GE's two decade transformation
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Jack Welch took over GE in 1981 and led a massive two-decade transformation of the company. Some of his key initiatives included implementing the three circle concept to streamline operations, aggressively destaffing to reduce bureaucracy, developing a real-time strategic planning system, focusing on cultural changes through programs like work-out and developing leaders, going global through acquisitions, and launching the highly successful Six Sigma quality initiative. Through these initiatives, Welch was able to dramatically improve GE's performance, cutting over 100,000 jobs while growing revenue and profits.
GE's two decade transformation
- 1. GE’s Two Decade Transformation: Allam Dinesh Reddy R810209012 M S S Charan R810209041 M Gopal Varma R810209044 Jack Welch’s Leadership
- 2. Contents Challenges for Jack Welch Initiatives taken by Jack Welch
- 3. Reg Jones (1973-81) Jack Welch (1981-2001) Jeffrey Immelt (2001- Present)
- 4. Challenges for Welch as CEO Matching and surpassing the standards set by his predecessor Reg Jones. CEO of the year (3 times) CEO of the decade (1979) “Management Legend” (WSJ-1981) Economy in recession (1981) Strong Dollar Highest Unemployment rates
- 5. Youngest CEO in action… Initiatives by Jack Welch Hardware Initiative • Three Circle Concept • De staffing process • Strategic(Real-time) Planning system
- 7. Disciplined Destaffing LEAN Less no. of people, bureaucracy& politics DESTAFFING AGILE Making people productive and competitive “We don’t need the questioners & checkers, the nit pickers who bog down the process… Today each staff has to ask, “How do I add value?” How do I make people on the line more effective and competitive?.”
- 8. Real Time Planning Five page strategy Play book One page answers to five questions 1. Current Market Dynamics 2. Competitors recent activities 3. GE’s Response 4. Greatest competitive threat over 3 years 5. GE’s Planned response
- 9. Benefits by “Hardware” initiatives Number of Employees (1981-89) 404,000 to 292,000 Revenue (1981-85) $27.2 billion to $29.2 billion Operating Profits (1981-85) $1.6 billion to $2.4 billion
- 10. “Hardware” Initiative • Fix, Sell/Close •Three Circle Concept •De staffing process •Strategic Planning system “Software” Initiative •Work Out •Best Practices •Go Global •Develop Leaders •Boundary less Behavior •Notion of stretch •Six Sigma Initiatives by Jack Welch “By mid 1988 the “Hardware” structure was basically in place. Now it was time to focus on organization’s “Software”. A company can boost productivity by restructuring, removing bureaucracy and downsizing, but it can not sustain high productivity without cultural change.”
- 11. Work Out 1. To design a process to get unnecessary bureaucratic work out of the system. 2. To create the culture of a small company, where all felt engaged and everyone had voice. Objective 1. An open discussion forum 2. Employee could give ideas and suggestions on business and get immediate responses to it. Overview 1. Implementation team (24 Consultants) 2. Group of 40-100 employees 3. Three day sessions 4. On the spot decision on 80% proposals. Implementation
- 12. Best Practices Learning from other industries Focus more on how things got done Implementation 1. Productivity increase 2. Managers realized the key focus areas of business Results
- 13. Going Global Appointing Paolo Fresco as Head, International Operations Rampant acquisitions Taking advantage of global economic slow down. European Crisis- $17.5Bn Mexican Peso collapse Asian Economy Crisis (1997-98)
- 14. Developing leaders for tomorrow Keeping close tabs on top 3000 executives Succession Planning Improved packages/Stock Options Training institute at Crotonville 360 Degree Feedback
- 15. Boundaryless Behavior Removing the barriers among engineering, manufacturing, sales and customer service. “Learning from others” “We quickly began to learn from each other: Productivity solutions from LIGHTING, Quick response asset management, transaction effectiveness from GE CAPITAL, Cost Reduction techniques from AIRCRAFT ENGINES, Global account management from PLASTICS.”
- 16. Notion of “Stretch” To set performance targets. “Using dreams to set business targets with no real idea of how to get there.” Try to get people think of fundamentally better ways of performing their work. “Objective was to change the way targets were set and performance was measured by creating an atmosphere that asked of everyone, “How good can you be?”
- 17. Six Sigma Initiative Employees were dissatisfied with the quality of its product. GE was operating at error rates 10,000 times the six sigma quality level of 3.4 defects/million costing $8-12 billion/year. Series of planning, resource allocation, review, and communication meetings were done. Participation in initiative was compulsory, 40% Bonus was tied with it.
- 18. “We have changed the very nature of what we do for a living. Today services account for two-thirds of our revenues” Foray into Service industry To reduce dependence on traditional industrial products. Biggest growth opportunity. “In-site concept”
- 19. Performance Appraisal System Rank Rating Reward 1 Top 10% TOP Stock Options 2 15% STRONG Stock Options 3 50% HIGHLY VALUED Training 4 15% BORDERLINE Improve or Move 5 Bottom 10% LEAST EFFECTIVE Weed out
- 20. Implementation Training- 6 weeks in statistics, data analysis and other six sigma tools. Training – 4 weeks Implementation- 5 Months project aimed at improving Quality. Full time six sigma instructors. Green Belt Black Belt Master Black Belt 1. 10Fold increase in life of CT scan X-ray tubes 2. 62% reduction in time at service stations 3. 30,000 Six Sigma projects were initiated a year. Results