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

Welch Transformation Framework- Business Simplification & Portfolio Planning:

1. Welch set the standard for each business to become the” #1 or #2 competitor” in its industry- or to disengage. Businesses having low potential or weak competitive position were sold, which helped company to make major acquisitions.

2. ‘Three circle concept’ for categorizing businesses:A. Core( priority is reinvesting in productivity and quality)B. High Technology(“stay on the leading edge” by investing in R&D)C. Services(add outstanding people and make continuous acquisitions)

It set clear priorities for businesses and helped them to plan the future roadmap.

3. The company did major acquisitions of $21 billion and major divestitures of $11 billion. The prime focus was on becoming industry leader in growing industries like medical equipment, container leasing etc.

4. By providing products with added-value services, GE became a service oriented company, with services adding 75% of its total revenues. It could build an ecosystem around its products, which gave it an edge over competitors.

5. The company started focusing on products and services having high profit margins, which meant better return on assets.

6. There was no imposition on corporate globalization strategy on businesses, each business was responsible for implementing a plan appropriate for its needs. This decentralized approach on globalization meant that company was thinking global but acting local.

Strategy Playbooks:

The removal of lengthy processes made them to have focus on the right businesses and also very efficient decision making process.

Also this process has a probability of over sighting a few factors as it involves quick decision processing

Delayering:

Mr. Welch eliminated sector level which used to be the powerful center of strategic control

This actually creates a lot of problem to middle level managers as they have to communicate the corporate strategy to lower level employees and should try to get the work done, though they have no complete power on them.

Huge layoffs also create negative impression on the employer as it creates a lot of insecurity among employees who are working and also who are aspiring to become a part of the company

Coming to investor sentiments, this process may increase their belief in the leadership and might have a positive effect on stock price.

Work outs and Best Practices:

Work outs helped company to get unnecessary bureaucratic work out of the system and devise new ways of employees and their bosses work style.

Adopting best practices from leading companies and small companies at the same time helped GE to improve its practices and make them more efficient.

Performance Management:

1. Performance appraisal system, as per below table:

Rank Rating Category Reward1 Top 10% Top Stock Options2 15% Strong Stock Options3 50% Highly valued Training4 15% Borderline Improve or Move5 Bottom 10% Least Effective Weed Out

2. 360 degree feedback process- employees graded by manager, peers and subordinates.3. Managers had to set higher, “stretch” goals for their businesses. It created an

atmosphere of thinking beyond their basic targets.4. Those who achieved stretch goals were rewarded with bonuses or stock options.5. As company had a vision of becoming lean and agile, 40% of individual bonuses tied to

their Six Sigma objectives.GE made sure that performance benchmarks were achieved by employees while carrying out their tasks.

Leadership Creation:

1. Top executives committed to rigorous management appraisal, development and succession planning reviews known as ‘Session C’

2. GE’s Crotonville management development facility dedicated to develop a generation of leaders aligned to GE’s new vision and culture norms.

3. Welch introduced real time challenges to the future leaders in his sessions at Crotonville and shared his vision with future leaders.

4. He characterized leaders on the basis of commitment and values, those who had wrong values were removed from GE.

5. GE was described as a company that wanted only A players, which had following charateristics:A. EnergyB. Ability to energise othersC. Edge- ability to make tough calls when neededD. Execution- consistent ability to turn vision into results

6. Welch urged managers to expand their efforts in “globalizing the intellect of the company” and upgrade the quality of their existing employees

7. GE created and maintained a leadership pipeline which was always ready to take new challenges and perform in a boundary less fashion with commitment and confidence.

Learnings from Case:

1. Companies should focus on making a product and service portfolio which make them industry leader and not just another market player.

2. We also feel that all the major company transformation activities should be carried out phase -wise, so that disruption risks due to some implementation failures are minimized. Also, transformation strategy depends on type of organization and its industry.

3. Businesses that transform themselves can sustain in long run.4. There should be continuous evaluation of company performance in terms of its

financials, market share, vision and future roadmap.5. There should be clear communication of company's vision, mission and strategies to all

employees.6. Adopt the best practices and be open to new ideas.7. Be lean and agile, as it cut costs to company.8. Leadership can either make or break a company. So, leadership creation demands focus

and the best leaning resources of a company.