GENERAL ELECTRIC: FROM JACK WELCH TO JEFFREY IMMELT
Ken Mark wrote this case under the supervision of Professor Stewart Thornhill solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail email@example.com. Copyright © 2008, Ivey Management Services
Version: (A) 2008-04-18
General Electric (GE) was a U.S. conglomerate with businesses in a wide range of industries, including aerospace, power systems, health care, commercial finance and consumer finance. In 2007, GE earned US$22.5 billion in net profit from US$170 billion in sales. In 2008, GE expected to generate US$30 billion in cash from operations. Driving GE’s growth was what many commentators considered to be the “deepest bench of executive talent in U.S. business,”1 the result of two decades of investment in its management training programs by its former chief executive officer (CEO), John F. (Jack) Welch, Jr. The current CEO, Jeffrey Immelt, took over from Jack Welch four days before September 11, 2001, and had spent the last few years preparing the firm for its next stage of growth.
GE’s roots could be traced back to a Menlo Park, New Jersey laboratory where Thomas Alva Edison invented the incandescent electric lamp. GE was founded when Thomson-Houston Electric and Edison General Electric merged in 1892. Its first few products included light bulbs, motors, elevators, and toasters. Growing organically and through acquisitions, GE’s revenues reached $27 billion in 1981. By 2007, its businesses sold a wide variety of products such as lighting, industrial equipment and vehicles, materials, and services such as the generation and transmission of electricity, and asset finance. Its divisions included GE Industrial, GE Infrastructure, GE Healthcare, GE Commercial Finance, GE Consumer Finance, and NBC Universal.2
Diane Brady, “Jack Welch: Management Evangelist,” Business Week, October 25, 2004. Available http://www.businessweek.com/magazine/content/04_43/b3905032_mz072.htm, accessed November 12, 2007. 2
http://en.wikipedia.org/wiki/General_Electric, accessed November 12, 2007.
For more than 125 years, GE was a leader in management practices, “establishing its strength with the disciplined oversight of some of the world’s most effective business people.”3 When he became chairman and CEO in 1972, Reginald Jones was the seventh man to lead General Electric since Edison. Jones focused on shifting the company’s attention to growth areas such as services, transportation, materials and natural resources, and away from electrical equipment and appliances. He implemented the concept of strategic planning at GE, creating 43 strategic business units to oversee strategic planning for its groups, divisions and departments. By 1977, in order to manage the information generated by 43 strategic plans, Jones added another management layer, sectors, on top of the strategic business units. Sectors represented high level groupings of businesses: consumer products, power systems, and technical products.4
In the 1970s, Jones was voted CEO of the Year three times by his peers, with one leading business journal dubbing him CEO of the Decade in 1979. When he retired in 1981, the Wall Street Journal proclaimed...