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Index History and Background Welch: Bio Welch: Acquisitions & Innovations Welch: Key Events at GE Leadership Six Sigma Immelt: Bio Immelt: Changes at GE Immelt: Key Events at GE Immelt: Leadership Style Conclusions 2
History and Background Thomas Edison invented incandescent electric lamp in 1879 1890 Edison General Electric Company formed, then in 1892 merged with Thomas-Houston Electric Company The firm developed best practice standards, including licensing its technology, developing policies for employees, a formal hierarchy, financial controls, restructuring, and automation 3
Welch: Bio Born on November 19, 1935 in Salem Massachusetts Studied Chemical Engineering at the University of Massachusetts Did PhD at University of Illinois He joined GE in 1960 and was not happy with excessive bureaucratic culture of company Hit his peak as CEO in 1981 as the eighth and youngest chairman and CEO in the history of GE 4
Welch: Acquisitions & Innovations Welch acquired several businesses Employers Reinsurance and Radio Corporation of America National Broadcasting Corporations To promote innovation he launched a program called “Work Out“ “Work Out“ brought various employees from different departments together to asses company and make suggestions for improvement 5
Welch: Key Events at GE As soon as Welch was in charge he made several changes aimed at making GE more profitable “Number one or number two” strategy He insisted that GE should be among the top two players in every segment it operates; failing to do so will result in closure of that particular segment – “Fix it, sell it or close it!” To improve communication at all levels he trimmed the number of management levels from 9 to 6 6
Leadership He believed that involving company employees in quality processes has a great potential benefit Welch was good at motivating employees and stirring them into action e.g. He frequently wrote notes to employees appreciating their contribution, this made them more motivated Welch stressed the importance of communication at GE 7
Leadership To determine rewards at GE, Welch devised a system where people are classified into 3 categories Each department classified employees into 3 categories based on their performance Top 20 % , Middle 70 % and Bottom 10 % Top 20 % were generously rewarded, middle performers were motivated to emulate top performers whereas bottom 10 % were fired He also introduced the elements of high performing leadership Four E’s: Energy, Energizer, Execute, Edge, and also Passion 8
Six Sigma His commitment to quality led to adoption of Six Sigma at GE in mid 1990’s To launch Six Sigma, the company invested heavily in employees Six Sigma is a quality standard Streamlining processes to improve productivity, quality, speed and efficiency At the business level it improves profitability, market share and long-term viability At the process level it reduces defects and variation Employees were trained at different levels Green belts, black belts and master black belts 9
Welch: Leadership StyleStrengths Weaknesses Motivating employees Putting too much Constantly identified pressure on employees other leaders at GE Formed opinions too Aggressive leadership quickly Communication Criticized for some Charismatic failed acquisitions e.g. “Black&Decker” and Stayed visible at GE mergers e.g. Succession planning “Honeywell Inc.” 10
Immelt: Bio Born in 1956 in Ohio His father worked at GE and after some time at P&G and completing an MBA Immelt joined GE’s marketing division Immelt was shortlisted as a Welch successor He became CEO of GE right before 9/11 The company faced a series of challenges after he took over 11
Immelt: Key Events at GE The events of 9/11 had lasting effects on the firm Some sectors of the business dealt with aviation and insurance, and they took a beating Stock value sank 20% There was also an anthrax scare, and GE was viewed with skepticism after other corporate scandals Immelt made some acquisitions, sold less profitable businesses, and increased GE’s global orientation 12
Immelt: Changes at GE Immelt caved to investor demands for transparency Restructured equity packages and GE’s portfolio Increased external communication Focused on intangible factors instead of just the bottom line, also was ‘green’ oriented Increased number of outsiders were brought in Took focus from production to marketing, stressed innovation and idea generation 13
Immelt: Leadership StyleStrengths Weaknesses People person; more Somewhat soft approachable than Welch Approach too structured Focused on innovation Spent too much time Increased transparency placating stakeholders Less demanding leadership Always compared to Welch style than Welch Was reactive instead of proactive at times 14
Conclusions Welch and Immelt obviously had very different leadership styles Welch seems to have been more charismatic and led with energy and passion, whereas Immelt was more approachable but formalized some processes that Welch accomplished naturally Immelt took over at GE during a difficult time, so the external environment impacted his leadership 15