GE’s Two-Decade Transformation: Jack Welch’s Leadership


GE‟s Two-DecadeTransformation:Jack Welch‟s LeadershipAkshpreet Narula (13016)Harkamal Singh (13052)Pallavi Jaiswal (13096)Sandeep Singh (13040)Shikha Jaiswal (13156)Varun Mahajan (13192)Siddhant Sanghvi (131)

Coverage Introduction Closing out the decade Founders & CEO‟s A player with 4 E‟s Jack Welch E business First stage of rocket GE in India Acquisition Reverse Innovation Second stage of Rocket Key milestone in „12 Work out & Best practice Going Global External Opportunity Developing Leaders Croton Ville Third stage of rocket Stretch Service business

IntroductionIs an American multinationalconglomerate headquartered inFairfield, USA.Company operates in energy,technology, infrastructure, capitalfinance and consumer and industrial.Products they offer are appliances,aviation, consumer electronics andelectrical distribution, electric motors,energy, finance, gas, healthcare,lighting, locomotives, oil software,water, wind turbinesRevenue:147,359 Billion USDGE is world‟s third largest companyCurrent CEO: Jeffery Immelt

FounderThomas Elva Edison

Founded in 1878 –by Thomas Edison First focus: generation, distribution and useof electric power. CENTURY later – one of the world’s leading diversified industrialcompanies. “profitless growth” in 1960’s lead to havestrategic planning systems.Year19301950StructureHighly CentralizedGreaterDecentralization

Reg Jones(1973-1980)YEAR197019791981Achievements“CEO of the Year” 3times by his peers.“CEO of the Decade”“management legend”by THE Wall StreetJournal.

43 strategic units to support strategicplanning. GE was benchmark for others companies(imitated its SBU based structure & planningprocess). Unable to review and approve massive volumes ofInformation generated by 43 SBU’s. Formed a covering on GE’s departments, divisions,groups and SBU’s with “SECTORS”. Country’s leading business statesman.

Jack Welch(1981-2001)YearAchievements1997National business hall offame1999Manager of the 20thcentury2001-2004Forbes 400 richestAmericans

When joined GE the U.S.economy had lotof problems:1. Unemployment2. High interest rate3. Recession4. Strong dollar exacerbated He challenged to be “better thanthe best”.

Jack Welchin anInterview“A decade from now, I wouldlike General Electric to beperceived as a Unique, highspirited, entrepreneurialenterprise the most profitable,highly diversified company onthe earth, with world qualityleadership in every one of itsproduct lines”.

1st Stage of n &EngineeringNuclear ServicesIndustrialElectronicsMedical SystemsMaterialAerospaceAircraft EnginesCoreLightingMajor ipment#1 or #2:Fix, Sell orCloseExhibit 2

Sold more than 200 businesses[SPIN OFF] and made over370 acquisitions. Replaced the strategic planning system with “real timeplanning”. Built five-page strategy playbook. Budgeting process was redefined.[rather than internalcomparison used external means] Insisted GE become more “lean and agile” resulting Delayering: “sector” level Downsizing: elimination of about 123,450 jobs Divestiture: elimination of an additional 122,700 jobs

AcquisitionServices Weaker of the three Made 9 acquisition in it with the brandsTechnology Moderately stronger Made 7 acquisition in itCore Stronger of the three Since they were stronger, they made only 6acquisition in it.Exhibit 3

Year19811985Revenues 27.2 billion 29.2 billionOperatingprofit 1.6 billion 2.4 billion Drastic restructuring earned Welch nickname “Neutron Jack”. “Varsity team” consisted of managers with a strong commitmentto new management values, ability to take charge and bringabout change.

Second Stage of Rocket 1980’s most of therestructuring was complete. Hardware was in place,focus is on Organization’sSoftware. His priorities were shiftingto Culture.

WorkoutBestPractise Jack welch James Baughan (directorof Managementdevelopment) Jack Welch Michael Frazier

Work – Out and Best Practices To get unnecessary bureaucratic work out of the system. Forum in which employees and their bosses could work outnew ways of dealing with each other. Groups of 40-100 employees were invited to share viewsabout the business and how it can be improved. 3-Day session, there was no documentation of meeting. This resulted in birth of a movement called “Best Practices” Competitive Intelligence[best practices of Ford, HP,Xerox, Toshiba]. Through best practices realization by managers that theywere measuring/managing wrong things.

Going Global“It is very difficult to jump into theworld arena if you don‟t have a solidbase at home, but once the solidbase was created, we really tookthe long jump”

#1 or #2 evaluated at world marketposition. Business are global and not companiesContributionKey negotiator in deal with Thomas S.A.[exchange offer]Joint venture with Robert BoschPartnership with ToshibaAcquisition of Sovac

External Opportunity Globalization not a one timeeffort but an ongoing theme

Problem Seen as OpportunityEuropeeconomicdownturn 17.5 billion invested in from1989-1995,on new plants,acquisitions and finance.Mexicanpesocollapsed Great buying opportunity,acquired 16 companies.Asia slippedinto Crisis Welch urged its managers toview this as an opportunity tobuy rather than a problem

Developing Leaders Focus of employees Outward(competitive world)instead of inward.[Lifetime employment] “I Own the People” good people were GE’s keyassets and are company's resource. Developing of employee was from bothside(employer and employee). Salary Structure Increase base salary compensation(stockoptions)

Croton ville managementdevelopment facility Hired Jim Baughman from Harvard andNovel Tichy from Michigan. Develop leaders aligned to GE’s new visionand culture. Work Out Idea striked. Introduced 360 degree feedback process.[rating employees on scale of 1-5 based onarea T.Q.V]

Crotonville managementdevelopment facilityFirstSecond Delivers commitments andshare values. Doesn’t meet commitmentand doesn’t share values.ThirdFourth Misses Commitments butshares Values Delivers commitments butdoesn’t share values.Autocrat and need toweed out from GE

3rd stage of RocketBoundary less company

Ideas free to flow, No distinction between foreignand domestic markets. Best practices can be leveraged by boundarylessbehavior. Adopted Fisher & Paykel – Job-Shop techniques intheir appliance business. GE’s appliance Park “must see” destination forother businesses.

Stretch:-Achieve asicTargetsHigherGoalsNot Accountable

How good can you be? Don’t-punish-failure concept.[No disaster ofStretch target Idea] By 1995 GE did achieve Operating margin of14.4% and inventory turns of almost 7 in1995.

Service Business Future offset slow growth in Products, started focuson added value services. Medical Business - “In Site” Real time diagnostic concepts applied in Aircraft andPower systems. Biggest growth opportunities Providing service tocustomer. Making existing assets of Customers moreproductive.

ProductsSelling Products toCustomersTRANSITIONProductsHelping ourcustomers win

Closing out the decade Didn’t go by the trend.[breaking upmultibusiness companies]. Six Sigma Quality Initiative.[AlliedSignal borrowed formMotorola] Gary Reiner-VP of Business Development lead the QualityInitiative. GE was operating in error[3.4 defects per million operationsand costing 8 - 12billion a year] Goal to reach Six Sigma quality levels company wide by2000.

GreenBelts4 weeks training5 MonthsimplementationBlackBeltsMasterBlackBelts6 weeks ofinstruction instatistic , dataanalysis and othersix sigma toolsFull time six sigmainstructors –mentored the BlackBelt candidatesthrough the two –years process

"A Players" With "Four E's"“A” Individuals with vision, leadership,energy and courage.PlayersEnergyEnergizeOthersEdgeExecution Implemented PerformanceAppraisal System. Globalizing the intellect of thecompany. Continuously upgrading Quality ofmanagement was key success of GE.

E-Business Each unit had full time teamfocused to redefine the business model. Welch thought GE was late entrant toInternet. Through the process of Six Sigma, GE has done the hard workwhich is needed to support e-business. Early results of digitizing the company was success. General Electric awarded “E-Business of the Year” byInternetWeek Magazine in 2000. GE has moved billions of dollars in sales and spending to theInternet at lightning speed.

3%11.9%285%673.5%Exhibit 5

Current Scenario of GE India GE’s presence in India was in 1902 hydropower plant. Today the best of GE is in Indiathrough technologies andinnovations. Bringing products, services andtechnologies closer tocustomers[Localization]. A long term player acrosstransportation, energy ,healthcareand financial services.Ref :-

Current CEO of GE andhis Contribution John Flannery is the President and CEOfor GE India and is directly responsiblefor all of GE‟s operations in the country. He has been with GE for over 22 years and has heldseveral senior leadership positions in the company. He has extensive experience in building and leadinglarge teams and growing businesses in globalassignments.Ref :-

Reverse Innovation GE Aim Conceiving and developing products for theIndian market and in turn use those products to penetratemore mature markets outside of India. This is the “reverse innovation” concept. “Localisation of business”. GE to become a truly great local company in India. Structure of Org business vertical heads are nowreporting directly to CEO of GE India, as compared to thepast where unit chiefs reported to global business verticals.

Key milestones achieved in2012GEopensmeasurement&control validation labin IndiaJet Airways signsagreement with GE onaircraft engine repairGE's Rs1,000 crorefirst Indian factory tocome up near PuneGE Energy to localiseproducts for India'swind energy sectorMajority Interest ofAdvanced Systek isacquiredReduce the maternaland infant mortalitythroughtechnologiesand partnerships.

GE’s Two-Decade Transformation: Jack Welch’s Leadership. GE‟s Two-Decade Transformation: Jack Welch‟s Leadership. Akshpreet Narula (13016) Harkamal Singh (13052) Pallavi Jaiswal (13096) Sandeep Singh (13040) Shikha Jaiswal (13156) Varun Mahajan (13192) Siddhant Sanghvi (131) Coverage.