Ge’s Two-Decade Transformation

Topics: Six Sigma, General Electric Pages: 5 (1859 words) Published: April 29, 2012
Ge's Two Decades Transformation
GE’S Two-Decade Transformation
1.How difficult a challenge did Welch face in 1981? How effectively did he take charge? When Jack Welch assumed as CEO of GE in April 1981, he had the challenge of revitalizing the competitiveness and productive competency of the company. In 1981 the economy was in a recession and high unemployment combined with high interest rates exacerbated GE’s problems. GE needed to be restructured and this entailed the modernization and streamlining of operations, downsizing the organization, reduction of payrolls and stringent efficiency measures. Welch Early Priorities: GE’s Restructuring

1 or 2: Fix, Sell or Close
Each business needed to be 1 or 2 competitor in industry. It had to be a broad strategy because it was a broad corporation. Circle Vision: 
Services (acquisition), 
Technology (leading edge), Core (re-invest in productivity)
Support, Outside, Ventures. Internally wanted company “lean and agile,” chip away bureaucracy example laborious strategic planning system or budgeting process (targeted towards competitors), reducing hierarchical levels from 9 to 4 ensured all business reported directly to him Downsizing, de-staffing, de-layering 123,000 staff cut, operating profits rose dramatically, and set base for strong increase in sales and earnings for second half of decade (exhibit 5) Replace 12 of 14 business heads, called “Varsity Team,” all strong commitment to new management values, and willingness to break old culture, and ability to take charge and bring change.

2. What was Welch’s objective in the series of initiatives he launched in the late 1980’s and early 1990’s? What was he trying to achieve in the round of changes he put in motion in that period? Is there a logic or rationale supporting the change process? In the late 1980’s GE’s restructuring was complete. But still culture shock and management exhaustion where common. GE needed more solid foundations
. A series of “Software” initiatives where implemented. These software changes led to cultural change. Welch wanted to create a culture of small company
. Forums where created for employees to speak their minds and get immediate response
. He designed a process ride of unnecessary bureaucratic work out of system
. 24 outside consultants were hired and productivity increased after reinventing a company-wide program
 similar to New England town meetings. In order to increase productivity, Welch studied other firms
 and focused on developing effective processes rather than controlling individual activities. Customer satisfaction was GE’s main gauge of performance. Suppliers were treated as partners, and there was an emphasis in the need for constant stream of high quality products designed for efficient manufacturing. Going Global
- During early-mid 1980s, this initiative was left on back burner
. Welch did not want to impose corporate globalization on the corporation, but allowed each business to decide
. However, in the late 1980’s he looked at ranking 1# or 2# on global level
. An ongoing effort was launched
. For example, during Mexico downturn, w/in 6 months GE bought 16 companies, positioned for country’s rapid recovery. This same strategy was implemented for Asia
. GE’s 1998 international revenues were $42.5B (doubled in 5 yrs) Developing Leaders
. Welch embarked in a huge task of realigning skill set and mindset of 290,000 employees
. Many of which felt overworked and there was a residual distrust left from layoffs
. Welch wanted to change focus outwardly to competition. He wanted staff willing to compete and in exchange get professional opportunities. He made a commitment to developing people
. He adapted GE’s human resources system to fit his goals. Overhauled GEs compensation package, stock options became primary component of management compensation and expand stock option from 300 to 30,000 people (more aggressive bonus awards)
- Create environment in which people could...
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