GE’s Two decades of Transformation under Jack Welch”.

Ganesh Ram
Kiran
Priyambad
Richa
Shiva
 GE Heritage
 Started in 1878 with focus on generation, distribution
and use of electric power.
 Expanded into power generation, household
appliances, and lighting.
 In 1978 engaged in diverse aircraft engines, medical
systems, and diesel locomotives.
 Leading edge of management practice
 Reg Jones CEO in 1973, was good at strategic
planning, started SBU-based structure and completed
a major reorganization process.
 Challenges Faced by Jack Welch

• Economy in recession, high unemployment, high

interest rates
• Revitalizing the competitiveness and productive
competency of the company .
• Modernization and streamlining of operations
• Downsizing the organization .
• Reduction of payrolls and stringent
efficiency measures .
 Welch’s line of attack

 Establishing a sense of urgency.

 Forming a powerful guiding coalition.
 Creating and Communicating the vision and
Empowering others to act on vision.
 Planning for and creating short-term wins.
 Consolidating improvements and producing still
more change
Early 80’s radical restructuring
 He wanted all his business to be either 1 or 2
competitor in business and followed Fix, Sell or
Close options.
 Generated Cash of $11 billion by selling 200
business and acquired 370 companies
 Three Circle Concept : Core, High technology and
Servics.
Early 80’s radical restructuring
 Implemented “lean and agile,”policy to chip away
bureaucracy and scrapped strategic planning system
or budgeting process
 Reduced hierarchical levels from 9 to 4 and ensured
all business reported directly to him .
 Through downsizing, de-staffing and de-layering
eliminated 123,000 staff which dramatically increased,
operating profits.
 Replaced 12 of 14 business heads and appointed a new
management , called “Varsity Team,”
 Late 80’s: Second Stage
 Believed high productivity cant be sustained without culture
change .
 Created a culture of small company where employees could

speak their mind and get immediate responses to their ideas

and Proposals.
 Focused on developing effective processes controlling

individual activities
 Customer satisfaction was their main priority.

 Treated suppliers as partners and emphasized for constant

stream of high quality products for efficient manufacturing

Late 80’s: Second Stage
 Globalization was an ongoing process.
 During Mexico downturn, GE bought 16
companies to participate in country’s rapid
recovery.
 In1998 international revenues were $42.5Billion
double the level of last 5 yrs.
 Developing Leaders

Stock options became primary component of

compensation.
 Changed focus outwardly to competition

Paid close tabs on upper 500 executives.

 Introduced 360 feedback process.

 Top level managers were rated on performance plus how

the “lived” GE values.

Focused on developing people and creating an

environment where they can perform best.

1990’s: The Third Wave
 Quickly learn from each other, “integration model,”
 Stretch” to set performance targets but traditional
forecasting was not replaced. Increased operating
margins from 91’ to 95’ 10% to 15%.
 Reduced GE dependence on traditional industrial
products.
 Initiated an initial tilt towards service business,
acquisition of financial service companies. 1997 GE
made 20 service-related acquisitions and joint ventures
 Believed in “turning the pyramid upside down”
Closing Out the Decade: Welch’s Final Chapter

 Learned from Motorola Six Sigma quality program

which improves quality, lowers costs, and increases
productivity. The Six Sigma was not optional as
40% was tied to individual Six Sigma objectives.
 Getting into E-business.
Welch’s Role
 Welch has been credited for the success of GE
during his tenure as CEO.
 Under his management GE was considered not
only as an industry leader but also became a model
for other companies.
 Critics point out that the degree of success of the
measures was distorted since Welch would often
opt to sell or to shut down operations when
outcomes did not suit his measures .