GE - Strategy_ Style and Culture by gauravjindal

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									                      General Electric
                 Strategy, Style and Culture

“I’m a different generation from Jack… I have a different view of the world.”
                                                         -Jeffrey Immelt, CEO of GE, in 2002



“The thing that makes me most proud of Jeff is his visibility in tough times.”
                                                     -Jack Welch, Former CEO of GE, in 2002



                                                                           Presented By,
                                                                                   Jishnu
                                                                                 Natasha
                                                                              Sharul Goel
                                                                            Arvind Singh
                                                                          Priyanka Copra
                                                                         Abhishek Lamsal
                Background
Invention of Electric lamp in 1879

Thomas Alva Edison

Inventor and Entrepreneur

In 1870s and 1880s - Small business dealing
 power stations, wiring devices and
appliances
               Contribution
In 1892 - Charles Coffin
Licensed electric bulb technology
Created formal hierarchy
Systematic business – Different unit for each
Product Line

In 1940 – Charles Wilson
Autocratic Leader
Employee relation deteriorated
              Contribution Cont’d…
In 1964 – Fred Borch
Aggressive Leader
Introduced 3 new Business Lines
Computers, Nuclear power, Aircraft Engineering
Introduced concept of SBU


In 1972 – Reginald Jones
Electromechanical to Electronic technology
Identified the importance of international environment and being
competitive
Office Automation


In 1981 – JACK WELCH
              Who is Jack Welch?

•   1935: Born in Salem, Massachusetts
•   1957: BS in Chemical Engineering (MIT)
•   1960: MS and PhD in Chemical Engineering
•   1960: Joined GE as a junior engineer
•   1961: Wanted to leave bureaucratic GE
              Jack Welch and GE
•   1972: Elected GE’s youngest VP
•   1977: Senior Vice President
•   1979: Vice Chairman
•   April 1, 1981: Became the 8th
    Chairman and CEO of General
    Electric
   Jack Welch on Business Strategy

• "Business strategy is less a function of
  grandiose predictions than it is a result of
  being able to respond rapidly to real changes
  as they occur. That's why strategy has to be
  dynamic and anticipatory." - Jack Welch
       Welch Strategies and Approaches
    Made GE more profitable and agile by taking
    proactive measures to avoid contentment as:

• “Fix it sell it or close it” : one of top two players.
• “Neutron Jack” : for firing employees
• “Mergers and acquisitions” : RCA, NBC…
• Gave responsibility for strategic planning to each
  individual business units.
• Curbed R&D
                     …..Contd.

• “Work out”: promotes innovation and problem solving

• “We want to make our quality so special, so
  valuable to our customers, so important to their
  success, that our products become their real
  value choice.”

                        ----------Jack Welch
                      …..Contd.
• Adoption of six sigma quality control program-
 reduces cost, production defects, increases productivity
  and profitability.
 Green belt was made compulsory for promotion.

• Encouraged communication at all levels and direction.
• “Small company environment, with big company
  resources”.
• Succession planning.
                  LEADERSHIP
•   Charismatic leader.
•   Role-Model.
•   Large fan-following.
•   Personal attention.
•   ‘4 E’s & P’ theory of leadership.
•   Rewards for high-performers.
‘‘Speed is the indispensable ingredient in
   competitiveness.
It keeps businesses and people young.
It’s addictive, It tends to propel ideas and drive
processes right through barriers, sweeping
bureaucrats.
 If you’re not fast, you can’t win.”
                                      -- Jack Welch
CLASSIFICATION AT GE


   70

                       Top

                10
                       Middle
        20

                       Bottom
                 0
• My main job is developing talent. I was a
  gardener providing water and other
  nourishment to our top people. Of
  course, I had to pull out some weeds,
  too.
                       Jack Welch
                     PERFORMANCE OF GE




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Executive-development
•   Leadership-training.
•   Executive-development.
•   Thought regularly at Crotonviellie.
•   Annual ‘C-session meetings’.
•   Succession-Planning sessions.
                 MISTAKES
• Sale of G.E.’s Appliances Business in 1984.
• Starting of G.E.’s Factory Automation Unit in
  1980, which by 1983 had ran into serious
  losses due to erroneous demand projections.
THE GREY SIDE OF HIM
• Extremely demanding Boss.
• Hard task master, created fear in subordinates.
JEFFERY IMMELT BACKGROUND
•Born in 1956 in Cincinatti,Ohio.
•Active in sports
•Major in mathematics from Dartmouth College in
1970’s.
•Joined P&G as a member of brand management
team.
•MBA from Harvard
•In 1982 joined GE .
•In 1990 nominated for CEO.
•2001 became CEO.
GE under Immelt
• September 11 affected GE aviation services.
• Immelt assured the investors about the
  double digit growth as earlier.
• But GE’s share fell by $30 per share, 20%
  lower than the price before attacks
• Anthrax
• Followed by two scandals Enron & Tyco.
• Investors demanded more information about
  GE.
• Immelt decided to give in their demands.
• Bill Gross published an article about GE’s
  opaque finance.
• 6% fall in shares
• Write-offs against GE power systems due to
  cancelled orders.
• To win investors, redesigned CEO
  compensation package and equity packages
  for other executives.
• He also reshuffled GE’s portfolio.
• Oct 8 2003 acquired French media giant
  Vivendi Universal’s American for $14 billion.
• Analyst were surprised by this acquisition
• GE had stayed away from production business.
• On Oct 9, 2003 GE acquired Instrumentarium,
  a medical equipment maker.

• On Oct 10,2003, it purchased Amersham, a
  British live science and medical diagnostic
  company.
      ANALYST VIEW OF IMMELT
• Analyst said Immelt was trying to showcase a
  bold business transformation through these
  deals.
• They were skeptical about the deals benefit to
  GE.
Challenges for Immelt?




                  Jack Welch and Jeff Immelt
                  -USA Today
    IMMELT’S POLICIES CONTD…
• By 2005, sold businesses like insurance
• Acquired fast growing businesses like renewable
  energy, bioscience and security.
• Invested hugely in setting up new research centers
  across the globe.
• Increased company’s R&D Budget from $286 million
  to $359 million in 2004.
• He thought globalizing research would allow GE to
  stay more in touch with customer needs.
         IMMELT A ‘FRIENDLY’ CEO
• Increased the company’s external communication.
• Spent more than 70% of his time away from office at
  GE’s headquarters.
• Unlike Welch, stressed more on customer
  satisfaction and value rather than meeting
  performance targets.
• Encouraged employees to take risks and come up
  with innovative ideas.
• His aim is to stretch GE’s six sigma quality initiative
  into the customer’s processes.
                 ...Contd.
• Continued firing low performers but in a subtle way
  by not doing it publicly.
• Hired from outside to bring in new ideas and new
  perspectives on the company’s policies.
• Greater amount of work force diversity
• 50% of senior execs hires and 54% of new corporate
  officers were women, minorities or foreigners.
• Encouraged mentoring for women, minorities and
  foreigners.
            IMMELT Vs. WELCH
• More ‘people oriented’ than Welch.
• Used a “friendly, regular-guy approach” in dealing with
  employees.
• Business Week once wrote “ He prefers to tease where
  Welch would taunt. Immelt likes to cheer his people on
  rather than chew them out.”
• He stressed “Best managers are great marketers and not
  just great operators”
• To make employees more marketing oriented appointed
  Beth Comstock as CMO.
• Extensive training to best marketers.
• Promoted innovation and creativity.
• Launched programs like ‘Innovation Breakthrough’,
  ‘Idea Jams’ and ‘virtual idea box’.
• Where employees were encouraged to give new
  ideas.
• Aim was to show GE can grow internally and not just
  through acquisitions.
   ENVIRONMENTAL INITIATIVES BY
            IMMELT
• Investment in ‘ecoimagination’ projects.
• For example producing diesel and electric hybrid
  vehicle, cleaner coal fired power plants.
• By late 2005 he announced all GE businesses would
  aim at reducing CO2 emissions.
• Evaluating managers on their involvement in
  environmental responsibility.
                      GE Now
•   Operates in 100+ countries worldwide
•   300,000+ employees worldwide
•   2006 revenue - $163.4 billion
•   2006 earnings - $20.8 billion
•   One of original six companies still listed on Dow
    Jones index
        Leadership Continues

“At the top, we don’t run GE like a big
 company. We run it like a big partnership,
 where every leader can make a
 contribution not just to their job, but to
 the entire Company.”
                               -Jeff Immelt, CEO
                     Letter to Investors
                                2005 Annual Report
             CASE ANALYSIS
                Question
Immelt was operating in a difficult economic environment
in the early 2000’s. What were the challenges facing
Immelt & GE? Do you think Immelt’s strategies &
leadership style were adequate to cope with those
challenges?

What steps do you think Welch would have taken if he had
to operate in the same environment? Would he have been
required to change his leadership style?
                Speculative Early 2000’s
1.   9/11 Attack on WTC
           Insurance Business took a $600 Million hit.
           Aircraft Engine business slowdown.
           GE Capital aviation services affected.
           NYSE , GE Stock fell by 20 %
2.   Anthrax Scare – NBC Employee
3.   Eruption of two Biggest Corporate scandals in US
           Enron Corporation
           Tyco International
4. Pacific Investment management company article on
   Opaque finances. Share price fell by 6%.
5. GE power systems was facing large write offs due to
   cancelled orders.
         Jeffrey’s Strategies & Leadership Styles

1.   9/11 Attack on WTC
     •    He was in Seattle.
     •    Met investors & assured double digit growth as under Welch.
2. Corporate scandals
   • Published a detailed annual report.
   • CEO compensation package was redesigned (Stock :$7.5M).
   • Modified equity packages.
   • Communicated that GE is a strong company.
3. Yr 2002 : GE’s Portfolio was modified by spinning off less
    lucrative businesses & acquiring strategically significant ones.
4. Bold Business transformation:
    3 consecutive acquisitions ($25M) in October’03
      Jeffrey’s Strategies & Leadership Styles (Contd..)

5.    Increased global orientation through R & D
6.    Increased External Communication.
7.    Increased number of outsiders to senior positions.
8.    Spending longer time on one job.
9.    Encouraged diversity at work place.
10.   “Best Managers are great marketers & not just operators”
11.   Commercial council was formed in 2002
12.   Innovation Break through program was initiated in 2003.
13.   Reorganized business based production line from 11 to 6.
           Jack Welch : Leadership & Power
LEADERSHIP               POWER EXERCISED
   STYLES                1. Legitimate
1. Autocratic            2. Reward
2. Democratic            3. Coercive
3. Laissez faire         4. Expert


    Revenue of GE : $ 27 Billion (1981) - $ 130
     Billion(2001)
    Biggest & most profitable Corporation of the
     world.
         Jefferey Immelt Vs Jack Welch
1.   WTC
2.   Corporate Scandals
3.   R&D
4.   Intimidating Boss Vs Friendly regular guy.
5.   Carrot & Stick approach
6.   Boundary less cooperation

“It’s time to repot the plant. If he did the same thing, why did we put
him there. You want change and fresh ideas. The idea that he sold
something I bought doesn’t bother me. I sold a lot my predecessor
bought’- Jack Welch
Strategic and Cultural Changes in GE
under Jack Welch and Jeffrey Immelt
                     Contributions of Jack Welch
Strategic changes in GE
 GE Matrix planning system -> ‘Number One Number Two’ Strategy

 Fix it, sell it or close it

 Strategic planning was made a line function
          Individual business units

 Lesser investment on R&D
           ‘Work Out’
           Quality improvement

 In 1995, Implementation of Six Sigma
          Linked with compensation

 Classified people into 3 categories
           Top 20%
           Middle 70%
           Bottom 10%
                      Contributions of Jack Welch
Cultural changes in GE

 Bureaucratic structure -> Flatter structure.
                    Improve communication

 Non performers - Fired
 Performers
         Quick promotion
         Raise
         Bonus
         Stock option

 Annual C session meetings
         Promote leadership talent

 Succession planning
          Potential leaders sent to Crotonville for training

 Boundary-less corporation with Open culture

 Six sigma, Demand flow technology, Bullet train thinking and Quick market intelligence
                  Contributions of Jeffrey Immelt
Strategic changes in GE

 Shift focus from production to marketing
           Extensive training to marketers
           New courses introduced

 Innovation and creativity was promoted.

 Commercial council in 2002
       Discuss growth strategies
       Innovative ways of reaching customers.

 ‘Innovation Breakthrough’ in 2003
          Improve existing products
          Development of new products.

 ‘Idea jams’

 ‘Virtual idea box’
           Employees posted their ideas
                   Contributions of Jeffrey Immelt
Cultural changes in GE
 Increased external communication

 Customer satisfaction and value

 Boost sales, innovative ideas and increased customer satisfaction.

 Employees were valued and Firing was subtle

 Outsiders brought into the company at senior positions

 Managers to gain expertise in one industry

 Increased diversity and mentoring
         Women, minorities or foreign employees.

 Commitment to environment - ‘Cleaner and Greener’

 Financials more transparent
Question . GE was already a hugely successful company
before Welch became CEO, with a tradition of strong and
able leadership. Did Welch make GE a great company, or did
GE make Welch a great leader?
• Welch foresaw the danger of GE becoming complacent
• Transformed bureaucratic culture
• “Number one number two” strategy.
• Various acquisitions to add value to GE’s portfolio
• More patents
• “Work Out”
• Adoption of Six Sigma
• Importance of communication
• Lowest level knew Welch and his opinion.
• “Corporate Executive Council”
• Master of the art of motivating.
THANK YOU




QUESTIONS ???

								
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