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This would be something that was difficult for most competitors to match, and would therefore provide GE with a source of sustainable competitive advantage.
Welch also saw decision-making speed as essential to his change process. He reduced the amount of paperwork and study relating to decisions to both free up the flow of valuable information and to speed up the decision-making process. Again, this was a means of differentiating the capabilities of GE from those of rivals. GE would gain competitive advantage time and again by responding more quickly to changes in the environment than its competitors. His five-page environmental outlooks were another example of how GE would always know its market position and the position of its competitors in order to make decisions more quickly.
There were a number of impacts of these changes on GE. The sense of urgency was created and the culture changed. The company began to be more open with information, and this empowered more people to make positive contributions. Essentially, GE unlocked the abilities of a lot of people within the organization. This created a newfound confidence within the organization that began to drive people towards the pursuit of excellence. That Welch demanded excellence also helped to lock in this change at the company.
The leaner GE was able to respond more quickly to market opportunities. It was able to reduce its cost structure by not only reducing internal inefficiencies but by allowing employees to make their own contributions to internal improvements, something that was discouraged by the barriers that had been in place. Welch changed the culture of the company, the structure of the company and ultimately he changed the performance of the company. He was able to unlock the entrepreneurial talent within the organization and encourage greater risk-taking, and this led to greater reward.
Many of Welch's initiatives directly impacted the human resources function. Welch saw HR as a means of implementing many of his strategies. He changed the incentive system, for example, to encourage greater risk taking. In doing this, he created a greater link between performance and pay, which encouraged managers to take risks in order to deliver more to the company.
Welch's moves with respect to ending the culture of lifetime employment also directly impacted on strategic human resource management. This culture was fostered by the company, but it did nothing to encourage positive outcomes. With his layoffs and firings, Welch was able to break this culture, and leave the company only with the talent that it felt it needed. In order to implement a strategy effectively, it is important that the right team is in place, and this is was what achieved at GE through these moves. Those who were unwilling to change, or unwilling to respond positively to the new culture, were culled from the organization.
Welch also changed the relationship that GE had with its unions. In order to implement some of the plant-level changes, the union needed to be brought on board. However, the union had an old-school "not my job" mentality, and this was going to prove resistant to any changes. What Welch was able to do effectively was communicate to the union the benefits of working with management to make the company more competitive. He brought union leaders and management together more frequently, and in doing so helped to foster a greater sense of labor-management cooperation. This in turn allowed both management and union to meet their objectives by allowing the company to flourish and grow.
Changing the culture of an organization is a difficult task, and Jack Welch was able to do that at GE over the course of his tenure there. Welch realized that the key to success was to open up information, to capitalize on the entrepreneurial abilities of his managers, to reform labor-management relations and to remove from the company those who would obstruct the new culture. In doing this, what he essentially did was remake GE is his own vision. All that he implemented, each tactic that was to separate GE from its competitors on a sustainable basis, came from that vision and Jack Welch's ability to instill that vision through the organization through organizational structure changes, process changes and strategic human resources management.[continue]
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