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  1. 1. Jack Welch and the General Electric Management System Presentation for MGT4133 Momchil Metodiev – M00237116 Yash K. Bajaj – M00241969 Masood Junaid Bin– M00236383
  2. 2. Introduction – History of GE <ul><li>GE was founded in 1892 – merger of Electric Light Company and the Thomas Houston Company; </li></ul><ul><li>GE became one of the largest industrial corporations in the 20 th century; constant growth and profits; </li></ul><ul><li>The only company that has remained a member of the Dow Jones index since its creation in 1896; </li></ul><ul><li>By 1981 it consisted of 33 different business groups. </li></ul>
  3. 3. Introduction – Jack Welch’s Career <ul><li>Joined GE in 1960; </li></ul><ul><li>Spent time in several of the conglomerate’s business sectors; </li></ul><ul><li>Appointed CEO in 1981 – the choice surprised many people; </li></ul><ul><li>Retired in 2001; </li></ul><ul><li>Welch was revered as possibly the greatest manager in history. </li></ul>
  4. 4. Welch’s Philosophy & Actions <ul><li>Some of Welch’s ideas countered what was held as common sense at the time, which was why many considered him a “maverick”; </li></ul><ul><li>Believed in constructive conflict, acknowledging disagreement and confronting reality – that led to open arguments with high-ranked managers; </li></ul><ul><li>His goal – to have his managers convince him, as well as themselves, that their approach would work; this makes them more confident and determined to succeed. </li></ul>
  5. 5. Welch’s Philosophy & Actions (Continued) <ul><li>Real world achievements </li></ul><ul><li> Self-confidence </li></ul><ul><ul><li> </li></ul></ul><ul><li> Simplicity </li></ul><ul><li> </li></ul><ul><li>Speed </li></ul><ul><li> Winner </li></ul>
  6. 6. Welch’s Philosophy & Actions (Continued) <ul><li>Annual planning meetings with the heads of the business units – Welch gave them 5 questions they had to answer </li></ul><ul><ul><li>What are your market dynamics globally today, and where are they going over the next several years? </li></ul></ul><ul><ul><li>What actions have your competitors taken in the last three years to upset those global dynamics? </li></ul></ul><ul><ul><li>What have you done in the last three years to affect these dynamics? </li></ul></ul><ul><ul><li>What are the most dangerous things your competitor could do in the next three days to upset those dynamics? </li></ul></ul><ul><ul><li>What are the most effective things you could do to bring your desired impact on those dynamics? </li></ul></ul>
  7. 7. Welch’s Philosophy & Actions (Continued) <ul><li>‘ Stretching’ meant using dreams to set business targets; </li></ul><ul><li>Welch saw good business leaders as visionaries who would be able to suit their visions to their companies and would be relentless in driving the vision to completion; </li></ul><ul><li>Those who did not share that vision could not last long in the company; </li></ul><ul><ul><li>“ They wanted to sit back, to keep things the way they were. And that’s just what they did – until they and most of their staff had to go.” </li></ul></ul>
  8. 8. Welch’s Philosophy & Actions (Continued) <ul><li>Welch was opposed to the bureaucratic system that had taken over business; that is why he eliminated several layers of management positions; </li></ul><ul><ul><li>“ When layers are taken out, the managers are exposed to more pressure”. </li></ul></ul><ul><li>He believed managers should have 10-15 people reporting to them, instead of 6-7; </li></ul><ul><li>As a result, the number of employees in the conglomerate was reduced – from 404,000 in 1981 to 221,000 in 1994 </li></ul><ul><li>By 2001, the number had grown to 310,000 due to foreign expansion – employees in the US only grew from 156,000 to 158,000 </li></ul>
  9. 9. HR Management <ul><li>According to Welch, GE’s core competency was its people; therefore, performance assessment had to be strict; </li></ul><ul><li>20-70-10% principle; </li></ul><ul><li>The bottom 10% were to be removed from the company every year. </li></ul>
  10. 10. Changes in GE’s Portfolio <ul><li>He only wanted to keep companies who had the largest or second largest market share in their global markets – he sold off a lot of the companies in the conglomerate; </li></ul><ul><li>Acquired many large companies, such as RCA, NBC, Kidder Peabody, CGR; </li></ul><ul><li>Some of his acquisitions were considered to be mistakes – Kidder Peabody, Montgomery Ward; </li></ul><ul><li>The acquisition of Honeywell, which was going to be his last major deal was stopped by the European Commission on antitrust grounds. </li></ul>
  11. 11. A More Detailed Look at GE’s Company Culture <ul><li>Research on following aspects of the company: </li></ul><ul><li>Everyday realities (Soft): </li></ul><ul><ul><li>Routines </li></ul></ul><ul><ul><li>Rituals </li></ul></ul><ul><ul><li>Stories </li></ul></ul><ul><ul><li>Symbols </li></ul></ul><ul><li>Top-executive realities (Hard): </li></ul><ul><ul><li>Power Structure </li></ul></ul><ul><ul><li>Control Systems </li></ul></ul><ul><ul><li>Organizational Structure </li></ul></ul><ul><li>Methodology – desk research . </li></ul>
  12. 12. GE’s Operating System <ul><li>Consisted of company initiatives that Welch introduced once every two years: Work-Out, Boundarylessness, Globalization, Six Sigma, Digitization; </li></ul><ul><li>The most important aims were to contribute to improving employees’ performance by incorporating the best practices from other businesses around the world; </li></ul><ul><li>It worked rapidly – all the initiatives became operational within one month of launch and have produced positive results within their first cycle. </li></ul>
  13. 13. Impact of the GE Operating System on Other Companies <ul><li>Have other large companies followed the example of Welch and used the Operating System or another system derived from it? </li></ul><ul><li>Was it successful? </li></ul><ul><li>Is it feasible to incorporate GE’s Operating System for a different company – e.g., smaller in size or one that is not a conglomerate? </li></ul><ul><li>Methodology – desk research, perhaps in-depth interviews; comparison between the position of the companies before and after the incorporation of the system. </li></ul>
  14. 14. Conclusion <ul><li>Welch’s management style and the innovations he brought to GE’s company culture became an example for other executives; </li></ul><ul><li>Instilled the company’s values – trust, informality, simplicity, boundary-less behaviour and love of change; </li></ul><ul><li>Considered “a living legend” and “best manager of the past half-century” by his successor Jeff Immelt – for these reasons it is important to study Welch’s ideas and achievements. </li></ul>