Abed Ramadan

Case 2

Case Study Questions:

GE’s Two Decade Transformation (SMALL SUMMARY)

Executive Summary Team Globalization has conducted an in-depth analysis on General

Electric's (GE) two decade transformation achieved by the company’s former Chief
Executive Officer (CEO) Jack Welch. This report consists of a reflective examination
performed by the team, incorporating perspective gained through professional
experience and key concepts gleaned from selected course readings elections. As CEO of
GE, Jack Welch's management skills became legendary, with little tolerance for
bureaucracy and archaic business processes. Acquiring new businesses and ensuring
that each business unit under the GE umbrella was one of the best in its field was a
primary concern for Mr. Welch. Under his guidance, the company expanded
dramatically from 1981 to 2001 (GE,2012). The culture of innovation and learning, which
included incorporation of measures related to new product development, technological
leadership, and rates of improvement, aided Welch and the company in defying the
critics as the company continued to profit.

1) How difficult a challenge did Welch face in 1981? How effectively did he take
charge?

Welch faced a very difficult challenge taking over the position as CEO of GE. His
predecessor, Reg Jones, set the bar extremely high at the company leaving a legacy for
Welch to compete with as the new CEO.

The types of challenges faced by jack Welch after coming on board in 1981 is extremely
excessive interest rates, this caused any investment strategies to require careful
consideration of costs. The fact that unemployment was also extensive made sales
revenue less than projected for many products. Also the nation was experiencing a
recession which means investors were not buying as much stock and inventories were
high. Welch moved decisively to invest his attention in taking advantage of proven
performance products and services due to a very hefty portfolio of business options. He
then challenged his managers and teams to be proactive and look for ways to improve
the business using the phrase GE to become “better than the best”. Some of the goals
established involved totally restructuring the company from the top down in five years.

Jack was effective in that his changes resulted in reclaiming $11 billion in capital from
selling off businesses. The result was a reinvestment in $21 billion of more technology
based, leading edge business during a time of recession.

How effectively did he take charge? Welch was extremely effective in taking over
the GE reins. Although his predecessor was quite successful during his reign and the
business thrived, there was still the need for change. The business world was evolving,
and competitors attempted nonstop to stay ahead of GE. Fortunately, Jones had left the
company in a “good place” during the transition, allowing Welch to come in with his
new and innovative ideas to take the company even further in the business world.

2) 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
rational supporting the change process?
The objective of initiatives was to charge leadership with the task of “fix, sell, or close”
down any business effort that did not confirm to core business, technology advances, or
serve to position GE in the top two positions in the individual industries the product
represented (Bartlett & Wonzy, 2005)
Welch also wanted GE to become less top heavy and begin to reduce the levels of
management in order to make the company leaner and less bureaucratic in structure.
This allowed for decisions to be implemented faster and solutions to come from those
closest to the process. He added several new strategies for managing processes
including Best in class, comparing sales figures against the competition versus past
performance, and by the mid 80s he had eliminated thousands of supervisory positions
and ineffective layers of management. Additionally he implemented organizational
developmental strategies designed to change the culture from management driven to
more open and collaborative. So that a free flow of ideas and problem solving
approaches can produce faster time to market solutions. Work out sessions allows
managers, and teams of workers to share information and make decisions together.
What is he trying to achieve in the round of changes he put in motion in
that period?
Welch was attempting to reduce waste, lower costs, build into the organization
efficiencies and stay ahead of the competition by implementing these strategies. In
order to restructure the huge 404,000 bureaucratic organization into a much leaner and
modern 300,000 (Bartlett & Wonzy, 2005). It was necessary to remove barriers to
performance including leadership. Welch wanted people that embraced change and
were willing to step up and take a change.

Is there a logic or rationale supporting the change process?

When analyzing Welch’s rationale for the changes made, it is important to identify the
benefits of incorporating Porter’s five forces model to analyze competition within an
industry. Welch based his proposed and implemented changes on proven tactics used
by other successful companies to achieve his strategic organizational goals. Realizing
that bureaucratic models of organizational structure were prone to promoting
sluggishness, Welch opted to depart from this model and implement a more flat
organizational structure to assist in meeting his defined objectives. Although unpopular
at the time, Welch’s decisions and actions have through time become renowned as
revolutionary exposing sheer genius in executing changes within an organization.

3) How does such a large, complex diversified conglomerate defy the

critics and continue to grow so profitably? Have Welch’s various
initiatives added value? If
So, how?

The way to growth is through streamlined processes and lean management. Best in
Class system for inventory, production, training, financial, and every phase of the
business has led to record profits. By the late 80s operations were experiencing at $2
billion dollar profit margin and sales revenue was on the increase. Now GE is known not
so much for the products as services. The In-site Medical Service diagnostic tool allows
GE remotely gives customers information on medical equipment, for example (Bartlett
& Wonzy, 2005). This became a model for reinventing the service industry.
Six sigma process improvement development project management tools and services
allow GE to choose only the best (Black Belt) leaders and most promising new ventures
and count the cost prior to getting involved. Then after implemented, the metrics will
allow the new business to be monitored and tweaked to remain efficient and
productive.

4) What is your evaluation of Welch’s approach to leading change? How

important is he to GE’s success? What implications for his replacement?

The advances in technology, the supplier chain, the global telecommunications

expansion, and the internet make traditional brick and mortar companies look archaic.
GE has managed to stay at the cutting edge by incorporating the latest methods in
remaining at the forefront of its industries. While many companies consider mergers,
joint ventures, and some even have had to close their doors. GE has remaining at the
top of its game due to the vision of Jack Welch along with the ability to implement not
simply discuss goals and objectives. His desire to be the best with his 4 E’s energy,
enthusiasm, edge, and execution allows him to achieve any level of success that is
pursued.

How important is he to GE’s success?

Welch was central to GE’s success. Without his vision, the company may have folded like
so many others, or at least become less competitive. Instead got rid of products and
entire business that were non-productive and reduced cumbersome processes and
outdated systems. He was also instrumental in introducing bold new initiatives in
organizational behavior and development such as capitalizing on the strengths of
diversity. He begin to challenge his people to stretch themselves in new and innovative
ways from research and development to global expansion. As the company begin to
implement its methods globally. GE was able to keep abreast of the competition in the
majority of its core businesses. With the wealth of experiencing and knowledge at GE
the service business was one of the results of the stretch initiative.

What implications for his replacement?

Welch’s replacement will have the task of moving the company to the next level which
is e-business and internet expansion. This is a monumental task for a company with so
many businesses (350) under one umbrella (Bartlett & Wonzy, 2005). However, if they
can continue to look forward and remain united, there is only one direction the
company can go, up.

Conclusion

As stated throughout this analysis, Jack Welch stepped out into uncharted territory with
lofty aspirations of making dramatic change within the GE organization for positive
growth. These efforts were achieved through several unprecedented means and
reorganization of the existing organizational structure to facilitate discussion,
communication, and constructive criticism unilaterally throughout the
company. Although some of his chosen methodologies were deemed by critics as
“radical” and “risky”, the results of Welch’s actions speak for themselves as a testament
to his strategic leadership at the GE helm. The agility, responsiveness, productivity and
ultimately profitability realized as direct results of Jack Welch’s actions while operating
in the office of GE CEO are key indicators of the lasting impact that his legacy leaves for
future officers tapped to fill the position. Programs and processes established under his
watch leave an impressive standard for successors. Without a doubt, Jack Welch’s
leadership has left a lasting impact on GE and the business world.