EFFECTIVE STRATEGIES: JACK WELCH AT GE 7
EffectiveStrategies: Jack Welch at GE
EffectiveStrategies: Jack Welch at GE
Theability to turn around the performance of a company is determined bythe effectiveness of the strategies adopted by the company. Tosucceed in a turnaround process, appropriate strategies must beemployed to manage both the resources and the people in anorganization. According to Griffinand Morehead (2013),oneof the most effective elements of influencing change and performanceof the people in an organization is through team management. Toeffectively transform a company, appropriate team managementtechniques must be employed along with a transformative strategy forthe management. To understand the most effective strategies used,this discussion will explore the experience and expertise of JackWelch.The analysis will explore the strategies and the team-buildingtechniques he applied to transform General Electric, and discussother relevant strategies that could have worked.
Beforefore Welch took over the chairman and CEO leadership at GE in 1981,the performance of the company was low and not up to capacity,compared to its potential. The market value of GE before Welch tookover was just $12 billion in 1981 and sales were $26.8 billion peryear (GE,2015).The performance of the company was not only low, but the staff moralewas low and not focused towards the organizational objectives(Thomas, 2011). Atthe same time, there was a leadership gap in the firm as seen in thelow levels of human relations before Welch took over at the helm ofGE leadership(Madrick, 2012). Inaddition, the company had a lot of employees, which was an element ofinefficiency. According to Lane(2008),the company had thousands of employees, who Welch let go later afterhe became the CEO.
AfterWelch took over as the CEO in 1980 and as both CEO and chairman in1981, the company had a turnaround of performance in all dimensions.By the time Welch retired in 2001, the company was worth $410billion, up from the $12 in 1981(GE, 2015). Accordingto GE (2015), the sales revenue went up from $30 to $130 billion. Thecompany was among the most competitive corporations in the world andthe reputation of the firm was high(Thomas, 2011). Currently,GE is a conglomerate with 14 different businesses that grew under thestrategy and the watch of Welch. The company has business interestsin aircraft, appliances, plastics, engineering, media and financialservices. By 2001, the motivation levels at the firm had increased,as marked by remarkable levels of human interaction because ofeffective teams.
Thetransformation at GE by Welch is as a result of the strategies andtechniques he employed to manage the company. These strategies areanchored in the effectiveness of the skills that Welch employed tomanage the company. Welch focused on the efficiency at the company byadopting strategies to streamline the human resource. This involvedreducing their numbers to the appropriate level and equipping thoseremaining (Lane,2008).Welch adopted team-building techniques that joined the people at thecompany in team-based operations. In addition, he also focused onadopting measures to ensure that teams were effective and had theappropriate leadership to transform the company. These techniqueswere based on the leadership strategy, which was focused ontransforming the company to achieve its objectives.
Oneof the main team building techniques that Welch adopted at GE iscultivation of leadership in the teams other than managing them.Welch believed that teams were a result of the level of leadershipthat existed in the organization. According to Madrick (2012), Welchviewed leaders as the people who were passionate about the success ofother people. Therefore, Welch ensured that the teams at the companywere based on the leadership of the members and the leaders. Welchfocused on cultivating proper leadership skills among the people atthe company in order to make them better leaders(Thomas, 2011). Theskills were meant to improve their skills of influencing the behaviorof the team and the people at the company. Therefore, the teams atthe company were managed and led in alignment with the firm’sobjectives and mission.
Anothertechnique Welch employed by the company to build and sustain teamsand team leadership is to engage managers and executives ininteractive sessions. He used to organize conferences and trainingsessions that were meant to allow the top leadership to interact andengage in strategic discussions. Welch used to meet around 15,000 GEexecutives, and it is believed that he made such sessions in hismanagement as the CEO (Lane,2008).It is through these sessions that Welch was able to impart hisleadership influence on the leaders of the company, and seek morecohesive and effective groups. This made teams in the companyeffective because they had good leadership that reflected histransformative strategy.
Theuse of proper reward schemes were another significant technique thatWelch adopted to build functional and effective teams at GE. Welchwas effective in using rewards to not only motivate the teams andemployees, but also to influence their behavior. According to Lane(2008), Welch employed inconsequential reward systems that were notdetermined to focus on the financial incentives only. Having been anemployee of the company for years, Welch knew of the weaknesses ofthe reward systems at the firm. Therefore, he transformed it bymaking rewards consistent and substantial(Madrick, 2012). Witha lower employee burden, Welch could afford to develop sustainablereward systems that motivate employees and influenced their behaviortowards the objectives of the company.
Theother technique that Welch employed at the company is the eliminationof bureaucracy. This was done by reducing the number and level ofconstraints and hierarchical regulations that had to be fulfilled fordecisions to be made. One of the key strategies for achieving thiswas the development of new policies by the management led by Welch(Griffin& Morehead, 2013).This was in addition to the adoption of a dynamic view to themanagement and regulations of the company. This was in line withWelch’s belief that leadership and management alike were onlyeffective if they were situational, and could not be static(Thomas, 2011). Throughthe elimination of bureaucracy, leadership at the firm was effectiveand functional. While leaders at the company were present before hisreign at the company, they were not recognized because of thebureaucratic environment that existed at the firm.
Anotherimportant technique that Welch undertook to manage teams at thecompany was to eliminate inefficiency by streamlining the humanresource. At the time he took over at GE, the company was large andthreatened to be not only unmanageable but inefficient. According toMadrick(2012),GE had over 400,000 employees spread across the world. As a result ofthe large labor force, interpretation of the rules was challenging.Within five years of his leadership, Welch relieved around 130,000employees, along with the sale of some GE firms that had around70,000 employees (Lane,2008).While he lay off employees, he did it skillfully, that the exercisedid not backfire on the company, which earned him the name NeutralJack
Whilethe leadership strategy and techniques used by Welch worked at GE atthe time, other strategies could have worked in similar situations.One of them is management of employees rather than leading. Thiscould have worked through the establishment of strict policies thatfocused on the achievement of the organizational goals throughtargets (Griffin& Morehead, 2013).Proper planning and targeting would inspire employee and teams toachieve their individual and teams towards organizational goals. Thiswould call for strict management of teams and people in techniquesthat do not involve humanistic leadership. However, this strategywould only work if the environment in the workplace is strictlyexpert oriented.
Thesuccess of effective team-building strategies and techniques at GEmakes Welch an expert in transformation and an industry leader. Thetransformation of GE by Welch was an evidence of a leader who soughtto manage through leadership. Through the adoption of properleadership skills, less bureaucratic environment and reward systems,Welch turned around the operations of the teams in the company.Moreover, his interactive leadership and efforts of efficient humanresource helped the company transform into better performance.Currently, GE rides of the strength that was founded on themanagement and leadership of Welch during the time he led the firm.This way, Welch was able to transform the company from a lowperforming firm in 1981 to a global conglomerate by the time heretired.
GE,2015, JohnF. Welch, Jr. Chairman & CEO 1981 – 2001.Retrieved From,<http://www.ge.com/about-us/leadership/profiles/john-f-welch-jr>June 22, 2015
Griffin,R., & Morehead, G. (2013). OrganizationalBehavior: Managing People and Organizations. New York: CengageLearning
Lane,B. (2008). JackedUp: The Inside Story of how Jack Welch Talked GE into Becoming theWorld`s Greatest Company.New York: McGraw Hill
Madrick,J. (2012). WhyJack Welch Knows About Changing Numbers.Retrieved From,<http://harpers.org/blog/2012/10/why-jack-welch-knows-about-changing-numbers>June 22, 2015
Thomas,O. (2011). AtAny Cost: Jack Welch, General Electric, and the Pursuit of Profit.New York: Knopf Doubleday Publishing Group