With the coming retirement of Jack Welch, GE is challenged with whether someone can maintain the pace of development which has started during the Welch era. In the 1980s, Welch has transformed the company's business portfolio and in the late 1980s and 1990s, Welch has introduced his revitalization initiatives. This case study analysis dwells on six of Welch's major developmental programs: The "Software" Initiatives, Globalization, Redefining Leadership, Stretch Objectives, Service Business Development, and Six Sigma Quality.
Christopher A. Bartlett
Harvard Business Review (399150-PDF-ENG)
April 28, 1999
Case questions answered:
- How difficult a challenge did Jack Welch face in 1981? How effectively did he take charge?
- What was Welch’s objective in the series of initiatives he launched in the late 1980s and early 1990s? What was he trying to achieve in the round of changes he put in motion in that period?
- How did such a large conglomerate continue to grow so profitably: Have Jack Welch’s various initiatives added value? If so, how?
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Case answers for GE's Two-Decade Transformation: Jack Welch's Leadership
1. How difficult a challenge did Jack Welch face in 1981? How effectively did he take charge?
Jack Welch faced internal challenges e.g. high pressure as he superseded a strong, successful, almost legendary predecessor. GE was a large, diversified business with 43 SBUs that was very bureaucratic, hierarchical and thus, unresponsive and slow.
In addition, he was exposed to external threats like the U.S. economic recession, high-interest rates, and a strong dollar. These worsened GE’s growth opportunities and increased the unemployment rate which led to lower consumer spending. Competition increased drastically as global, especially Japanese, competitors engaged in the fight for market share.
To tackle the challenges, Welch took charge and created a sense of urgency by signaling the need for large restructuring. He categorized businesses into core, high-technology, and service, providing each type with an overall strategy or objective. Businesses being #1 or #2 in the industry were kept, otherwise, GE disengaged.
GE divested from 200 uncompetitive businesses and reduced the workforce to 292 000 workers despite 370 SBUs acquisitions. Internally, he focused to make GE lean and more agile by streamlining its processes, downsizing and delayering. Jack Welch abolished the strategic planning system, launched real-time planning, and cut the complicated strategy planning to 5-page strategy playbooks.
Budgeting now focused on external competitive criteria (MaSh growth). He reduced hierarchical levels, increased the number of direct reports, and initiated direct reporting of every SBU to himself. He changed the culture and norms by replacing the management team with individuals committed to new values and the will to change the old GE culture.
Welch’s initial actions increased profits and productivity while setting the stage for future changes and initiatives at GE.
2. What was Welch’s objective in the series of initiatives he launched in the late 1980s and early 1990s? What was he trying to achieve in the round of changes he put in motion in that period?
Jack Welch throve to leverage the newly set foundation from restructuring to create a culture that…