Course 5130: Strategic Thinking
Session 3 Assignment: GE Case Study
The culture at General Electric, before Jack Welch assumed his role as CEO in 1981, was highly decentralized, where significant emphasis on strategic planning was levied on 43 Strategic Business Units. However, Jack’s vision of changing the culture of the company was a priority to him.
As a result, Jack began the culture change by replacing 12 of his 14 business heads. He replaced them with new managers who had a strong commitment to the new management values, with a willingness to break from the old culture, and had the ability to take charge and bring about change. Welch wanted to reflect a management style of openness, candor, and one of facing reality. In addition to the culture change, he wanted the culture to be characterized by speed, simplicity, and self-confidence. Instead of continuing with the old style bureaucracy characterized by large corporation, Welch wanted to create a culture of small companies where everyone had a voice and felt engaged in their business.
One of the initiatives Welch implemented in the late 80’s, which was instrumental to changing the culture at GE, was called “Work-Out”. This process was designed to get unnecessary bureaucratic work out of the system while creating a forum in which management and employees could work out new ways of dealing with each other, and cut out the bureaucracy. This open style forum would bring 40 to 100 employees together to share their views about their business and how it might be improved. The “work-out” consisted of three-day sessions where employees would get the opportunity to lists all of their problems, debate solutions to these problems, and prepare presentations. On the 3rd day of the session, the employees would make their recommendations and the process would require the bosses to make decisions on the spot in front of every employee and their peers.
Welch also focused of realigning skills sets and changing the mindset of his employees with GE’s new strategy and organizational imperatives. Because of this new demanding environment, some employees felt overworked and there was some residual distrust from the layoffs that took place during the 80’s; hence, he recognize this challenge and felt the need to redefining his commitment to his employees. As a result, a new psychological contract developed which gave a sense to the employees at GE that their jobs were the best jobs in the world. They had the best training and development resources, and they provided an environment committed to providing opportunities for personal and professional growth.
Another initiative Welch took on, as a way to shock the culture at GE, was by introducing the notion of “stretch” to set performance targets. In addition to setting their basic targets, managers were asked to set stretch goals for their businesses as a way to reach for a higher mark knowing that they would be rewarded handsomely if they hit these goals. Within a year of introducing stretch goals into the organization, GE was reporting significant progress in areas such as inventory turns and operating margins.
Finally, one of the last cultural changes Welch was able to integrate at GE was having a boundaryless company. This vision is characterized by an “open, anti-parochial environment, friendly toward the sharing and seeking of new ideas, regardless of its origin. He envisioned removing all barriers amongst disciplines and operations, and one that removed labels in titles and hierarchy chain. Equally important to having a boundaryless company was changing the internal mindset of selling products to helping their customer to win.
In order to make all of these cultural changes, Jack Welch needed to make human resource changes which will allow him to execute on his vision to be the best company in the world. He introduced the 360degree...