GE's Two-Decade Transformation: Jack Welch's Leadership
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A case study analysis of General Electric's two decade transformation under Jack Welch's leadership. The case study of Harvard Business School.
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GE's Two-Decade Transformation: Jack Welch's Leadership
- 1. GE’S TWO-DECADE TRANSFORMATION: JACK WELCH’S LEADERSHIP
- 2. CONTENT GE OVERVIEW ALL ABOUT JACK WELCH INITIATIVES TAKEN BY JACK WELCH GE’S VISION FOR 2013 & BEYOND TWOS ANALYSIS
- 3. OVERVIEW 1 2 3 4 FOUNDED 1878, Thomson Houston Electric Company (THEC) MERGER 1892, Between GE and THEC formed General Electric HEADQUARTERS Fairfield, Connecticut, U.S REVENUE $ 147.300 Billion (as of 2012) imagination at work
- 4. ACHIEVEMENTS (2012-13)OVERVIEW 3rd Largest Company in the world (Forbes) 5th Best Global Brand (Interbrand) 6th Largest in USA (Gross Revenue) 7th Best company for Leaders (Fortune) 14th Most profitable company in the world (Fortune) 15th Most admired company (Fortune) 19th Most Innovative company (Fast Company)
- 5. SINCE 1973GE – CEOs
- 6. REG JONES (1973 - 1980)PREDECESSOR 43 strategic units: To support strategic planning. GE was benchmark for others companies (Imitated its SBU based structure & planning process). Unable to review and approve massive volumes of Information generated by 43 SBU’s. Formed a covering on GE’s departments, divisions, groups and SBU’s with “SECTORS”. Country’s leading business statesman. YEAR ACHIEVEMENTS 1970 “CEO of the Year” 3 times by his peers. 1979 “CEO of the Decade” 1981 “Management Legend” by WSJ
- 7. BRIEF INTRODUCTIONJACK WELCH John Francis "Jack" Welch, Jr. (born November 19, 1935), Peabody, MA ALMA- MATER •Salem High school •University of Massachusetts (Bachelor of Science in Chemical Engineering, 1957) •University of Illinois at Urbana- Champaign (M.S and PhD, 1960) YEAR ACHIEVEMENTS 1997 National business hall of fame 1999 Manager of the 20th century 2001-2004 Forbes 400 richest Americans
- 8. CHALLENGES AS A CEOJACK WELCH 3 1 2 ECONOMY IN RECESSION HIGHEST UNEMPLOYMENT RATES SINCE DEPRESSION HIGH INTEREST RATES
- 9. WELCH’S EARLY PRIORITIESINITIATIVES HARDWARE INITIATIVE #1 or #2 - Fix, Sell or Close o Three Circle Concept o De-Staffing & Real Time Planning SOFTWARE INITIATIVE o Work Out o Best Practices
- 10. THREE CIRCLE CONCEPTINITIATIVES SERVICES GECC Information Construction & Engineering Nuclear Services CORE Lighting Major Appliance Motor Transportation Turbine Construction Equipment TECHNOLOGY Industrial Electronics Medical Systems Materials Aerospace Aircraft Engines OUTSIDE Housewares Central Air-Conditioning TV & Audio Cable Mobile Power Delivery Radio Stations SUPPORT Ladd Petroleum Semiconductor GE Trading Co. Utah Mining VENTURES Calma
- 11. DISCIPLINED DESTAFFINGINITIATIVES “We don’t need the questioners & checkers, the nit-pickers who bog down the process.…. Today each staff has to ask, “How do I add value?” How do I make people on the line more effective and competitive?.” LEAN & AGILE: Making people productive and competitive
- 12. REAL TIME PLANNINGINITIATIVES FIVE PAGE STRATEGY PLAY BOOK ONE PAGE ANSWERS TO 5 QUESTIONS: 1. Current Market Dynamics 2. Competitors’ Key Recent Activities 3. The GE Business Response 4. Greatest competitive threat over next 3 years 5. GE’s Business’s Planned Response
- 13. BENEFITS OF “HARDWARE” INITIATIVEINITIATIVES Number of Employees (1981-89) •404,000 to 292,000 Revenue (1981-85) •$27.2 Billion to $29.2 Billion Operating Profits (1981-85) •$1.6 Billion to $2.4 Billion
- 14. THE FIRST “SOFTWARE” INITIATIVEWORK OUT Implementation Team (24 consultants) Group of 40-100 employees 3 day sessions On the spot decision on 80% proposals. IMPLEMENTATION To design a process to get unnecessary bureaucratic work out of the system. To create the culture of a small company, where all felt engaged and everyone had voice. OBJECTIVE An open discussion forum Employee could give ideas and suggestions on business and get immediate responses to it. OVERVIEW
- 15. THE SECOND “SOFTWARE” INITIATIVEBEST PRACTICES FOCUS MORE ON HOW THINGS GET DONE LEARNING FROM OTHER INDUSTRIES IMPLEMENT ATION RESULT Productivity Increase Managers realized the key focus areas of business
- 16. GO GLOBAL Appointing Paolo Fresco as Head, International Operations Rampant Acquisitions Taking advantage of global economic slow down • European Crisis- $17.5Bn • Mexican Peso collapse • Asian Economy Crisis (1997-98)
- 17. DEVELOPING LEADERS FOR TOMORROWEMPLOYEES Keeping close tabs on top 3000 Executives Succession Planning Improved Packages/Stock Options Training institute at Croton Ville 360 Degree Feedback “A” Players (Characterized by 4Es – Energy, Energize, Edge, Execution)
- 18. PERFORMANCE APPRAISAL SYSTEMEMPLOYEES RANK RATING REWARD 1 Top 10% TOP Stock Options 2 15% STRONG Stock Options 3 50% HIGHLY VALUED Training 4 15% BORDERLINE Improve or Move 5 Bottom 10% LEAST EFFECTIVE Weed Out
- 19. Boundary less Behavior Notion of “Stretch” Service Businesses THE THIRD WAVEINTO THE 1990s
- 20. Employees were dissatisfied with the quality of its product. GE was operating at error rates 10,000 times the six sigma quality level of 3.4 defects/million costing $8- 12 billion/year. Series of planning, resource allocation, review, and communication meetings were done. Participation in initiative was compulsory, 40% Bonus was tied with it. QUALITY INITIATIVESIX SIGMA
- 21. MASTER BLACK BELT BLACK BELT GREEN BELT Training- 6 weeks in statistics, data analysis and other six sigma tools. Training – 4 weeks Implementation- 5 Months project aimed at improving Quality. Full time Six Sigma instructors. RESULTS 10 Fold increase in life of CT scan X-ray tubes. 62% reduction in time at service stations. 30,000 Six Sigma projects were initiated a year. IMPLEMENTATIONSIX SIGMA
- 22. SUMMARY PRODUCTIVITY Restructuring Removing Bureaucracy Downsizing Changing Attitude CULTURAL CHANGE “going for the leap”
- 23. COMPARISON • Promoted internal communication • Focus on performance & strictly quantifiable results • mostly promoting from within • Focused on production • demanding and intimidating • External communication (Investors & Third Parties) • Allowed employees to come up with innovative ideas • Brought a number of outsiders into Organization • Focused on marketing • Made GE more environmentally conscious • Friendlier and more approachable JACKWELCH JEFFEMMELT
- 24. TOWS ANALYSIS TOWS ANALYSIS T O SW Competition Information security Financial crisis Media depictions Evaluation and Analysis Under-performing energy sector Threat to flexibility Mergers and acquisitions Research and development Global recognition Global strength and competitiveness Excellent Management Diversified lines of operation Environmental initiatives
- 25. PERFORMANCE2012 180 154 150 147 147 2008 2009 2010 2011 2012 CONSOLIDATED REVENUES (In $ Billions) 16.9 9.9 12.4 14.9 16.1 2008 2009 2010 2011 2012 OPERATING EARNINGS (In $ Billions) • Total Industry Segment Revenue + GE Capital Revenue (45%) • Change in portfolio • Sale of 49% stake of NBCU • Rising profit from selling Air craft engines and transportation equipments • Acquisition of Lufkin Industries • Rise in orders from aviation and oil
- 26. GE’S VISION FOR 2013 & BEYONDSTRATEGIES Margin Expansion Growth from Emerging Economies Product and Service launches Energy, Healthcare and Aviation to drive growth 01 02 03 04
- 27. THANK YOU! FOR YOUR ATTENTION