GENERAL ELECTRIC’S TWO-DECADE TRANSFORMATION CASE STUDY 1

General Electric’s Two-Decade Transformation Case Study

Bryan Stone

National Graduate School

QMS381

January 21, 2017

GENERAL ELECTRIC’S TWO-DECADE TRANSFORMATION CASE STUDY 2

Abstract

For week 3 of QMS381, we were to read the Harvard Business School case study by Bartlett and

Wozny’s “GE’s Two-Decade Transformation: Jack Welch’s Leadership.” The case study

encapsulates the twenty-year reign of Jack Welch’s tenure at GE as CEO. The following

questions focus on the changes that Jack Welch felt was necessary to support his vision.
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General Electric’s Two-Decade Transformation Case Study

1. Describe the environment (external and internal) for GE when Jack Welch became CEO.

Jack Welch became the CEO of GE April 1981. His predecessor, Reg Jones was renown

for his strategic planning prowess. Having already gone through re-organization, Reg Jones had

developed a strategic planning infrastructure that required a small army of macro-managers to

shoulder the review burden. The number of business units at the time was 43, which contained

10 groups, 46 divisions, and 190 departments.

In addition to his strategic planning model, Reg Jones spent much of his time on

government relations. Earning him accolades such as CEO of the Year by his peers and CEO of

the Decade by a leading business journal. The Wall Street Journal regarded Reg Jones as “a

management legend” being “replaced by a live wire.”

2. What was Jack Welch’s Vision for GE, and how did he direct the business focus?

Jack Welch took over GE while the U.S. economy was in the middle of a recession.

Welch set the standard for each business to become the #1 or #2 competitor in its industry – or to

disengage. As time progressed, Welch adopted aggressive de-staffing processes to become more

lean and agile. He drove-out middle management sectors that was the nerve center for strategic

control.

Welch chipped away at the bureaucracy and the red-tape followed by the entire strategic

planning system. Through disciplined downsizing, destaffing, and delayering, GE eliminated

nearly 292,000 positions in 9 years. His business focus became less on the internal comparisons

and past performance and more focused against external competitively based criteria.
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Welch’s vision was for GE to be perceived as a unique, high-spirited, entrepreneurial

enterprise. . . the most profitable, highly diversified company on earth, with word leadership in

every one of its product lines.

3. What core processes did Welch streamline in the beginning of the GE turnaround?

The core processes that Welch streamlined in the beginning the GE turnaround was the

strategic planning system processes. Coupled with the dramatic delayering of the companies,

Welch replaced the laborious strategic planning system with “real time planning.”

Real time planning was built around a short five-page playbook for each of the

companies. Each playbook provided one page simple answers to market dynamics, the

competitors’ key recent activities, the GE business response, the greatest competitive threat over

the next three years, and the GE business planned response.

4. How did Welch bring about cultural change?

Welch recognized that he needed to break the old GE culture. In the early and mid

1980s, Welch performed a wide sweep business heads and replaced 12 of 14 of them who didn’t

show a strong commitment to the new management values earning him the nickname “Neutron

Jack”. Welch’s new management team was poised to bring about change in the organization.

For Welch, the idea was not to bring in change incrementally but rather all at once in a big heap.
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5. Describe boundary-less behavior as it applies to GE. How would this work in your current

environment?

As part of Welch’s vision entering into the 1990s, was to bring about integrated diversity.

Welch describes his vision for GE as a “boundary-less” company, characterized by an “open,

anti-parochial environment, friendly toward the seeking and sharing of new ideas, regardless of

their origin”.

The basic premise of the concept is that a company ignores the barriers among

engineering, manufacturing, marketing, sales, and customer service. There is no distinction

between foreign and domestic operators. The concept ignores and erases groups such as

management, salaried, and hourly that get in the way of people working together.

I believe this concept would work very well in my environment. As a quality manager,

part of my job is to perform audits and reviews. Removing the label and working as a team all

with the same goal of finding and eliminating waste and variation sounds good to me.

6. Why did Welch choose the Six Sigma initiative? How did he drive it to success?

It need not be said that Welch was a driven individual. In 1995, a company survey

showed that GE employees were dissatisfied with the quality of products and processes. Despite

recovering from triple bypass surgery, Welch was more determined than ever to improve

performance and find new initiatives.

Welch was introduced to the Six Sigma quality program from a friend who was also the

CEO of AlliedSignal Inc. Welch learned about the benefits of Six Sigma and how the tools can

help dramatically improve quality, lower costs, and increase productivity. Welch reported the

AlliedSignal program at the next Corporate Executive Council and won rave reviews.
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Welch choose the Six Sigma initiative after learning that GE was currently operating at

ten thousand times the quality level of the six sigma quality level of 3.4 defects per billion

operations. As a result of the gap analysis, it was estimated that $8 billion to $12 billion a year

was being lost due to inefficiencies and lost productivity.

Welch drove the Six Sigma program to success by heavily investing in Six Sigma

training for GE employees to become Greenbelts, Blackbelts, and Master Blackbelts.

Participation in the Six Sigma program was not optional. Welch tied 40% of bonuses to

individuals Six Sigma objectives.

Synopsis

Jack Welch appears to have been a very driven man. His relentless pursuit to transform a

giant corporation like GE was (in my opinion) swift and ruthless earning him the appropriate

nickname of “Neutron Jack”. His vision was clear, his objectives cut deep into the corporate

bone. Anybody who was left who didn’t share the vision was replaced with someone else that

did. Earnings tripled, profits increased, GE was re-invented. I was left wondering if his vision

served the benefits of stakeholders more so than to serve the benefit of the customer…
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References

Harvard Business School (2005) GE’s Two-Decade Transformation: Jack Welch’s Leadership.

[Case Study]. Boston, MA:

Christopher A. Bartlett, Meg Wozny