GE's Two Decade Transformation Case Study

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GE's Two Decade Transformation

• Examine Jack Welch and his transformation of General Electric

Welch's initial resolve to make the company more agile and lean led to a highly systematic downsizing, delayering and destaffing process focusing on every large headquarters group, which included a cutback by half in the company’s 200-strong strategic planning workforce and the elimination of its arduous strategic planning structure. In its place, he incorporated "real-time planning'', discussed with fourteen key business leaders via informal sessions. GE’s budgeting process was also drastically altered: results were assessed against external competitive conditions, instead of internal comparisons. In the year 1985, Welch did away with the sector level; to guarantee every business directly reported to him, he eliminated 5 hierarchical levels (Bartlett, 2000).

The company did away with 64,160 hourly and 59,290 salaried jobs from 1981 to 1988; divestiture led to the elimination of 122,700 more jobs. While a modest revenue growth from 27.2 to 29.2 billion dollars was achieved from 1981 to 1985, operating profits grew significantly from 1.6 to 2.4 billion dollars. Years after commencing extensive reform, Welch deemed GE’s hardware to finally be in place and believed the time had come to concentrate on its software.

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His priorities shifted to achieving cultural change to sustain its productivity (Bartlett, 2000).

In the year 1989, Welch proposed a management technique based on honesty and transparency, refining key cultural elements to create a culture marked by speed, self-confidence and simplicity. To this end, he initiated the ‘Best Practices’ and ‘Work-Out’ initiatives. Additionally, he concentrated on globalization, investing 17.5 billion dollars in Europe from 1989 to 1995 and nearly doubling GE’s international revenue to $42.8 billion by 1998 (Bartlett, 2000).

Welch concentrated on creating integrated diversity and a boundaryless firm marked by an anti-parochial climate, open to sharing and seeking ideas from all. Lastly, he focused on the service sector by acquiring Peabody, Kidder, and other financial service firms (Bartlett, 2000)

• Identify the strategy Jack Welch used to create value for General Electric

As soon as he took charge, Welch established a business standard of either becoming the industry’s top or second-largest competitor, or disengaging (Bartlett, 2000).

• Why do you think this strategy was successful?

Welch’s aim was ensuring a unique, entrepreneurial, most diversified, and most successful firm through historical acquisitions and deals, and the selling off of less-profitable divisions.….....

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