1. How difficult a challenge did Welch face in 1981?How effectively did he take charge?In 1981, Welch confronted the onerous task of filling the shoes of GE’sprevious CEO, “management legend” Reg Jones.
Jones had also come across problemswhen he inherited GE in 1973 because it had just completed a reorganization ofthe entire company. However, he overcame the difficulties and set highstandards, reasonably leading him to be voted CEO of the decade and CEO of theyear three times (Barlett & Wozney, 2002). Welch became CEO during arecessionary period of the US economy. With high-interestrates, a stable dollar, and the highestunemployment rates for some time, Welch had to tactically manage GE to avoid itfrom becoming another bankrupt company during a recession.
Welch’s had a clear 10-year goal ofmaking GE “the most profitable, highly diversified company on earth…” (Barlett& Wozney, 2002) This would beaccomplished by only having managers and executives who added value to thecompany; a “varsity team” (Barlett & Wozney, 2002). These individuals were dedicatedto Welch’s apparition as well as embraced and effectively lead the changes thatwere to come. Any others who opposed or did not fit the new culture were let go.
Also,Welch tested the theory that a manager should have no more than 6 or 7 directreports. He brought that number closer to 10 or 15 with his new restructuring.Aside from substantial downsizing, destaffing, and delayering, Welch sold over200 businesses and invested $21 billion in purchases of over 370 businesses(Barlett & Wozney, 2002). Welch was very vigorous at taking charge of GE after Jones. GEwas doing well during the time of the transition, but Welch knew that noteworthy change was needed to maintain theirstanding in the business world and safeguard profitability. His strategic ideasand strategic planning lead to his efficacious transition as CEO.
2. What was Welch’sobjective in the series of initiative he launched in the late 1980’s and early1990’s? What is he trying to achieve in the round of changes he put in motionin that period? Is there a logic or rationale supporting the change process? ? With all the changes made duringWelch’s initial transition to the CEO role in the early 1980’s, he believedthere remained many changes to company culture todistinguish continued high productivity amongst employees. In the late 1980’s,with the help of the Director of Management Development, James Baughman, Welch employedthe “Work-Out” process, reproducing an open forum session that he saw operative at one of his teaching visits to theManagement Development Institute. This meetingallowed GE managers to willingly express their challenges during the changesthat were taking place.
However, Welch and Baughman saw this open forum as awonderful way to engage and give employees a voice to express their opinionsand concerns regarding upcoming organizational changes. The new “Work-Out” process provided collaboration between employees and theirmanagers to find the most effective ways to work together as a team. Employeeswould form groups within their units and evaluate the challenges presentlyfacing their unit. They would work together to determine possible resolutions to ultimately be proposed to their unit boss.The bosses would then make a concluding decision in front of everyone on whichproposals would be executed in theirunit. Over two-thirds of the organization participated in the sessions, showingan overall doubled increase in productivity to 4% in the late 1980’s and early1990’s (Barlett & Wozney, 2002). During the same time that Work-Outwas being implemented, Welch rolled outthe “Best Practices” movement, headed by Business Development department leaderMichael Frazier.
Their goal was to learn what best practices and practical processes other successful companieswere using. After studying nine firmswith higher production growth than GE, Welch introduced the Best Practicesprogram in conjunction with the Work-Out teams (Barlett & Wozney, 2002). With his strong focus on buildingthe GE business in the United States, globalization was the next venture forhim to focus on. Pablo Fresco, previouslypresident of GE Europe, was hired by Welch to be head of InternationalOperations, followed by joining his corporate executive office as vice-chairmana few years later. With his track record of being a great negotiator, GEengaged in numerous acquisition opportunities that often arose with a collapsing economy, such as the collapse ofthe Mexican peso. Within five years, GE had doubled international revenues, andglobal revenues were growing at a rate of three times of domestic sales. Welch’s next focus was to grow anddevelop leaders in all areas of GE.
“Session C” was the evaluation process usedfor excellent leadership to determineareas of improvement as well as compensation. Using this same method, Welch implemented it among allprofessional-level employees in the company, allowing them to identify skills that needed development andsuccession planning. In addition to the evaluation process, Welch improved GE’scompensation packages to provide even more incentive for employees to be theirbest. The management development facilityin Crotonville was revamped to provide a place where leaders could work ondeveloping necessary skills to effectively lead and contribute to GE’s culturefollowing Welch’s vision.
For those unable to adapt and embrace these changes were let go. The “360° review” was a feedbackprocess where an employees team, including leaders and peers, would rate theirperformance in various areas such as teambuilding and vision. The initiativeslaunched by Welch were implementedbecause of their success in other organizations outside of GE. Welch’s approachwas a more team-oriented one, involvingall levels of the team to participate andwork on growing GE as a whole (Barlett & Wozney, 2002). His strategicdecisions and changes made within the organizationhad lasting effects on their success. 3. How does such a large, complexdiversified conglomerate defy the critics and continue to grow so profitably?Have Welch’s various initiatives added value? If so, how? When Welch stepped in as CEO, therewere still many changes needed to securetheir standing in the market.
With the challenges of the recession, high-interest rates, and a strong dollar, Welch saw that GE needed to be re-evaluated from a strategic point of view to face their growing competition strong. Welchfirmly believed in the value of humanresources and their impact on the success of the organization. This was provenwith the increases in revenue GE experienced after their employee andleadership development strategies. He also looked at unstable internationaleconomies as opportunities to acquire businesses that could be developed and later provide profits for GE. Critics were skeptical that GE wasmaking the right decisions in their global acquisitions.
However, Welch’sstrategies included improving the production processes and developing employeesto adopt a culture of engagement and desire for overall accomplishment. The SixSigma Quality Initiative was the program used to accomplish these goals(Barlett & Wozney, 2002). The “Fix, Sell, or Close” initiative was anotherstrategy aimed at improving existingbusinesses or eliminating them; if the businessdid not contribute to GE’s success and add value, it was not needed. With the remaining companiesat the end of the initiative, Welch would place full efforts on making them thebest in their market. Remaining businesseswere then subject to the lay-offs of thousands of workers, creating a more leanand profitable business with top contributing employees.
These employees werefurther developed with Work-Out sessions and the Best Practice movement toempower employees at all levels to have a voice and work towards a moreproductive work environment. Critics were uncertain of how these methods wouldwork since it was not typical for employees to be so involved in businessprocesses. On the contrary, Welch proved that these unconventional methods would benefit GE, with a more positive company culture, expandingbusiness ventures, and an increase in the company’s value.
4. What is yourevaluation of Welch’s approach to leading change? How important was he to GE’ssuccess? What are the implications for his replacement? When Welch took over GE as CEO, hehad a goal to lead the industry by making strategic changes in production andhuman capital. His team consisted of employees, managers, and executives whowere on board with major transformationsin the way GE conducted business. The programs and sessions he launched allcontributed to positive results such as increases in revenues and profits(Barlett & Wozney, 2002). His approach to leading was to be directlyinvolved in all areas of business, guaranteeing that his vision was being consistantly followed through. The person that will replace Welch, asCEO, will have big shoes to fill. They will needto provide the culture of open communication and the growth and development ofhuman resources. As Welch has done in the past, it would be recommendedto use proven methods and programs that will continue to engage employees andadd value to the work they do every day.
Works CitedBarlett,C. A., & Wozney, M. (2002, January 4). GE’s TwoDecade Transformation: Jack Welch’s Leadership. Harvard Business School .