GE’s Two Decade Transformation:

Jack Welch’s Leadership

Case Facts Presentation: By Group- 9

Pratish Jindal- PGP/21/035

Raghvendra PS Chauhan- PGP/21/036
Ratheesh- PGP/21/037
Rithish Krishnan- PGP/21/038
Devang Roongta- PGP/21/039
 The Late 1980s: Second stage of the rocket

Most Business restructuring is complete; but with culture shock and

management exhaustion
Jack Welch acknowledges that High productivity cannot be
sustained without cultural change
In 1989 Welch articulated the management style he hoped to make
GE’s norm, simultaneously refining the oraganizational culture he
wanted to create – characterized by speed, simplicity and self –
confidence
Over the next few years he launched “Workout” and “Best
Practices”
 “Work Out”
Conceived during a discussion with James Baughman at GE’s
Management Development Institute
Welch wanted to replicate honest, energetic interaction he had
with a group of GE managers throughout the company
Developed an idea of a forum where employees can discuss
freely about more effectively running the business and also get
immediate responses to their ideas
“Work Out” – a process that gets unnecessary bureaucracy out
of the system while achieving the above objectives
Baughman formed a small implementation team with the help
of outside consultants for a companywide rollout of this
program
Groups of 40 to 100 employees were invited to share views
about their businesses
 “Work Out”
The unit boss presented a challenge and the broad agenda and then
he or she is asked to leave
Employees aided by facilitators lists their problems & debated their
solutions
Managers must make an instant, on the spot decision to 80% of the
proposals
The Example of Lauzon – Lauzon had to accept 100 out of 108
proposals submitted by his team
Welch insisted that the meetings were undocumented to prevent
adding up bureaucratic procedures
Productivity increased from 2% average annual growth to 4%
annual rate
 “Best Practices”

Challenge given to Michael Frazier “How can we learn from

other companies that are achieving high productivity growth
than GE?”
Frazier studied Ford, HP, Toshiba etc.
Frazier’s report identified focus on developing effective
processes, customer satisfaction as a measure of performance,
treating suppliers as partners, the emphasis on a need for
constant stream of high quality new products
Many GE managers were able to realize that they were
measuring the wrong things
 Going Global

Welch preferred to let each business take responsibility of an

appropriate plan than having a corporate globalization strategy
Deals with Thomson SA, Robert Bosch, Toshiba etc
Purchasing overseas assets when their price went down – Europe’s
economic downturn, Collapse of Mexican Peso, Asian crisis
International revenues were almost double the level just five years
earlier. The company expected to do half of its business outside
US. Global revenues were growing at almost 3 times the rate of
domestic sales
 Developing Leaders
Realigning employees’ mindsets to GE’s new strategic and
organizational imperatives
Old psychological contract of lifetime employment was replaced
by an implicit contract that the jobs at GE are best in the world for
people willing to compete
The performance appraisal system of GE was levered by Welch to
achieve his objectives of translating broad cultural changes down to
individual level
Future leaders were identified by the top executives, given training
and development
Old compensation package was overhauled and stock options
became a main component of compensation. Bonuses were linked
to performance
GE’s Crotonville management development facility was used to
help bring cultural change. Experienced academics were hired to
help this transition. It evolved from a training center to a place
where teams of managers worked on real priority issues and
decided on result-oriented action
Leaders were characterized into four ways. But type 4, those who
performed but does not share values
GE introduced a 360 degree feedback process. Every employee was
graded by his or her manager, peers and all subordinates on a 1 to
5 scale in areas such as teambuilding, quality focus and vision
This was described by Welch as a tool for detecting and changing
those who smile up and kick down
360 degree feedback became the means for identifying the training
needs, coaching opportunities and eventually career planning
 Closing Out the Decade: Raising the Bar
Jack Welch, despite hospitalization in 1995 continued to
focusing on making GE bigger and better

SIX SIGMA INITIATIVE

Post 1995 survey which showed employee dissatisfaction

with quality of process and products, Welch proposed
implementing Six Sigma system in GE
To achieve that, He took the help of Lawrence Bossidy and
Gary Reiner to carry out a quality study in GE
The study concluded that GE was operating in ten thousand
times the six sigma quality of 3.4 defects per million
operations
This resulted in a yearly loss of $8 - $12 billion due to
inefficient process and lost production
 Six Sigma Implementation

“We are Relentless” – Jack Welch

First progress report at Two day CEC meeting

March

HR deployment checking against the target by Welch

April

Strategic review sessions would review the impact of the

July initiative on each business’s 3 year outlook

October Officer’s meeting tracked progress and showcased best practice

Operating plan reviews to fold the impact into the following

Novem year’s forecasts
ber
 Six Sigma Initiative – Other Features

Six Sigma participation was mandatory with 40% of bonus tied to

individual’s six sigma objectives

Master Black Belts – Mentored Black belts through 2

year process

Black Belts – Six weeks of instruction in statistics, data

analysis etc followed by undertaking 3 major quality
projects that resulted in appreciable performance increase

Green Belts – 4 Week training; 5 month project aimed at

improving quality
 Six Sigma Initiative – Consequences

MEDICAL SYSTEMS
Tenfold increase in the life of CT RAIL CAR LEASING BUSINESS PLASTICS BUSINESS
scanner X Ray Tubes 62% reduction in Turn Around Time Added 300 million pounds of new
Two - three times faster than the rivals capacity

30000 Six
Sigma
projects

Investment of 500 million dollars to train Returns of $750 million exceeded

5000 managers working full time as Black
the workforce of 85000 in two years expectations and forecasted returns of
belts and Master Black Belts
$1.5 billion in 1999
 “A Players” with “Four E’s”

With retirement date approaching, Welch focussed on leaving a

legacy behind for his successor
In addition to already available first class team of leaders at the
top, he wanted deep quality in the organisation
Raising the bar for current employees as well as weeding out
people who did not conform to GE standards

4E’s

Excited by ideas and attracted to turbulence because of opportunity it

Energy brings
Infecting everyone with their enthusiasm for an idea and having everyone
Ability to energise others dreaming the same big dreams
Edge Ability to make tough calls
Execution The consistent ability to turn vision into results
 “A Players” with “Four E’s”

TOP 10% as 1’s

STRONG 15% as 2’s

Every Group ranked on
“Vitality Curve”
PERFORMANCE
HIGHLY VALUED 50% as 3’s
All 1’s and 2’s : Stock Options APPRAISAL
All 5’s : Leave GE
SYSTEM
“I Have got all ‘A’ players in BORDERLINE 15% as 4’s
the Corporate Council. I am
pleased – Jack Welch
LEAST EFFECTIVE 10% as 5’s
Towards Retirement: One More Initiative

Before Retiring Welch introduced his 4th Strategic Initiative- e-

Business, Where he described internet as the biggest change that
he have ever seen and thus launched a programme named
“destroyyourbusiness.com”

Within two months each unit had a full time dyb.com team
focused on the challenge of redefining its business model before
someone else did

Welch considered changes an opportunity & considered this as

their greatest opportunity yet

Through the dyb.com teams digitizing the company &

Developing the e-business model become very easier
THANKS'…!!!