Ge: Mergers and Acquisitions

Managing Diversified Organizations- Submission 7

GE: View on Case

- Priyanshi Garodia (16257)

As CEO for 20 years at GE, Jack Welch was recognised and praised as one of the greatest business leaders in the world. He has more or less defined the modern corporation with his initiatives like globalization, six sigma and e-business. His out of the box thinking on organizational dynamics led him to envision a boundary-less company, where inhibitors to people working together such as ‘management’, ‘salary’, hourly’ etc were done away with.  Jack Welch’s focus on people, his integrity and his passion in his work led GE to extreme heights.

 However, with his retirement, GE needs to set plans for the future and ensure efficient succession planning to take keep moving on the path Jack Welch has sought for the organization. The company’s performance during his tenure was excellent. Under his tenure, GE won the Fortune’s “Most admired company in the US” for the third consecutive time and he was named Fortune’s “Manager of the Century”. With Welch delivering 23% annual total shareholder return in 2 decades, it would now be very difficult for his successor to match or grow at the pace that was typical of the Welch Era.

Hence, GE needs to start looking at alternatives on how to approach the new CEO position. The alternatives with GE are:

1. Superstar CEO from outside the company

• Pros: Will help retain shareholder confidence, will also help look at GE from a fresh pair of eyes and help in improving flaws that might have been let go of during the Welch era, unseen to internal eyes.
• Cons: The momentum of growth of GE might be lost, with the new CEO needing time to settle in as he will need to be acquainted with GE culture. Moreover, the senior executives at GE might feel it like a lost opportunity leading to lowering of morale throughout the organization. Moreover, he might not carry forward the final push of Welch (E-commerce) which would be extremely detrimental to the company.

1. Run the organization by committee that comprised of a group of top executives in the company that helped lead it during Jack Welch’s era

• Pros: It will help continue all of Welch’s major initiatives as they were taken after consultation and guidance of the same executives. Many facts and figures point to the extreme success of these initiatives and hence continuing them would help GE maintain its pace of growth. Moreover, with their expertise in GE’s culture and having observed and learnt from Jack Welch himself, they would be best suited to carry on his legacy.
• Cons: While a group of executives works well for boards where decisions to be taken are not an everyday issue, and strategy needs to be thought over and looked over as many pair of eyes as possible to reach the best solution, it might not work well for replicating the position of CEO. This would harm the response time of the organization by a large amount, and decisions would take a long time to be reached.

1. Promote a single leader form within

• Pros: It has all the benefits of Option 2.
• Cons: The pressure & responsibility on the successor to match up to Welch’s standards would be enormous and could result in negative consequences for the organization.

The best alternative would be to choose Option 3. The four main development area that need to be looked after are:

1. Technology: As quoted by Welch, “GE’s greatest opportunity yet” should be carefully explored by focusing on R&D. GE should also continue to increase its potential in the internet market place.
2. Internationalization: Jack Welch’s plan of seeking overseas operations in countries like India and China should be continued.
3. Business Portfolio: Achieve growth targets through solid acquisitions and divesting low-growth parts of the portfolio to maximize opportunities.
4. Marketing & Customer Service: Continue with the tradition of building close and trustworthy relationships with its customers and being a customer centric firm.