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Effective Strategies: Jack Welch at GE
The ability to turn around the performance of a company is determined by the effectiveness of the strategies adopted by the company. To succeed in a turnaround process, appropriate strategies must be employed to manage both the resources and the people in an organization. According to Griffin and Morehead (2013), one of the most effective elements of influencing change and performance of the people in an organization is through team management. To effectively transform a company, appropriate team management techniques must be employed along with a transformative strategy for the management. To understand the most effective strategies used, this discussion will explore the experience and expertise of Jack Welch. The analysis will explore the strategies and the team-building techniques he applied to transform General Electric, and discuss other relevant strategies that could have worked.
Before fore Welch took over the chairman and CEO leadership at GE in 1981, the performance of the company was low and not up to capacity, compared to its potential. The market value of GE before Welch took over was just $12 billion in 1981 and sales were $26.8 billion per year (GE, 2015). The performance of the company was not only low, but the staff morale was low and not focused towards the organizational objectives (Thomas, 2011). At the same time, there was a leadership gap in the firm as seen in the low levels of human relations before Welch took over at the helm of GE leadership (Madrick, 2012). In addition, the company had a lot of employees, which was an element of inefficiency. According to Lane (2008), the company had thousands of employees, who Welch let go later after he became the CEO.
After Welch took over as the CEO in 1980 and as both CEO and chairman in 1981, the company had a turnaround of performance in all dimensions. By the time Welch retired in 2001, the company was worth $410 billion, up from the $12 in 1981 (GE, 2015). According to GE (2015), the sales revenue went up from $30 to $130 billion. The company was among the most competitive corporations in the world and the reputation of the firm was high (Thomas, 2011). Currently, GE is a conglomerate with 14 different businesses that grew under the strategy and the watch of Welch. The company has business interests in aircraft, appliances, plastics, engineering, media and financial services. By 2001, the motivation levels at the firm had increased, as marked by remarkable levels of human interaction because of effective teams.
The transformation at GE by Welch is as a result of the strategies and techniques he employed to manage the company. These strategies are anchored in the effectiveness of the skills that Welch employed to manage the company. Welch focused on the efficiency at the company by adopting strategies to streamline the human resource. This involved reducing their numbers to the appropriate level and equipping those remaining (Lane, 2008). Welch adopted team-building techniques that joined the people at the company in team-based operations. In addition, he also focused on adopting measures to ensure that teams were effective and had the appropriate leadership to transform the company. These techniques were based on the leadership strategy, which was focused on transforming the company to achieve its objectives.
One of the main team building techniques that Welch adopted at GE is cultivation of leadership in the teams other than managing them. Welch believed that teams were a result of the level of leadership that existed in the organization. According to Madrick (2012), Welch viewed leaders as the people who were passionate about the success of other people. Therefore, Welch ensured that the teams at the company were based on the leadership of the members and the leaders. Welch focused on cultivating proper leadership skills among the people at the company in order to make them better leaders (Thomas, 2011). The skills were meant to improve their skills of influencing the behavior of the team and the people at the company. Therefore, the teams at the company were managed and led in alignment with the firm’s objectives and mission.
Another technique Welch employed by the company to build and sustain teams and team leadership is to engage managers and executives in interactive sessions. He used to organize conferences and training sessions that were meant to allow the top leadership to interact and engage in strategic discussions. Welch used to meet around 15,000 GE executives, and it is believed that he made such sessions in his management as the CEO (Lane, 2008). It is through these sessions that Welch was able to impart his leadership influence on the leaders of the company, and seek more cohesive and effective groups. This made teams in the company effective because they had good leadership that reflected his transformative strategy.
The use of proper reward schemes were another significant technique that Welch adopted to build functional and effective teams at GE. Welch was effective in using rewards to not only motivate the teams and employees, but also to influence their behavior. According to Lane (2008), Welch employed inconsequential reward systems that were not determined to focus on the financial incentives only. Having been an employee of the company for years, Welch knew of the weaknesses of the reward systems at the firm. Therefore, he transformed it by making rewards consistent and substantial (Madrick, 2012). With a lower employee burden, Welch could afford to develop sustainable reward systems that motivate employees and influenced their behavior towards the objectives of the company.
The other technique that Welch employed at the company is the elimination of bureaucracy. This was done by reducing the number and level of constraints and hierarchical regulations that had to be fulfilled for decisions to be made. One of the key strategies for achieving this was the development of new policies by the management led by Welch (Griffin & Morehead, 2013). This was in addition to the adoption of a dynamic view to the management and regulations of the company. This was in line with Welch’s belief that leadership and management alike were only effective if they were situational, and could not be static (Thomas, 2011). Through the elimination of bureaucracy, leadership at the firm was effective and functional. While leaders at the company were present before his reign at the company, they were not recognized because of the bureaucratic environment that existed at the firm.
Another important technique that Welch undertook to manage teams at the company was to eliminate inefficiency by streamlining the human resource. At the time he took over at GE, the company was large and threatened to be not only unmanageable but inefficient. According to Madrick (2012), GE had over 400,000 employees spread across the world. As a result of the large labor force, interpretation of the rules was challenging. Within five years of his leadership, Welch relieved around 130,000 employees, along with the sale of some GE firms that had around 70,000 employees (Lane, 2008). While he lay off employees, he did it skillfully, that the exercise did not backfire on the company, which earned him the name Neutral Jack
While the leadership strategy and techniques used by Welch worked at GE at the time, other strategies could have worked in similar situations. One of them is management of employees rather than leading. This could have worked through the establishment of strict policies that focused on the achievement of the organizational goals through targets (Griffin & Morehead, 2013). Proper planning and targeting would inspire employee and teams to achieve their individual and teams towards organizational goals. This would call for strict management of teams and people in techniques that do not involve humanistic leadership. However, this strategy would only work if the environment in the workplace is strictly expert oriented.
Conclusion
The success of effective team-building strategies and techniques at GE makes Welch an expert in transformation and an industry leader. The transformation of GE by Welch was an evidence of a leader who sought to manage through leadership. Through the adoption of proper leadership skills, less bureaucratic environment and reward systems, Welch turned around the operations of the teams in the company. Moreover, his interactive leadership and efforts of efficient human resource helped the company transform into better performance. Currently, GE rides of the strength that was founded on the management and leadership of Welch during the time he led the firm. This way, Welch was able to transform the company from a low performing firm in 1981 to a global conglomerate by the time he retired.
References
GE, 2015, John F. Welch, Jr. Chairman & CEO 1981 – 2001. Retrieved From, <http://www.ge.com/about-us/leadership/profiles/john-f-welch-jr> June 22, 2015
Griffin, R., & Morehead, G. (2013). Organizational Behavior: Managing People and Organizations. New York: Cengage Learning
Lane, B. (2008). Jacked Up: The Inside Story of how Jack Welch Talked GE into Becoming the World’s Greatest Company. New York: McGraw Hill
Madrick, J. (2012). Why Jack Welch Knows About Changing Numbers. Retrieved From, <http://harpers.org/blog/2012/10/why-jack-welch-knows-about-changing-numbers> June 22, 2015
Thomas, O. (2011). At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit. New York: Knopf Doubleday Publishing Group