GE case study Group 6 Group members 31. Madhav Malpani 32. Girish Mani 33. Harshal Mehta 34.

Krunal Mendpara 35. Rohit Menon 36. Minal Nair

Q1.Introduction .How difficult a challenge did welch face in 1981?How effectively did he take charge Ans: The case talks about the transformational leadership of Jack Welch as he became the CEO of GE in 1981.He inherited an organisation which was very bureaucratic and was among the biggest company in the world in terms of the turnover and manpower. The earlier CEO Reg Jones was a legend and there were huge expectations from Welch as he took over. Throughout the span of 20 years as CEO Welch takes GE to pinnacle of success by bringing in revolutionary reforms and proper restructuring of the organisation The problems faced by Welch in 1981: The US economy was in a recession with high interest rates and a strong dollar resulting in the countrys highest unemployment rates since the depression Lot of Bureaucracy in the organisation There were lot of businesses which were not performing well The culture in GE was not open and transparent .It was filled with complex hierarchies

Welch effectively took charge as he became CEO and instantly brought revolutionary changes in the organisation like: 1.Getting rid of bureaucracy :He reduced the number of hierarchical levels from nine to as few as four ,He ensured that all businesses reported directly to him 2.Made GE a Lean and Agile organisation: Through downsizing, destaffing and delayering he eliminated 59,290 salaried and 64,160 hourly positions between 1981 and 1988 3.Be #1 or #2:He wanted the company to be no.1 or no. 2 in all businesses so all businesses which were not doing well were either fixed or sold off .This made them focus their energy and resources on their highly profitable businesses and also acquired new potential businesses 4.Introduced new initiatives and innovative practices in the organisation: Initiatives like work out and best practices,boundaryless behaviour,going global etc he kept the organisation updated with the times and created a culture of constant improvement and being the best .The only way to survive in the organisation was through competitive spirit So Welch was able to bring a great culture at GE having strong values and striving towards perfection all the time. He made a truly global organisation which was creating a lot of value for all stakeholders

2) What is Welchs objective in the series of initiatives he launched in the late 1980s and early 1990s? What is he trying to achieve? Is there logic or rationale supporting the change process? If so, what is it? Ans-In the first cycle (from early 1980s to late 1980s) he focused GE on the elimination of variety in its portfolio of businesses by reducing the nonperforming businesses. He launched the #1 or #2 approach. The central idea that guided GEs business decisions was that those business areas that intended to compete in global markets must either be or become numberone or number-two in their market places. Those businesses that had no chance of attaining

this goal were to be fixed, either sold or closed. During this stage almost 200 businesses were sold off and more than 370 acquisitions were achieved. The rationale behind managing the portfolio of businesses was to ensure that GE would make the best use of its capital for appropriate investments. To strengthen this measure, Welch eliminated the sector level, ensuring that all businesses reported directly to him. He said, We used to go from CEO to sectors to groups to businesses, now we go from the CEO to businesses. Then he had started some two initiatives like, Work-Out and Best Practices were launched aimed at creating culture where everyone was same in the organization. Work-Out is a forum where employees could give their ideas on how to run the business more effectively and get immediate responses from the managers. This tool was used to assure quick decision-making based on the consideration and analysis of the ideas of all involved people from all levels. Welch also initiated the culture of following Best Practices by learning from other companies with higher productivity. Meanwhile, he launched a global strategic initiative, enabling GE to continue expand globally and generate almost half of its total revenue internationally by 1998. In addition, its international operations has been grown at over twice as fast as domestic businesses, which enabled GE to experience overall double digit revenue growth in the years to come. Also Welch focussed on realigning the skill sets and mindsets of companys employees with new strategic and organizational directives. He created a performance oriented culture with incentives such as stock options, bonuses and through management training at GEs Crotonville management development facility. Welch also focussed on imbibing open and participative values in the organization by weeding out managers who didnt comp ly with these values. In the early 1990s, Welch focussed on creating a boundaryless company i.e. friendly to seeking and sharing of new ideas regardless of their origins. This removed the barrier between different departments which could get in the way of people working together. Also Welch focussed on boosting service businesses to reduce GEs dependence on traditional industrial products. Q3.How well did Welchs leadership style fit the context? Jack Welch was a transformational leader who had great skills at inspiring and motivating others. He also possessed an ability to get things done relentlessly and take quick and decisive action. For a company which was bureaucratic and hierarchical like GE, Jack Welch was the perfect leader to bring about change and improve competitiveness. Also, having gone through the ranks at GE to reach the CEOs seat, Welch had the knowledge of what needs change and how to bring about that change. So, a combination of both the trait theory and the behavior theory can be seen here. Welch had the inherent qualities of a leader and also learned it to make it work in the context of GE. This also helped him to create a program to develop future leaders. Jack Welch also articulated his vision and the cultural change that was required very well. He used a supportive and participative style of leading where employees were given lots of

opportunities to be creative and stretch their limits. He was also achievement-oriented because he kept very high goals for the organization to achieve. This made the employees strive hard for achieving these goals and helped GE reach its potential. He was very charismatic and also built his team of managers who shared his vision of GE. He also built trust among his employees by invoking them in the business processes at GE. For sweeping organizational change like the one that GE required at the start of his tenure, he was the right match to drive the businesses to increased competitiveness and profits.

Q4. How does such a large, complex, diversified conglomerate continue to grow so profitably? Have Welchs various initiatives added value? If so how? Ans:GE continues to grow profitably due to lesser bureaucracy and flat structure in the organization. There are best of the practices followed for constant improvement in the organization. Strong culture and values makes GE highly productive.GE becomes more lean and agile under welch which is easier to manage. His undertook several initiatives: 1) Be No.1 or No.2 His strategy was to fix, sell or close. Between 1981 and 1990, GE freed up over $11billion of capital by selling off more than 200 businesses. The company made over 370 acquisitions totaling $21 billion. He insisted that GE should become more lean and agile. He reduced number of hierarchical levels from nine to four so as to ensure that all businesses reported directly to him. 2) Work out and Best Practices He acknowledged that a company can boost productivity by restructuring, removing bureaucracy and downsizing, but it cannot sustain high productivity without cultural change. He introduced Work Out and Best Practices in which his objective was to get unnecessary bureaucratic work out of the system while providing a forum in which the employees and their bosses could work out new ways of dealing with each other 3) Going Global As rightly said that Its very difficult to jump into the world arena if you dont have a solid base at home. Taking the advantage of Europes economic downturn, GE invested $17.5 billion then in 1995 in mexico and then in 1997-98 in Asia. In Japan alone company spent $ 15 billion. As a result by 1998 international revenues were $ 42.8 billionalmost doubled in just 5 years. 4) Developing Leaders He was of the vision to develop a generation of leaders aligned to GEs new vision and cultural norms. Leaders can be characterized in 4 ways:

One who delivers on commitments and shares the value of the company. One who does not meet our commitment and does not share our value. One who misses commitment but shares value. Last one is most difficult to handle who delivers on commitment, makes all the numbers but does not share the value. Welch was prepared to take action on Type 4. He saysI own the people,you just rent them

5) Boundaryless Behaviour He focused on integrated diversity .He created a company characterized by an open, anti-parochial environment, friendly toward the seeking and sharing of new ideas, regardless of their origins It will ignore or erase group labels such as management salaried or hourly which get in the way of people working together. Also if a person is turf oriented , self centered, doesnt share with people and are not searching for ideas then he has no place in GE. Welchs was of the opinion that awards should be rewarded to people who are seeking the ideas and sharing them and just idea creators. 6) Stretch: Achieving the impossible Strech goals were an established part of GEs culture. People started liking problem solving and wanted to the next level. Thats becoming a bigger drive for the company than work out. Also no punishment if the person fails to meet the stretched commitments 7) Service Businesses According to Welch, oppurtunity for growth in product services was unlimited. Earlier businesses were seen as pyramid with base as the product and other elementsservicing, manufacturing and information resting on the base. But now the pyramid is turned upside down. The biggest growth oppurtunity may come from providing services to the customer. By 1996, GE had built an $8 billion equipment services business which was growimg much faster than the product business. Helping our customers to win was the motto. 8) 4Es Close to his retirement Jack Welch focussed on improving quality within the organization by raising bar for new hires and weeding out those who did not meet GEs high standards. He wanted only A players in the company. He defined A players as having 4 Es:- energy, ability to energise others, edge and execution. To implement this , company implement performance appraisal system and letting go of the poorest performers. 9) SIX SIGMA

In an attempt to improve efficiency and productivity, Welch incorporated SIX SIGMA in GE. To encourage employees to follow SIX SIGMA processes, 40% of bonus was tied to their SIX SIGMA objectives. Also massive training of managers was undertaken to create a cadre of Green Belts, Black Belts and Master Black Belts in SIX SIGMA quality. 10)E-business As GE had set a good base for e business through the six sigma initiative this last initiative by him could be executed easily and this also set the tone for doing business in future i.e the digital era

Q5.What is your evaluation of Welchs approach to leading change? How important is he to GEs success? What are the implications for his replacement? What kind of leader is required by the organization to continue its growth path? Evaluate Immelts performance as his successor. Ans:He literally disassembled the existing system and put it back together with many major changes. Even though his methods were brutal for those who were laid off, they were widely recognized as practical and effective. He was quick to adapt to the emerging requirements of the industry and was a pioneer in bringing new systems and practices in place that would drive the organization to greater heights. He brought changes to GEs structure, culture and business hence improving its efficiency and competitiveness globally. People like him are truly essential for GEs success. His successor will have a hard time living up to his reputation. He has a huge responsibility of carrying forward the existing business model with all the new changes; and additionally has the task of spearheading new systems and practices that people expect out of him. He would have to be a constant innovator and connoisseur of fine ideas while simultaneously striving to achieve efficiency in work practices. Jeff Immelt has a more relaxed style of leadership that he brings to GE. He is much less confrontational than the former GE CEO, Jack Welch. Immelt says himself, Im direct and Im truthful. One of Immelts strengths is in motivating others by encouraging them and relating to them at their level. Immelt uses a conservative and modest approach. He is not one who will overwhelm someone with personal charisma, but instead has an ability to interact with others and adjust to the demands at the moment. Immelt is very versatile and can multitask like few other leaders. He has a focus on goals, the future, and is a master of the larger picture. Logic is very important to Immelt and he continues to use this skill to find solutions to his challenges. He also does not need to be successful at others expense. It would appear that Immelt has and will continue to lead GE with his youthful exuberance and personal style of leadership.