concept, Lean and Agile, Cut Bureaucracy• Work-out, Session C, 360 degree feedback process• Six Sigma

Internal Business Process

• Work-out, Session C• Crotonville Management development facility• Integrated Diversity• “A Players”

Learning and Growth

Strategic Impact

Jack Welch had been a Strategic Leader for GE and he has taken GE in 20 years at a stage no one would have thought of – a highly successful diversified company.

Jack WelchFrom the perspective of the Generic Strategic Leadership Model

Task Achieving the

common

Individual Motivating

& Developing

TeamBuilding &

Maintaining

Three Broad Functions

Task – Jack Welch defined overall targets for the employees of GE and pushed them to achieve the same

Team – Build his management team with new people and constituted institutes to develop future leaders and performers

Individual – Reward systems and incentives based on performance to motivate people to achieve more and stretch their limits

Seven Role Functions

Vision : Wanted GE to be perceived as a unique, high spirited, entrepreneurial enterprise

Strategic Thinking : Restructuring, software initiatives, going global, services business, e - business shows Welch’s long term strategies

Administration: Was authoritarian in his approach and held his company and employees tightly

Flexibility: Welch was very particular in his approach and can be particularly termed as flexible

Energy/Morale: Motivated his teams and all other employees to achieve the organizational goals

Allies & partners: Made successful strategic alliances with partners like Bosch, Toshiba, Sovac etc. to strengthen GE

Leading by example: he did what he said and asked others to do

Jack WelchFrom the perspective of the 4-Framework Leadership Model

Structural Framework

•Focused on Strategy through re-structuring, joint ventures, e- businesses

•Made formal working structure

•Made changes as per changing environment like in case of recession

Human Resource Framework

•Approach based on openness, candor, and facing reality

•Made regular visits to company's Management Development Institute

•Engaged managers in outspoken sessions & “Work – out’ a forum to find new ways to deal with issues

Political Framework

•As per this framework Welch wasn’t a political leader as he never used coalition or any form of manipulation

Symbolic Framework

•As per this framework, he was definitely a source of inspiration and guidance to his team mates and other employees

Jack Welch

Conclusion

Thus Jack Welch has guided GE strategically in a

- Strategic direction by forming “Three Circle Concept” Vision

- Effectively managed firm’s resource portfolio by making GE “Lean and Agile”

- Create an Entrepreneurial Mind-set through Work-out and Best-Practices

- Build leaders through – Session C, “A Players”

- Create an Open Culture through Integrated Diversity

- Win Customers through Six Sigma, Innovation

- Training and Development through Crotonville management facility

Thank You!