Case Analysis: GEs Two-Decade Transformation- Jack

Welchs Leadership
Welch Transformation Framework- Business Simplification &
Portfolio Planning:
1. Welch set the standard for each business to become the #1 or #2
competitor in its industry- or to disengage. Businesses having low
potential or weak competitive position were sold, which helped
company to make major acquisitions.
2. Three circle concept for categorizing businesses:
A. Core( priority is reinvesting in productivity and quality)
B. High Technology(stay on the leading edge by investing in R&D)
C. Services(add outstanding people and make continuous
acquisitions)
It set clear priorities for businesses and helped them to plan the future
roadmap.
3. The company did major acquisitions of $21 billion and major
divestitures of $11 billion.
The prime focus was on becoming industry leader in growing industries
like medical equipment, container leasing etc.
4. By providing products with added-value services, GE became a service
oriented company, with services adding 75% of its total revenues. It
could build an ecosystem around its products, which gave it an edge
over competitors.
5. The company started focusing on products and services having high
profit margins, which meant better return on assets.
6. There was no imposition on corporate globalization strategy on
businesses, each business was responsible for implementing a plan
appropriate for its needs. This decentralized approach on globalization
meant that company was thinking global but acting local.
Strategy Playbooks:
The removal of lengthy processes made them to have focus on the right
businesses and also very efficient decision making process.
Also this process has a probability of over sighting a few factors as it involves
quick decision processing

Delayering:
Mr. Welch eliminated sector level which used to be the powerful center of
strategic control
This actually creates a lot of problem to middle level managers as they have
to communicate the corporate strategy to lower level employees and should
try to get the work done, though they have no complete power on them.
Huge layoffs also create negative impression on the employer as it creates a
lot of insecurity among employees who are working and also who are
aspiring to become a part of the company
Coming to investor sentiments, this process may increase their belief in the
leadership and might have a positive effect on stock price.
Work outs and Best Practices:
Work outs helped company to get unnecessary bureaucratic work out of the
system and devise new ways of employees and their bosses work style.
Adopting best practices from leading companies and small companies at the
same time helped GE to improve its practices and make them more efficient.
Performance Management:
1. Performance appraisal system, as per below table:
Ra
nk
1
2
3
4
5

Rating

Category

Reward

Top 10%
15%
50%
15%
Bottom
10%

Top
Strong
Highly valued
Borderline
Least Effective

Stock Options
Stock Options
Training
Improve or Move
Weed Out

2. 360 degree feedback process- employees graded by manager, peers

and subordinates.
3. Managers had to set higher, stretch goals for their businesses. It
created an atmosphere of thinking beyond their basic targets.
4. Those who achieved stretch goals were rewarded with bonuses or
stock options.
5. As company had a vision of becoming lean and agile, 40% of individual
bonuses tied to their Six Sigma objectives.

GE made sure that performance benchmarks were achieved by

employees while carrying out their tasks.
Leadership Creation:
1. Top executives committed to rigorous management appraisal,
development and succession planning reviews known as Session C
2. GEs Crotonville management development facility dedicated to
develop a generation of leaders aligned to GEs new vision and culture
norms.
3. Welch introduced real time challenges to the future leaders in his
sessions at Crotonville and shared his vision with future leaders.
4. He characterized leaders on the basis of commitment and values,
those who had wrong values were removed from GE.
5. GE was described as a company that wanted only A players, which had
following charateristics:
A. Energy
B. Ability to energise others
C. Edge- ability to make tough calls when needed
D. Execution- consistent ability to turn vision into results
6. Welch urged managers to expand their efforts in globalizing the
intellect of the company and upgrade the quality of their existing
employees
7. GE created and maintained a leadership pipeline which was always
ready to take new challenges and perform in a boundary less fashion
with commitment and confidence.

Learnings from Case:

1. Companies should focus on making a product and service portfolio
which make them industry leader and not just another market player.
2. We also feel that all the major company transformation activities
should be carried out phase -wise, so that disruption risks due to some
implementation failures are minimized. Also, transformation strategy
depends on type of organization and its industry.
3. Businesses that transform themselves can sustain in long run.
4. There should be continuous evaluation of company performance in
terms of its financials, market share, vision and future roadmap.
5. There should be clear communication of company's vision, mission and
strategies to all employees.
6. Adopt the best practices and be open to new ideas.
7. Be lean and agile, as it cut costs to company.

8. Leadership can either make or break a company. So, leadership

creation demands focus and the best leaning resources of a company.