Case Study Analysis

1. Jack Welch and Jeffery Immelt:
Continuity and Change in
Strategy, Style and Culture at GE
By,
Anam Patel

2. • GE’s origin can be traced back to the late 1800’s, when
Thomas Alva Edison invented the first successful incandescent
electric lamp
• Edison was an entrepreneur as well as an inventor and started
several small businesses dealing in power stations, wiring
devices and appliances
• In 1890, he bought all the businesses together and combined
them under the Edison General Electric Company (EGEC)
• EGEC merged with the Thomas-Houston Electric Company in
1892 to form GE
Synopsis

3. Synopsis
• In 1981, Jack Welch was chosen as Jones’ successor thereby
becoming the youngest CEO in GE’s history
• Changes carried out under Welch’s dynamic leadership were:
– Steps taken to transform company’s bureaucratic culture
– By creating a flatter structure by trimming 9 management
levels to 6
– Movement from using GE matrix for corporate planning
process to ‘Number One Number Two’ Strategy
– Strategic planning process was a corporate function, he
made it line function and vested the responsibility with
individual business unit
– He cut spending on R&D

4. Synopsis
– Introduction of ‘Work Out’ program which encouraged
employees at all the levels to get involved with innovation
and problem solving at the company
– Adoption of Six Sigma for quality improvement
– Effective communication was promoted by GE’s informal
culture
– Rewards and promotion were based strictly on
performance and Welch routinely fired non-performers
– Leadership development
• Between 1981 to 2001, GE’s revenues increased from around
27 billion to 129.8 billion

5. Synopsis
• In the late 1990’s, James McNerney, Robert Nardelli and Jeffery
Immelt were shortlisted as a possible successor to Welch as GE’s
CEO
• In November 2000, the board chose Immelt as the successor to
Welch
• Subsequently, McNerney and Nardelli left GE, to become CEO’s of
3M and Home Depot respectively
• Immelt became the head of GE at one of the most difficult times in
American economic history
– GE lost 2 employees in 9/11 attack
– Company’s insurance business took $600 million hit
– Aircraft Engines business experienced an immediate slowdown
– Anthrax scare
– Corporate scandals – Enron Corporation & Tyco
– Loss of investors confidence in large conglomerates

6. Synopsis
• Immelt met with investors and assured them that GE will
continue to post double digit growth
• He issued detailed and lengthy annual report to meet
investors demand for more information
• In an attempt to win over investors, GE redesigned its CEO
compensation package in mid 2003
• Reshuffling of GE’s portfolio
• Vision to create ‘Global Brain Trust’ therefore increased
investment in R&D
• He increased workforce diversity in the company
• Shift in GE’s focus from production to marketing

7. Problem Identification Stage
• Jeffery Immelt had to step into the shoes of a highly
successful predecessor CEO
• Environmental uncertainty:
– Recession and the bursting of dotcom bubble in 2000
– Terrorist attack on September 11, 2001
– Scams
• Investors distrust in large corporations and the way they were
managed
• GE’s share price had fallen to levels much below its peak in
early 2001

8. Relating approaches to HR
Concepts
• Leadership Styles
• Jack Welch
– Demanding, aggressive, intimidating boss
– Focused on tangible bottom line results
– Task master
– Emphasis on internal communication with employees
• Jeffery Immelt
– Friendly, regular-guy approach, more approachable
– Focused on intangible results like customer satisfaction,
innovation
– People oriented
– Emphasis on external communication with investors and third
party

9. Relating approaches to HR
Concepts
• Organization Culture
– Under Welch focus was on performance and strictly
quantifiable results
– Whereas under Immelt it shifted to more abstract things
like customer satisfaction and value
– Immelt also tied executive compensation to factors like
ability to boost sales, come up with innovative ideas,
generate customer satisfaction rather than just the ability
to meet performance targets

10. Relating approaches to HR
Concepts
• GE Matrix
Invest/Grow
Selective
Investment
Harvest/Divest

11. Relating approaches to HR
Concepts
• ‘Number One Number Two’ strategy
– Jack Welch insisted that GE should be one of the top two
players in every segment in which it operated
– If any business failed to meet this criterion, he closed it
down or sold it
– During his tenure, GE divested several businesses like air-
conditioning & house wares

12. Relating approaches to HR
Concepts
• Communication:
– Welch encouraged communication at all levels and in all
directions (top-down, bottom up and lateral) within the
company
– Various company’s meeting gave him a chance to interact
with different people, listen to their opinions and gauge
their leadership potential
– Welch’s speeches were regularly video taped, translated to
local language and sent to various GE set ups across the
world
– This enabled him to make his presence felt even to
employees at far flung locations
– Surprise visits were also a part of his style of functioning

13. Relating approaches to HR
Concepts
• Motivation
1. Employees participation in management
‘Work Out’ program
– A group of employees (usually 50 in number) of varying
ranks and responsibilities, got together to review company
policies, processes and make suggestions for improvement
– Initiative undertaken to encourage innovation and
problem-solving within the company
– Welch believed that there was no limit to human creativity
and when its tapped, it could lead to tremendous value.

14. Relating approaches to HR
Concepts
• Motivation
1. Employees participation in management
‘Innovation Breakthrough’ program
– Employees were expected to come up with ideas to improve
GE’s existing products or for development of new products
– All business leaders were expected to submit 3 innovative
project ideas per year that would be reviewed by the
Commercial Council
– Qualifying criteria was that the idea should take GE into a new
line of business, a new geographic area, or a new customer base
and potential of generating $100 million revenue

15. Relating approaches to HR
Concepts
• Motivation
2. Personal notes written by the CEO
– Welch frequently wrote notes to all levels of employees, to
appreciate their contribution to the company, or to guide,
inspire or stir them to action
– These notes were faxed directly to employees the moment
they were written and the originals were sent later by mail
– Welch did not know all the employees personally but
learnt about them through their bosses

16. Relating approaches to HR
Concepts
• Six Sigma
– It is a quality initiative first developed by Motorola Inc. in
1986
– The program aims at reducing production defects to less
than 3.4 per million through continuous improvement
– Welch’s commitment to quality led to the adoption of Six
Sigma at GE in 1995
– It helped in cutting cost and increase productivity

17. Relating approaches to HR
Concepts
• Six Sigma
– Employees at GE were trained at 3 levels
• Green Belt: Employees who took Six Sigma implementation
responsibility along with their regular work
• Black Belt: They guided green belts in the implementation of
the Six Sigma program and were completely devoted to it
without any other job responsibilities
• Master Black Belt: They supervised the black belts and were
responsible for indentifying the projects in which Six Sigma
could be implemented
• GE made it compulsory for employees to have at least green
belt training and involvement in 1 quality improvement
project to be eligible for promotion to management level

18. Relating approaches to HR
Concepts
• Rewards Management
– Welch devised a system where people were classified
under 3 categories
1. Top 20% : They were generously rewarded
2. Middle 70% : They were rewarded and encouraged to
emulate the top performers
3. Bottom 10% : They were fired
Welch believed that retaining non-performers was
detrimental to the company’s health

19. Relating approaches to HR
Concepts
• Leadership Development & Succession Planning
1. C Session Meetings:
– It started in April and lasted through May every year
– Welch along with 3 senior executives traveled across the US to
meet with the top managers of each of GE’s 12 businesses and
to review their performance over the previous year
– Purpose of this session was to identify and promote leadership
talent within GE
– It also served as a way to recognize good performers and assist
them in developing their skills

20. Relating approaches to HR
Concepts
• Leadership Development & Succession Planning
2. Executive Development
– Usually employees in management ranks were transferred
every few years between locations
– This was done to enable them to learn about various
businesses and obtain an overall understanding of GE’s
operations
– Leadership development institute was set up at Crotonville

21. Relating approaches to HR
Concepts
• Succession Planning
– Under Immelt’s leadership there was increase in the
number of outsiders brought into the company at senior
positions
– Immelt believed that it helped in bringing new energy,
ideas, creativity
– This was in contrast to GE philosophy of promoting from
within
– Immelt encouraged managers to become industry experts
whereas Welch had focused on enhancing general
management skills

22. Relating approaches to HR
Concepts
• Welch’s 4E’s Leadership Theory
– Energy: Enormous amount of positive energy and strong
bias for action
– Energizing: High level of people orientation and the ability
to motivate and inspire people to their maximum potential
– Edge: The courage to take bold decisions and conviction to
stick with them
– Execute: The ability to give form to vision and deliver
results
– Passion: A heartfelt, deep and authentic excitement about
life and work

23. Relating approaches to HR
Concepts
• Compensation and benefits
1. Pay for Performance
– In 2003, Immelt was eligible to receive stocks worth $7.5
million over a period of 5 years
– Half of the performance share units would be vested if
GE’s cash flow rose at least 10% annually over the next
five years
– The other half would accrue to him if GE’s stock met or
exceeded the avg performance standard of S&P 500-
stock index

24. Relating approaches to HR
Concepts
• Diversity
– In early 2000’s, 50% of all senior executive hires and 54%
of new corporate officers were women, minorities or
foreign employees
– Immelt created diversity forums within the company and
actively encouraged mentoring programs for women,
minorities and foreigners

25. Extrapolation
• Revenue - $142.46 Billion (2013)
• Consolidated Net Income - $ 15.48 Billion (2013)
• FORTUNE World’s Most Admired Companies: 2014 (rank: 10)
• The Times Top 50 Employers for Women: 2014
• Total Employees Worldwide: 307,000 as of Dec 2013
• Operations - More than 170 countries
• What’s Important to GE in 2014?
– Diversity
– Volunteerism
– GE Foundation - The philanthropic organization of GE

26. Thank You!