GE’s Two Decade Transformation : Jack Welch’s Leadership
The case examines the transformation of GE under the charismatic leadership of Jack Welch, from the time when GE was a small player to its status of the ‘Most Admired Company’ and the ‘Most Respected Company’ by late 1990s. We have done a detailed study of the impact Jack Welch has had as CEO over the past twenty years and reveals a leadership style that is the driving force behind a successful transition from a corporate model that was highly centralized and bureaucratic to one that is dynamic, flexible, and at the same time more profitable. GE progressed magnificently under the reign of "Neutron Jack, even though it was at a cost of letting go numerous employees even at the executive levels! But most shareholders were also starting to get worried about his retirement and the prospects of the company post his retirement. The analysis shows the stages through which GE progressed under Jack Welch and its effects on its employees and the culture of the company as a whole.
Evolution of GE
In 1930 GE had a highly centralized and tightly controlled culture but GE as a company was constantly undergoing change. By 1950 it delegated the power of decision making to the department managers which led to greater decentralization. It also developed its staff and strategic planning system.
Era of Reg Jones
Reg Jones inherited GE when it went through a major reorganization. During that time most of the companies were imitating the SBU based structures. GE also followed SBU based structure as it went in for more decentralization but became a role model for other companies in SBU and strategy formulation. Jones went for restructuring of the organizational structure and also concentrated on having good relationships with the government.
Jones management philosophy was mainly based on the following principles: * Minimize ambiguity: This was important in GE at the time. Jones worked to make sure that everyone's job was clear and that the purpose of every meeting was clear. * Do your homework: Jones thought that every senior manager should be able to personally perform "validity tests." He expected executives to "read in depth and breadth." * The necessity of strategic planning: Jones wanted everyone to develop a clear-eyed view of business reality. He wanted strategic thinking to be a way of life. * Personal relationships: This meant knowing people, both customers and company people as individuals. Knowing people meant listening to them "with both ears." It meant being willing to tell the truth and receive it. * Decision making: For Jones this meant a consensus framework and the willingness to make a decision if consensus could not be reached. There are three specific pieces of advice in this area that deserve special mention. * Adapting and living with change.
* Preparing oneself to faced odd situations.
* Risk taking and learning from mistakes.
* Put on the company hat: Accept decisions that may not be in the best interest of your unit, if they are in the best interest of the company.
Multilayer in organization
GE faced with problems when it was not able to store and process the massive information generated from the strategic plans. So he created new organizational layer of “sectors” in the divisions, SBUs and departments representing the macro business agglomerations such as consumer products, power systems or technical products. This brought about more levels of hierarchy in the organizational structure.
Under Jones' administration, the company's sales more than doubled ($10 billion to $22 billion) and earnings grew even faster ($572 million to $1.4 billion). A major thrust was into international markets. As Chairman of the President's Export Council, Mr. Jones became an eloquent voice for the expansion of world trade and the restoration of U.S. competitiveness.
When analyzing Welch’s...