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GE Case Study

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Strategic Management case study for MBA coursework.

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GE Case Study

  1. 1. Case StudyLAUREN & FLORIAN 1
  2. 2. Index History and Background Welch: Bio Welch: Acquisitions & Innovations Welch: Key Events at GE Leadership Six Sigma Immelt: Bio Immelt: Changes at GE Immelt: Key Events at GE Immelt: Leadership Style Conclusions 2
  3. 3. History and Background Thomas Edison invented incandescent electric lamp in 1879 1890 Edison General Electric Company formed, then in 1892 merged with Thomas-Houston Electric Company The firm developed best practice standards, including licensing its technology, developing policies for employees, a formal hierarchy, financial controls, restructuring, and automation 3
  4. 4. Welch: Bio Born on November 19, 1935 in Salem Massachusetts Studied Chemical Engineering at the University of Massachusetts Did PhD at University of Illinois He joined GE in 1960 and was not happy with excessive bureaucratic culture of company Hit his peak as CEO in 1981 as the eighth and youngest chairman and CEO in the history of GE 4
  5. 5. Welch: Acquisitions & Innovations Welch acquired several businesses Employers Reinsurance and Radio Corporation of America National Broadcasting Corporations To promote innovation he launched a program called “Work Out“ “Work Out“ brought various employees from different departments together to asses company and make suggestions for improvement 5
  6. 6. Welch: Key Events at GE As soon as Welch was in charge he made several changes aimed at making GE more profitable  “Number one or number two” strategy  He insisted that GE should be among the top two players in every segment it operates; failing to do so will result in closure of that particular segment – “Fix it, sell it or close it!” To improve communication at all levels he trimmed the number of management levels from 9 to 6 6
  7. 7. Leadership He believed that involving company employees in quality processes has a great potential benefit Welch was good at motivating employees and stirring them into action  e.g. He frequently wrote notes to employees appreciating their contribution, this made them more motivated Welch stressed the importance of communication at GE 7
  8. 8. Leadership 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 He also introduced the elements of high performing leadership  Four E’s: Energy, Energizer, Execute, Edge, and also Passion 8
  9. 9. Six Sigma 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 Six Sigma is a quality standard  Streamlining processes to improve productivity, quality, speed and efficiency  At the business level it improves profitability, market share and long-term viability  At the process level it reduces defects and variation Employees were trained at different levels  Green belts, black belts and master black belts 9
  10. 10. Welch: Leadership StyleStrengths Weaknesses Motivating employees  Putting too much Constantly identified pressure on employees other leaders at GE  Formed opinions too Aggressive leadership quickly Communication  Criticized for some Charismatic failed acquisitions e.g. “Black&Decker” and Stayed visible at GE mergers e.g. Succession planning “Honeywell Inc.” 10
  11. 11. Immelt: Bio Born in 1956 in Ohio His father worked at GE and after some time at P&G and completing an MBA Immelt joined GE’s marketing division Immelt was shortlisted as a Welch successor He became CEO of GE right before 9/11 The company faced a series of challenges after he took over 11
  12. 12. Immelt: Key Events at GE The events of 9/11 had lasting effects on the firm  Some sectors of the business dealt with aviation and insurance, and they took a beating  Stock value sank 20% There was also an anthrax scare, and GE was viewed with skepticism after other corporate scandals Immelt made some acquisitions, sold less profitable businesses, and increased GE’s global orientation 12
  13. 13. Immelt: Changes at GE Immelt caved to investor demands for transparency Restructured equity packages and GE’s portfolio Increased external communication Focused on intangible factors instead of just the bottom line, also was ‘green’ oriented Increased number of outsiders were brought in Took focus from production to marketing, stressed innovation and idea generation 13
  14. 14. Immelt: Leadership StyleStrengths Weaknesses People person; more  Somewhat soft approachable than Welch  Approach too structured Focused on innovation  Spent too much time Increased transparency placating stakeholders Less demanding leadership  Always compared to Welch style than Welch  Was reactive instead of proactive at times 14
  15. 15. Conclusions Welch and Immelt obviously had very different leadership styles Welch seems to have been more charismatic and led with energy and passion, whereas Immelt was more approachable but formalized some processes that Welch accomplished naturally Immelt took over at GE during a difficult time, so the external environment impacted his leadership 15
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