Jack Welch and the General Electric Management System

Management at a Company

Jack Welch and the General Electric Management System

Introduction

The management's actions at a company shape the company's future, deciding either failure or success. Furthermore, to maintain an edge in the competitive industry, organizations are well known to alter management styles to keep up with the times. This paper analyses the management at General Electric (GE). An American multinational conglomerate headquartered in Boston, General Electric is a manufacturer of several large scale machinery and equipment. The company produces aircraft engines, oil and gas production equipment, medical imaging products, and industrial products. The company also provides services such as power generation and financing. This paper discusses the management styles the company has employed since its inception, the major changes in each management style affected, and the impact those changes had on the company. This paper further provides an innovative idea that can bring about a positive change in the company and lead to success.

1. Evaluate two key changes in the selected company's management style from the company's inception to today. Indicate whether you believe the company is properly managed and provide support for your position.

Globalization – During the last decade, under the leadership of CEO Jeff Immelt, GE attempted expansion by implementing policies that promote globalization. These policies shifted the focus of the company to international enterprise, transcending nations to operate globally. This shift is well described in the sentence issued by Immelt to Financial Time's Crooks and Marsh (2012), which states, "When I became CEO [in 2001] we were 70 percent inside the US industrially. Now we are 60 percent outside the US." The globalization policies brought about the following changes in the company's operations: manufacturing plants were outsourced to developing countries, the various divisions of company head offices were relocated overseas, research and development centers were concentrated overseas, the local workforce was engaged in GE overseas operations, and there was an increased focus on exports. The changes are discussed further in the paper, focusing on the advantages and disadvantages of the change. The globalization attempt was to create an avenue to exploit international economies of scale across GE's business portfolio and take advantage of emerging international opportunities (Grant, 2016). One such global opportunity arose during the 1997 Asian financial crisis; GE accumulated quality assets at discount prices by investing acquired distressed assets in the region to leverage off an eventual upturn. This strategy had paid off for GE in the past during the US and European recessions in the 1980s. This approach was also used to yield returns in the mid-1990s during the Mexican crisis.

Digitization – In 1999, Welch launched the program destroy-your-business.com to introduce this new initiative. The program encouraged line managers to visualize how the business managed might be 'crushed by the dot-com juggernaut' (Grant, 2008). Digitization encouraged internal reflections in all parts of the organization, and this internal review brought about improvements in internal processes and the discovery of profitable new market opportunities.

My personal opinion is that GE is properly managed. GE has grown into an industrial powerhouse under the management, which has administrated the company over the years. The company has experienced significant yield, valuation, and industrial growth. GE has so thrived under good management that being one of the 12 original companies on the Dow Jones Industrial Index, GE is the only company remaining on the index after 116 years. This success-level could not have been achieved if the company could not have been properly managed to adapt to changing technology, to diversify into emerging markets, and to remain sufficiently profitable over the years.

2. Explain senior management's role in preparing the organization for its most recent change. Provide evidence of whether the transition was seamless or problematic from a management perspective. Provide support for your rationale.

During his years as the CEO of General Electric, the accomplishments of Jack Welch earned him the admiration of many as the greatest leader of his era. In the 20 years from 1981 to 2001 in which Welch was CEO, he grew the company from a lightbulb and appliances manufacturer into a multinational organization whose services include financial service, media service, and the manufacture of industrial products. He was initially criticized for his management style, which employed cost-cutting methods and layoffs, which earned him the moniker "Neutron Jack." However, after realizing success by expanding GE's revenues and raising its share prices in the following years, he was lauded (Fernández-Aráoz, 2020). Welch de-layered the organization to reduce decision-making time to better respond to any external change or performance demand from the corporate HQ. The organization implemented a simplified strategic planning system, which increased business-level managers' accountability to reinforce speed and responsiveness (O'Boyle, 2011).

Under Welch, the primary objective of GE was shareholder value creation. To achieve this objective, Welch established a performance-driven business culture that strongly oriented the individual businesses under the GE company to maximize profits and value creation. GE's financial controls encouraged value creation by linking the remuneration of business-level managers in the company's various divisions to the individual division's value. The war-like strategies implemented by Welch, which, while effective, were rather questionable. Nevertheless, in measuring the strategies' effectiveness by the profits yielded, the strategies were very successful. Through these strategies, GE expanded into new markets, created new business lines through diversification, and grew in financial value with a rise in GE stock prices.

3. Evaluate management's decision on its use of vendors and spokespersons. Indicate the organizational impact of these decisions.

One of the changes attributed to the globalization efforts of GE is the engagement of the local workforce. The local vendors and spokespersons were integrated into the local workforce at the GE foreign branches through several policies that encouraged the steady rise of the non-US workforce. The engagement of the local workforce within the GE international subsidiaries and the internationalizing of the senior level management in the company provide the following benefits, which include the gaining of knowledge about the behavior of the local marketplace and the provision of a positive representation of the GE company in a host country. Additionally, knowledge about the local culture is gained, which reduces the chances of offending through a misunderstanding due to cross-cultural differences.

Beyond the obvious advantages such as cost-saving and the gaining of invaluable knowledge about the market's characteristics obtained by engaging a local workforce and internationalizing senior-level management, there are also disadvantages to the practice. The alienation of the home workforce is one such disadvantage. In 1989, after the closing of a GE plant in Morristown, Tennessee, CATS (Citizens Against Temporary Services) was established to respond to the closure. A community-based organization, CATS, performed activities that dealt considerable damage to GE's public image (Lee, 2007, p.247). The continuous shifting of jobs overseas, which the GE company has been implementing to become truly global, will cause discontent among the US population and other non-governmental agencies, attracting public criticism dealing a terrible blow to the company's public image. The problem must be addressed to avert the inevitable confrontation by installing measures which will balance the allocation of jobs between the US and non-US populations.

As a manager within the selected company, suggest one innovative idea that could positively affect both employees and customers. Indicate the approach you will take in implementing the new idea. Provide support for your suggestion.

The suggested idea is for GE to seek assistance from the United States government. An approach such as this will be proactive in keeping GE highly competitive in the global market. This assistance will become necessary for GE competitively as it will be highly challenging for GE to maintain an edge above the others. According to Lou and Wang (2008), Chinese multinational companies such as those that could grow to become potential competitors for GE could receive assistance from the Chinese government for certain business aspects. However, the US government has a poorer relationship with global private entities as any attempt to assist will be construed as an act of violation of public interest. Thus, the government refrains from negotiating ways of assisting such global organizations.

Moreover, this help will be vital to companies such as GE in keeping a competitive edge on the global market (Biggeri & Bortolotti, 2020). The GE company has to request the United States government's assistance to negotiate better trading terms with key partners such as Canada, Mexico, and China. Receiving this assistance might be possible if the GE company can build a constructive relationship with the US government by impressing the government and other organizational stakeholders and the GE company's importance to the national economy.

The best form of government assistance the company should receive is a stake of trust in the international market without a direct association of the company to the government. This implies that beyond appearing at functions such as the launch of a new product or the opening of new offices, government officials should not be involved in operations, which can create a negative association of the company with a particular government, such as in the case of Huawei and the Chinese government.

4. Predict the selected company's ability to adapt to the changing needs of customers and the market environment. Indicate how open communication channels are critical for successfully implementing change in the organization. Provide support for your prediction.

As advocated by the former CEO of GE Jack Welch, the company's success will be heavily dependent on the company's ability to remain flexible like a small business regardless of the large size the company has attained. However, the low level of attention the current CEO Jeff Immelt is paying to maintain the company's flexibility raises concern about the company's adaptability in the future to keep a competitive edge. This concern is exacerbated by the highly uncertain macroeconomic environment in the US and the dynamic nature. Moreover, coupled with the increasing importance of internet-related technology, a great deal of flexibility is required to keep up with technological advancements (Caselli, 2012). Thus, it is of greater importance now more than ever for GE to retain flexibility across all levels of management to respond to the fluctuations in the global and local environments in a way that can be profitable.