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 7/13/2011 10:43 AM 15 20 40 60 80 100 120 140 160 180 0 02/Jan/80 02/Jan/81 02/Jan/82 02/Jan/83 02/Jan/84 7/13/2011 10:43 AM 02/Jan/85 02/Jan/86 02/Jan/87 02/Jan/88 02/Jan/89 02/Jan/90 02/Jan/91 02/Jan/92 02/Jan/93 02/Jan/94 02/Jan/95 02/Jan/96 02/Jan/97 02/Jan/98 118 02/Jan/99 Share Prices 02/Jan/00 02/Jan/01 167.94 02/Jan/02 53.55 02/Jan/03 SHARE PRICES 02/Jan/04 02/Jan/05 02/Jan/06 02/Jan/07 02/Jan/08 02/Jan/09 16 Share Prices 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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