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Jack Welch’s Leadership
GROUP 5, SECTION C, STRATEGIC MANAGEMENT-2
Anand Kumar12P127
Ankush Singla12P129
Bhoomi Ashwin12P131
Aditya Chadha12P132
Siddharth Bharadwaj12P170
Soumyajit Sengupta12P171
GE’s Two Decades Transformation
General Electric: Background
Reg Jones (1973-1981) 10 groups, 46 divisions and 190 departments
were 43 strategic business units to support strategic planning
Benchmarked strategic planning and other companies imitated its SBU – based structure
Unable to review & approve information from 43
New Organizational Layer of “Sectors” introduced to cap the various departments, divisions & groups
The GE Heritage1878 - 1981
1878
Founded by Thomas Edison
1930
Centralized,Tightly controlled firm 1950
Decentralization1973
Reg Jones became CEOSBU Structure 1977
Firm restructured toSectors 1981
Jack Welch Replaces Reg Jones
Jack Welch1981 - 2001
1981
Three Circle Vision <Core, Technology, Services>
1983
1988
1995
2001
First Wave Second Wave Third Wave
Change Initiatives-Work-out-Best Practices-Going Global-Developing Leaders
Initiatives- Boundary less behaviour- Service Business-Six Sigma
Internet
<destroyyourbusiness.com>
History Founded in 1878 by Thomas Edison.
Focus on Generation , Distribution, and use of electric power to become.
1978 – Power Generation , household appliances, lighting + Aircraft engines, medical systems and Diesel Locomotives.
Strategic Context & 1st Restructuring Wave Internal Issues
Massive information
Inefficient macro-business
Bureaucracy
External Environment
Economic recession
High interest rates
Highest unemployment rate since the depression
Strong Dollar
Restructuring of General ElectricWelch’s “Three Circle Concept” Vision
Services
GECC InformationConstruction & Engineering
Nuclear Services
Technology
Industrial Electronics
Medical SystemsMaterial
AerospaceAircraft Engines
Core
LightingMajor Appliance
Motor Transportation
Turbine ConstructionEquipment
SupportLadd PetroleumSemi ConductorGE Trading Co.
Utah Mining
VenturesCalma
OutsideHousewaresCentral Air-
ConditioningTV&Audio
CableMobile
Power DeliveryRadio Stations
Going about the job, the Welch Way
•Challenged everyone to be “better than the best”•Sold more than 200 businesses and made over 370 acquisitions•Insisted GE become more “lean and agile” resulting
• De layering: elimination of the “sector” level• Downsizing: elimination of about 123,450 jobs• Divestiture: elimination of an additional 122,700
jobs•Replaced 12 of his 14 business heads
2nd Wave of Restructuring
Work Out Best Practices
Going Global Developing Leaders
A process designed to get unnecessary bureaucratic work
out of the system while providing a forum in which
employees and their bosses could work out new ways of
dealing with each other.
•Focused more on developing effective processes than controlling individual activities.• Customer satisfaction was main gauge of performance.•Treated their supplier as partners•Emphasized the need for a constant stream of high quality new products designed for efficient manufacturing
•Appointed Paulo Fresco, a key negotiator on the Thompson swap• Continued to broker numerous international deals• Joint venture with German-based Robert Bosch• Partnership with Toshiba• Acquisition of Sovac , the French Consumer Credit Company
• Focus on employees on competitive world rather than life time employment
•Changed salary structure with stock options
•Crotonville Management Development facility to harness cultural change and make leader
Productivity increased from 2% in 1981 to 4% between 1988-1991
For Example: Head of Corporate Audit told “ When I started 10 years ago, the first thing I did was count the $5,000 in the cash box. Today, we look at $5 million in inventory on the floor, searching for process improvements that will bring it down”
By 1998, international
revenues doubled in 5 years
Global revenues were growing at
almost three times the rate of
domestic sales
Crotonville Management Development facility : Key Institution for management
training focus : “Work-Out”
Concept emerged from here
3rd Wave of Restructuring
Boundary less Behavior
Stretch: Achieving the
Impossible
Service Businesses
The Boundary less company we envision will remove the barriers among engineering, manufacturing, marketing, sales, and customer service; it will recognize no distinctions between domestic and foreign operation
•In 1990 , Welch Introduced the notion of “stretch” to set performance targets and described it as “using dreams to set business targets, with no real idea of how to get there.”•Stretch Targets did not replace traditional forecasting and objectives-setting process.
•In 1994, Welch launched a new strategic initiative designed to reinforce one of his earliest goals: to reduce GE’s dependence on its traditional industrial products
• Biggest opportunity is to provide services to customers
•Making existing assets of customers more productive
•Making a shift from – selling products to customers towards – Helping our customers win - approach
Closing the Decade
E – Business Initiative
‘ A Players’ with ‘ Four
Es’
Six Sigma Quality
Initiative
destroyyourbusiness.com for each division in order to redefine business model
Each division had its own DYB team which helped in digitizing the company and added to its success
“A – Players” - Individuals with vision , leadership, energy and courage“4 E’s”•Energy i.e. excited by ideas•Ability to Energize others •Edge , the ability to make tough calls•Execution , the consistent ability to turn vision into results.
•In 1996 – Boca Raton- Welch announced a goal of reaching Six Sigma quality levels company – wide by the year 2000, describing the program as “the biggest opportunity for growth, increased profitability , and individual employee satisfaction in the history of our company
Green Belts - 4 weeks training5 Months implementation
•Black Belts - 6 weeks of instruction in statistic , data analysis and other six sigma tools
•Master Black Belts - Full time six sigma instructors – mentored the Black Belt candidates through the two –years process
Strategic ControlBalanced Scorecard Approach
• ROE increased from 18.1% in 1981 to 28.7% in 2000• Revenues increased by 376.7%• Net Earnings increased by 670.88%
Financial
• Best Practices : Aim of moving focus on to Customer Satisfaction• Change on Internal mind-set from selling products to “Helping our
customers win”Customer
• Three Circle Concept, Lean and Agile, Cut Bureaucracy• Work-out, Session C, 360 degree feedback process• Six Sigma
Internal Business Process
• Work-out, Session C• Crotonville Management development facility• Integrated Diversity• “A Players”
Learning and Growth
Strategic Impact
Jack Welch had been a Strategic Leader for GE and he has taken GE in 20 years at a stage no one would have thought of – a highly successful diversified company.
Jack WelchFrom the perspective of the Generic Strategic Leadership Model
Task Achieving the
common
Individual Motivating
& Developing
TeamBuilding &
Maintaining
Three Broad Functions
Task – Jack Welch defined overall targets for the employees of GE and pushed them to achieve the same
Team – Build his management team with new people and constituted institutes to develop future leaders and performers
Individual – Reward systems and incentives based on performance to motivate people to achieve more and stretch their limits
Seven Role Functions
Vision : Wanted GE to be perceived as a unique, high spirited, entrepreneurial enterprise
Strategic Thinking : Restructuring, software initiatives, going global, services business, e - business shows Welch’s long term strategies
Administration: Was authoritarian in his approach and held his company and employees tightly
Flexibility: Welch was very particular in his approach and can be particularly termed as flexible
Energy/Morale: Motivated his teams and all other employees to achieve the organizational goals
Allies & partners: Made successful strategic alliances with partners like Bosch, Toshiba, Sovac etc. to strengthen GE
Leading by example: he did what he said and asked others to do
Jack WelchFrom the perspective of the 4-Framework Leadership Model
Structural Framework
•Focused on Strategy through re-structuring, joint ventures, e- businesses
•Made formal working structure
•Made changes as per changing environment like in case of recession
Human Resource Framework
•Approach based on openness, candor, and facing reality
•Made regular visits to company's Management Development Institute
•Engaged managers in outspoken sessions & “Work – out’ a forum to find new ways to deal with issues
Political Framework
•As per this framework Welch wasn’t a political leader as he never used coalition or any form of manipulation
Symbolic Framework
•As per this framework, he was definitely a source of inspiration and guidance to his team mates and other employees
Jack Welch
Conclusion
Thus Jack Welch has guided GE strategically in a
- Strategic direction by forming “Three Circle Concept” Vision
- Effectively managed firm’s resource portfolio by making GE “Lean and Agile”
- Create an Entrepreneurial Mind-set through Work-out and Best-Practices
- Build leaders through – Session C, “A Players”
- Create an Open Culture through Integrated Diversity
- Win Customers through Six Sigma, Innovation
- Training and Development through Crotonville management facility
Thank You!
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