Jack Welch and Transformational Leadership

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Introduction

In 1981, 45-year-old Jack Welch became the eighth and youngest CEO in General Electric’s history. During his 20 years at the helm, Welch transformed the company from an aging industrial manufacturer into one of the world’s most competitive organisations, by building more shareholder wealth than any corporate chief in history. Time and again he reinvented the company, and time and again, his employees went along with it (Krames, 2002).

The paradigm of transformational leadership is useful in analysing how he was able to accomplish this (Dubrin, Dalglish & Miller, 2006). It is also useful in identifying the personal characteristics, the leader and follower values and the situational factors that contributed to his success.

This paper will analyse Welch’s leadership of GE using the framework of transformational leadership. Conclusions will be drawn regarding Welch’s leader behaviour and effectiveness, taking into account the situation, the nature of the followers, Welch’s values and the international and cultural context.

Jack Welch

Welch performed a number of leadership roles that contributed to his achievements as CEO. Gardner (1989, as cited in Dalglish & Evans, 2005 ) identifies nine main tasks of leadership: envisioning goals, affirming values, motivating, managing, achieving workable unity, explaining, serving as a symbol, representing the group and renewing.

When Welch took over at GE, corporate America revered large bureaucracies as critical for close monitoring of personnel and it had placed great faith in a command-and-control management system (Slater, 2003). Although GE was regarded by many as a model organisation, Welch recognised that new global competition and poor economic conditions had changed the game. He set about transforming and reinventing the company from top to bottom, with a goal to make GE “the world’s most competitive enterprise” (Krames, 2002).

One of his first steps was to envision goals. In September 1981, in an internal GE publication, Welch articulated the corporate strategy that each division would be number one or number two in their industry, and that GE would remain lean, agile and able to respond to changes in its environment. In his first decade of leadership, GE pursued these strategies as it divested hundreds of businesses, removed layers of management and laid off more than 150,000 workers. By 1989, 12 out of 14 GE units were leading their markets both in the U.S. and abroad (Atwater & Atwater, 1994).

Welch referred to these years as his ‘hardware phase’. Although this period boosted GE’s bottom line, it also disconcerted many employees. Having almost achieved the position he had envisioned in 1981, Welch then set about developing a strategy that would allow GE to remain successful and continue growing. To do this, Welch believed that the focus had to shift to the people side of the organisation, and embarked on a period of renewal that he called the ‘software phase. According to Atwater & Atwater (1994), the strategic objectives he presented were twofold: a companywide drive to identify and eliminate unproductive work, and transforming the attitudes of employees to encourage creativity and feelings of ownership and self-worth.

Both objectives sough to motivate employees; the first, by removing frustrating obstacles, such as bureaucracy and hierarchy that forced people to focus inward on the organisation, killing the company’s competitive spirit (Atwater & Atwater, 1994), and the second, by creating employees who would be able to deal with the challenges of global diversity and opportunity.

In pursuing these objectives, Welch spent a great deal of time affirming values. While they were never completely rewritten, Welch and GE revised the values every few years to encompass the latest ideas and initiatives. By the late 1990s the values included the key beliefs at the core of Welch’s revitalisation of the company. Having excellence and...
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