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Jack Welch and Jeffery Immelt:Continuity and Change in Strategy,
Style and Culture in GE
PARVAZ SHAIKH
MUKUL UPASANI
NEELAM PATHAN
PRASHANT VERMA
PRATIK BACCHE
VINTI DUBEY
SANDESH SINGH
SURYA RANA
TASNEEM MANSURI
VIJAY BAVISKAR
General Electric(GE)- BackgroundIn 1872, Thomas Alva
Edison set up The Edison Electric Light
Company(EELC)
In 1892, EELC merged with The Thomas-Houston Electric
Company to form GE
-In 1894, Charles Coffin replaced Edison as CEO of GE
-Licensed electric bulb technology
-In 1922, Gerard Swope became CEO -Introduced
many schemes
-In 1940, Charles Wilson became CEO -Undid most of the changes that
Swope brought
-In 1950, Ralph Cordiner became CEO
-Did restructuring to improve management
practices
-In 1964, Fred Borch became CEO
-Added 3 new capital intensive lines
-In 1972, Reginald Jones became CEO
-Shift from electro-mechanical to electronic
technology
In 1981, Jack Welch became
CEO
.
Was born on November 19,1935 at Salem Massachusetts
His father was a railway conductor
Studied chemical Engineering from University of Massachusetts
Did Phd from University of Illinois
He joined GE in 1960 ,was not happy with excessive bureaucratic culture of company
Early Life
.
He resigned from company due to pay issues and he joined International
Minerals and Chemical Corporation, rejoined GE after few days
Named Vice President of G.E. in 1972
Named Senior Vice President in 1977
Became Vice Chairman in 1979
Hit his peak as CEO in 1981. The eighth and youngest chairman and CEO in history of G.E.
YOUNGEST CEO IN HISTORY OF G.E.
.
As soon as Welch took the charge he made several changes that aimed at making GE more profitable and nimble
He insisted that GE should be among top two players in every segment it operates, failing to do so will result in closure of that particular segment
He replaced matrix based corporate planning system with number one number two strategy
To improve communication at all levels he trimmed the number of management levels from 9 to 6
Jack Welch In Action
.
Welch acquired several business:
Employers Reinsurance and radio corporation of America
National Broadcasting Corporations
To promote innovation he launched program called “work out “
“Work out” brought various employees of different designation together to asses company and make suggestions for improvement
ACQUISITION AND INNOVATION
DIRECTIVE DEMOCRAT
.
He believed that involving company’s employee in quality process of the company has great potential benefit
His commitment to quality led to adoption of six sigma at GE in mid 1990’s
To launch six sigma, the company invested heavily in employees –
Employees were trained at different level-Green belts, black belts and master black Belts
Black belt guided green belt in implementation of Six Sigma program
To stress importance of six sigma ,GE linked the same with compensation
QUALITY AND STANDARD
Team building- Delegation
SIX SIGMA
It is a Quality Standard
Streamlining processes to improve productivity, quality, speed and efficiency
Six Sigma – 3.4 defects out of a million
Six Sigma Levels: Two Sigma - 308,537 Three Sigma - 66,807 Four Sigma - 6,200 Five Sigma - 233
At Business Level – Improve profitability, market share and long-term viability
At Process Level – Reduce defects and variation
.
Welch stressed importance of communication at GE
He stressed on communication at all levels and in all directions
Welch also made sure that the various meetings organized by GE were transformed from formal gathering to levers of leadership
He also used this opportunity to make sure that all GE employees know about this idea
He also believed in staying visible within the company and he visited various GE departments and factories and interacted with employees
IMPORTANCE OF COMMUNICATION
.
Welch was master of the art of motivating employees and stirring them into action
He frequently wrote notes to employees appreciating their contribution, this made them more motivated
His charisma earned him large fan following inside and outside GE
Good performers were rewarded well
Promotions were from mostly within the company
MOTIVATING EMPLOYEES
Path goal theory
.
To determine rewards at GE, Welch devised a system where people are classified into 3 categories
Each department classified employees into 3 categories based on their performance
Top 20 % ,middle 70 % and bottom 10 %
Top 20 % were generously rewarded ,middle performers were motivated to emulate top performers whereas bottom 10 % were fired
DETERMINING REWARDS
LMX THEORY
.
The GE’s factory automation started in early 1980’s,ran into serious losses by 1983 due to erroneous demand projections
Welch was also criticized for the sale of GE’s appliance business to Black and Decker in 1984 and acquisition of Thomson SA in 1987
He also was criticized for the failure of GE’s attempt to merge with Honeywell Inc.
The Kidder, Peabody & Co . Scam in 1994 was also a source of considerable embarrassment for GE
FAILURES
GE under Jeffrey Immelt
Appointed as the CEO of GE on 7th September 2001
Aircraft Engines and GE Capital Aviation Services were affected due to terror attacks
Stock price fell to $30 per share i.e. 20% decline, after the attacks
Anthrax scare and corporate scandals in 2001-2002
Investors started panicking and offloading there shares
Modifications by Immelt:
Redesigned its CEO compensation package in mid 2003
Modified the equity packages of other executives to links their stock options to the company’s performance
Tried to improve investor confidence by reshuffling GE’s portfolio
GE under Jeffrey Immelt (cont.)
Path Goal Theory
Sold insurance business in 2005
Lighting business, reduced to 10%(2005) from 33%(2000)of its portfolio
Continued with the policy of firing 10 % of low performers
Increased company’s R & D budget
Invested heavily in setting up new research centers in:
Shanghai(China)
Bangalore(India)
Munich(Germany)
GE under Jeffrey Immelt (cont.)
Managerial Grid [9,1]
Changes in GE culture
Restructure GE’s business into 11 business group, which where placed in 2 categories
Growth Businesses
Cash Generators
More importance to customer satisfaction(“At the customer, For the customer”) and values
Encourage employees to take risk and come up with innovative ideas
Increased number of outsiders brought into the company at senior positions
Created a separate diversity forum within the company
More “people-oriented”
Shifting focus from production to marketing
Setup high profile group known as the commercial Council in 2002
“Innovation Breakthrough” in 2003
Encourage executives to hold “idea jams”
Changes in GE culture(cont.)
DEMOCRATIC
Aims at reducing the emission of main green house gases
Initiated the process of making governance change
Made changes in accounting policies for better transparency
Changes in GE culture(cont.)
Succession Planning at GE
An ongoing, rigorous and challenging process
Human Resource Reviews(Session C) heart of succession planning
As important as financial monitoring in GE
Identifies ‘differentiation’ as key factor in its leadership development and succession planning
Major Tools for Differentiating Talent:Vitality Curves:
Managers rank employees in a 20-70-10 scale
Reveals top 20%, vital 70% and bottom 10% players in all processes and organizations
Used for recognition and rewarding best performing employees
9 block
Nine square chart, used to plot employee’s potential against his performance
Ratings based on GE’s corporate objective and key initiatives
Helped determine employee’s annual performance rating, analysing their growth and success potential
Accomplishment Analysis
10-15 page report prepared on every manager by team of two HR professionals
Identifies manager’s strengths and weaknesses, and his development needs
Major development tool also helps them earn recognition
Differentiation
A• E4 + Passion• Got most promotions, incentives
B• Lacked passion• Encouraged and helped to
become A
C • Could not get their job done• Likely to enervate than energize
Session C Review Process
Self-assessment review to be
discussed with his/her manager
Managers and HR executives assess
individuals on various criteria
All assessment reports sent to Top
Management
CEO, VP HR meet the 13
CEOs, HR chiefs
Develop succession planning for all key
jobs
Management and Leadership Development Program
Manager Development Course
Training executives in managing a multifunctional
organization
Value Driven System
Values played vital role in running company’s business
Compliance with GE’s corporate values were key factors for differentiating between leaders and managers
Eg: getting results through autocratic management had no place in GE portfolio
CURIOSITYPASSIONATE
ACCOUNTABLERESOURCEFUL
COMMMITTEDTEAMWORK
OPENENERGIZING
30
SUCCESSION PLANNING
Welch started planning in 1994
Bill Conaty + Chuck Okosky + HR and Executive Development
List of 23 potential CEO candidates in the age group of 36 to 58 years
“Hit-by-a-truck” Succession plan
IDEAL CEO
CEO
Values
Vision
Leadership
Edge
Stature
Energy
Balance
Courageous Advocacy
High Risk
Enhance Knowledge
Fairness
1st phase
Welch submitted a list of 23 candidates to the board
All 23 candidates were put through rigorous testing process
Welch and board reviewed succession process every June and December
Welch gave real time assessment to the board every February and September
GE board members had informal interactions with them
Committee members spent whole day with each potential candidate and his team
2nd phase
In 1998, 8 serious candidates selected out of 23 contenders
Test process and continuous observation
To enhance the process, 8 objectives were designed
Final three – McNersey, Nardelli and Immelt
8 OBJECTIVES FOR SELECTION
Pick the strongest
leader
Best complementary
mix of skills
Retain contenders through transitions
Minimize dysfunctional competition
Create Opportunities
Provide necessary transition
3rd phase
1997- All the 3 members on GE Capital Board
1997- 1999 – Meeting at lunch and discuss the proposals
1999- Early 2000 – Meeting at dinners and learning their opinions
2000- Selection of the successor
Major Q? and conditions
If not selected for the post, would they leave the company?
April 2000 - Candidate not selected should leave GE
June 2000 - Announced 3 new Chief operating Officer (COO)
Dave Calhoun
John Rice
Joe Hogan
Oct 2000 - Welch proposed Immelt as his successor
Nov 2000 –Unanimous agreement by the board
Sep 2001 – Welch retired and Immelt took over as the new CEO
World class Leadership and Development approach enabled GE to
develop a ready regiment of successors
Conclusion