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GE’s Two-Decade Transformation: Jack Welch’s Leadership Amanda Rodriguez Patricia Robledo Brittany Culberson Yue Jiang
Leader or Manager?
1. TRUE or FALSE: I think more about immediate results than I do about mentoring others.
2. TRUE or FALSE: People will be motivated if you pay them enough.
3. TRUE or FALSE: It’s nice to know about people’s long-term goals, but not necessary to get the job done. 4. TRUE or FALSE: If you have a consistent recognition system that rewards everyone in the same way, then that is enough. 5. TRUE or FALSE: The best way to build a team is to set a group goal that is highly challenging, maybe even “crazy.” 6. TRUE or FALSE: My greatest pleasure in my job comes from making the work process more effective. 7. TRUE or FALSE: I spend more of my time and attention on my weaker performers than I do on my top performers, who basically take care of themselves. 8. TRUE or FALSE: It’s better not to know anything about the personal lives and interests of the people who report to me. 9. TRUE or FALSE: Sometimes, it’s almost as if I’m a “collector of people” because I’m always recruiting and getting to know new people. 10. TRUE or FALSE: I like to surround myself with people who are better at what they do than I am.
11. TRUE or FALSE: I am a lifelong student of what makes other people tick.
12. TRUE or FALSE: People talk about “mission” too much – it’s best just to let people do their work and not try to bring values into the conversation. 13. TRUE or FALSE: It’s my job to know everything that goes on in my area.
14. TRUE or FALSE: I pay close attention to how and where I spend my time, because the priorities I put into action are the ones that other people will observe and follow. 15. TRUE or FALSE: I’ve worked hard to get along with or understand people who are very different from me.
What it takes to be a Leader
Drive Leadership motivation Integrity Self-Confidence Knowledge of the business Ability to perceive the needs and goals of others and to adjust one’s personal leadership approach accordingly
Leaders
&
Managers
Key Behaviors
Challenge the process
Inspire a shared vision Enable others act
Don’t rock the boat
Deal with ongoing dayto-day Monitoring activities
Planning and budgeting routines
Model the way
Encourage the heart
Short-term profits
Followers
Capable of independent thinking Are actively committed to organizational goals instead of their own interests Willingness to tell the truth Hold performance standards higher than required
Leaders, Managers, Followers
An individual can exemplify both processes (leadership, management), one or the other or neither
It is vital for a company to have both, leaders and effective managers
How well followers follow is also key for success
Innovation=Imagination
Six businesses, each with a number of business units aligned for growth
Commercial Finance
Healthcare
Infrastructure Industrial
Consumer Finance
NBC Universal
GE Global Research: First Industrial Lab in the U.S.
Began in Schenectady, New York in 1900
Founded with the focus to improve businesses through technology
One of the world’s most diverse industries
Cornerstone of GE’s commitment to technology
1900
2006
A History of Innovation 1909
Ductile Tungsten
1913
Medical X-Ray
1932 Langmuir Nobel Prize in Chemistry 1942
First US Jet Engine
1952
LEXANTM Polycarbonate
1955
Man-Made Diamonds
1973
Giaever Nobel Prize in Physics
1983
Magnetic Resonance Imaging
1995 GE90®, The World’s Most Powerful Jet Engine 1999
Digital X-Ray
Innovation-Key of GE culture
“At GE, we consider our culture to be among our innovations. Over decades our leaders have built GE’s culture into what it is today — a place for creating and bringing big ideas to life. Today, that culture is the unifying force for our many business units around the world”-GE
How important is innovation for leadership? If leaders don’t have innovation, what happens to the company?
GE –a Bellwether of American Management Practices 1930s,
highly centralized, tightly controlled corporate form 1950s,
decentralization
1960s,
strengthen its corporate staff and develop sophisticated planning systems 1970s,
SBU-based structure and sophisticated planning processes 1980’s-2001,
period
three waves in Welch’s
Reg Jones -1970’s Strategy-SBU based structure and planning processes
10 groups, 46 divisions, 190 departments, and 43 strategic business units Develop a constructive business-government dialogue Wall Street Journal proclaimed him as a “management legend”
Success
Sales more than doubled ($10 billion to $22 billion) and earnings grew even faster ($572 million to $1.4 billion) A major thrust into international markets Expansion of world trade and restoration of U.S. competitiveness
Questions
Shareholders:
Employees:
What are your concerns regarding the new leadership and the financial success of GE? What are your concerns regarding the culture, benefits, work environment under a new leader?
Potential CEO:
What challenges do you see coming into a successful corporation?
Who is Jack Welch? 1935: born in Salem, Massachusetts 1957: BS in Chemical Engineering 1960: MS and PhD in Chemical Engineering
Jack Welch and GE
1960: Joined GE as a chemical engineer 1972: Elected GE’s youngest VP 1979: Vice Chairman April 1, 1981: Became the 8th Chairman and CEO of General Electric
Taking Over GE
Challenges from outside of GE Economic recession High interest rates Highest unemployment rate since the depression
Challenges from GE
Massive information and inefficient macrobusiness
What is Welch’s reaction to these Challenges?
Welch’s Vision “A decade from now, I would like General Electric to be perceived as a Unique, highspirited, Entrepreneurial enterprise…the most profitable, highly diversified company on the earth, with world quality leadership in every one of its product lines”. -- Jack Welch
Three-Circle Vision for GE
“Restructuring the Hard Drive”
Challenged everyone to be “better than the best” Sold more than 200 businesses and made over 370 acquisitions Insisted GE become more “lean and agile” resulting
Delayering: elimination of the “sector” level Downsizing: elimination of about 123,450 jobs Divestiture: elimination of an additional 122,700 jobs
Replaced 12 of his 14 business heads “Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while.” ~ Jack Welch
Initiatives - Objective
Work-Out Best Practices Going Global Boundaryless Behavior Six Sigma E-Business
“We bring together the best ideas – turning the meetings of our top managers into intellectual orgies.” ~ Jack Welch
Did it work?
Revenue
Culture?
Jack Welch
1999: Named “Manager of the Century” by Fortune named one of the three most admired business leaders in the world by Financial Times September 7, 2001: Retired as CEO Published autobiography, “Jack, Straight from the Gut”
Leadership Styles
Autocratic
Makes decisions alone • Yields higher performance
Democratic
Solicits input from group for decisions • Yields positive attitude
Laissez Fair
Absence of managerial decision making • Yields negative attitudes
Type of Power
Authority
Legitimate Power • Was CEO: Position to tell others what to do
Reward Power
Control over Rewards: • Performance reviews, pay increases, bonus
Coercive Power
Control over punishment • Implementation of policies and administration of disciplinary action
Expert Power
Has expertise or knowledge over the business • Had been with the company for 20 years when he became CEO
-foxnews.com
“Followership”
Success depends on how well followers follow
Not just Jack’s Company “GE’s 100-year-plus track record is simply about having the very best people at every single position. That is its number one core competency. No one has better people. When you get the best people, you don’t have to worry about execution, because they make it happen.” -Larry Johnston, CEO of Albertsons Former CEO of GE Appliances (1991-2001)
Passing the Torch
Retirement – September 2001
Lengthy process of succession
Internal candidates only Never named candidates No strategic vision No common measure for candidates
Long list of candidates
The New Guy
Jeff Immelt
-ge.com
GE Corporate Marketing - 1982 Plastics, Appliance, Medical President & CEO, GE Capital Board - 2000
“GE hit a home run with Welch and wanted to try again. More profoundly, [Immelt] demonstrated a superior capacity to grow, which was the most important criterion in the choice…They just knew he would have to rethink and reinvent GE” -Geoffrey Colvin (Fortune)
The End of an Era
Reg Jones era (1981) Built up immense financial strength Saw profits and growth
Jack Welch era (1981-2001) Superior leadership Profitable and immense growth
Challenges for Immelt?
Jack Welch and Jeff Immelt -USA Today
“Whole New Levels”
New Values
Imagine Solve Build Lead
New Businesses
Energy Customized Medicine
-rollingstone.com
GE Now
Operates in 100+ countries worldwide 300,000+ employees worldwide 2006 revenue - $163.4 billion 2006 earnings - $20.8 billion One of original six companies still listed on Dow Jones index
Success Continues
Continually finding ways to improve
Accountability of managers
Developing leaders
Rewarding leaders
Leadership Continues “At the top, we don’t run GE like a big company. We run it like a big partnership, where every leader can make a contribution not just to their job, but to the entire Company.” -Jeff Immelt, CEO Letter to Investors 2005 Annual Report
Bibliography http://www.schulersolutions.com/leadership_self_test_answers.html http://money.cnn.com/magazines/fortune/fortune_archive/1989/03/27/7183/index.htm http://www.ge.com http://money.cnn.com/magazines/fortune/fortune_archive/2001/01/08/294478/index.htm http://www.cnnmoney.com http://www.nni.nikkei.co.jp/FR/TNKS/TNKSHM/welch/index.html Abetti,
P,(2006), Creativity and innovation Managerment, “Case study: Jack Welvh’s Creative revolutionary Tranformation of General Electric and Thermidorea Reaction (1981-2004), V15 no.1, p74.
Leader or Manager?
1. TRUE or FALSE: I think more about immediate results than I do about mentoring others.
2. TRUE or FALSE: People will be motivated if you pay them enough.
3. TRUE or FALSE: It’s nice to know about people’s long-term goals, but not necessary to get the job done. 4. TRUE or FALSE: If you have a consistent recognition system that rewards everyone in the same way, then that is enough. 5. TRUE or FALSE: The best way to build a team is to set a group goal that is highly challenging, maybe even “crazy.” 6. TRUE or FALSE: My greatest pleasure in my job comes from making the work process more effective. 7. TRUE or FALSE: I spend more of my time and attention on my weaker performers than I do on my top performers, who basically take care of themselves. 8. TRUE or FALSE: It’s better not to know anything about the personal lives and interests of the people who report to me. 9. TRUE or FALSE: Sometimes, it’s almost as if I’m a “collector of people” because I’m always recruiting and getting to know new people. 10. TRUE or FALSE: I like to surround myself with people who are better at what they do than I am.
11. TRUE or FALSE: I am a lifelong student of what makes other people tick.
12. TRUE or FALSE: People talk about “mission” too much – it’s best just to let people do their work and not try to bring values into the conversation. 13. TRUE or FALSE: It’s my job to know everything that goes on in my area.
14. TRUE or FALSE: I pay close attention to how and where I spend my time, because the priorities I put into action are the ones that other people will observe and follow. 15. TRUE or FALSE: I’ve worked hard to get along with or understand people who are very different from me.
What it takes to be a Leader
Drive Leadership motivation Integrity Self-Confidence Knowledge of the business Ability to perceive the needs and goals of others and to adjust one’s personal leadership approach accordingly
Leaders
&
Managers
Key Behaviors
Challenge the process
Inspire a shared vision Enable others act
Don’t rock the boat
Deal with ongoing dayto-day Monitoring activities
Planning and budgeting routines
Model the way
Encourage the heart
Short-term profits
Followers
Capable of independent thinking Are actively committed to organizational goals instead of their own interests Willingness to tell the truth Hold performance standards higher than required
Leaders, Managers, Followers
An individual can exemplify both processes (leadership, management), one or the other or neither
It is vital for a company to have both, leaders and effective managers
How well followers follow is also key for success
Innovation=Imagination
Six businesses, each with a number of business units aligned for growth
Commercial Finance
Healthcare
Infrastructure Industrial
Consumer Finance
NBC Universal
GE Global Research: First Industrial Lab in the U.S.
Began in Schenectady, New York in 1900
Founded with the focus to improve businesses through technology
One of the world’s most diverse industries
Cornerstone of GE’s commitment to technology
1900
2006
A History of Innovation 1909
Ductile Tungsten
1913
Medical X-Ray
1932 Langmuir Nobel Prize in Chemistry 1942
First US Jet Engine
1952
LEXANTM Polycarbonate
1955
Man-Made Diamonds
1973
Giaever Nobel Prize in Physics
1983
Magnetic Resonance Imaging
1995 GE90®, The World’s Most Powerful Jet Engine 1999
Digital X-Ray
Innovation-Key of GE culture
“At GE, we consider our culture to be among our innovations. Over decades our leaders have built GE’s culture into what it is today — a place for creating and bringing big ideas to life. Today, that culture is the unifying force for our many business units around the world”-GE
How important is innovation for leadership? If leaders don’t have innovation, what happens to the company?
GE –a Bellwether of American Management Practices 1930s,
highly centralized, tightly controlled corporate form 1950s,
decentralization
1960s,
strengthen its corporate staff and develop sophisticated planning systems 1970s,
SBU-based structure and sophisticated planning processes 1980’s-2001,
period
three waves in Welch’s
Reg Jones -1970’s Strategy-SBU based structure and planning processes
10 groups, 46 divisions, 190 departments, and 43 strategic business units Develop a constructive business-government dialogue Wall Street Journal proclaimed him as a “management legend”
Success
Sales more than doubled ($10 billion to $22 billion) and earnings grew even faster ($572 million to $1.4 billion) A major thrust into international markets Expansion of world trade and restoration of U.S. competitiveness
Questions
Shareholders:
Employees:
What are your concerns regarding the new leadership and the financial success of GE? What are your concerns regarding the culture, benefits, work environment under a new leader?
Potential CEO:
What challenges do you see coming into a successful corporation?
Who is Jack Welch? 1935: born in Salem, Massachusetts 1957: BS in Chemical Engineering 1960: MS and PhD in Chemical Engineering
Jack Welch and GE
1960: Joined GE as a chemical engineer 1972: Elected GE’s youngest VP 1979: Vice Chairman April 1, 1981: Became the 8th Chairman and CEO of General Electric
Taking Over GE
Challenges from outside of GE Economic recession High interest rates Highest unemployment rate since the depression
Challenges from GE
Massive information and inefficient macrobusiness
What is Welch’s reaction to these Challenges?
Welch’s Vision “A decade from now, I would like General Electric to be perceived as a Unique, highspirited, Entrepreneurial enterprise…the most profitable, highly diversified company on the earth, with world quality leadership in every one of its product lines”. -- Jack Welch
Three-Circle Vision for GE
“Restructuring the Hard Drive”
Challenged everyone to be “better than the best” Sold more than 200 businesses and made over 370 acquisitions Insisted GE become more “lean and agile” resulting
Delayering: elimination of the “sector” level Downsizing: elimination of about 123,450 jobs Divestiture: elimination of an additional 122,700 jobs
Replaced 12 of his 14 business heads “Willingness to change is a strength, even if it means plunging part of the company into total confusion for a while.” ~ Jack Welch
Initiatives - Objective
Work-Out Best Practices Going Global Boundaryless Behavior Six Sigma E-Business
“We bring together the best ideas – turning the meetings of our top managers into intellectual orgies.” ~ Jack Welch
Did it work?
Revenue
Culture?
Jack Welch
1999: Named “Manager of the Century” by Fortune named one of the three most admired business leaders in the world by Financial Times September 7, 2001: Retired as CEO Published autobiography, “Jack, Straight from the Gut”
Leadership Styles
Autocratic
Makes decisions alone • Yields higher performance
Democratic
Solicits input from group for decisions • Yields positive attitude
Laissez Fair
Absence of managerial decision making • Yields negative attitudes
Type of Power
Authority
Legitimate Power • Was CEO: Position to tell others what to do
Reward Power
Control over Rewards: • Performance reviews, pay increases, bonus
Coercive Power
Control over punishment • Implementation of policies and administration of disciplinary action
Expert Power
Has expertise or knowledge over the business • Had been with the company for 20 years when he became CEO
-foxnews.com
“Followership”
Success depends on how well followers follow
Not just Jack’s Company “GE’s 100-year-plus track record is simply about having the very best people at every single position. That is its number one core competency. No one has better people. When you get the best people, you don’t have to worry about execution, because they make it happen.” -Larry Johnston, CEO of Albertsons Former CEO of GE Appliances (1991-2001)
Passing the Torch
Retirement – September 2001
Lengthy process of succession
Internal candidates only Never named candidates No strategic vision No common measure for candidates
Long list of candidates
The New Guy
Jeff Immelt
-ge.com
GE Corporate Marketing - 1982 Plastics, Appliance, Medical President & CEO, GE Capital Board - 2000
“GE hit a home run with Welch and wanted to try again. More profoundly, [Immelt] demonstrated a superior capacity to grow, which was the most important criterion in the choice…They just knew he would have to rethink and reinvent GE” -Geoffrey Colvin (Fortune)
The End of an Era
Reg Jones era (1981) Built up immense financial strength Saw profits and growth
Jack Welch era (1981-2001) Superior leadership Profitable and immense growth
Challenges for Immelt?
Jack Welch and Jeff Immelt -USA Today
“Whole New Levels”
New Values
Imagine Solve Build Lead
New Businesses
Energy Customized Medicine
-rollingstone.com
GE Now
Operates in 100+ countries worldwide 300,000+ employees worldwide 2006 revenue - $163.4 billion 2006 earnings - $20.8 billion One of original six companies still listed on Dow Jones index
Success Continues
Continually finding ways to improve
Accountability of managers
Developing leaders
Rewarding leaders
Leadership Continues “At the top, we don’t run GE like a big company. We run it like a big partnership, where every leader can make a contribution not just to their job, but to the entire Company.” -Jeff Immelt, CEO Letter to Investors 2005 Annual Report
Bibliography http://www.schulersolutions.com/leadership_self_test_answers.html http://money.cnn.com/magazines/fortune/fortune_archive/1989/03/27/7183/index.htm http://www.ge.com http://money.cnn.com/magazines/fortune/fortune_archive/2001/01/08/294478/index.htm http://www.cnnmoney.com http://www.nni.nikkei.co.jp/FR/TNKS/TNKSHM/welch/index.html Abetti,
P,(2006), Creativity and innovation Managerment, “Case study: Jack Welvh’s Creative revolutionary Tranformation of General Electric and Thermidorea Reaction (1981-2004), V15 no.1, p74.
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