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Jack Welch and Jeffrey Immelt: Continuity

and Change in Strategy, Style and Culture at


GE
General Electric Company (GE) was a major conglomerate and one of the biggest
companies in the world. One of the factors that was believed to be responsible for the
company’s steady growth for more than a century was its tradition of stable and long
term leadership.
One of the most successful phases in GE’s history began when Jack Welch became its
CEO in 1981. Welch attempted to make GE one of the top companies in every
segment in which it operated. He also supervised several acquisitions that added
value to the business portfolio and was instrumental in creating a performance
oriented culture at the company. Welch retired in 2001 after 20 years at the helm. He
was succeeded by Jeffrey Immelt, who was chosen by GE’s board after a long and
careful succession planning activity supervised by Welch himself.
This case discusses the strategic and cultural changes at GE as a result of the change
in leadership. It compares GE’s strategy and operations under Welch, with those
under Immelt. It also talks about the changes in the company’s culture under Immelt.
The case concludes with a discussion on the challenges facing Immelt, as of mid 2006.
Jack Welch and Jeffrey Immelt: Continuity and
Change in Strategy, Style and Culture at GE

“I’m a different generation from Jack…..I have a different view of the world.”
- Jeffrey Immelt, CEO of General Electric, in 2002.1
"The thing that makes me most proud of Jeff is his visibility in tough times.”
- Jack Welch, Former CEO of General Electric, in 2002.2

An Inauspicious Beginning
Jeffrey Immelt (Immelt) became the Chief Executive Officer (CEO) of the General
Electric Company (GE) on September 7, 2001, drawing to a close one of the longest3
succession planning programs in corporate America. Immelt succeeded Jack Welch
(Welch), who was generally acknowledged as one of the most successful CEOs in
business history for his management of GE in the twenty years he headed the
company.
On September 11, 2001, just four days after Immelt finally stepped into the job that he
had been in training for for almost a year, the infamous terrorist attack took place,
when hijackers crashed planes into the Pentagon and the twin towers of the World
Trade Center. This event shocked the world and left the US economy – already in bad
shape from a recession and the bursting of the dotcom bubble in 2000 – battered.
It was an inauspicious beginning for Immelt. As a huge, diversified company, GE had
interests in several sensitive industries like aircraft engines, plastics and insurance,
which were sure to suffer the after-effects of September 11.
The terrorist attacks were a harbinger of bad times to come for GE. As of early 2006,
in the four and a half years that he had headed GE, Immelt had had to deal with a
series of problems. By 2002, GE‟s share price had fallen to levels much below its
peak in early 2001, and even by mid 2006, showed no significant improvement (Refer
Exhibit I for GE’s share price).

Background
GE‟s origin can be traced back to the late 1800s, when Thomas Alva Edison (Edison),
invented the first successful incandescent electric lamp in 1879. Edison was an
entrepreneur as well as an inventor and started several small businesses dealing with
power stations, wiring devices and appliances during the late 1870s and 1880s. In
1890, he brought all these businesses together and combined them under the Edison
General Electric Company (EGEC).

1
“The Days of Welch and Roses,” BusinessWeek Online, April 29, 2002.
2
“The Days of Welch and Roses,” BusinessWeek Online, April 29, 2002.
3
Succession planning to identify Welch‟s successor had started in 1994 and the final decision
was announced in November 2000.
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Enterprise Performance Management

Exhibit I
GE’s Share Prices

Source: www.bigcharts.com
EGEC merged with the Thomas-Houston Electric Company4 in 1892 to form GE. The
newly formed GE was then headquartered in New York. In 1894, Edison gave way to
Charles Coffin (Coffin), a former shoe salesman, as the CEO of GE. Coffin licensed
out the electric bulb technology to other companies, thus consolidating GE‟s position
in the emerging lighting industry. Coffin also created a formal hierarchy at the
company and organized GE‟s various businesses in a systematic manner, arranging
each unit around a product line. Coffin was also responsible for setting up financial
control systems at GE.
Coffin had a long tenure at GE and eventually stepped aside in favor of Gerard Swope
(Swope) in 1922. Under Swope, GE launched several progressive industrial relations
initiatives, setting up new policies to give employees pensions, bonuses, stock
purchase options, profit sharing and group insurance. GE also became the first
company to establish an unemployment pension plan, which guaranteed laid-off
workers a stipend of $7.50 per week for a period of 10 weeks after the layoff.
In 1940, Charles Wilson (Wilson) became the CEO of GE. Wilson was an autocratic
leader and employee relations deteriorated during his tenure. After the Second World
War (1939 to 1945), GE faced a major crisis in industrial relations due to the
increasing clout of the trade unions. The crisis culminated in a major strike in 1948,
which caused a rift between the blue collar workers and the top management at the
company.
By the 1950s, GE was a major industrial conglomerate with interests in a variety of
businesses. But growth brought its own problems. From the beginning, GE was
organized like a holding company, with a few executives at the headquarters

4
The Thomas-Houston Electric Company was founded in 1879 by Elihu Thomson and Edwin
J. Houston. It was a competitor to EGEC, until the merger of the two companies.
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Jack Welch and Jeffrey Immelt…

monitoring the activities of the various businesses. But for routine monitoring, each
business unit enjoyed great autonomy. Over the years, the heads of individual
businesses became powerful and began operating their units like independent
businesses with little reference to GE‟s strategic intentions.
After Ralph Cordiner (Cordiner) became the CEO in 1958, he embarked on a
company-wide restructuring program to bring discipline to GE. To obtain more
control over the various businesses, he strengthened bureaucracy within the company.
Cordiner created a team of GE executives, outside consultants and management
experts to develop strategies to streamline the company‟s management practices.
Cordiner was also responsible for setting up GE‟s management training center at
Croton-on-Hudson in New York, popularly known as the Crotonville School
(Crotonville)5, to train future GE leaders.
Fred Borch (Borch) succeeded Cordiner in 1964. Borch was an aggressive leader and
was responsible for much of GE‟s growth in the 1960s. He added three new capital
intensive lines to GE‟s portfolio – computers, nuclear power and aircraft engines, all
of which were considered risky investments, but with huge potential, at that time.
Borch was also responsible for introducing the concept of Strategic Business Units
(SBUs)6, and created 46 SBUs within the company in the late 1960s. (At that time
GE‟s businesses were arranged around ten groups with nearly 200 profit centers and
145 departments in all.)
Reginald Jones (Jones) became the CEO in 1972. Jones accelerated GE‟s shift from
electromechanical to electronic technology. He also emphasized on the need to be
responsive to the international environment and competition from overseas. Jones
invested heavily in office automation in a bid to increase productivity and took some
strategic decisions which involved strengthening promising businesses units like
plastics and divesting the unproductive computer businesses. Under Jones, GE
became one of the most powerful conglomerates in the world.
A significant phase in GE‟s history began in 1981, when Welch became the CEO of
the company.

Jack Welch
Welch, the son of a railway conductor, was born on November 19, 1935 at Salem,
Massachusetts. He studied chemical engineering at the University of Massachusetts,
from where he graduated in 1957. He then moved to the University of Illinois, where
he received his Masters and Ph.D in chemical engineering.
Welch joined GE in 1960 as a junior engineer at a salary of $10,500 per annum. He
was not happy with the excessively bureaucratic culture of the company. In 1961,
soon after he completed his first year at GE, he put in his papers as he was
disappointed with the $1000 raise he received 7. He accepted a job at a company called
International Minerals & Chemicals Corporation.

5
Over the years, Crotonville became a major corporate training center. It was also the
birthplace of several management techniques like SWOT Analysis, Management by
Objectives (MBO) and Strategic Planning.
6
Strategic Business Unit or SBU is understood as a business unit within the overall corporate
identity which is distinguishable from other business units because it serves a defined
external market where management can conduct strategic planning in relation to products
and markets.
7
At that time, raises were standardized at GE and the company did not differentiate between
meritorious employees and non-performers.

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Enterprise Performance Management

But just a few days before he was due to leave GE, Reuben Gutoff (Gutoff), Welch‟s
immediate superior, took him out to dinner and spent four hours trying to convince
him to stay with GE. Gutoff promised Welch that he would try to create a good work
atmosphere for him – one that would combine a “small-company environment, with
big-company resources.” He also assured Welch that he would keep him from getting
entangled with GE‟s bureaucracy.
Welch apparently promised that he would stay on for some time and see how things
worked out. Gutoff presumably kept his word, as Welch stayed with GE and rapidly
rose through the company‟s ranks. After he helped develop a new type of plastic
called Noryl8, Welch was made general manager of GE‟s new plastics factory. A little
later, he was made the head of GE‟s entire plastics division.
In 1972, Welch became vice president (it was one of the fastest rises into senior
management within GE). In 1977, he was made senior vice president and two years
later, vice-chairman. In 1981, he was chosen as Jones‟ successor, becoming the
youngest CEO in GE‟s history.

GE under Welch
Welch‟s appointment as the CEO of GE was first greeted with skepticism. Several
people thought that at 45, Welch was far too young and inexperienced for a post with
so much responsibility (GE was one of the largest companies in the world by then and
had interests in a diverse range of businesses). People also thought he was something
of a playboy and far too aggressive to fit in with GE‟s staid culture.
In addition to this, Jones had been a very successful CEO, having managed to keep
GE profitable and growing, even during the recession of the late 1970s. He had also
been one of the most admired business leaders in the US at that time. Therefore,
stepping into Jones‟ shoes was not easy for Welch.
GE was widely regarded as one of the most profitable and well managed companies in
the world, when Welch became CEO. However, Welch still felt the need for several
changes that were aimed at making the company more nimble and profitable. He
foresaw that GE was in danger of becoming complacent, and that this would harm the
company in the long run. Besides, in the early 1980s, the US was facing tough
competition from the Japanese and the Europeans in several industries.
One of the first things Welch did as CEO of GE was to take steps to radically
transform the company‟s bureaucratic culture. He created a flatter structure by
trimming the company‟s nine management levels to six. The object of this exercise
was to make GE more nimble and to improve communications within the company.
Over the years, GE had been following a matrix based corporate planning system 9,
which was widely admired by management experts. However, Welch replaced this
with what was known as his „Number One Number Two‟ strategy.

8
Noryl was a modified PPO (Polyphenyleneoxide)/PS blend resin that offered optimized
processing and enhanced productivity for applications of business equipment and
communications, and electrical and electronic appliances.
9
The GE matrix, which was based on the BCG Matrix, was developed for GE by McKinsey
and Co. The GE matrix cross-referenced market attractiveness and business position using
three criteria for each – high, medium and low. The market attractiveness considered
variables relating to the market itself, including the rate of market growth, market size,
potential barriers to entering the market, the number and size of competitors, the actual profit
margins currently enjoyed, and the technological implications of involvement in the market.
The business position criteria looked at the business‟s strengths and weaknesses in a variety
of fields. These included its position in relation to its competitors, and the business‟s ability
to handle product research, development and ultimate production. (www.palgrave.com)
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Jack Welch and Jeffrey Immelt…

“Fix it, sell it or close it” summarized Welch‟s approach to GE‟s businesses during
this period. He insisted that GE should be one of the top two players in every segment
in which it operated. If any business failed to meet this criterion, he closed it down or
sold it. During his tenure, GE divested several businesses like air-conditioning and
housewares, and thousands of employees lost their jobs. Welch‟s willingness to
retrench employees earned him the nickname „Neutron Jack.‟10
On the other hand, Welch acquired several other businesses which he thought would
add value to GE‟s portfolio. Some significant acquisitions in the 1980s and 1990s
were Employers Reinsurance and Radio Corporation of America (RCA) including
National Broadcasting Corporation (NBC). (When GE acquired RCA for $6.28 billion
in December 1985, it was the biggest merger ever in the non-oil sector. It established
Welch‟s reputation as a master of large business deals.) By the time Welch retired in
2001, he had supervised GE‟s acquisition of more than 600 companies.
Strategic planning had always been given great importance at GE and the company
had been the birthplace of several new management concepts. Other companies often
sent their managers to study the strategic planning process at GE. Till the 1980s,
strategic planning was primarily a corporate function at the company. However,
Welch made it a line function and vested the responsibility for strategic planning with
individual business units. He felt that the business units understood their own markets
and were better off doing their own planning.
Welch also cut the company‟s spending on Research & Development (R&D).
Historically, from the time of Edison, GE had put great emphasis on R&D. the
company had an active Global R&D Center in New York, assisted by over 100
product-oriented labs around the world. By the 1980s, GE owned more patents than
any other company in the world.
However, Welch felt that innovation and problem solving had to be incorporated into
everyday work. To promote innovation, he launched a program called „Work Out‟
which encouraged employees at all levels of the organization to get involved with
innovation and problem solving at the company.
The Work Out program was a series of company retreats where a group of employees
(usually 50 in number) of varying ranks and responsibilities, got together to review
company policies and processes and make suggestions for improvement. Employees
were encouraged to argue with and criticize their superiors, and the superiors were
required to respond to the issues raised by employees as soon as possible. Welch
believed that organization-wide problem solving improved overall quality, which
made better business sense for the company as it increased customer value. “We want
to make our quality so special, so valuable to our customers, so important to their
success, that our products become their only real value choice,” said Welch. 11
Welch also believed that involving all employees in the quality processes of the
company had great potential benefits. He believed that there was no limit to human
creativity and that when this creativity was tapped, it could lead to tremendous value.
“The idea flow from the human spirit is absolutely unlimited. All you have to do is tap
into that well. I don‟t like to use the word efficiency. It‟s creativity. It‟s a belief that
every person counts,” he said.12

10
In reference to the neutron bomb that killed people but left buildings standing.
11
“Assessing Jack Welch,” beginnersinvest.about.com, September 10, 2001
12
“How Jack Welch Runs GE” BusinessWeek, June 8, 1998.

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Enterprise Performance Management

Welch‟s commitment to quality led to the adoption of Six Sigma at GE in the mid
1990s. Six Sigma was a quality initiative first developed at Motorola Inc.13 in 1986.
The program aimed at reducing production defects to less than 3.4 per million through
continuous improvements (Refer Exhibit II for a note on Six Sigma).

Exhibit II
A Note on Six Sigma
Six Sigma is based on a combination of well-established statistical quality control
techniques and simple plus advanced data analysis methods. It essentially involves
the systematic training of all personnel at every level of the organization involved
in the targeted activity or process. It is based on the statistical concept that the
output of most of the physical processes follows a normal distribution, 14 with the
processes centered at the mean. As a normal result of the manufacturing process,
all manufactured items are subject to item-to-item variation. Sigma is the
standardized statistical measure of the variability or the dispersion within a given
population of items. Six Sigma denotes 3.4 defects per million. Other Six Sigma
levels include Two Sigma, Three Sigma, Four Sigma and Five Sigma. These levels
signify 308,537, 66,807, 6,200 and 233 defects per million respectively.
Six Sigma focuses on streamlining all the processes in the organization to improve
productivity and reduce capital outlays while increasing the quality, speed and
efficiency of the operations. It was originally developed to be used for „physical
processes‟ – those performed in manufacturing which are easy to observe, record,
analyze and measure. However, later on it was extended to processes that were not
as explicit and encompassed business areas such as bid and proposal, procurement
and contract management. While Six Sigma comprised strict measurements for
physical processes, it involved identifying waste in the form of delays for other
processes.
Six Sigma‟s success is measured by the extent to which it improves the quality and
profitability at all levels of an organization. At the business level, Six Sigma could
be used to improve profitability and market share, and also to ensure the
company‟s long-term viability. At the process level, Six Sigma could be used to
reduce defects and variation. It could also be used to enhance process capability so
as to increase profitability and customer satisfaction.

Compiled from various sources


Welch borrowed the idea of implementing Six Sigma from AlliedSignal Inc., 15 where
his friend Lawrence Bossidy (Bossidy) had become the CEO in 1991. Welch heard
from Bossidy about how the Six Sigma program was helping AlliedSignal cut costs
and increase productivity. He invited Bossidy to present this idea to the top
management at GE. The management was impressed with the concept and decided to

13
Motorola was one of major manufacturers of mobile phones and communication systems in
the early 2000s.
14
The normal distribution is one of the most important distributions used in probability. It is
useful for describing a variety of random processes. A normal distribution is fully described
with just two parameters: its mean and standard deviation. The distribution is a continuous,
bell-shaped distribution, which is symmetric about its mean and can take on values from
negative infinity to positive infinity.
15
AlliedSignal was a major business conglomerate in the 1980s and 1990s, with interests in
chemicals, dyes and aerospace products. The company merged with Honeywell Inc., another
technology and manufacturing conglomerate in 1999.
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Jack Welch and Jeffrey Immelt…

implement a Six Sigma program at GE. The program was launched at the company in
1995 and was applied to 200 projects in its first year.
Launching Six Sigma was not easy. The company had to invest heavily in training
employees. Employees at GE were trained in Six Sigma at three levels – green belts,
black belts and master black belts, in increasing order of proficiency. Green belts were
employees who took up Six Sigma implementation responsibility along with their
regular work. Black belts guided green belts in the implementation of the Six Sigma
programs. Black belts were completely devoted to Six Sigma without any other job
responsibilities. Master black belts supervised the black belts and were responsible for
identifying the projects in which Six Sigma could be implemented.
GE made it compulsory for employees to have at least green belt training and
involvement in one quality control project to be eligible for promotion to management
levels. Black belts and master black belts were usually at higher levels of
management, and the company ensured that the best people were trained as black belts
and master black belts.
To stress the importance of the Six Sigma initiative, GE linked it with compensation.
Typically, 40 percent of the annual bonus of GE‟s top 7000 employees was directly
related to involvement in Six Sigma. By 1996, Six Sigma was applied to 3000 projects
and this number rose to 7000 by 1997.
There were some concerns within GE that the stress placed on Six Sigma was leading
to an increase in bureaucracy within the company, as employees were rigidly
following established processes and were not willing to try new things. But Welch
said that he was ready to put up with a little bureaucracy if it brought improved
production and greater efficiency for the company.
At GE management meetings, heads of businesses were frequently encouraged to talk
about the quality initiatives at their own units, so that ideas and best practices could
get transferred among the company‟s various businesses. The business heads usually
spoke on the methods they used at their units to decrease costs and/or increase
efficiency, so that people from other parts of the company could borrow and adapt
their ideas.
Welch stressed the importance of communication at GE. He encouraged
communication at all levels and in all directions (top-down, bottom-up and lateral)
within the company. Effective communication was promoted by GE‟s informal
culture. Welch had a unique ability to communicate with and motivate people at all
levels of the organization. All the company's employees called him „Jack‟, and were
encouraged to express their opinions candidly to their superiors or to him directly. It
was said that Welch tried to create the same “small-company environment, with big-
company resources,” atmosphere that Gutoff had created for him at the start of his
career.
Welch used GE‟s various meetings and review sessions to great advantage in
enhancing communications at the company. GE held several company events through
the year, which Welch became responsible for when he became CEO. Instead of
making these events just formal company gatherings, Welch transformed them into
levers of leadership. The meetings gave him a chance to interact with different people
in the company, listen to their opinions and gauge their leadership potential.
Welch also used these opportunities to make sure that all GE employees knew his
opinions and ideas. At the beginning of his term as CEO, Welch had realized that a
CEO of a large company could not afford to communicate only with his top people

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Enterprise Performance Management

and expect things to happen. Therefore, he constantly repeated his opinions and ideas
at every opportunity, to all classes of employees. In their turn, the business heads
followed the same behavior within their units, which ensured that the lines of
communication were always active. Welch‟s speeches were regularly video taped,
translated into local languages and sent to various GE set ups across the world. This
enabled him to make his presence felt even to employees at far flung locations.
Welch believed in staying visible within GE. He regularly visited different GE
departments and factories where he made it a point to interact with employees.
Surprise visits were also a part of his style of functioning. Analysts said that it was
remarkable how, at a company of GE‟s size, employees at even the lowest levels in
the company hierarchy seemed to know Welch and his opinions.
GE as a company lost most of its staidness under Welch. Thirty of GE‟s top managers
met just before the close of every quarter in a meeting called the „Corporate Executive
Council‟. All the business heads were required to candidly share the new
developments (particularly relating to the success or failure of new initiatives) in their
departments. Welch challenged and tested his business heads constantly and pushed
them to do better. Reportedly, these meetings often became heated and there were
vigorous arguments, prompting some employees to call them „food fights‟ and „free
for alls‟. However, the meetings allowed Welch to keep a tab on the happenings at the
different GE businesses.
Analysts said that Welch was a master of the art of motivating people and stirring
them to action. One way he made his presence felt at the company was by writing
notes to employees. Welch frequently wrote notes to all levels of employees, to
appreciate their contribution to the company, or to guide, inspire or stir them to action.
These notes were faxed directly to the employees the moment they were written, and
the originals were sent later by mail. This way, Welch managed to exert a tremendous
amount of influence over the behemoth that was GE.
Naturally, Welch did not know all the GE employees personally, but learnt about them
through their bosses. Employees said that it made them feel more motivated that the
CEO knew about them and bothered to get in touch personally. “We‟re pebbles in an
ocean, but he knows about us. He's able to get people to give more of themselves
because of who he is,” said Brian Nailor, a marketing manager at GE‟s industrial
products division.16
William Woodburn, an employee at GE‟s industrial diamonds business, recalled that
when he turned down a promotion just because it would also involve a transfer and he
did not want to uproot his teenage daughter from her school, he received a personal
note from Welch appreciating his concern for his family. “Bill, we like you for a lot of
reasons – one of them is that you are a very special person. You proved it again this
morning. Good for you and your lucky family,” wrote Welch. 17
Another employee at GE‟s Capital Services business once spent several days
preparing a report on why GE should buy AT&T‟s Universal Card18 division. When
this report was sent to Welch, he decided within a day that the division would not add
value to GE‟s portfolio. However, he wrote a note to the employee appreciating the
effort she had put into the presentation and complimenting her work.

16
“How Jack Welch Runs GE,” BusinessWeek, June 8, 1998.
17
“How Jack Welch Runs GE,” BusinessWeek, June 8, 1998.
18
AT&T‟s credit card division.
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Jack Welch and Jeffrey Immelt…

Welch‟s charisma earned him a large fan following both within and outside GE.
According to analysts, his appeal was magnified by the fact that he was a self-made
man and had managed to overcome several handicaps to became a great leader (Welch
had a stutter, but was a great orator. He came from a lower middle class background,
but went on to become the head of one of the greatest companies in the world). This
made him a role model for many Americans.
However, Welch also had another side to him that was quite the opposite of the
benevolent leader. According to GE insiders, he had a tendency to jump to
conclusions about people, and formed opinions too rapidly. In addition to this, he was
an extremely demanding boss and several employees, especially those at the lowest
levels, complained about the pressure that was placed on them to perform.
Reportedly, Welch had a habit of asking people things like “What have you done for
me lately?” whenever he met them. Besides, rewards and promotions at GE were
based strictly on performance and Welch routinely fired non-performers. Several
employees felt that this put too much pressure on them. They complained that they
were never sure how much was enough.
Welch was a hard task-master who created fear in his subordinates. Non-performers
did not last at GE. Welch demanded that employees perform or be prepared to forgo
their jobs. It was said that Welch was never satisfied with GE‟s performance even
when the company was growing at more than 10 percent a year.
However, good performers were rewarded well. Analysts said that under Welch GE
functioned as a true meritocracy. Promotions at the company were mainly from within
and very few outsiders were ever brought in. High performers could expect quick
promotions in addition to generous bonuses, pay raises and stock options. Bonuses
and stock options were also highly differentiated with high performers being rewarded
far more than mediocre ones. However, rewards came with the demand that the
employee do even better the next year. “There are carrots and sticks here, and he is
extraordinarily good at applying both.” said Gary M. Reiner, a senior vice-president at
the company, “When he hands you a bonus or a stock option, he lets you know
exactly what he wants in the coming year.”19
Welch was responsible for extending the stock options program to the middle and
lower levels of the organization and insisted that as many people as possible should
receive options. One rule Welch made was that every time options were given, at least
25 percent of the people receiving options should be getting them for the first time,
and that not more than 50 percent should get more than three grants in a row.
To determine rewards at GE, Welch devised a system where people were classified
under three categories. Every department had to classify its employees as the top 20
percent, the middle 70 percent and the bottom 10 percent, based on their performance.
The top performers were generously rewarded, and the middle level performers were
rewarded and encouraged to emulate the top performers. The bottom 10 percent, who
were considered the least effective employees, were fired. Welch believed that
retaining non performers was detrimental to the company‟s health and that they would
probably be better off in another company where the work was more suited to their
potential and inclinations.
Among the most important events at GE under Welch were the annual „C‟ session
meetings that started in April and lasted through May every year. During this period,
Welch along with three senior executives traveled across the US to meet with the top
managers of each of GE‟s 12 businesses and to review their performance over the

19
“How Jack Welch Runs GE,” BusinessWeek, June 8, 1998.

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Enterprise Performance Management

previous year. Three thousand senior GE employees were reviewed every year during
the C Sessions and Welch kept close tabs on the top 500 people in the organization.
The purpose of these sessions was to identify and promote leadership talent within
GE.
The sessions were usually conducted with the CEO of each GE business and the
senior human resource executive. Each business head was expected to identify
candidates with leadership potential in their units and chalk out plans to help them
realize this potential. Succession planning was also done for all key jobs within each
unit and decisions were made about who to send to Crotonville for leadership training.
Welch was usually given a briefing book containing details of all the employees being
reviewed along with their strengths, weaknesses and development needs. The „C‟
sessions were a good way of identifying leadership talent within the company and
planning for succession. They also served as a way to recognize good performers and
assist them in developing their skills.
Leadership training and executive development were given tremendous importance at
GE. Usually employees in management ranks were transferred every few years
between locations. This was done to enable them to learn about the various businesses
and obtain an overall understanding of GE‟s operations.
Welch‟s theory of leadership later came to be known as the 4E theory. The four Es
stood for Energy, Energizing, Edge, and Execute. According to Welch, successful
leaders had tremendous positive energy, and the edge, or the courage, to take bold
decisions. They also had the ability to energize other people, and the ability to
execute, or deliver results. He connected these four Es with a „P‟ that stood for
Passion. Welch said that the best leaders had the four Es as well as the „P‟. People
who had the four Es, but not the „P‟ had the potential to develop into good leaders,
and were encouraged to emulate the top leaders. (Refer Table I).
Table I: Welch’s 4E’s

Energy: Enormous amount of positive energy and a strong bias for action. An
ability to love and adapt to change.
Energizing: High level of people orientation and the ability to motivate and
inspire people to maximize organizational potential.
Edge: The courage to take bold decisions and the conviction to stick with
them. Healthy competitive spirit.
Execute: The ability to give a form to vision and deliver results.
Passion: A heartfelt, deep and authentic excitement about life and work.
Compiled from various sources.
Welch himself played an active role in leadership development at GE and taught
regularly at Crotonville. He said that this gave him a chance to interact dircetly with
the future leaders of the company. At Crotonville, managers were expected to
participate actively in the leadership training, ask questions, and debate issues. Welch
said interacting with the participants at Crotonville helped him understand them and
their ideas about GE better. Welch also interacted with the participants informally
after the sessions at the cafeteria. Typically Welch taught one class a month at
Crotonville, generally at the end of the three weeks program.

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Jack Welch and Jeffrey Immelt…

Welch was also familiar with each of GE‟s businesses, no matter what its size, and
took a keen interest in operations. It was said that when a unit was not operating up to
the mark, Welch became more involved with it and asked managers to send him
regular reports updating him on the situation. Other the other hand, when a business
was functioning well, the head of the business was given a great deal of autonomy.
GE business heads who showed results were sometimes given more autonomy and
power than even the heads of independent companies. “It‟s part of living with Jack,” a
former General Electric executive said. “If you're doing well, you probably have more
freedom than most CEOs of publicly traded companies. But the leash gets pulled very
tightly when a unit is underperforming.” 20
Welch promoted the idea of a „boundary-less corporation‟ at GE. Not only did he
break down the boundaries separating the different departments within the company to
promote the exchange of ideas, but also borrowed ideas from other companies to
implement at GE. Welch believed that an organization was very dependent on the
external environment for its success. He created a culture at GE where people were
open and curious and always ready to adopt ideas and „best practices‟ from other
organizations.
Analysts said that borrowing ideas from other organizations was institutionalized at
GE and any idea that was not patented or copyrighted was adopted by the company.
The adoption of Six Sigma was just one of the many examples of this practice. GE
also adopted ideas like „Demand Flow Technology‟ 21 from American Standard (a
customer of GE‟s Motors and Industrial Systems business), „Bullet Train Thinking‟ 22
from Yokogawa, (GE‟s partner in the Medical Systems business) and „Quick Market
Intelligence‟23 from Wal-Mart, among others.
While most analysts agreed that Welch‟s successes at GE were more significant than
his failures, his tenure was not without a few big missteps. One of Welch‟s biggest
failures was GE‟s factory automation unit started in the early 1980s. The unit was set
up to tap the nascent factory automation market by offering a collection of high
technology products. However, by 1983 it had run into serious losses due to erroneous
demand projections. It was then that Welch shifted focus from manufacturing to
financial services and concentrated on GE Capital Services, which remained one of
the most profitable units of the company, even in the early 2000s.
Welch was also criticized for the sale of GE‟s appliance business to Black & Decker
in 1984 and the acquisition of Thomson SA, a French medical diagnostics firm in
1987. The Kidder, Peabody & Co. (a brokerage firm that GE acquired in 1986) scam
of 1994 was also a source of considerable embarrassment for GE and Welch.24
Welch also received some brickbats for the failure of GE‟s attempt to merge with
Honeywell Inc. (Honeywell) an aerospace and industrial-equipment group. In late
2000, Welch had learned that Honeywell‟s board was about to take a final decision on

20
“How Jack Welch Runs GE,” BusinessWeek, June 8, 1998.
21
A system that allowed a company to have zero working capital by increasing inventory
turnover rates.
22
This technique employed "out-of-the-box" thinking and cross-functional teams to remove
obstacles to cost reduction.
23
QMI was a system of getting rapid feedback directly from the customer.
24
It was discovered in 1994 that a Kidder & Peabody trader named Joseph Jett had created
around $350 million in phantom profits to increase his own bonuses.

209
Enterprise Performance Management

accepting a takeover offer from GE‟s rival United Technologies Corporation. 25 Welch
apparently did not want this deal to happen and interrupted Honeywell‟s board
meeting with a higher offer of his own at $43 billion.
United Technologies did not wish to enter into a bidding war with the „wild man‟
from GE, and refrained from further bidding. Honeywell accepted Welch‟s offer on
the condition that he would postpone his retirement until the deal went through in late
2001. (He had previously planned to retire in April 2001). The GE-Honeywell merger
was to create one of the world‟s largest industrial companies, until the European
Union‟s Competition Commission refused to permit it on the grounds that it would
give the merged company undue competitive advantage in the aviation industry.
Between 1981 and 2001, GE‟s revenues increased from around 27 billion to 129.8
billion. (Refer Exhibit III). By the time Welch retired from the company, GE was not
only the biggest corporation in the world, but also one of the most profitable.

Exhibit III
GE’s Revenues 1981-2000 (in Millions of US Dollars)

Source: www.ge.com

Jeffrey Immelt
Immelt was born in 1956 in Cincinnati, Ohio. His father was an employee of GE‟s
Aircraft Engines division. As a child, Immelt was active in sports and was on the
football and basketball teams at his school. He majored in mathematics from
Dartmouth College in the late 1970s, after which he joined Proctor & Gamble Co.
(P&G) as a member of its brand management team.

25
United Technologies was one of the major manufacturers of building systems and aerospace
products. It owned brands like Carrier (air conditioners), Otis (lifts), Hamilton Sundstrand
(engine controls, environmental systems, propellers, and other flight systems), etc.
210
Jack Welch and Jeffrey Immelt…

After about a year with P&G, Immelt enrolled for an MBA from Harvard. On
finishing his course, he joined GE as a marketing executive in 1982 at the company‟s
headquarters in Fairfield, Connecticut. After six months, he was transferred to GE
Plastics, where he continued till the late 1990s, in various marketing positions.
In the late 1990s, Immelt, along with James McNerney (McNerney) and Robert
Nardelli (Nardelli), was short listed as a possible successor to Welch as GE‟s CEO. In
November 2000, the board of GE chose Immelt as the successor to Welch. McNerney
and Nardelli subsequently left GE, to become the CEOs of 3M and Home Depot
respectively. Immelt was formally appointed as the CEO of GE in September 2001.
Observers thought that Immelt was chosen because he was the youngest of the three
contenders and therefore, likely to have the longest term. Besides, like Welch, Immelt
had also spent a major part of his career at GE in the plastics division.
GE Under Immelt
Immelt became the head of GE at one of the most difficult times in American
economic history. At the start of his tenure, GE lost two employees to the September
11 attacks and the company‟s insurance business took a $600 million hit. In addition
to this, Aircraft Engines, one of GE‟s major businesses, experienced an immediate
slowdown. GE Capital Aviation Services, a unit which leased aircraft to airlines was
also expected to be affected. Immelt was in Seattle when the attacks occurred. He
reacted immediately by setting up an office and command center at the small GE
office in Seattle. He had to stay there for a few days as there were no flights operating
and had to manage through telephone and email. Immelt met with investors in late
September 2001 and assured them that despite the bad economic scenario, GE would
still continue to post double digit growth as it did under Welch.
However, when the New York Stock Exchange opened the week after the attacks,
investors began selling their shares and the price of GE stock fell to $30 per share, 20
percent lower than the price before the attacks.
This was just the beginning of a troublesome period for GE. Just a little after
September 11, an anthrax26 scare broke out when an envelope containing a brown
granular substance (containing anthrax spores) was opened by an NBC employee Erin
O‟Connor (O‟Connor). In a few days O‟Connor contracted anthrax. Over the next few
months, envelopes containing anthrax spores were posted to a few prominent people
in the US, resulting in a major scare. This was followed by the eruption of two of the
biggest corporate scandals in US business history – Enron Corporation (Enron) 27 and
Tyco International Corporation (Tyco) 28 in 2001-2002. Allegations of corporate fraud
at both companies cast a shroud of doubt on all large conglomerates.

26
Anthrax, also referred to as splenic fever, is an acute infectious disease caused by the
bacteria Bacillus Anthracis and is highly lethal in some forms. It is therfore used as a weapon
in biological warfare. Anthrax most commonly occurs in wild and domestic herbivores, but
it can also occur in humans when they are exposed to infected animals, tissue from infected
animals, or high concentrations of anthrax spores.
27
Enron Corporation was an energy company based in Houston, Texas. Prior to its bankruptcy
in late 2001, Enron employed around 21,000 people and was one of the world's leading
electricity, natural gas, pulp and paper, and communications companies, with claimed
revenues of $101 billion in 2000. At the end of 2001, it was revealed that its prosperous
financial condition was sustained mostly by institutionalized, systematic, and „creatively‟
planned accounting fraud. The company‟s European operations filed for bankruptcy on
November 30, 2001, and it sought Chapter 11 protection in the U.S. two days later, on
December 2.
28
Tyco was a major conglomerate with interests in electronic components, health care, fire
safety, security, and fluid control. The company‟s CEO Dennis Kozlowski and CFO Mark
Swartz were accused of theft of the company‟s funds in 2002. The case went on trial in 2004
and both of them were convicted in 2005.

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Enterprise Performance Management

These financial frauds triggered off investors‟ distrust in large corporations and the
way they were managed. GE, being one of the largest corporations in the world, bore
the full brunt of the distrust as investors started panicking and offloading their shares
in the company. Investors were especially skeptical about GE‟s record of profitability
and wanted to know how the company managed to stay profitable and fuel growth
even during economic lows. They also wanted to know how much of GE‟s growth
depended on acquisitions and how much of it was organic. The very consistency
which had made GE a favorite with investors now became something that was viewed
with suspicion in the early 2000s.
By early 2002, investors had started demanding more information about GE‟s
complicated finances and Immelt decided to give in to their demands. (Analysts
thought that in the same situation, Welch would have ignored such rumors and
demands for explanations.) GE‟s annual report in March 2002 was huge, giving
several hitherto unknown details about the company and its financial management
systems.
However, the move did not work out quite the way it was supposed to. In the same
month, Bill Gross, the manager of Pacific Investment Management Co., which ran the
largest bond fund in the world, published an article about GE‟s opaque finances and
accused the company of inflating earnings through acquisitions and cheap debt rather
than through organic growth. GE‟s share price fell by six percent after this report was
published.
Investors also expressed concerns about how the company would fuel growth, with
several of its units like Aircraft Engines, Aviation Services, Plastics and Industrial
Systems affected by the downturn in the economy. Even GE Power Systems, one of
the big drivers of growth at GE, was facing large write-offs due to cancelled orders.
There were also concerns about the debt levels of GE Capital, the company‟s very
successful financial arm. This left people questioning Immelt‟s promises of double
digit growth. They also wondered how long it would be before GE would have to be
split up, considering that at the rate of growth the management was promising the
company would reach revenues of one trillion by around 2020. In financial year 2002,
GE‟s net earnings were $14.1 billion on revenues of $132 billion (Refer Exhibit IV
for GE’s revenues and net profits in the early 2000s.)

Exhibit IV
GE’s Revenues and Earnings
(All amounts in millions of US dollars)

Year ended 2000 2001 2002 2003 2004 2005


December 31
Revenues 130,385 126,416 132,210 134,187 151,300 148,019
Net earnings 12,735 13,684 14,118 15,002 16,593 16,353
Compiled from www.hoovers.com and www.ge.com
In an attempt to win investors over, GE redesigned its CEO compensation package in
mid 2003. Under the new plan, Immelt was eligible to receive stock (performance
share units) worth $7.5 million over a period of five years. Half of the performance
share units would vest if GE‟s cash flow from operations rose at least 10 percent
annually over the next five years. The other half would accrue to him if GE‟s stock

212
Jack Welch and Jeffrey Immelt…

met or exceeded the average performance of the Standard & Poor‟s 500-stock index29
over the same period.
Immelt also modified the equity packages of other GE executives to link their stock
options to the company‟s performance. “We believe that our pay should be completely
transparent, that shareholders should know how we‟re paid. We have a philosophy on
compensation that's based on performance,” said Immelt. 30 He also said that while
retention was an important issue in the granting of options for other GE executives, in
his case, the only issue should be that of performance.
Immelt also tried to improve investor confidence by reshuffling GE‟s portfolio.
Analysts said that he was trying to send across the message that GE was essentially a
strong company and that there was no need for investors to be concerned about its
business model. Immelt said that, while GE had acquired other companies, it was not
done only to fuel expansion but also to improve the business portfolio. “I don‟t want
us to be a company that does deals because we can. I want us to do the deals we need
to do to improve strategically. If I didn‟t think this improved our business strategically
for the long-term good of our shareholders, I wouldn't do it. We're not in the business
of flipping assets. That's not our game,” said Immelt. 31 By 2002, Immelt had started
trying to beef up GE‟s portfolio by spinning off less lucrative businesses and
acquiring other strategically significant ones.
On October 8, 2003, GE announced the final terms of its acquisition of the French
media giant Vivendi Universal‟s American assets in an equity deal valued at $14
billion. The combined company was expected to have $13 billion in 2003 revenues,
with holdings that included film and TV studios, theme-park interests and cable
channels. Analysts were a little surprised by this acquisition, as GE had stayed away
from the production business for years despite owning the NBC television network.
The company had long believed that NBC could survive without the backing of a
studio and a content library. Therefore, analysts wondered whether Immelt had just
been attracted by the bargain price of the deal.
On October 9, 2003, GE acquired Instrumentarium, a Finnish medical-equipment
maker and immediately after that, on October 10, 2003, it purchased Amersham, a
British life-sciences and medical-diagnostics company. The three deals together were
valued at $25 billion. Analysts said that Immelt was trying to showcase a bold
business transformation through these deals. However, they were skeptical about
whether these deals would actually benefit the company or create more trouble for it.
By 2005, Immelt had sold less profitable GE businesses like insurance and had spent
more than $60 billion to acquire businesses in new and fast growing industries like
renewable energy, cable and film entertainment, bioscience, and security. Slow
growth low margin businesses like lighting were also reduced to 10 percent of GE‟s
portfolio from 33 percent in 2000 (Refer Exhibit V for Immelt’s important
acquisitions in the early 2000s).
Immelt also tried to increase GE‟s global orientation in the early 2000s. GE had
always been a global company, but Immelt saw the potential to push it further. He
invested hugely in setting up new research centers in Shanghai (China), Bangalore
(India), and Munich (Germany) in 2004, and increased the company‟s R&D budget
from $286 million in 2000, to $359 million in 2004. Immelt said that he wanted to

29
The Standard & Poor‟s 500 Index was one the most watched indices of large firms in the US.
30
“On the Record: Jeffrey Immelt,” The San Francisco Chronicle, June 6, 2004.
31
“Jeff Immelt: We Know This World,” BusinessWeek Online, September 15, 2003.

213
Enterprise Performance Management

create something like a „global brain trust‟ that the company could use to spur
innovation, which explained the diverse locations of the facilities. Immelt also thought
that globalizing research would allow GE to stay more in touch with customer needs.
(GE predicted in 2004 that 60 percent of the company‟s growth in the next 10 years
would come from developing countries as against 20 percent in the 1990s).
Exhibit V
Some of GE’s Business Acquisitions under Immelt
Industry Acquisition
Media Content Universal Entertainment
Biosciences Amersham
Security Edward Systems
Water Ionics and Osmonics
Renewable Energy Enron Wind
Source: “Shuffling the Portfolio,” BusinessWeek, March 28, 2005.
By 2003-2004, Immelt had begun to put his stamp on GE‟s culture and insiders said
that they could find several changes in the company. For one thing, GE had always
had a culture of promoting communications within the company. But under Immelt,
the company had increased its external communications. Communicating with
investors and third parties had become very important in the early 2000s, due to
uncertain external conditions. Immelt reportedly spent more than 70 percent of his
time away from his office at GE‟s headquarters. He was either in the field meeting
employees or he was meeting with investors.
Analysts said that GE‟s culture had softened under Immelt. The focus had shifted
from performance and strictly quantifiable results, to more abstract things like
customer satisfaction and value. Immelt also tied executive compensation to factors
like ability to boost sales, come up with innovative ideas and generate customer
satisfaction, rather that just the ability to meet performance targets.
In a departure from the company‟s traditional way of basing compensation on the
bottom-line results, the new GE was focused on intangible factors that were more
difficult to measure. Immelt thought that removing the emphasis from the bottom-line
would encourage employees to take risks and come up with innovative ideas. It was
his aim to stretch GE‟s Six Sigma quality initiative into the customers‟ processes to
create more value for them.
GE however continued with the practice of firing the least effective 10 percent of its
workforce every year. But analysts said that the way the firing was done seemed to be
more subtle than in the Welch era, where it was done more publicly and with a view
to letting the entire organization know the reasons for the firing.
Another significant change within GE was the increased number of outsiders brought
into the company at senior positions. Immelt believed that bringing in people from
outside brought in new ideas, creative energy and a new perspective on the company‟s
policies. This was in contrast with GE‟s traditional policy of promoting from within.
Managers within GE were also being encouraged to „develop a passion‟ for and
become experts in industries of their interest by spending a longer time at one job,
rather than moving frequently between jobs. This was also different from the Welch
era where managers were transferred between industries every few years. Under
Welch, the focus had been on enhancing general management skills rather than
industry expertise.

214
Jack Welch and Jeffrey Immelt…

There was also a greater amount of diversity in GE‟s workforce under Immelt.
Traditionally GE had one of the lowest levels of workforce diversity among large
companies in the US. Welch however always maintained that this was not due to the
company‟s policies or work environment, but because of the nature of GE‟s
businesses, which did not seem to attract women. This was changing under Immelt. In
the early 2000s, fifty percent of all senior executive hires and 54 percent of new
corporate officers were women, minorities, or foreign employees. Immelt also created
a separate diversity forum within the company and actively encouraged mentoring
programs for women, minorities and foreigners.
Within GE, Immelt was thought to be more „people-oriented‟ than Welch. While
Welch was an intimidating boss, Immelt used a “friendly, regular-guy approach” 32 in
dealing with employees. He was also not as demanding as Welch, and reportedly,
employees found him more approachable than his predecessor. Describing Immelt‟s
style of functioning, BusinessWeek, a prominent business magazine wrote, “He prefers
to tease where Welch would taunt. Immelt likes to cheer his people on rather than
chew them out.”33
Immelt was also responsible for shifting GE‟s focus from production to marketing.
For a long time, GE had operated on the premise that winning products sold
themselves. In contrast Immelt stressed that „the best managers are great marketers
and not just great operators‟. 34 In 2002, Immelt appointed Beth Comstock (Comstock)
as GE‟s chief marketing officer with the mandate of improving the company's
marketing expertise.
Comstock said that it was not easy to get the employees of the production oriented
company to take to marketing. However, she put together a commercial leadership
strategy that identified the best marketers within GE and gave them extensive training
by sending them across the organization for two years. (Under Welch this was done
for audit staff, who played an important role in maintaining financial discipline in the
company). GE also designed new marketing courses to train the company‟s marketing
executives.
GE continued with its tradition of borrowing winning ideas from other companies and
in November 2004, some GE marketing executives spent time at P&G learning how
the company examined and debated strategies and issues to arrive at marketing
decisions. Employees also spent time at FedEx Corp. which was known for its
exceptional customer service, in the early 2000s.
Immelt set up a high profile group known as the Commercial Council in 2002. It
consisted of a handful of the top sales and marketing executives from GE‟s different
units as well as some unit heads from some of the critical businesses like Consumer
Finance. The Commercial Council met every quarter to discuss growth strategies and
ways to reach customers innovatively, as well as evaluate new ideas from the senior
staff. According to GE insiders, these meetings were generally more „collegial and
experimental‟ than other typical GE meetings. Meetings under Immelt were also not
as aggressive as those led by Welch.
Innovation and creativity were also promoted by Immelt. Immelt was worried that the
uncertain economic scenario of the early 2000s would make GE employees risk-
averse and hesitant to take bold decisions. Besides, GE had been criticized as being

32
“The Days of Welch and Roses,” BusinessWeek, April 29, 2002.
33
“The Days of Welch and Roses,” BusinessWeek, April 29, 2002.
34
“The Immelt Revolution,” BusinessWeek, March 28, 2005.

215
Enterprise Performance Management

excessively dependent on acquisitions for its growth. To combat this, he launched a


program called „Innovation Breakthrough‟ in 2003. Employees were expected to
come up with ideas to improve GE‟s existing products or for the development of new
products through the Innovation Breakthrough program.
All business leaders were expected to submit at least three innovative project ideas per
year that would then be reviewed and discussed by the Commercial Council within
GE. For a project to qualify under the Innovation Breakthrough program, it had to
take GE into a new line of business, a new geographic area, or a new customer base.
Each project also had to have the potential to give GE incremental revenue of $100
million.
Since mid 2003, when the project was launched, GE invested more than $5 billion in
80 projects that ranged from creating microjet engines and cleaner coal to
desalination. The company expected to have more than 200 projects under way by
2007 and estimated that the first lot of 80 projects would generate $25 billion in
revenue by then. Analysts said that this move was aimed at proving that GE could
grow internally and organically and not just through acquisitions.
GE also wanted to develop ways to spark idea generation. Executives were
encouraged to hold „idea jams‟, where employees from different departments came
together to brainstorm. GE Energy had also set up a „virtual idea box‟ where
employees could post ideas on the web, and „Excellerator awards‟ for the
development of ideas.
In early 2005, Immelt reorganized GE‟s businesses to make them more customer
focused. Towards the end of Welch‟s tenure, GE was organized around 11 businesses
based on product lines. These were pared down to six in 2005 and the grouping was
done based on the customers served. The reorganization was done to lower costs and
eliminate redundancies, as well as to implement new systems of customer
management. It was expected that as opposed to a product based grouping, customer
based grouping made it easier for GE to mine and manage customer information
better. “This change allows us to leverage our exceptionally deep leadership team to
accelerate growth and improve productivity,” said Immelt. 35 (Refer Exhibit VI).
Under Immelt GE was also becoming „cleaner and greener‟. In 2005, GE announced
that it would double its investment in „ecoimagination‟ projects to $1.5 billion by
2010. Ecoimagination projects related to the development and use of technologies that
would eventually lead to cleaner and environmentally responsible products and
processes at the company. Some of the ecoimagination projects at GE included
producing a diesel and electric hybrid vehicle, developing cleaner coal-fired power
plants and other products that would put less strain on the environment. Immelt‟s
acquisition of Enron Wind (the only manufacturer of utility-scale wind turbines in the
US) in 2002 reflected the company‟s commitment to exploring alternative sources of
energy.
Immelt announced in late 2005 that all GE businesses would aim at reducing the
emission of carbon dioxide, the main greenhouse gas36 behind global warming, by
2010 by a significant percentage. The company would focus on the by-products of

35
“GE Begins Reorganizing around the Customer,” http://customer.corante.com, June 23,
2005.
36
Greenhouse gases are those components in the atmosphere which contributed to the
„greenhouse effect‟ or global warming. The main natural greenhouse gases are carbon
dioxide, water vapor and ozone.
216
Jack Welch and Jeffrey Immelt…

energy intensive businesses like locomotives and plastics to achieve its environmental
targets, but even non-energy based businesses like GE Capital would have to take up
environmentally responsible initiatives. The company had also started evaluating
managers on their involvement in environmental responsibility.
Exhibit VI
GE’s Business Reorganization in 2005
GE’s 11 Core Businesses before 2005
1. Healthcare
2. Transportation
3. Energy
4. Infrastructure
5. Commercial Finance
6. Consumer Finance
7. NBC
8. Advanced Materials
9. Consumer & Industrial
10. Equipment & Other
11. Insurance

GE’s Six Core Businesses after 2005


1. Commercial Finance
2. Consumer Finance
3. Healthcare
4. Industrial
5. Infrastructure
6. NBC Universal
Adapted from www.ge.com
Previously GE had never displayed any special consideration for the environment.
The company had long been criticized for boosting coal and nuclear power and for
dumping chemicals in the Hudson River near New York. Therefore, analysts were
skeptical about the company‟s seriousness in this initiative and were inclined to
dismiss it as „greenwash‟. However, Immelt seemed committed to this cause. GE‟s
new environmental mantra was „green is green‟ (invoking the green color of currency
in America) and the company was poised make substantial investments in
environmental projects.
Immelt also initiated the process of making governance changes at GE. GE had
always had a reputation for good governance, and Immelt was trying to enhance it by
bringing more outside directors to the board. The company had also adopted some
accounting changes in an attempt to make its financials more transparent from 2002.
Making changes at GE was not easy for Immelt and there were several reasons for
this. The most important was that he was a follow-up act to Welch, and Welch had
already been established as one of the greatest business managers of all time.
Therefore, making changes at GE, especially those that contradicted Welch‟s policies
would not find easy acceptability at the company.

217
Enterprise Performance Management

Besides, every step he took was being analyzed in the media in terms of what Welch
would have done in the same situation. In addition to this, Immelt had to fight an
uphill battle at GE to introduce concepts like creativity, customer satisfaction and
value to employees who were steeped in the Six Sigma culture and for years had only
understood quantifiable bottom-line results.
As of mid 2006, Immelt still had several challenges before him. He had to consolidate
his position at and put his personal stamp on a company that had been molded to a
great extent by a strong and charismatic predecessor. He also had to operate in a
difficult economic environment and still try to post double digit growth every year,
and he was having to prove time and again that GE had not lost its magic after Welch
left.

218
Jack Welch and Jeffrey Immelt…

Additional Readings & References:


1. “GE: When Execs Outperform The Stock,” BusinessWeek, April 17, 2006.
2. “GE Begins Reorganizing Around the Customer,” http://customer.corante.com,
June 23, 2005.
3. “Shuffling the Portfolio,” BusinessWeek, March 28, 2005.
4. “The Immelt Revolution,” BusinessWeek, March 28, 2005.
5. “Jeff Immelt on Taking "Swings"”, BusinessWeek, March 28, 2005.
6. “The Best & Worst Managers of 2004 -- The Best Managers: Jeffrey Immelt,”
BusinessWeek, January 10, 2005.
7. “On the record: Jeffrey Immelt,” The San Francisco Chronicle, June 6, 2004.
8. “The Hard Way,” The Economist, October 16, 2003.
9. Monica Roman, “Jeffrey Immelt: Show Them the Money,” BusinessWeek,
September 29, 2003
10. “Jeff Immelt: We Know This World,” BusinessWeek, Online Extra, September 15,
2003.
11. “Solving GE's big problem,” The Economist, October 24, 2002.
12. “A Helluva Problem,” The Economist, September 19, 2002.
13. “The Jack and Jeff show loses its luster,” The Economist, May 2, 2002.
14. “The Days of Welch and Roses,” BusinessWeek, Online Extra, April 29, 2002.
15. “Q&A with GE's Jeff Immelt,” BusinessWeek, April 29, 2002.
16. “What GE Watchers Want to Know,” BusinessWeek, April 29, 2002.
17. “Commentary: Was Jack Welch's Run All It Was Cracked Up to Be?”
BusinessWeek, April 29, 2002.
18. “Where's the Heat on Neutron Jack?,” BusinessWeek, March 28, 2002.
19. “Q&A with GE's Jeffrey Immelt” BusinessWeek, October 8, 2001.
20. “The GE Jock,” The Economist, October 4, 2001.
21. Diane Brady, “Taking Jeffrey Immelt at His Word,” BusinessWeek, September 26,
2001
22. “Jack Welch: A CEO who can’t be cloned,” Business Week, September 17, 2001.
23. “Jack Welch: The Lion Roars,” Business Week, September 14, 2001.
24. “Jack Welch: A Role Model for Today’s CEO?,” Business Week, September 10,
2001.
25. “Assessing Jack Welch,” September 10, 2001 beginnersinvest.about.com
26. Daniel Eisenberg, “Jack Who?” Time, September 2, 2001.
27. “Overvalued: Why Jack Welch Isn't God,” The New Republic, June 11, 2001.
28. “The Man who would be Welch,” BusinessWeek, December 11, 2000.
29. “Jack: The Welch Era at General Electric,” BusinessWeek, December 2000.
30. “The CEO Trap,” BusinessWeek, December 11, 2000.
31. “The Man who Would be Jack,” The Economist, November 30, 2000.
32. “Jack’s Gamble,” The Economist, October 26, 2000.

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Enterprise Performance Management

33. “The Revolutionary Spirit,” The Economist, September 16, 1999.


34. “The House that Jack Built,” The Economist, September 16, 1999.
35. “Jack Welch Corporate Villain,” BusinessWeek, November 23, 1998.
36. Robert Slater, “How Jack Welch Brought GE to Life,” BusinessWeek, October 26,
1992.
37. www.hoovers.com
38. finance.yahoo.com
39. www.bigcharts.com
40. www.freeinfosociety.com
41. www.ge.com

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