1. How difficult a challenge did Welch face in 1981? How effectively did he take charge?

When Jack Welch accepted the position of CEO of GE in 1981 he faced a number of looming

challenges which firstly included taking the reins of the company following a complete

reorganization by a strong, successful predecessor. The second major challenge he faced was

the new globalized marketplace in which GE had to compete. Welch had to act fast before

GE's territory was taken over by global growth from foreign companies. The third challenge

was the beginning symptoms of a contracting economy which, by 1982, would become a deep

recession.

Jack Welch approached the first challenge of taking over from a successful predecessor by

deciding that keeping the status quo would not guarantee GE future success. He felt that GE

was to be a standard; they needed to be “better than the best”. This fierce drive to restructure

the company during the next 5 years, immediately after the organization had barely finished

their prior restructuring, also helped solve his other immediate challenge: the economy. He

effectively implemented a new strategy, “Fix, Sell, Close.” If a business could be fixed so it

could be #1 or #2 in its competing category then it was kept, otherwise the business was sold

or closed. In order to prepare for the incoming global competition, Welch decided to part ways

with 12 of his 14 previously hired business heads. The new business heads had to fit a certain

billing: “strong commitment to the new management values, a willingness to break with the old

GE culture, and most of all, an ability to take charge and bring about change."

The difference may not have shown in GE’s revenues, with only a 2 billion dollar increase

between 1981 and 1985. However, his effectiveness was demonstrated by their growth in

operating profits. This represented an increase from 1.6 billion dollars to 2.4 billion dollars in

that same period, 67% growth. His ability to take charge and break away from the old culture

would allow them to tackle the new challenges of the global marketplace.
2. What is Welch’s objective in the series of initiatives he launched in the late 1980s and

1990s? What is 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?

“Neutron Jack” Welch had aspirations of transforming GE to be the most diverse, profitable,

and innovative company in the world. He identified several essential objectives that he

considered crucial to success. The primary objective was to change the fundamental culture of

GE to one of openness, candor, and facing reality, where everyone had a voice and their ideas

and proposals got an immediate response. His new corporate vision was characterized by

speed, simplicity, and self-confidence. He also knew that he would have to cultivate leaders

that were aligned with his new vision of GE and create an environment where people could be

their best. He understood that people were his greatest resource and competitive advantage.

To execute this transformation he launched several initiatives to free the organization from its

burdensome bureaucracy and restructured the organization completely. By creating this

“boundaryless” environment, he encouraged idea creation and sharing across business units,

management levels, and geographic locations to further leverage his human capital. “You

measure your people and you take action on those that don't measure up”. There was a strong

logic and rationale supporting Welch’s change process. His objectives were not always clear,

but once they were in focus he pursued them with a relentless passion. All new initiatives had

well developed programs with detailed plans for their implementation, and comprehensive

metrics to measure success. For example, leaders were evaluated on a 360 degree feedback

process by their managers, peers, and subordinates to identify those managers that “smiled

up and kicked down”. Leaders that did not share the new company values regardless of

whether they delivered on commitments or not, were moved out. As long as you shared the

company values, you would receive additional training and were given a second chance to

make your numbers. This program eventually evolved into what Welch expressed as “A-

Players with 4 Es”. An “A-Player” was characterized as having Energy, Edge, and Execution.

Welch urged top management to take care of their best by rewarding them, promoting them,
and paying them well. Time was not wasted developing “C-Players” into “B-Players”. They

were moved out early (“vitality curve”). Welch made it clear when he exclaimed, “You got to be

rigorous in your appraisal system. The biggest cowards are managers who don't let people

know where they stand”

3. How does such a large, complex diversified conglomerate defy the critics and

continue to grow so profitably? Have Welch’s various initiatives added value? If so,

how?

Welch addressed this question from critics head-on in GE’s 1995 Annual Report by

emphasizing the company strategy to continue getting bigger with the only spin off being

“Cash – and lots of it.” A main key to GE’s sustained success was to “nurture and continuously

upgrade” their employees, specifically management. Second, he expanded the globalization

strategy to the employees and asked them to “globalize the intellect of the company.” This

strategy reinforced his prior initiative of “boundaryless” behavior.

GE’s top line growth over Welch’s two decades of leadership was $102.6 billion or 377%

(Exhibit 5). More importantly, he was able to grow the business effectively by increasing

operating profits $171.8 billion or 702%. Unsurprisingly, the growth between 1990 and 2000

was more than three times greater than the amount seen between 1981 and 1990. His change

in direction to focus on people initiatives (i.e. Best Practices, Work Out, Leadership

Development, & Stretch Goals) during his second decade is implicitly seen in these results.

Another way to look at this is the sales generated by each employee which rose from $67,000

in 1981 to $415,000 in 2000, a 515% increase.

There were three other business initiatives that drove significant results for the organization.

The first was globalization. In reference to Exhibit 6, the international business experienced a

15% average annual growth rate between 1987 and 1998. This accounted for $42.8 billion in

revenues during 1998, “almost double the level just five years earlier.” The second was the

focus on driving the service business. In 1980, services were only 15% of revenues. The

forecast for 2000 saw the service business making up 75% of total revenues (Exhibit 9). This

positively affected the company’s profitability, making up almost 60% of profits in 1995. The

third was the implementation of six sigma processes. While there was an initial investment of
$500 million to train all employees, GE forecasted incremental returns of $1.5 billion in 1999

(Exhibit 11)

4. What is your evaluation of Welch’s approach to leading change? How important is he

to GE’s success? What implications are here for his replacement?

Jack Welch’s style toward leading organizational change was highly influential and motivating

to his team and to those familiar with this case. His relentless passion, adaptability, and

unquestioned commitment toward making GE better than the best was the center of his drive

toward leading positive change. Succeeding the great business leader, Reg Jones, despite a

looming economic downturn, in 1981 Welch took charge of a prosperous and somewhat blithe

General Electric. However, this did not prevent him from recognizing the need for and

commanding immediate radical change in order to not only sustain, but to pave the way for

GE’s boundless success. Coupling these circumstances with the fact that Welch’s methods

ignored fair process, he initially faced a great amount of resistance. Nonetheless, Welch’s

contagious attitude and unflinching confidence to build a better GE overcame this and his

influence stretched beyond the gigantic and vastly diversified conglomerate.

Throughout the first phase and during the first decade of his leadership, Welch focused his

energy on breaking the system and streamlining GE. From 1981 to 1988 he not only cut more

than 100,000 jobs, he also challenged the company’s business models and future focuses all

while initially failing to involve others, provide explanations, or clarify expectations. This first

phase of the change he brought was instrumental to GE’s success and prevented it from

wasting valuable resources on employees that were not stars, did not have the desire to

compete, or had values differing from that of GE’s. Once he felt he had the A-Players in place,

it was around 1989 he began reshaping the culture and developing many of the programs that

are still in practice today. Although Jack always seemed to recognize the value in human

capital by retaining good people and by eliminating the deadwood within the company,
contradictory to his leadership style exercised in the first phase, he embraced open

communication and advanced techniques to achieve commitment by aligning employee goals

with company targets through use of a human resource system. He emphasized the

importance of creativity and innovation versus objectives being results driven. This was

accomplished by fostering an atmosphere in that failure was not a catastrophic event.

Although his focus may have shifted, Jack remained a powerhouse never letting up and never

becoming comfortable in all of the great successes he and his team shared. Because he was

a steward leader, he continually made efforts to improve and wholeheartedly believed that his

work, as well as the evolution of GE was continually changing and could never be entirely

fulfilled.

Similar to Jack himself, and arguably to a higher degree, his replacement confronts colossal

barriers in building upon and extending the direction of General Electric. Upon Welch’s

retirement, stakeholders naturally shared a deep concern about the financial well-being and

long-term security of GE. It is important to acknowledge the principle that Jack Welch was not

successful by merely following the models of Reg Jones or by conducting business as usual.

He invented his own vision and in by doing so he renewed GE to become more. Mr. Welch

passionately challenged every person at GE to add value each day. Leading a company into

ultimate and perpetual success using someone else’s model and vision is possibly even more

difficult. For GE’s new CEO to be a transformative leader he must place his own fingerprint on

the organization and continuing to harness and advance human capital.

GE’s Two Decade Transformation
1. )How difficult a challenge did Welch face in 1981? How
effectively did he take charge?
- Mychal Upon coming onboard with GE, Jack Welsh accepted an enormous
uphill battle of completely restructuring such a huge and vastly
industrially diversified conglomerate. Not only in recognizing the
paramount importance for drastic organizational change in how GE
conducted its business, but systematically carrying out detailed
approaches to build value and make GE more competitive and profitable
for the future was a tremendous undertaking.
To compound difficulties, former CEO, Reg Jones passed the torch to Welch
during trying economic times for the U. S. Welsh wasted no time in
challenging each of GE’s divisions, departments, and SBU’s to be “better
than the best”. This mindset shook GE and challenged its employees with
gaining the competitive advantage through creativity and innovation. Like
any leader, Jack Welsh experience resistance to the changes he imposed;
however, his vision was clear and resolute. Between 1981 and 1989 he
eliminated over 100,000 positions within GE.
In addition, he made decisions to rid GE from negativity by eliminating
100 people and cutting the strategic planning staff group in-half. This
decision was made to help reinforce how critical it was to have a positive
attitude going forward. These difficult decisions transformed the
company’s functionality and as a result productivity rose 2% annually,
revenues increased, and profits nearly doubled. His relentless push for a
better GE continued as he began even challenging scopes of control, other
business models, and organizational efficiency theories.
•High interest rates, unemployment – challenging economy (unfavorable
exchange rates) •Global competition, particularly Japanese •Came in after
complete reorg (strategic planning) and following strong leader •Coming
in after strong leader arguably harder than coming in with a complete
opportunity to revamp •He addressed the company through #1 & #2 “Fix,
Sell, or Close” Strategy oInitial attempts in recessionary economy led to
close oAlso made strategic (and a lot) of acquisitions •He addressed the
people/structure through “lean & agile” through destaffing process
oEliminating layers & bureaucracy oUsed a highly disciplined, somewhat
“hard”, approach oInitial attempt and communication style was awkward
and not well received.
Eventually abandoned GE Business Engine name to GE Social Architecture
•Relentless to sticking to HIS strategy ? no “fair process” in terms of
human capital •Neutron Jack •Obsessive about what he wanted, 1
dimensional •Did what he felt was necessary to maintain business results
in recession, but the “flattening”/”breaking of the structure” had a
significant impact on morale & managerial overwork lending to his name
Neutron Jack

2.) What is Welch’s objective in the series of initiatives he

launched in the late 1980s and 1990s? What is 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?
- Tim “Neutron Jack”. Welsh had aspirations of transforming GE to be the
most diverse, profitable, and innovative company in the world, and
identified several fundamental objectives that he considered crucial to
success.
The primary objective was to change the fundamental culture of GE to the
culture of a small company, where everyone had a voice and their ideas
and proposals got an immediate response. He also knew that he would
have to cultivate leaders that were aligned with his new vision of GE and
create an environment where people could be their best. He understood
that people were his greatest resource and competitive advantage. To
achieve this he launched several initiatives to free the organization from
bureaucracy and restructured the organization entirely.
“If you don’t have a competitive advantage, don’t compete. ” Welsh
realized that in order to achieve his vision he would have to tear down GE
to its core competencies. Only businesses that were “#1 or #2” in their
market would be retained. All other businesses would be sold or ultimately
closed, “fix, sell, or close”. This restructuring built a base that would
enable solid increases in revenues and profit. Once a firm domestic
foundation was in place, Welch new he would need to expand global
operations to compete on the world stage, and in fast growing emerging
markets.
He also knew he could not achieve his goals by depending on just the
revenue from GE’s traditional industrial products alone; he would need to
grow the more profitable services business. “You measure your people and
you take action on those that don't measure up”. There was a strong logic
and rationale supporting Welsh’s change process. His objectives were not
always crystal clear, but once they were well defined he pursued them
with a relentless passion. All new initiatives had well developed programs
with detailed plans for their implementation and comprehensive metrics
to measure success.
After positioning the corporation for success by streamlining GE, he was
restless, insatiable, and was absolutely unyielding in making GE better—A
true capitalist. He launched several initiatives in the late ‘80s and ‘90s
that he believed would achieve global success across a multitude of GE’s
divisions. Furthermore, he knew that to devise and execute these plans it
would require a strong and motivated team. He shifted his focus on
transitioning into a more collaborative and efficient organizational culture.
Welsh fostered creativity and championed excellence.
He strongly held the notion that the employees of GE were the key to the
business’ success. He rolled out creative methods for identifying whether
an employee shared GE values such as the 360 approach—“Smile up and
Kick down. ” While building an extremely competitive work atmosphere
while fostering an open and trusting environment. There is strong
evidence substantiating this style of management across manufacturing,
service, and knowledge based industries is prevalent in this case and
others.
•Metric based culture/system
•Wanted to transform GE into the most profitable, energetic,
entrepreneurial business in the world with the best leadership operating a
diversified portfolio of business •Internationalization (topline sales) &
Service Business (drove profits) •Change the fundamental culture of GE to
the culture of a small company where everyone had a voice and their
ideas and proposals got an immediate response •Developing Leaders –
Cultivate leaders that were aligned with the new GE culture •Create an
environment where people could be their best
•Boundaryless Behavior – demolish the silos separating engineering,
manufacturing, marketing, etc. •Stretch – Trying to inspire people to think
of creative ways to increase productivity •Work-Out & Best Practices
•Trying to achieve: #1 or #2 in the world, rebuild on more solid
foundations, environment where people can be their best & only the best
are “welcomed” per se (openness, fairness, allow creativity, followed by
compensation & promotion for those exemplifying those traits)
•Logic/Rationale to Change Process: Rapid Change - Failure did not stall
moving forward.
No standard process, never had a full vision, but when he went after it
(immediacy & impulsion), he went after it relentlessly & then set up a
program with defined metrics for how “success” could be measured. If a
program didn’t measure to success, he got rid of it. He had a
psychological shift with the culture from “lifetime contract” to the best
jobs go to those who will compete ?
3. )How does such a large, complex diversified conglomerate defy
the critics and continue to grow so profitably? Have Welch’s
various initiatives added value? If so, how?
- Whitney Against great odds Welsh was able to conquer huge barriers and
overcome doubt and resistance within GE as well as externally of the
manufacturing giant. The initiatives that Jack Welsh put into motion in no
inarguably saved the company from economically troubling times, but also
dramatically shaped GE for what it is today. Welsh was successful because
he challenged everything and everyone to be better. And did this by
evoking simple yet radical changes to the fundamental aspects of how GE
does business such as planning, budgeting, and breaking hierarchical
order.
Furthermore, he served the people of GE and held them accountable to be
the very best by adding value. •Innovating & reinvention. Move quickly
and able to manage change effectively. •General skills with ability to pivot
quickly and move throughout the organization (boudaryless) •He set up a
culture where they could employ the best and then empower them to be
better •Benchmarking for success & diversification (open environment
allowed GE to bring in other companies) Used their size to an advantage.
Shared “Best Practices”. On both sides of the equation •Change criteria to
reward idea seeking & sharing •Look at Sales Growth, etc
•Internationalization: 15% vs 6% for domestic (Avg Annual Growth Rate) •
4. )What is your evaluation of Welch’s approach to leading
change? How important is he to GE’s success? What implications
are here for his replacement?
- Kevin Welsh’s style was extraordinary influential and highly motivating to
his team.
His contagious attitude and unflinching confidence to building a better GE
was extraordinarily powerful and absolutely crucial to the organizational
change he led. Jack Welsh was a powerhouse never letting up and never
becoming comfortable in all of the great work he and his team had
accomplished. He continually made efforts to improve and wholeheartedly
believed that his work, as well as the evolution of GE was continually
changing and could never be entirely fulfilled. I find his attitude,
commitment, and methods to be incredibly inspiring.
Similar to Jack himself and arguably to a higher degree, his replacement
confronts colossal barriers in building upon and extending the direction of
General Electric. Upon his retirement, stakeholders naturally shared a
deep concern about the financial well-being and long-term security of GE.
Leading a company into ultimate and perpetual success using someone
else’s model and vision is possibly even more challenging than inventing
an original direction because things can feel imitated and even apathetic.
•1st decade break the system, 2nd decade rebuild on foundations oFair
process missed at the beginning, morale loss, Neutron Jack o2nd decade
focused on building the RIGHT people (A Players), he embraced open
communication and found ways to achieve commitment by tying human
resource system to their goals. Recognized the value of human capital
•(Exemplifying the 4E’s) His ability to pivot/adapt his style as a leader
allowed him to be successful in this endeavor. Also, his relentless passion,
impulsiveness, and service (Steward vs Agent) to the organization attitude
let him lead change and drive through results.
Failure was not a bad thing, if it was, that would kill creativity (a pillar
important to Welch) •If he did not address the morale challenges, he may
be in a similar situation as GM or US Steel. •The new leader has to use
self-assessment to understand if the current culture matches their
purpose (the why? ) if it does, run with what’s in front of you while making
improvements and putting your own “fingerprint” on it, if not, the
company must change to continue driving success (people buy the why,
not the what or how) ? power of transformative leaders

1. How difficult a challenge did Welch face in 1981? How

effectively did he take charge?

Welch faced internal challenges e.g. high pressure as he

superseded a strong, successful, almost legendary
predecessor. GE was a large, diversified business with 43
SBUs was very bureaucratic, hierarchical and thus,
unresponsive and slow. In addition, he was exposed to
external threats like the U.S. economic recession, high
interest rates, and a strong dollar. These worsened GE’s
growth opportunities and increased the unemployment rate
which led to lower consumer spending. Competition
increased drastically as global, especially Japanese,
competitors engaged in the fight for market share.
To tackle the challenges, Welch took charge and created a
sense of urgency by signaling the need for large
restructuring. He categorized businesses into core, high-
technology, and service, providing each type with an overall
strategy or objective. Businesses being #1 or #2 in the
industry were kept, otherwise, GE disengaged. GE divested
from 200 uncompetitive businesses and reduced the
workforce to 292 000 workers despite 370 SBUs
acquisitions. Internally, he focused to make GE lean and
more agile by streamlining its processes, downsizing and
delayering. Welch abolished the strategic planning system,
launched real-time planning and cut the complicated
strategy planning to 5-page strategy playbooks. Budgeting
now focused on external competitive criteria (MaSh growth).
He reduced hierarchical levels, increased the number of
direct reports and initiated direct reporting of every SBU to
himself. He changed the culture and norms by replacing the
management team with individuals committed to new values
and the will to change the old GE culture.

Welch’s initial actions increased profits and productivity

while setting the stage for future changes and initiatives at
GE.

2. What was Welch’s objective in the series of initiatives he

launched in the late 1980s and early 1990s? What was he
trying to achieve in the round of changes he put in motion in
that period?

Welch throve to leverage the newly set foundation from

restructuring to create a culture that...