GE as History

Author: Paradigm Business Plans |

Blog by Paradigm Business Plans

Jack Welch was chairman and CEO of General Electric ‘GE’ from 1981 to 2001. GE’s value increased by 4000% during his tenure. He is well-known to streamline GE by “Growing fast in a slow-growth economy” (Jack Welch, 2019). He transformed the company by selling unprofitable businesses, reducing management layers, laid-off non-performers, implementing six-sigma, conducting 600 acquisitions while shifting into emerging markets, pursuing lean manufacturing by trimming inventories, and dismantling bureaucracy. His Employee Management System ‘EMS’, which was called “rank and yank”, was designed to identify performers and non-performers. He would fire the bottom 10% of his managers and rewarded those in the top 20%. The EMS was adopted by other corporates as a resource management platform later.

Welch's performance indicated he was a goal-driven leader to transform GE from a mediocre company to a performing great company. That is the reason Collins rated him as a level 5 leader in his research (Collins, 2001). Welch promoted a performing culture top-down. Managers' jobs were dependent to their performance. Although this culture boosted the competing-values model (Daft & Armstrong, 2015, p. 75) for integrated effectiveness across the company, it put extra pressure on the managers to perform to save their jobs. Such managers were on the spot to potentially cut corners to meet the deliverable, therefore, they were prone to unethical behaviors or decisions.

There are also criticisms of welch’s lack of compassion for the middle class and working class. He has a record of laying off 100,000 people during his tenure. He was supporting his actions by reducing the fat to build up an enduring company. From the utilitarian school of thought, his actions elevated people’s life quality by increasing efficiencies in the manufacturing of industrial parts and systems such as locomotives, jet engines, power turbines, etc. He is seen ethical leader from a holistic view. That said, there are unmatching ethical decisions when it comes to the organization and employees. For example, he was scrutinizing employees’ performance and was upfront on firing the bottom 10% with no further justifications while he was defending CEO salary that should be open and the market should determine it.

Overall, Welch was successful to transform GE from good to great (Colins, 2001). He influenced GE's organization, the market and was succeeded to grow GE while the economy was in a slow pace.

Bibliography

Colins, J. (2001). Level 5 Leadership: The Triumph of Humility and Fierce Resolve. Harvard Business Review, 136-139.

Daft, R. L., & Armstrong, A. (2015). In Organization Theory & Design. NELSON.

Jack Welch. (2019, March 11). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Jack_Welch



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