Ge’s Two-Decade Transformation: Jack Welch’s Leadership

GE’S Two-Decade Transformation: Jack Welch’s Leadership

Jack Welch finally seemed happy at General Electric’s Annual Meeting in March 1999. Their operating margins were at an all-time high at 16.7% and their revenue exceeded $100 billion. The Financial Times named General Electric two years in a row the “Most Respected Company in the World.” For any company this is a huge accomplishment and a great recognition. The Fortune poll voted them the country’s “Most Admired Company.” The shareholders were somewhat concerned about Welch’s rumored retirement at the end of the year 2000. No one was sure if anyone would take Welch’s place and keep the financial growth that occurred during Welch’s era as leader for General Electric.

Thomas Edison founded General Electric in 1878. The company’s early focus was on the generation, distribution, and use of electrical power to become one of the world’s biggest industrial companies. It would take them one hundred years to accomplish this but they would. General Electric was always going through change all the way through the early 1900s and into the mid 1900s. To strengthen their corporate staffs they began to use “profitless growth.” By 1973 General Electric had ten groups, forty six divisions, and one hundred and ninety departments. And they had forty three strategic business units that were designed to support strategic planning. Reg Jones, who was Welch’s predecessor, had been voted three times by his peers as CEO of the Year.

Welch was forty five when he became CEO of General Electric in 1981. He took the company over at somewhat of a rough time. The U.S. economy was in a recession. The recession resulted in the country’s highest unemployment rates since the Depression. Welch’s early priorities would be extensive restructuring of General Electric. Welch’s encouraged all of this employees to be “better than the best.” Over the next five years General Electric under the command of Jack Welch would go through some incredible changes.

Welch developed The Three-Circle Vision for General Electric in 1982. It would categorize businesses as core, high technology, and services. Core would focus on “reinvesting in productivity and quality.” High technology would invest in Research and Development to “stay on the leading edge.” And services would require them to “add outstanding people and make contiguous acquisitions.” The core also focused on lighting, major appliances, motor, transportation, turbine, construction, and equipment. Technology would focus on industrial electronics, medical systems, materials, aerospace, and aircraft engines. Services would be GECC information, construction, engineering, and nuclear services. General Electric’s support would come from Ladd Petroleum, Semiconductor, General Electric Trading Co., and Utah Mining. Their outside help -would be house wares, central air-conditioning, TV, audio, cable, mobile, power delivery, and radio stations. General Electric’s venture was Calma. This encompasses all parts of Jack Welch’s Three Circle Vision for General Electric.

Through his radical restructuring in the 1980s as the new CEO, Jack Welch earned the nickname “Neuron Jack.” The term gained some prevalence when Welch fired twelve of his fourteen business head in August of 1986. Welch felt he did not deserve his nickname. He was looking for new managers who were eager for change and would branch away from General Electric’s old values. His main goal was to get a management staff that could take charge like him and bring the change that General Electric needed to exceed the $100 billion mark. He did not let his nickname effect him. Welch did not back down and kept pushing for change. Most of General Electric’s restructuring was done by the late 1980s but Welch knew more could be done. He really wanted General Electric to move past his nickname “Neuron Jack.” He wanted to company to have a more stable foundation.

By the last 80s, Welch was confident that that hardware part of his restructuring was almost complete so he wanted to focus on other aspects. The other aspect I am talking about is the software aspect of General Electric. Welch admitted his priorities were changing, “A company can boost productivity by restructuring, removing bureaucracy and downsizing, but it cannot sustain high productivity without cultural change.” There would be two