Hrm5001 - a Study of Welch’ Ge: a Case of Leveraging Leadership for Corporate Growth

        Our company has entered a point where growth has become stagnant and revenues have gone flat. We have come to a crossroad where our product no longer stands by itself. To overcome this challenge, we must create an environment that promotes strong individual performance and creates high performing teams. Its foundation will be built by our leaders. I would recommend that our leaders look to the practices outlined in The Leadership Challenge and the experiences of Jack Welch in growing GE. Welch, confronted with a similar issue as us, lead GE to success by unbeknownst embodying The Leadership Challenge’s practices.

        Welch began establishing himself as an effective leader by breaking down the current organization and architecting a foundation of success. He initially led by applying the practices “Envision the Future” and “Clarify Values”. Upfront, he laid out the ground work for success by creating visions that everyone within GE could aspire to. He then enacted corporate values that supported the vision. Welch was able to achieve two things by doing this. The first was that he was able to determine who within GE’s leadership were committed to the new values and change. This was easily seen when Welch replaced the 12 of the 14 business heads with leaders who had shown they were committed to GE’s new values and mission. He knew that if his leaders did not embrace the new vision, then the rest of the company would not embrace the change and growth would be futile. He was also able to breakdown the current state of GE to identify a strategy that would allow for ongoing growth. The strategy caused Welch to question corporate paradigms and to “Challenge the Process”, another practice in The Leadership Challenge.

        The strategy was to break away from the bureaucratic processes that all too often inhibited GE’s own growth and to take unconventional actions. Welch took a risk of destabilizing GE by removing middle management levels and flattening GE’s governance. Levels that previously prevented him from getting a direct line of sight into the business and slowed the decision-making process were removed. This resulted in GE going from a company of 404,000 employees in 1980 to 292,000 nine years later. In turn, this increased revenues by $2 billion and operational profit by $800 million. Welch had achieved his goal of making GE “lean and agile” by challenging the highly vertical and process driven structure typical of large companies. Welch also saw opportunities to challenge the products GE was invested in.

GE, at the time Welch took over, was involved in markets that were difficult to perform in due to market saturation and a recessionary environment. Welch’s immediate reaction was to liquidate certain sectors where growth was limited. He used the $11 billion of freed up capital to purchase companies where he could position GE to be successful in the long term. GE entered the avionics, medical, and financial service markets. Two of these sectors, avionics and medical, accounted for more than $10 billion in profit for 2017. Welch successfully grew GE by taking upfront risks and taking advantage of opportunities. However, he knew GE would truly be successful if the employees felt empowered to create, share, and execute new ideas. In his words, “A company can boost productivity by restructuring, removing bureaucracy and downsizing, but it cannot sustain high productivity without cultural changes.”

Welch executed on his word by developing two initiatives that embraced the “Enabled others to act” practice. The first initiative was the “Work-out” program. The purpose of the program was to open a communication channel for everyone to speak their minds about the current state of business and how to improve it. These forums allowed people to actively take part in the growth of GE. It gave individuals a sense of ownership and motivated everyone to grow GE. Welch immediately saw improvement with the refreshed energetic environment. Productivity increased 20% over a five-year period and more than 66% of the employees had partook in the program. While “Work-out” focused on internal environment changes, Welch created a second simultaneous initiative to change culture perceived externally. The Best Practices effort was created to modernize business processes and remove micromanaging of individuals. This allowed everyone to run more efficiently and empowered employees to act quickly. Efficiency within GE allowed for individuals to be better rewarded for their achievements.