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GEs Two-Decade Transformation: Jack Welchs Leadership

Case Analysis

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Final Case Analysis (General Electric)
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Alicia K. Hoverson
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Biola University
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December 20th, 2014

Section 1: Summary of background and facts

General Electric (GE) was founded over 100 years ago in 1878 by Thomas Edison.
Edison developed and invented the telegraph, phonograph, electric light bulb, alkaline storage
batteries and Kinetograph (a camera for motion pictures) (Thomas). Although, he is more
commonly known for his invention of the lightbulb. Thanks to Thomas Edison cities around the
world are able to receive electricity and power. Now because of his idea Edison founded a
company which he called the Edison Illuminating Company (Thomas). The Edison
Illuminating Company eventually became the General Electric Corporation which has become
one of the worlds leading diversified industrial companies since the 100 years that it was
founded (Bartlett). As General Electric became increasingly more powerful they added power
generation, household appliances, lighting, aircraft engines, medical systems, and diesel
locomotives to their list of products and services. Without Edisons inventions, or more
specifically his development of electrical technology, the United States and the world would not
be the society it is today. Edisons leading advancements in the technological world allowed for
Americans, and the world, to enjoy night life and stay up later. Because of Edison the culture of
the world has changed forever. Now General Electric has a purpose and provides a need for
anyone who uses a telephone, a lightbulb, planes for flying, and basically everything else.
Now that the company had solidified itself in the business world, and in the everyday life
of the common person, there were still some rough edges in management. Although the 1930s
were a time where GE was the leading model of a tightly controlled corporate business, by the
1950s their growth had become mismanaged. The hundreds of department managers that had
been hired lead to a great decentralization in the company. Even through this decentralization GE

found themselves leading the edge of management practices because of the strength of the
corporate managers and the strategic planning systems. But, in 1973 the company was inherited
by Reg Jones. Reg Jones was the company CEO before Welch was even thought of as a CEO
manager of the General Electric corporation. Jones succeeded as GEs CEO as he led the
company to become a management structure that is now looked up to by hundreds of companies.
It started with Jones idea of implementing an SBU- based structure. SBU stands for Strategic
Business Unit Structure. An SBU, divides the company into units including the main
headquarters, the strategic business units (SBUs) and the divisions of each SBU (Bianca). Each
of the SBU sections that management is divided into has a different role, or specific organization,
but they all deal with a common set of products or markets. In GEs case the SBUs would be
dealing with power generation, household appliances, lighting, aircraft engines, medical systems,
and diesel locomotives. While management, or the main headquarters, is responsible for
implementing strategic management and achieving the goals of the company. Now hundreds of
other companies are using the SBU structure because they have seen how successfully it was
implemented into GEs corporate operating system.
Then Jack Welch entered as the new CEO of General Electric and as The Wall Street
Journal put it, [GEs] management legend, replaced a legend with a live wire when they
handed the CEO position to Welch in 1981 (Bartlett). Welch was fantastic in providing for the
role of interpersonal leadership in the GE company. He used diagnostic skills to understand what
he needed to do so that he could provide the company with optimal solutions to any managerial,
or company, problems. Early on, Welchs priorities for General Electric were to be perceived as
a unique, high-spirited, entrepreneurial enterprise the most profitable, highly diversified

company on earth, with world quality leadership in every one of its product lines (Bartlett).
Such lofty goals in Welchs early priorities lead him to be successful during his time as the
General Electric Manager.

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Section 2: Statement of Core Problem
General Electrics core problem is building their e-business with a new manager. Even
though Welch knew we was reaching the required retirement age of GE employees he did not
stop building up the company. Welch was just as committed as ever and continued to make GE
bigger and bigger without breaking up the multi-business as other businesses have done in the
past. His motivation is to make the company bigger, not smaller, and to bring in Cash - and lots
of it (Bartlett). In order for Welch to continue expanding the company he created a new
operating system at GE called Six Sigma Quality Initiative. Six Sigma is about providing for the
customer with as little defects as possible with consistent quality service and products. General
Electric is quoted saying, To achieve Six Sigma Quality, a process must produce no more than
3.4 defects per million opportunities. An opportunity is defined as a chance for
nonconformance, or not meeting the required specifications. This means we need to be nearly
flawless in executing our key processes (GE). This new operating system promised the biggest
opportunity for growth, increased profitability, and individual employee satisfaction in the
history of [the] company. Knowing the advantages to this Welch made this operating system
mandatory for all employees. All managers at GE were now required to undergo a massive
training regime so that the Six Sigma Quality Initiative would be underway.

Once Welch had this operating system underway he also took on the responsibility of
preparing the way for his successor. In order to prepare for his successor he continued upgrading
the quality that was embedded within the company. Now Welch was looking for specific people
to work at GE that would maintain and increase the quality and brand image of GE. For Welch to
distinguish the key players in GE he looked for A Players. If his intellectual capital was not
performing as A Players they would be let go. Welch describes A Players as people who
have the 4Es. The 4Es include energy for ideas and opportunities, ability to energize others,
edge to make tough calls, and execution of turning visions into results. In this way GE will be
able to fulfill their need for exceptional leadership talent. Also, in order to leverage their
intellectual capital GE will take care of their best by rewarding, promoting, and paying them
well. Although, for those who are not contributing to the GE competitive culture, they will be
moved out as soon as possible so that the company will not be harmed and those people can
move on to do something they are better at and contribute somewhere else where they can make
a difference.
Now that Welch has continued to expand General Electric and build up their operation
system to be the most efficient, he is beginning to implement an e-business initiative. When
Welch realized the potential that the internet had on businesses he is quoted saying, Change
means opportunity and this is our greatest opportunity yet (Bartlett). Even though the internet
was an ominous beast in the beginning GE took on the challenge and is beginning to benefit
form the accessibility and ease that the internet brings to the company. Without the internet today
a company may not even be competitive. One article I found that expanded on the impact that the
internet is having on business read, The ability to collaborate with others may be just as much

of a competitive advantage as the ability to deploy the technology. Certainly the technology
matters, but getting the business strategy right matters even more. And that may mean not just reengineering your company, but reinventing it (The Impact). So basically the problem now is
that GE must find a successor for Welch who will be able to get the business strategy of ebusiness right, who will be able to continue executing the Six Sigma Quality Initiative, and
continue to implement the A Player challenge for all employees. Wether that means reengineering or reinventing the company is the next question.

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Section 3: Solutions
First of all GE should not reinvent the entire company, but merely tweak, or maintain a
few of their operating, delivery and accessibility factors of the company. In order to maintain and
tweak their operations GE must hire a successor to Welch who is driven and determined to make
the company the best it can be. Basically, GE needs to carry out a rigorous application course for
those recommended, or interested in Welchs position at GE. The new leader must be driven,
independent, confident, interpersonal, diagnostic, technology savvy, and have a positive attitude
towards their work. These factors are necessary because Welchs successor will need to be able
to build up the e-business program of GE and maintain the programs that Welch implemented
while at GE. These programs include A Players and the Six Sigma Quality Initiative. Welchs
successor must also be humble and willing to learn as he will have some huge shoes to fill when
he/she becomes the new CEO of GE.
Second, the intellectually capital must continue to be leveraged and taken care of.
Welchs goal of GE was to create the culture of a small company - a place where all felt

engaged and everyone had a voice (Bartlett). When Welch started to create a company that
leveraged their employees he was on to something. He took the human relations approach which
suggests that favorable employees attitudes result in motivation to hard work (Moorhead). His
belief in the people working for the organization was huge to their success. In the future GE must
continue to take care of their intellectual capital because they are the greatest asset a company
may buy. Motivated people tend to be the best workers and the most efficient employees. When
people feel they are needed, or necessary to the workings of a small project or a large important
turn around operation of a large successful company, they will work closer to the best of their
ability then if they were not treated as important.
In short, the solution to GEs problem of losing their incredible CEO, Jack Welch, is to
create a rigorous course that will help GE find someone who can continue in Jack Welchs
programs and pick up where he left off on the e-business implementation.

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Section 4: Constraints and Limiting Factors
The enormous limiting factor in this solution is that no human being could ever
encompass exactly what Welch had done. Finding someone who is exactly Welch in personality
and character would be impossible. So even though GE would want another Welch it is not going
to happen. This is the main constraint for General Electric as they move forward to continue
expanding and remaining the worlds largest multi-business company. Another limiting factor
could be the goals of different CEOs. If GE wants to stay on top they will need a new CEO who
has the same visions and goals that Welch had. Although, most people cannot see the vision of
others and this will be hard to duplicate. This is why GE needs to find a CEO who is humble and

willing to share the floor with the past CEO and take on the old as well as bringing in the young
and new ideas from a younger generation. These group of geeks and youngsters that will come in
to take over the General Electric company will hopefully be able to take Welchs ideas and put a
new spin on them so that the company can grow with the times.

Section 5: Implementation of Best Solution

First, General Electric must create a rigorous application process that will test the skills
and strengths/weaknesses of the CEO applicants. There should also be recommended applicants
from within company. Possibly someone who worked well with Welch, or even better, worked
under him! So the first step is to find a Chief Executive Officer who has all the strengths of a
determined leader that wants the best for GEs business.
Second, the new CEO must completely understand the the programs that Welch has
implemented into GEs corporation. If the new CEO does not understand the corporate culture of
and programs of GE they will be eaten up and spit out. After Welch, GE will continue not
accepting any one less than an A Player who does not have energy for ideas and opportunities,
ability to energize others, edge to make tough calls, and execution of turning visions into results.
There must also be full understanding of the program Six Sigma Quality Initiative. Once the CEO
is educated on these programs he/she must not forget the most important asset to the company.
Their intellectual capital. If the new CEO does not take care of these precious assets and leverage
them by taking into account all their strengths and listening to their advice GE will lose a ton of
knowledge. When a company can take into account the advice of the people running the show
they can gain knowledge and advice they may have never even thought of on their own. Use the

knowledge of the people around you. Keep a CEO who knows that they will never be able to
stop learning from everyone they come in contact with.
Thirdly, the CEO must be educated in technology. Preferably knowledgable in e-business
structure and strategy. General Electric must continue to expand their business and compete with
the other businesses that are becoming accessible through the internet.

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Section 6: Justification for Solution
Providing a solution and a strategy that includes a driven CEO who continues Welchs
programs and ideas is the best solution because Welch knew what he was doing. When Welch
implemented the e-business strategy and leveraged his intellectual capital he became a genius.
Although, this is becoming age old stuff, Welch was one of the first to actually downscale for the
benefit of the corporate culture. He did not downscale because the company needed the money,
but because he wanted better communication between the upper divisions and lower divisions
within the company. Everything Welch did was to benefit the growth of the company. Welch took
the responsibility that was given to him. This reminds me of a verse that I found in a packet that
was recently given to me by a Professor at Biola. The verse is found in Luke 12:35-48 and
writes, From everyone who has been given much, much will be demanded; and from the one
who has been entrusted with much, much more will be asked. Professor Avila wrote that this
verse is about responsibility and that servants serve [their] master by proving he is trustworthy
and exhibiting the competence to manage the responsibilities entrusted to him (Avila). Welch
served his company well and should be respected because he knew that there would be a lot
demanded of him and he lived up to those demands.

A new CEO will have to be trustworthy to complete his duties. They will need to grow
the organization as Welch has, make a greater profit as Welch has, and take risks as Welch has.
Basically, as I have been saying before, the new CEO will have some huge shoes to fill. GE must
be picky in choosing who will take over the position as CEO. Although, through this case
analysis there is advice on how to choose the new CEO of GE. If General Electric chooses to
strategically take time to find another monster CEO as Welch was, they will not regret the time
they spent. Taking the time to choose the best CEO possible to fill Welchs shoes will help the
General Electric Corporation stay as one of the worlds leading diversified industrial companies.

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Works Cited

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1. Avila, Jacob A. Christs Parables: Practical Advice for Business Leaders. (2014). Biola
University Business School. 19 Dec. 2014. Print.

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2. Bartlett A, Christopher and Wozny, Meg. GEs Two-Decade Transformation: Jack Welchs
Leadership. (2005). Harvard Business School website. 3 May 2005. 13 Dec. 2014. Print.

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3. Bianca, Audra. What Is the Best Organizational Structure for Strategy Implementation?.
(2014). eHow website. Retrieved 14:25, Dec 13, 2014, from http://www.ehow.com/
way_5304532_organizational-structure-strategy-implementation.html.

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4. GE: Our Company: Leadership, History, Culture, Advertising. (2014). Retrieved December
16, 2014, from http://www.ge.com/en/company/companyinfo/quality/whatis.htm.

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5. Moorhead, G., & Griffin, R. (2014). Organizational behavior: Managing People and
Organizations (11th ed., pp. 92-93). Australia: South-Western CENGAGE Learning.

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6. The Impact of the Internet on Business. (1999, July 2). Retrieved December 16, 2014, from
http://crab.rutgers.edu/~goertzel/economistnetbusiness.htm.

7. Thomas Alva Edison. (2014). The Biography.com website. Retrieved 01:23, Dec 13, 2014,
from http://www.biography.com/people/thomas-edison-9284349.