GE's Two Decade Transformation

GE's Two Decade Transformation
• Examine Jack Welch and his transformation of General Electric
Welch's initial resolve to make the company more agile and lean led to a highly systematic downsizing, delayering and destaffing process focusing on every large headquarters group, which included a cutback by half in the company’s 200-strong strategic planning workforce and the elimination of its arduous strategic planning structure. In its place, he incorporated "real-time planning'', discussed with fourteen key business leaders via informal sessions. GE’s budgeting process was also drastically altered: results were assessed against external competitive conditions, instead of internal comparisons. In the year 1985, Welch did away with the sector level; to guarantee every business directly reported to him, he eliminated 5 hierarchical levels (Bartlett, 2000).
The company did away with 64,160 hourly and 59,290 salaried jobs from 1981 to 1988; divestiture led to the elimination of 122,700 more jobs. While a modest revenue growth from 27.2 to 29.2 billion dollars was achieved from 1981 to 1985, operating profits grew significantly from 1.6 to 2.4 billion dollars. Years after commencing extensive reform, Welch deemed GE’s hardware to finally be in place and believed the time had come to concentrate on its software. His priorities shifted to achieving cultural change to sustain its productivity (Bartlett, 2000).
In the year 1989, Welch proposed a management technique based on honesty and transparency, refining key cultural elements to create a culture marked by speed, self-confidence and simplicity. To this end, he initiated the ‘Best Practices’ and ‘Work-Out’ initiatives. Additionally, he concentrated on globalization, investing 17.5 billion dollars in Europe from 1989 to 1995 and nearly doubling GE’s international revenue to $42.8 billion by 1998 (Bartlett, 2000).
Welch concentrated on creating integrated diversity and a boundaryless firm marked by an anti-parochial climate, open to sharing and seeking ideas from all. Lastly, he focused on the service sector by acquiring Peabody, Kidder, and other financial service firms (Bartlett, 2000)
• Identify the strategy Jack Welch used to create value for General Electric
As soon as he took charge, Welch established a business standard of either becoming the industry’s top or second-largest competitor, or disengaging (Bartlett, 2000).
• Why do you think this strategy was successful?
Welch’s aim was ensuring a unique, entrepreneurial, most diversified, and most successful firm through historical acquisitions and deals, and the selling off of less-profitable divisions. He employed top global talents strongly committed to his management values as divisional leaders. These leaders displayed the readiness to capably take charge, leave behind the company’s old culture, and effect requisite changes (Bartlett, 2000).
Early R&D and innovation helped GE venture into multiple business lines. The new millennium saw 70 percent of its business originating from product, financial, and information services. Further, Welch began employing open and reverse innovation for effectively stepping into emerging international markets (Adari).
• Think of another strategy that may not have been as successful. Why would it have been less successful?
A budgeting strategy incorporating internal comparisons would prove less effective as compared to the aforementioned strategy, as it would mainly involve comparisons with the company’s own prior performance rather than comparisons with industry rivals. With results and documentation not being gauged against industry rivals, the company’s industry leadership would be negatively impacted.


References
Adari, P. (n.d.). GE and Jack Welch Leadership - Case study approach. Retrieved March 19, 2018 from http://www.academia.edu/11670513/GE_and_Jack_Welch_Leadership_-_Case_study_approach
Bartlett, C. A. (2000). GE's Two Decade Transformation: Jack Welch's Leadership. Harvard Business School