HBR Case analysis: GE's two decade transformation Jack Welch's Leadership

1. GE- Jack Welch leadership
analysis
A Case analysis presented by Ankush Goel

2. Case Synopsis
▪The case analysis the two decade
transformation GE as a brand went
through under Jack Welch’s leadership

3. September 2001: Stepped down from as CEO of GE
Most admired company for the 3rd consecutive year -Financial Times
Jack Welch Manager of the century – Fortune
23% p.a. shareholder return under is leadership tenure of two decades
Jack Welch

4. About GE: The Heritage
▪ Founded 1878
▪ Early Focus Generation, Distribution and
use of electric power
▪ Tightly controlled corporate firm
▪ A company that adapts: Decentralised

5. GE- Today “One of the World’s
Most Diversified Companies”
▪ Power Generation
▪ House Appliances
▪ Aircraft Engines
▪ Diesel Locomotives
▪ Medical Equipment

6. Reg Jones
• CEO 1973
• Overlaid 10 groups, 46 divisions,
190 departments
• Followed an SBU structure : 43
Sectors
• Focussed on Govt Relations
✓ 3 times CEO of the Year
✓ CEO OF THE DECADE
✓ “Management Legend” - WSJ

7. ▪ Jack Welch CEO at 45
▪ Environment Scanning: Recession
▪ High Interest rates & Strong Dollar
▪ Highest Employment post Economic Depression
“Radical Restructuring”
“Better than the BEST”
GE Replacing a Legend with a live wire

8. Jack Welch’s Vision of a
decade
“A decade from now, I would like GE to be perceived as a
unique, high-spirited, entrepreneurial enterprise… the
most profitable and highly diversified company on
earth, with world quality leadership in everyone of its
product lines”

9. Fix, Sell or Close
Standard for all businesses: #1 or #2 competitor in the Industry or disengage
 Add Outstanding People &
make contiguous acquisitions
 Stay on leading edge
through investing in R&D
 : Priority- Reinvesting In
productivity & Quality

10. Fix Sell or Close
▪ Managers Struggled to reach #1 or #2 positions due to
recessionary environment and global competition especially
from Japan
▪ Freed over $11 Bn. capital by selling more than 200 businesses
which accounted for 25% revenue in 1980
▪ Acquired close to 370 companies for over $21 Bn.
▪ Sold: central air-conditioning, houseware, coalmining
▪ Bought : Westinghouse lighting, employee reinsurance, Kidder
Peaboy & Thomason CGR

11. “Make GE lean & agile”
▪ Discipled destaffing, 50% reduction in the 200
people strategic planning staff
▪ Established real time planning across a 5-page
strategy book
▪ Evaluated Results against external competitive
criteria
▪ Cut heretical levels from 9 to 4 & took direct
report
GE Internal Restructuring
CEO Sectors
BUSINESSES CEO

12. Internal Restructuring:
A man who took Bold Actions
• Eliminated 59,290 salaried & 64,160 hour positions
between 1981-88
• Operational Profits rose from $1.6 Bn. to $2.4 Bn.
Aimed to Bring a Change, Break the traditional GE
Culture
“A company can boost
productivity by
restructuring, removing
bureaucracy and
downsizing, but it cannot
sustain high productivity
without cultural change”

13. Stage 2
Software
Initiatives
▪ Jack wanted each GE employee to have honest energetic
interactions throughout the company
▪ Developed a Forum – Each member felt engaged & everyone
had a voice
▪ Groups of 40-100 employees were invited to share their
views on their business division and how could they improve
it
“A process through which employees and their bosses could
workout new ways to improve the current systems and deal
with each other by removing unnecessary bureaucracy”
Workout

14. Stage 2
Software
Initiatives
▪ Michael Frazier studied 9 companies including HP, Xerox ,Toshiba
to help incorporates the worlds best techniques at GE
▪ Helped GE managers realize they were managing & measuring the
wrong things; Understood the importance to find how to get things
done instead of what got done
Best Practices
How Can we Learn from other companies ?

15. Results of Software Initiatives
▪ Productivity Increased from an annual rate of
2% between 1981-87 to 4% between 82-92
▪ Gave GE employees a different perspective of
doing business
“We used to look at the petty cash of $5000 first
now we focus on $5 Mn. Inventory on the floor
working towards bringing it down.”

16. Going Global
“It is difficult to jump in the world arena if you don’t have
a solid base at home”
▪ Did not impose corporate globalisation strategy
▪ Raised the Bar: Be #1 or #2 in the world market
positions
“Business are global not
Companies”

17. Going Global
Paolo Fresco Head International operations:
 JV with Robert-Bosch
Partnered with Toshiba
Acquired Tungsram
▪ Jack Invested 17.5Bn in Europe by taking advantage of the Europe economic
slowdown. Did the same in Mexico acquired 16 companies invested 16Bn for
acquisition in Japan
▪ Result: International Revenue : $42.8BN. Double in 5yrs
“Global revenue growth was 3times the rate of
domestic sales”

18. Developing Leaders
• Jack wanted people willing to compete and
were deeply committed towards GE
• Jack Welch and 3 senior executives
reviewed progress of top 3,000 executives
• Took exhaustive 10-12hrs review of each
business
• Enhanced GE’s Compensation Package by
providing stock options and high bonuses as-
well as promotions
Jack Introduced a 360 feedback process : every employee was to be
graded by his manager, peers and subordinates on a scale of 1-5 on the
basis of team building, quality focus, vision
Helped identify training needs, coaching opportunities & career planning

20. Boundaryless
Behaviour
Stage 3
1990’s
Focus on
integrated
diversity
As a Boundaryless company a GE envisions to remove barriers among
engineering, manufacturing, marketing, sales and customer service
The Company decided to not decide any distinctions between domestic &
foreign operations
Bonuses were given on idea sharing and idea seeking not just idea
creation
Cost-effectiveness from Ge aircraft Global A/C mgt. GE Plastics
Transactional effectiveness GE Capital

21. Stretching Out
• Using Dreams to set business targets with no
real idea of how to get there
• Change the way how targets are set & measured
• Create a challenging environment where people
see how good they could be…
• Goals were not accountable but resulted in high
bonuses

22. Service Business
• Reduce Dependence on Traditional industrial products
• Aimed to develop added-value services
InSite a technique through which remote diagnostics
were possible Diagnostic sensors on MRI, CT scanning
equipment enabled GE’s on-line service to asses the
product performance in real time and also fix any
technical issues.
GE equipment service business of $8 BN.

23. Service Business
▪ Aimed to make customers existing products more
productive
▪ GE acquired 20 service related businesses
▪ Today 2/3 of revenue is from services

24. Six Sigma
▪ Invested $500 MN. For GE employee’s training
▪ GE operating rate 10,000 times six sigma
quality level
▪ Welch tied 40% bonuses to individual’s Six
Sigma objective
▪ ROI: $750 Mn.

25. ‘A’ players with 4 E’s
➢Vision
➢Leadership
➢Energy
➢Courage
▪ 4E’s: Energy (excited by turbulence)
▪ Energize (Dreaming big and spreading the
enthusiasm )
▪ Edge (Ability to make tough calls)
▪ Execution (Consistent ability to turn vision to
reality )
Globalising the intellect of the company

26. One Last initiative
before retirement:
e-business
Impact of the Internet
• Destroyyourbusiness.com: Focussed on the challenge of
redefining the business model before someone else

28. Lessons Learnt
▪Be ready for Change and take bold
decisions
▪Over Deliver
▪Never Hold Back
▪Stretch-out
Do what's BEST FOR BUSINESS