JACK WELCH & GE WAYManagement Insights and Leadership

Secrets From the Legendary CEO

ROBERT SLATER

Presented by-

Sakshi Verma Diwanshu Sharma

Surya PanikkarManvendra Shahi

Jack Welch, is America’s most successful CEO, running the most valuable company in the United States, General Electric. For all that, his business philosophy is quite straight-forward:

Business is simple. Don’t make it overly complicated. Face reality. Don’t be afraid of change. Fight bureaucracy. Use the brains of your workers. Discover who has the best ideas and put those ideas

into practice.

And, always keep learning -- from your staff, from your competitors and from your customers. Do that on a consistent basis and

You’ll be able to successfully position your company to take advantage of the great opportunities that will open in the future.

1..“ACT LIKE A LEADER, NOT A MANAGER” “Find great ideas, Exaggerate them, And

spread them like hell around the business with the speed of light.”

Conventionally, business managers thought their prime role was to supervise their employees. Jack Welch, by contrast, thinks business leaders rather than business managers are required. A business leader is someone who inspires co-workers with a vision of how to improve.“Weak managers are the killers of business,They are the job killers..”

THE CHARACTERISTICS OF GOOD BUSINESS LEADERS ARE: Leaders inspire their co-workers, thereby encouraging

them to perform today at a higher level than they did yesterday.

Leaders keep things simple by asking the right questions focusing on the key issues. At GE, Jack Welch asks those senior managers that report directly to him:1. Describe your global competitive environment.2. What have your competitors done in the last 3 years?3. In the same period, what have you done to them?4. How might they attack you in the future?5. What are your plans to leapfrog them?

Leaders energize, excite and control using the company values and cultures.

Leaders face reality and then act decisively

Leaders are relentless and consistent. Leaders love change, and try to

consciously change the competitive environment by focusing on quality and service.

Leaders deliver on their commitments. Leaders talk with their co-workers face-to-

face, rather than talking to one another or issuing memos.

Leaders harp on about a few key themes every time with co-workers. They repeat the same message over and over.

2..BUILDING THE MARKET-LEADING COMPANY‘‘WHAT CAN I DO TO MAKE ONE OF MYBUSINESSES DOMINANT IN ITS MARKET?”

Main Idea GE has built an open and informal business

atmosphere of market leading companies. GE’s core competence is its culture which views GE as a series of business laboratories that share ideas, financial resources and managers in a boundary less organization. GE employees learn from each other -- and from others who are strong in their own markets.

SUPPORTING IDEAWhen Jack Welch took over as CEO of General

Electric in the early 1980’s, the company had 350 businesses, clustered into 43strategic business units. Unfortunately, that meant investors had trouble understanding exactly what GE produced -- and what its prospects were in the coming years.

Jack Welch set a target for GE to become the most competitive enterprise on earth. To do that, he suggested that only those businesses that were number one or number two in their markets should be nourished, and all others should be divested.

1. Core CircleMajor Appliance, Motor,Transportation, Turbine,Contractor Equipment

2. Technology CircleIndustrial Electronics,Medical Systems,Materials, Aerospace,Aircraft Engines

3. Services CircleGE Credit Corp.,Information,Construction & Engineering,Nuclear Service

Strategies in three Circle..

In 1984, these 15 businesses produced 90-percent of GE’s corporate earnings. Over the next few years, GE sold 117businesses valued at $9 billion, and purchased new assets valued at $16 billion. The company now has a number of businesses which are either #1 or #2 in their respective U.S. or global markets.

In addition to building existing businesses, Jack Welch also looked for quantum leap opportunities -- the chance to use surprise, boldness and shock to keep competitors off balance. Such as when GE purchased Radio Corporation of America(RCA), owner of NBC, for $6.28 billion in 1984. (Over the 1985- 1990 period, NBC profits grew from $333 million to $750 million under GE’s direction)

GE’S FUTURE GROWTH INCLUDES.. Hiring good managers and giving them room to

run their own businesses. Focusing on a clear, well thought out

management philosophy rather than focusing solely on the numbers.

Creating a learning culture in which GE actively seeks out the best new ideas and puts them into action – irrespective of where the ideas have come from. In this way, GE is attempting to build a learning organization which is boundary less -- in which good ideas learned in one area can be applied profitably and successfully in other areas.

3… FORGING THE BOUNDARY LESS ORGANIZATION‘‘WE HAD TO GET RID OF ANYTHING THAT WAS GETTING IN THE WAY OF BEING INFORMAL, OF BEING FAST, OF BEING BOUNDARY LESS.’’

Main Idea To survive in a competitive world, large

companies have to:- Get lean- Get agile- Start thinking like a small company

Small, sleek companies have huge competitive advantages:

They communicate better without the drag of bureaucracy. People (who usually know and understand each other well)listen as well as talk.

They move faster because they instinctively understand the penalty for hesitating in the marketplace.

Leaders show up very clearly with clear and precise impact.

They waste less. Energy and attention is directed to the market place rather than to the bureaucracy.

As a leader, Jack Welch sees his role as removing any parts of the business that is slowing forward momentum. Becoming boundary less was an important step in eliminating any obstacles that could hinder the successful production and marketing of GE products.

Jack Welch said to all GE employees they could and should challenge everything, and be unafraid of what the ultimate outcome will be.

4..HARNESSING YOUR PEOPLE FOR COMPETITIVE ADVANTAGE‘‘My whole job is people. I can’t design an engine.I have to bet on people.’’

Main Idea To get GE employees to increase

productivity, Jack Welch encouraged them to focus on:- Speed- Simplicity- Self-confidence

SUPPORTING IDEAS Rather than trying to empower employees, focus

instead on how best to increase everyone’s involvement in decision making. That way, you harness everyone’s intellect instead of just a few top people’s intellects.

Try everything possible to take the traditional "boss" concept out of the company. Actively encourage employees to make suggestions face-to-face to their bosses by suggesting that every employee will be able to get an immediate response --no paperwork, no filters, no impediments. That way employees know their input has been considered rather than flowing off into the ether.

Bosses should:- Agree on the spot to implement the proposal.- Say no to the proposal immediately.- Ask for more information by a set date, and then decide

CONTINUE.. Whenever a new idea is being introduced,

formally select a ‘‘Champion’’ will assume responsibility for all follow-up and implementation issues, as well as ongoing discussions with managers.

The key issues to focus on is ways to increase productivity. Often, this will be accomplished by eliminating unnecessary paperwork that has crept into systems, by highlighting unwieldy bureaucratic systems and in a host of other, frequently unexpected ways.

GE encourages its employees to do the best they can – and then to stretch a little further and to reach for goals that area little higher

ACHIEVEMENT.. Over the period that GE has focused on

increasing its productivity under the leadership of Jack Welch, sales revenues have increased from $25 billion to $90 billion, which in turn has made GE the most valuable company in the world in terms of market valuation

5..PUSH SERVICE AND GLOBALIZATION FOR DOUBLE-DIGIT GROWTH‘‘The opportunity for growth in product services is unlimited.’’

Main Idea Two key drivers of GE’s revenue growth

in the recent past and into the foreseeable near-term future are service businesses and globalization.

GE is also finding an increasing number of its strongest competitors are non-American companies as it starts to exploit business opportunities in overseas markets.

1990 1995 2000 (projected)

Manufacturing 56.0% 43.5% 33.2%

Financial services

25.6% 38.2% 45.8%

After-market services

12.4% 12.3% 16.0%

Broadcasting 6.0% 6.0% 6.0%

GE’s revenue mix is currently undergoing a shift in emphasis, ascan be seen from this analysis:

This illustrates the fact GE is currently making a transition from being manufacturing-oriented to being service-oriented. The decision to build up GE’s service component was made in 1994,as GE managers looked for opportunities to grow revenues.

The service business is the wave of the future as GE strives to become a global service business which also sells high-quality products. In 1995 GE Capital Services had an operating profit of$3.5 billion, a substantial proportion of GE’s total pretax operating profit of $9.8 billion. Again in 1996, GE Capital’s profit of $4 billion was more than a quarter of GE’s total $11 billion operating profit.

6.. DRIVE QUALITY THROUGHOUT THE ORGANIZATION‘‘YOU’VE GOT TO BE PASSIONATE LUNATICS ABOUT THE QUALITY ISSUE.

Main Idea In the late 1990s, a focus on quality is

driving GE with intensity. In fact, Jack Welch has made delivering quality the job of every GE employee.

GE HAS SET A TARGET OF BECOMING A SIX SIGMA QUALITY COMPANY BY THE YEAR 2000.

To achieve this goal, GE has developed a four step program called MAIC:

Measurement

Identify the processes that are critical-to-quality (CTQ) and measure the number of defects produced by each.

Analysis

Try to understand why defects are generated by each specific CTQ process and the key variables responsible.

Improvement

Quantify the effect of improvements in each of the key variables identified and make system modifications.

Control

Ensure the modified process is now enabling key CTQ process variables to stay within acceptable ranges.

GE MEASURES THE IMPACT OF ITS SIX SIGMA PROGRAM USING:

1.Customer satisfaction survey results.2.Keeping track of internal and external

cost savings.3.Keeping track of supplier quality

performance.4.Measurement of internal defects

generated by GEprocesses.5.Designing new products and services

with CTQs which are up to six sigma standards.

Since GE launched its quality initiative in 1995, the company has started to produce results. In 1996, 3,000 projects (with a total investment of $200 million) were commenced, producing $170million in cost savings. In 1997, $300 million was spent on 11,000new projects, which produced savings of $600 million for GE. In1998, the company is embarking on 37,000 six sigma projects, with an anticipated benefit of more than $1 billion in cost savings for the company.

Ultimately, Jack Welch believes the six sigma program will save

GE many billions, which will flow directly to the bottom line.

7.. JACK WELCH’S VISION FOR THE MILLENNIUM‘‘PEOPLE ALWAYS OVERESTIMATE HOW COMPLEX BUSINESS IS. THIS ISN’T ROCKET SCIENCE.’

Main Idea Looking ahead, GE doesn’t plan on either

standing still or on continuing to celebrate a glorious history. Jack Welch believes the company’s rate of growth will accelerate, and that there are no practical limits to that growth.

SUPPORTING IDEA..

To increase profitability, Jack Welch believes GE (and any other company looking to move ahead) should focus on:1.Speeding up business processes.2.Increasing investment in information technology.3.Working to simplify business processes.4.Continuing to build a learning organization.5.Focusing on service and quality.