Guocai Zhen

AMBA 670 Section 9041

Jack Welch
Two Decade Transformation Paper

Executive Summary
This paper is an in-depth analysis of General Electrics (GE) former Chief Executive
Officer (CEO) Jack Welch and his transformational leadership and accomplishment. This report
also contains a comprehensive and thoughtful analysis performed by me, incorporating
fundamental concepts assembled from this weeks selected course reading materials. After
taking over as the new Chief Executive Officer of General Electric in April of 1981, Jack Welch
was presented with some significant challenges. The U.S. economy was in terrible recession
the early 1980s, high-interest rates and a strong dollar made matters worse (Bartlett & Wonzy,
2005, p. 2). As a result of a sluggish economy, the U.S. unemployment rate was very high. In
order to shield GE from the economic downturn, the new CEO, Jack Welch had to improve
performance in GEs diverse portfolio of business units (Barlett & Wonzy, 2005, p.2). The
legendary CEO challenged its GE executive and top managers to become innovative thinkers by
being better than the best. Under the leadership of Jack Welch, GE was able to revamp the
companys business units. This new important method of innovation was called, #1 or #2: fix,
sell or close. The aim was to invest money back into business units that were productive and
quality business units under the GE umbrella, sell off business units that were of high risk to the
company and purchased new business units that had enormous potential earnings. The culture of
innovation and development process of GE employees cemented Jack Welchs legacy as the
legendary CEO.
Introduction
In order to survive in todays competitive business world, executives and upper-level
managers must demand innovation as a strategic implementation process in their perspective
organizations. As the new CEO of GE, Welch had to identify the needs and challenges that GE

was confronted with in the competitive market. Welch was then tasked with formulating
numerous strategies and ideas to combat the competition GE had encountered from competitors.
Upon establishing strategies, executives and organizational leaders must successfully execute
on their intent (Neilson, Martin & Powers, 2008, p.1). The execution of an established strategy
enables an organization to facilitate the decision-making process, thus in hopes of sustaining a
competitive advantage over its competitors. As CEO of GE, Welch understood that an
organization's ability to execute a strategy will support the development and growth process of
its employees. Welch also knew that in order for his employees to become active leaders and
thinkers, Welch had to provide the employees with the best development resource and training
available. The establishment of Crotonville helped revolutionized GEs leadership on all levels.
This also provided GE employees with a sense of empowerment, as leaders and managers
became innovators. This analysis summarizes Welchs objectives, strategic corporate leadership
while taking charge at the helm as CEO of GE. The analysis will also provide an evaluation of
Welchs leadership and his overall impact on the companys success.
How difficult a challenge did Welch face in 1981? How effectively did he take charge?
As Welch took over the helm as CEO of GE, Welch was confronted with a tough
challenge. Welchs predecessor, Reg Jones took GE through a major revamping process of the
companys business units. The overhauled off the new business unit was designed strategically
to support GEs management process (Barlett & Wonzy, 2005, p.2). As a result of Reg Jones
many accomplishments at GE, Jones was hailed as a management legend and voted CEO of
the year three times by his fellow peers. A business magazine also nominated Jones as the CEO
of the decade, Needless to say, amidst Jones many accolades he was considered to be one of the
most influential CEO of his time. Welch was under a lot of pressure to continue improving the

performance of GEs diverse portfolio. The pressure for Welch to perform at a high level was
tough at that time, the American economy was going through a recession, and the business
market was extremely competitive. Despite all these challenges, Welch was ready to take on the
responsibility as CEO. The transition wasnt easy for Welch. Needless to say, in order for Welch
to succeed in preserving GEs legacy, Welch had to develop a team of executives that would buy
into the new CEOs vision to be better than the best (Barlett & Wonzy, 2005, p.2). Welch was
ready to put the new strategy into action, but the new CEO needed the support of his executives
and managers in key areas to help revamped GEs organizational culture. Managers and leaders
that did not buy into Welchs vision and strategy was immediately dismissed.
How effectively did he take charge?
When Welch took over the role of CEO at GE, the new leader was very effective in
taking charge and implementing his new strategic business plan. Despite the companys success
under the leadership of Jones, there was always room for improvement. The business market
was constantly changing, and the competitors were always trying to overtake one another.
Fortunately, Welchs predecessor Jones had made GE into one the greatest company at the time.
This allow Welch to transition over easily as the new CEO. Welchs radical and innovative ideas
were instrumental in helping the company to advance further in the business market.
What was Welchs objective in the series of initiative 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? Is there a logic or rational
supporting the change process?

At the end of the 1980s, Jack Welch had initiated the restructuring of GEs business units
to maximum the business units profit potential. Despite the organization's recovery from the
initiate shakeup, Welch was ready to focus on the human resource aspect of GEs company

culture, to rebuild the company on a more solid foundation (Barlett & Wonzy, 2005, p. 4). After
setting the companys hardware in place, it was now time for Welch to shift the focus to the
companys software side, the employees. Welch understood that the employees are key assets
to GEs success, Welch wanted to create a business environment that foster openness, candor,
and facing reality (Barlett & Wonzy, 2005, p.4). In order for GE to sustain a high level of
performance from its employees, Welch had a vision of changing the culture of GEs employees.
The CEO of GE understood the distinction between what should never change and what should
be accessible for change (Collins & Porras, 1996, p.66). The Innovator had the rare ability to
manage continuity and change (Collins & Porras, 1996, p.66). In the years to come, Welch
worked diligently to establish the two initiatives called dubbed Work-Out and Best Practices.
These two initiatives was formed as GEs core ideology, which describes the companys identity
as fast, simple, and self-confident (Barlett & Wonzy, 2005, p.4). In 1988, during one of
Welchs visit to GEs Management Development Institute, the CEO led an open session with a
group of managers. The managers had difficulty implementing change in their business units;
the visionary CEO took this open-forum as a teaching opportunity for GEs employees to voice
their concerns openly. The conference talk proved to be resourceful. As a result, Welch enlisted
the help of James Baughman, GEs director of management development to help Welch duplicate
these open and honest discussion with GE employees. Welch later incorporated these public
conference talks in GEs training curriculum; the Work-Out was held at GEs management
development institute where everyone had a voice. GE employees and managers were
gathered together in groups to discuss ideas on how the organization can improve the efficiency
of their business units. A facilitator from the academy was present to facilitate the process
between the group of employees and managers. Managers were requested to leave the room

while the employees were asked to discuss openly the potential problems and issues that had
plagued the business units. The facilitator then asked the employees to come up with a series of
solutions to present to their unit managers. When the unit managers returned, each manager was
requested to sit down and listen to the proposed solutions made by the employees. Managers
were required to make an immediate decision on eighty percent of the total solutions that were
presented by the employees. According to Neilson, Martin, and Powers, when a company does
not communicate information effectively across the board, units perform like silos, losing their
economies of scale and the transfer of best practices (Neilson, Martin, &Powers, 2008). As a
result of these open forums, GE was able to increase its companys productivity two-fold. In
Welchs continuous efforts to increase GEs productivity and profits, the CEO implemented GEs
best practices curriculum. In order to take the best practice movement a step further to
increase higher productivity. The ambitious CEOs next moved was to appoint Michael Frazier
to lead the research to see what companies had higher productivity rates than GE. Frazier
examines nine different companies effective processes, at the conclusion of Fraziers research,
GE had to reevaluate its companys core values. Welch had adopted Fraziers research and
immediately integrated the research into action. As a result of the new best practices curriculum,
GE shifted its focus on how the company will accomplish a task. The new effective processes
proved to be very successful throughout the organization. This was mainly due to the companys
emphasis on customer satisfaction, high-quality products, efficiency manufacturing and fair
treatment of its suppliers. The legendary CEO took and applied the best business practices ideas
to its global business unit. Welch appointed Pablo Fresco, a proven negotiator, to be GEs head
of International Operations and vice-chairman. As the global economy was going through a
recession, many companies saw the situation as economic uncertainty, Welch and Pablo Fresco

saw the situation as an opportunity to acquire more companies to turn a profit. Five years later
GE almost double its international revenues in the late 90s, international revenues grew three
times faster the rate of domestic sales (Barlett & Wonzy, 2005, p.6). GEs visionary CEO
turned the new initiative to developing the companys top talents. Welch believed that the
companys best assets are the employees, and the success of GE future depended on the
companys top manager. In Welchs initiative to develop GEs top talents, the CEO was a strong
believer in compensation. As a result Welch rewarded GEs top performers by revamping the
companys compensation packages.
Is there a logic or rationale supporting the change process?
Despite Welchs unconventional approach to restructuring GEs business units and
culture. The CEO understood that the success of GE depended on a new set of core values.
Welch implemented the use of "best practices" in GEs corporate culture. This theory proved to
be effective after Michael Fraziers study of other companies effective processes. The nonsense
CEO had no patience for bureaucracy, in order to maximize the companys overall performance
and to increase profit. Welch had to implement the proposed changes in a timely matter to
achieve his strategic goals. The visionary CEO often received much criticism, due to his
leadership style. Needless to say, Welchs leadership has become legendary and was consider to
be one of greatest CEO of all time.
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?
GEs success was mainly attributed to the restructuring of the companys business units. Welch
understood that the competitive business world was always revolving, the forward thinking CEO tested
boundaries by continuously looking for new ways to improve the companys processes. Despite the downturn of

a U.S. economy, one thing reminds for certain, Welch was going to take matters into his hands. The Legendary
CEO realized that in order to remain competitive against other companies, Welch had to be unconventional and
bold to become successful and profitable. Long term sustainability and profitability depended on the development
of his managers and employees. While the relentless leader continues to initiate new ideas to make GE a more
lean and agile workplace, Welch implemented a real-time planning strategy book to help reduced the number
of employees in large organizational levels within GE business units. Despite the implementation and
organizational changes in GE hierarchical levels, Welch also develops an action plan so that GEs business units
can compete and thrive in the competitive market. As stated by Collins and Porras, organizations that enjoy
continuing achievement have core principles and a core purpose that remained constant while their business tactics
and practices interminably adjust to a changing world (Collins & Porras, 1996, p.65). Welch was tasked with the
job of assessing and revamping GEs existing business units. The reorganization was necessary to reduce GEs
operational cost. Welch initiated a new set of standard of evaluating each business unit, #1 or #2, fix, sell or
close. If GEs business unit was not the #1 or #2 competitor in its industry, it was time to sell off that particular
business unit. In an effort to make GE an entrepreneurial enterprise, the company sold more than 200 of its
businesses, which represented 25% of the companys sales in 1980 (Barlett & Wonzy, 2005, p.2). However, in
that same year, Welch strategically acquired other business as well, in an attempt to increase the GEs revenue and
operating profits.

What is your evaluation of Welch's approach to leading change? How important was he to GE's success?
What are the implications for his replacement?
Under two decades of exceptional leadership, Jack Welch has restructured GE to become
one of the most efficient and diverse company in the world. As soon as Welch came on board to
become the CEO of GE, Welchs first initiate was to increase the productivity and quality of

GEs business units. As an innovator, Welch was constantly pushing for transformational change
within the company. Welch was committed to excellence and refuse to settle for mediocracy, he
encouraged his managers and leaders to embrace changed. Under Welchs leadership, the CEO
created a business environment that foster openness and candor (Barlett & Wonzy, 2005, p.4).
Furthermore, Welch was more than a CEO; he was a role model that practice what he preached.
During the CEOs initiative to developed GE employees, Welched challenge the managers to
better than the best (Barlett & Wonzy, 2005, p.2). As a firm believer in hard work, Welched
rewarded hard worker managers with new compensation packages. The legendary leader was
committed to his employees; he realized that the success of GE depended on the leaders and their
ability to openly communicate with each other to resolve issues. Welchs replacement will have
some big shoes to fill. As Welchs replacement comes on abroad, he/she will have to be more
aggressive than Jack in taking charge and implementing change. The new CEO must establish
him/herself as a strong leader by leading by example. He/she will have to earn the trust of the
employees in order to open up the lines of communication. Welchs replacement must
communicate his/her vision clearly and define the company core values as he/she stepped into
the role.

Conclusion
In the analysis of Jack Welch, the legendary CEO of General Electric took over the helm at a turbulent
time. The American economy was in recession, and the business markets were in chaos. Amidst all the confusion
in the business market, Welch was able to step in with total confidence in rebuilding GEs business units. Under
the innovative leadership of Jack Welch, he was able to implement his core values and leave behind an everlasting
legacy.

References
Bartlett, Christopher & Wozne, Meg (2000). GE's Two Decade Transformation: Jack Welch's
Leadership. Harvard Business School Press. HBS 9-399-150
Neilson, G., Martin, K., & Powers, E. (2008). The secrets to successful strategy execution.
Harvard Business Review, 86(6), 60-+. Retrieved from https://hbr.org/2008/06/the-secrets-tosuccessful-strategy-execution
Collins, J. C., & Porras, J. I. (1996). Building Your Company's Vision. Harvard Business Review,
74(5), 65-77.