Jack Welch and Jeffery Immelt:Continuity and Change in Strategy,

Style and Culture in GE

PARVAZ SHAIKH

MUKUL UPASANI

NEELAM PATHAN

PRASHANT VERMA

PRATIK BACCHE

VINTI DUBEY

SANDESH SINGH

SURYA RANA

TASNEEM MANSURI

VIJAY BAVISKAR

General Electric(GE)- BackgroundIn 1872, Thomas Alva

Edison set up The Edison Electric Light

Company(EELC)

In 1892, EELC merged with The Thomas-Houston Electric

Company to form GE

-In 1894, Charles Coffin replaced Edison as CEO of GE

-Licensed electric bulb technology

-In 1922, Gerard Swope became CEO -Introduced

many schemes

-In 1940, Charles Wilson became CEO -Undid most of the changes that

Swope brought

-In 1950, Ralph Cordiner became CEO

-Did restructuring to improve management

practices

-In 1964, Fred Borch became CEO

-Added 3 new capital intensive lines

-In 1972, Reginald Jones became CEO

-Shift from electro-mechanical to electronic

technology

In 1981, Jack Welch became

CEO

JACK WELCH

.

Was born on November 19,1935 at Salem Massachusetts

His father was a railway conductor

Studied chemical Engineering from University of Massachusetts

Did Phd from University of Illinois

He joined GE in 1960 ,was not happy with excessive bureaucratic culture of company

Early Life

.

He resigned from company due to pay issues and he joined International

Minerals and Chemical Corporation, rejoined GE after few days

Named Vice President of G.E. in 1972

Named Senior Vice President in 1977

Became Vice Chairman in 1979

Hit his peak as CEO in 1981. The eighth and youngest chairman and CEO in history of G.E.

YOUNGEST CEO IN HISTORY OF G.E.

.

As soon as Welch took the charge he made several changes that aimed at making GE more profitable and nimble

He insisted that GE should be among top two players in every segment it operates, failing to do so will result in closure of that particular segment

He replaced matrix based corporate planning system with number one number two strategy

To improve communication at all levels he trimmed the number of management levels from 9 to 6

Jack Welch In Action

.

Welch acquired several business:

Employers Reinsurance and radio corporation of America

National Broadcasting Corporations

To promote innovation he launched program called “work out “

“Work out” brought various employees of different designation together to asses company and make suggestions for improvement

ACQUISITION AND INNOVATION

DIRECTIVE DEMOCRAT

.

He believed that involving company’s employee in quality process of the company has great potential benefit

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 –

Employees were trained at different level-Green belts, black belts and master black Belts

Black belt guided green belt in implementation of Six Sigma program

To stress importance of six sigma ,GE linked the same with compensation

QUALITY AND STANDARD

Team building- Delegation

SIX SIGMA

It is a Quality Standard

Streamlining processes to improve productivity, quality, speed and efficiency

Six Sigma – 3.4 defects out of a million

Six Sigma Levels: Two Sigma - 308,537 Three Sigma - 66,807 Four Sigma - 6,200 Five Sigma - 233

At Business Level – Improve profitability, market share and long-term viability

At Process Level – Reduce defects and variation

.

Welch stressed importance of communication at GE

He stressed on communication at all levels and in all directions

Welch also made sure that the various meetings organized by GE were transformed from formal gathering to levers of leadership

He also used this opportunity to make sure that all GE employees know about this idea

He also believed in staying visible within the company and he visited various GE departments and factories and interacted with employees

IMPORTANCE OF COMMUNICATION

.

Welch was master of the art of motivating employees and stirring them into action

He frequently wrote notes to employees appreciating their contribution, this made them more motivated

His charisma earned him large fan following inside and outside GE

Good performers were rewarded well

Promotions were from mostly within the company

MOTIVATING EMPLOYEES

Path goal theory

.

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

DETERMINING REWARDS

LMX THEORY

ELEMENTS OF HIGHPERFORMING LEADERSHIP

EXECUTE

EDGE

ENERGIZER

ENERGY

PASSION

.

The GE’s factory automation started in early 1980’s,ran into serious losses by 1983 due to erroneous demand projections

Welch was also criticized for the sale of GE’s appliance business to Black and Decker in 1984 and acquisition of Thomson SA in 1987

He also was criticized for the failure of GE’s attempt to merge with Honeywell Inc.

The Kidder, Peabody & Co . Scam in 1994 was also a source of considerable embarrassment for GE

FAILURES

GE under Jeffrey Immelt

Appointed as the CEO of GE on 7th September 2001

Aircraft Engines and GE Capital Aviation Services were affected due to terror attacks

Stock price fell to $30 per share i.e. 20% decline, after the attacks

Anthrax scare and corporate scandals in 2001-2002

Investors started panicking and offloading there shares

Modifications by Immelt:

Redesigned its CEO compensation package in mid 2003

Modified the equity packages of other executives to links their stock options to the company’s performance

Tried to improve investor confidence by reshuffling GE’s portfolio

GE under Jeffrey Immelt (cont.)

Path Goal Theory

Sold insurance business in 2005

Lighting business, reduced to 10%(2005) from 33%(2000)of its portfolio

Continued with the policy of firing 10 % of low performers

Increased company’s R & D budget

Invested heavily in setting up new research centers in:

Shanghai(China)

Bangalore(India)

Munich(Germany)

GE under Jeffrey Immelt (cont.)

Managerial Grid [9,1]

Changes in GE culture

Restructure GE’s business into 11 business group, which where placed in 2 categories

Growth Businesses

Cash Generators

More importance to customer satisfaction(“At the customer, For the customer”) and values

Encourage employees to take risk and come up with innovative ideas

Increased number of outsiders brought into the company at senior positions

Created a separate diversity forum within the company

More “people-oriented”

Shifting focus from production to marketing

Setup high profile group known as the commercial Council in 2002

“Innovation Breakthrough” in 2003

Encourage executives to hold “idea jams”

Changes in GE culture(cont.)

DEMOCRATIC

Aims at reducing the emission of main green house gases

Initiated the process of making governance change

Made changes in accounting policies for better transparency

Changes in GE culture(cont.)

LEADERSHIP DEVELOPMENT AT GE

Succession Planning at GE

An ongoing, rigorous and challenging process

Human Resource Reviews(Session C) heart of succession planning

As important as financial monitoring in GE

Identifies ‘differentiation’ as key factor in its leadership development and succession planning

Major Tools for Differentiating Talent:Vitality Curves:

Managers rank employees in a 20-70-10 scale

Reveals top 20%, vital 70% and bottom 10% players in all processes and organizations

Used for recognition and rewarding best performing employees

9 block

Nine square chart, used to plot employee’s potential against his performance

Ratings based on GE’s corporate objective and key initiatives

Helped determine employee’s annual performance rating, analysing their growth and success potential

9 block

Accomplishment Analysis

10-15 page report prepared on every manager by team of two HR professionals

Identifies manager’s strengths and weaknesses, and his development needs

Major development tool also helps them earn recognition

Differentiation

A• E4 + Passion• Got most promotions, incentives

B• Lacked passion• Encouraged and helped to

become A

C • Could not get their job done• Likely to enervate than energize

Session C Review Process

Self-assessment review to be

discussed with his/her manager

Managers and HR executives assess

individuals on various criteria

All assessment reports sent to Top

Management

CEO, VP HR meet the 13

CEOs, HR chiefs

Develop succession planning for all key

jobs

Management and Leadership Development Program

Manager Development Course

Training executives in managing a multifunctional

organization

Value Driven System

Values played vital role in running company’s business

Compliance with GE’s corporate values were key factors for differentiating between leaders and managers

Eg: getting results through autocratic management had no place in GE portfolio

CURIOSITYPASSIONATE

ACCOUNTABLERESOURCEFUL

COMMMITTEDTEAMWORK

OPENENERGIZING

30

THE CEO SUCCESSION PLAN PROCESS

SUCCESSION PLANNING

Welch started planning in 1994

Bill Conaty + Chuck Okosky + HR and Executive Development

List of 23 potential CEO candidates in the age group of 36 to 58 years

“Hit-by-a-truck” Succession plan

IDEAL CEO

CEO

Values

Vision

Leadership

Edge

Stature

Energy

Balance

Courageous Advocacy

High Risk

Enhance Knowledge

Fairness

1st phase

Welch submitted a list of 23 candidates to the board

All 23 candidates were put through rigorous testing process

Welch and board reviewed succession process every June and December

Welch gave real time assessment to the board every February and September

GE board members had informal interactions with them

Committee members spent whole day with each potential candidate and his team

2nd phase

In 1998, 8 serious candidates selected out of 23 contenders

Test process and continuous observation

To enhance the process, 8 objectives were designed

Final three – McNersey, Nardelli and Immelt

8 OBJECTIVES FOR SELECTION

Pick the strongest

leader

Best complementary

mix of skills

Retain contenders through transitions

Minimize dysfunctional competition

Create Opportunities

Provide necessary transition

3rd phase

1997- All the 3 members on GE Capital Board

1997- 1999 – Meeting at lunch and discuss the proposals

1999- Early 2000 – Meeting at dinners and learning their opinions

2000- Selection of the successor

Major Q? and conditions

If not selected for the post, would they leave the company?

April 2000 - Candidate not selected should leave GE

June 2000 - Announced 3 new Chief operating Officer (COO)

Dave Calhoun

John Rice

Joe Hogan

Oct 2000 - Welch proposed Immelt as his successor

Nov 2000 –Unanimous agreement by the board

Sep 2001 – Welch retired and Immelt took over as the new CEO

World class Leadership and Development approach enabled GE to

develop a ready regiment of successors

Conclusion

Thank You