Case study of General Electric

Résumé du document

Jack Welch was the CEO of General Electric (GE) from 1981 until 2001. He is regarded as one of the most successful CEOs of the 20th century. This essay intends to analyze Jack Welch's two-decade leadership by answering the question of what made him the "Manager of the Century" and GE the "Most Respected Company in the World". Jack Welch took on leadership in April 1981, taking over from "management legend" Reginald Jones who had managed GE very successfully. However, at the beginning of the 1980s the U.S. economy found itself in a recession. The growth rate of the GDP even dropped to -6.4% in the first quarter of 1982. Coupled with this was the highest unemployment rate since the Great Depression in 1929, as well as high interest rates. Moreover, Japanese high-tech companies had emerged, swiftly becoming main competitors for GE in the global market. Internally, Welch had to face a highly bureaucratic company, a disadvantage that was soon about to change.

Extraits

[...] htm Krames, J The Welch Way: 24 Lessons from the World's Greatest CEO, McGraw-Hill, USA Levinson; M 'Destructive Behaviour', Retrieved: March from http://www.cio.com/archive/071500_destructive.html Mercer Management Consulting Inc cure for your Internet Hangover”, Retrieved: March from http://www.mercermc.com/Perspectives/WhitePapers/Commentaries/einitComm.v6fi nal.pdf Useem, J., 'Internet Defence Strategy: Cannibalize yourself', Fortune Magazine, June Zhao, V 'E-Business @ Retrieved: March from http://www.uscsi.org/publications/papers/GE%20ecommerce%20presentation.ppt#2 74,1,Slide%201 Endnotes Fortune Magazine named GE the "Most Admired Company" in 1999 Financial Times named GE the "Most Respected Company in 2000" for the third consecutive year [iii] The Wall Street Journal U.S. recession 1980-1982 GDP: Gross Domestic Product BEA National Economics Account [vii] Krames, J. [viii] In GE productivity was defined by the following calculation: Productivity = Real Revenue (net of price increases)/ Real Costs (net of inflationary increase) See also Bartlett, C. & Wozny, M. General Electric Zhao, V. Levinson, M. [xii] Mercer Management Consulting Inc. [...]

[...] With the emergence of the Six Sigma approach, first developed by Motorola Inc, the possible solution for GE's quality problem was found. An initial analysis revealed that GE wasted money on defects - up to $12 bn a year. In order to achieve the Six Sigma quality level by the year 2000 GE invested in training and bonuses for employees. This approach turned out to be very successful. In the first four years, returns exceeded investments by the factor of four, making quality GE's first value. [...]

[...] Welch also reduced the number of hierarchical levels to ensure that all reports go directly to him. The success of these changes can be measured by data. Through downsizing, destaffing and divestiture Welch reduced the number of employees by more than 70,000. By 1984, the number of employees was reduced from 404,000 to 330,000. The success of Welch's restructuring can also be measured by revenues, which rose by $ 2 bn between 1981 and 1985, from $ 27.2 bn to $ 29.2 bn., The profits rose by $ 800,000 m from $ 1,6 bn to $ 2,4 bn. [...]

[...] The implementation of the process was also innovative. To conduct the DYB projects of each business unit, Welch built full-time teams consisting mainly of very young managers[xii] dedicated for each business unit. By looking at an example of implementation in a particular business unit, the DYB system can be described thus[xiii]: In GE Plastics, even if the products were proposed online since 1997, the DYB team looked at the existing online competitors as well as at online actors of other industries. [...]

[...] He decided to change the organisation and the nature of the business model. Indeed, he wanted its businesses to be more service-oriented. After discovering that employees were dissatisfied with quality, Welch decided to undertake an investigation into competitors' business models. The first objective was to rethink the company's structure, from separated to connected departments, making cooperation and communication more efficient. Welch's initiative was to increase the flow of information in order to learn the best practices from everyone and everywhere. [...]