GE’s Two-Decade Transformation:

Jack Welch’s Leadership

Contents
▪ Welch’s Early priorities: GE’s Restructuring
▪ The “Software” Initiatives: Work out & Best practices
▪ Going Global
▪ Developing Leaders
▪ Boundaryless behavior
▪ Stretch: Achieving the impossible
▪ Six Sigma quality Initiative
▪ A players” with “four E’s”
Accolades to GE
▪ “Most admired company in US” by Fortune
▪ “Most admired company in the world” by Financial Times
▪ “Manager of the century” by Fortune for his contribution to GE’s outstanding 20
years
The GE Heritage
▪ 1930 – highly centralized, tightly controlled corporate
▪ 1950 – Delegated responsibility, leading a trend towards greater decentralization
▪ 1960 – Profitless growth caused company to strengthen corporate staff and
develop sophisticated planning system.
▪ 1973 – Designed 43 strategic business units to support the strategic planning
▪ 1977 - Capped SBUs with a new organization layer of “sectors”
Welch’s Early priorities: GE’s Restructuring
# 1or 2: Fix, Sell, or Close
▪ Business were categorized as:
▪ Core (with the priority of “reinvesting in productivity & quality)
▪ High technology (challenged to “stay on the leading edge” by investing in the R&D)
▪ Service ( required to “add outstanding people and make contiguous acquisitions”)

▪ Between 1980 – 1990:

▪ GE freed up over $11 billion by selling more than 200 businesses which accounted for
25% of 1980 sales.
▪ GE made over 370 acquisitions investing more than $21 billion
Welch’s Early priorities: GE’s Restructuring
▪ Highly disciplined destaffing to become more “lean and agile” including 50%
reduction in the 200-person strategic planning staff
▪ Welch described his motivations:
▪ We don’t need the questioners and checkers, the nitpickers who bog down the process.
Today each staff has to ask "How do I add value? How do I make people on the line
more effective and competitive?”

▪ As he continued chipped away bureaucracy, Welch scrapped GE laborious

strategic planning system and replaced it with “real time planning” built around a
five-page strategy playbook.
Welch’s Early priorities: GE’s Restructuring
▪ Each business’s playbook provided simple one-page answers to five questions”
1. Current market dynamics
2. Competitor’s key recent activities
3. GE business response
4. Greatest competitive threat over next three years
5. GE business’s planned response

▪ Budgeting process was redefined. Rather than documenting internally focused

comparison with past performance, results were now evaluated against external
competitively based criteria. E.g. Do sales show increase market share?
▪ In 1985, Welch removed sector level. Going from CEO to business.
Welch’s Early priorities: GE’s Restructuring
▪ Through downsizing, the number of employees declined from 404,000 in 1980 to
330,000 by 1984 and 292,000 by 1989.
▪ The further into the restructuring welch got, the more convinced he become of the
need for bold actions.
▪ For me, the idea is to shun the incremental and go for the leap… How does an institution
know when the pace is about right? Institution ought to stretch itself, ought to reach to
the point where it almost comes unglued.
▪ Remember the theory that a manager should have more than 6 or 7 direct reports? I say
the right number is 10 or 15.
 The Late 1980s:
Second stage of the rocket
The “Software” Initiatives:
Work out & Best practices
▪ Welch acknowledged that “A company can boost productivity by restructuring,
removing bureaucracy and downsizing, but it can not sustain high productivity without
cultural change.”
▪ In 1989, Welch articulated the management style to make GE’s norm – an approach
based on openness, candor and facing reality.
▪ He launched two closely linked initiatives – dubbed Work-out and best practices and
Best Practices
▪ He redefined core elements of organizational structure, one characterized by speed,
simplicity, and self confidence. Create a culture of small company - a place where all
felt engaged and every one had voice.
▪ Major change Initiative: Wok-Out – a process designed to get unnecessary
bureaucratic work out of the system while providing a forum in which employees and
their bosses could work out new ways of dealing with each other.
The “Software” Initiatives:
Work out & Best practices
▪ Open forum style of “New England town meetings” started.
▪ No meeting documented
▪ Welch’s relentless pursuit of ideas to increase productivity resulted in the birth of a
related movement called Best practices. The challenge was:
▪ How can we learn from other companies that are achieving high productive growth?

▪ Team selected 9 companies including Ford, HP, Xerox & Toshiba & identified:
▪ they focused more on developing effective processes than controlling individuals
▪ Customer satisfaction was their main gauge of performance
▪ they treated their supplier as partners
▪ They emphasized the need for a constant stream of high quality new products
Going Global
▪ Welch raised the bar on GE’s well known performance standard:
▪ from now on, #1 or #2 was to be evaluated on world market positions.

▪ GE invested huge amount in Europe, Asia and Japan on acquisitions

▪ By 1998 inter. revenues were $42.8 billion, double the level just five years earlier.
▪ The company expected to do half of its business outside united states by 2000,
compared with only 20% in 1985.
Developing Leaders
▪ Welch was focusing of realigning the skill set – and more important, the mind sets
– of the company’s 290,000 employees
▪ Like many other large companies, GE had an implicit psychological contract based
on perceived life time employment. This produced a paternal kind of loyalty.
▪ The new psychological contract is that Jobs at GE are the best in the world for
people willing to compete. We have the best training & development resources
and an environment to providing opportunities for Personal & Professional growth.
▪ Company’s top executives had committed substantial amount of time to:
▪ Rigorous management appraisal
▪ Development & succession planning reviews
 Developing Leaders
▪ Welch along with three senior executives reviewed the progress of company’s top
3,000 executives particularly upper 500 who were appointed with his personal approval.
▪ In each business reviews, welch asked the top executives to:
▪ Identify future leaders
▪ Outline planned training & development plans
▪ Detail succession plans for all key jobs

▪ As these reviews rolled out, all employees excepted honest feedback about:
▪ Where they were professionally
▪ Reasonable expectations about future positions they could hold & specific skills required.
▪ Managers at every level used these discussions as the basis for coaching and developing staff
Developing Leaders
▪ Despite all the individual development & corporate initiatives, not all managers were able to
achieve Welch's ideal leadership profile.
▪ He addressed the problem. In our views, Leaders whether on the shop floor or at the top of
our business can be characterized in at least four ways.
▪ Who deliver on commitments & share the values. She/he has an onward & upward future.
▪ Who does not meet commitments& does not share our values. Not pleasant a call, but equally easy.
▪ Who misses commitments but share values, usually get a 2nd chance in a new environment.
▪ Who delivers on commitments but doesn’t share the values we must have.
▪ To reinforce his intentions to identify and weed out Type 4 managers, Welch began rating
top managers not only on performance but also on the extent to which they lived GE values.
▪ As back up his commitment to the new leadership criteria, GE introduced a 360 degree
feedback process. 360 feedback become the means for identify training needs & career
planning.
Into the 1990s:
The third wave
Boundaryless behavior
▪ Welch share his vision for GE in the 1990s as a “boundaryless” company, one
characterized by an open, anti parochial environment, friendly towards seeking
and sharing new ideas regardless of their origin.
▪ In many ways an institutionalization of the openness “work-out” had initiated and
“best practices” transfers had reinforced.
▪ The boundaryless company will:
▪ remove the barrier between all departments
▪ it will recognize no distinctions between foreign and domestic operations
▪ will ignore group labels group labels such as “management” “salaried” or “hourly”
Stretch: Achieving the impossible
▪ He introduced the notion of “stretch” to set performance targets and described it as a
using dreams to set business targets.
▪ The objective was to change the way targets were set and performance was
measured.
▪ You absolutely have to honour the don’t push failure concept, stretch targets
becomes a disaster without that.
Service business
▪ In 1994, launched a new strategic initiatives to reduce GE’s dependence on
traditional industrial products.
Closing out the decade:
Raising the Bar
Six Sigma quality Initiative
▪ Provided massive training to thousands of managers to create a cadre of:
▪ Greenbelts with training of four weeks followed by implementation of a five months
project aimed at improving quality.
▪ Black belts with six weeks training in statistics, data analysis, and other six sigma tools
which prepared the candidate to undertake three major quality projects
▪ Master Black belts – full time sigma instructors- mentored the black belt candidate
through two year process.

▪ GE invested $500 million to train 85,000 professional workforce in first two years.
▪ Welch said, they have began to change the DNA of GE to one wheose central
stand is quality
“A players” with “four E’s”
▪ Modifying his early language of four management types, he described GE as a
company that wanted only “A players” – individual with vision, leadership, energy
and courage.
▪ “A players” were characterized by welch as 4E’s –
▪ Energy – excited by ideas and attracted to turbulence of the opportunity it brings
▪ Ability to energize others – infecting every one with their enthusiasm for an idea and
having every one dreaming the same big dreams.
▪ Edge – the ability to make tough calls
▪ Execution – the consistent ability to turn vision into results
▪ Welch urged his top management, We are an A plus company. We want A players.
Take care of your best. Reward them. Promote them. Pay them well. Give them lot
of stock option.
▪ Don’s spend all the time trying to work plans to get Cs to be Bs. Move them out
early. It is a contribution.
“A players” with “four E’s”
▪ Implemented a strong performance appraisal system that required each
manager to rank his employees into five categorise based on long term
performance
1. Top 10% - offer stock option
2. Strong 15% - offer stock option
3. Highly valued 50%
4. Borderline 15%
5. Least effective 10% - had to go

▪ E-business
 Q/A
Thank you
What Leaders Really Do?
John P. Kotter
 They don’t make plans; they
don’t solve problems; they
don’t even organize people.

THEN WHAT LEADERS ACTUALLY DO?

 § Harvard Business School professor Abraham
Zaleznik published an HBR article with the
deceptively mild title “Managers and
Leaders: Are They Different?
§ The study of leadership hasn’t been the
same since.

History § Harvard Business School professor John

Kotter proposes that management and
leadership are different but complementary,
and that in a changing world, one cannot
function without the other.
§ Managers promote stability while leaders
press for change.
 About the Author
John P. Kotter was a professor of
organizational behavior at Harvard
Business School in Boston. He is the author
of such books as The General Managers
(Free Press, 1986), The Leadership Factor
(Free Press, 1988), and A Force for
Change: How Leadership Differs from
Management (Free Press, 1990).
 Successful corporations actively seek out people with
leadership potential and expose them to career experiences
designed to develop that potential.
 § To combine strong leadership and strong management
and use each to balance the other. Of course, not
everyone can be good at both leading and managing.
§ Smart companies value both kinds of people and work
hard to make them a part of the team.
Real Challenge § Once companies understand the fundamental
difference, they can begin to groom their top people to
provide both.
 Coping with complexity and coping with
change—shape the characteristic
activities of management and leadership.
Each accomplishes three tasks in
different ways.
Management involves;
The Difference Between § Planning and budgeting,
Leadership and § Organizing and staffing
Management § Controlling and problem solving
Leadership involves;
§ Setting a direction
§ Aligning People
§ Motivating and Inspiring
 § Setting direction is never the same as
planning or even long-term planning,
although people often confuse the two.
§ Planning is a management process,
deductive in nature and designed to
Setting a Direction Versus produce orderly results, not change.
Planning and Budgeting § Setting a direction is more inductive.
Leaders gather a broad range of data
and look for patterns, relationships, and
linkages that help explain things.
 § Managers “organize” to create human
systems that can implement plans as
precisely and efficiently as possible.
§ Aligning is different. It is more of a
communications challenge than a
design problem.

Aligning People Versus § Aligning invariably involves talking to

Organizing and Staffing many more individuals than organizing
does. The target population can involve
not only a manager’s subordinates but
also bosses, peers, staff in other parts of
the organization, as well as suppliers,
government officials, and even
customers.
 § Leadership is different. Achieving
grand visions always requires a burst of
energy.
§ Motivation and inspiration energize
people, not by pushing them in the right
Motivating People Versus direction as control mechanisms do but

Controlling and Problem by satisfying basic human needs for

achievement, a sense of belonging,
Solving recognition, self-esteem, a feeling of
control over one’s life, and the ability to
live up to one’s ideals. Such feelings
touch us deeply and elicit a powerful
response.
 Some companies have consistently
demonstrated an ability to develop people into
outstanding leader-managers.
Recruiting people with leadership potential is
only the first step. Equally important is
managing their career patterns.
Individuals who are effective in large leadership
roles often share a number of career
experiences.
The methods successful companies use are
surprisingly straightforward. They go out of their
way to make young employees and people at
lower levels in their organizations visible to
senior management. Senior managers then
judge for themselves who has potential and what
the development needs of those people are.
Executives also discuss their tentative
conclusions among themselves to draw more
accurate judgments
Create Leadership Culture
How is it possible?
 § Some companies have consistently
demonstrated an ability to develop people
into outstanding leader-managers.
§ Recruiting people with leadership potential is
only the first step. Equally important is
managing their career patterns.
§ Individuals who are effective in large
leadership roles often share a number of
career experiences.
What organizations do § The methods successful companies use are

about this? surprisingly straightforward.

§ They go out of their way to make young
employees and people at lower levels in their
organizations visible to senior management.
§ Senior managers then judge for themselves
who has potential and what the development
needs of those people are.
§ Executives also discuss their tentative
conclusions among themselves to draw more
accurate judgments
WHY SHOULD ANYONE BE LED BY YOU?
Robert Goffee and Gareth Jones
 Leaders need vision and energy. but to be
inspirational, they need four other qualities,
these can be honed by almost anyone willing
to dig deeply into their true selves.
FOOD FOR THOUGHT….

¡ You can’t do anything in business without followers, and followers in these “empowered” times are hard to
find.
¡ So executives had better know what it takes to lead effectively—they must find ways to engage people and
rouse their commitment to company goals.
¡ Everyone agrees that leaders need vision, energy, authority, and strategic direction.
¡ But we’ve discovered that inspirational leaders also share four unexpected qualities.
 WHAT ARE THOSE QUALITIES THEN?
ANY GUESSES?
¡ They selectively show their weaknesses.
¡ They rely heavily on intuition to gauge the appropriate timing and course of their
actions.
¡ They manage employees with something we call tough empathy.
¡ They reveal their differences.
REVEAL YOUR WEAKNESSES

¡ Exposing a weakness establishes trust and thus helps get folks on board.
¡ Indeed, if executives try to communicate that they’re perfect at everything, there will
be no need for anyone to help them with anything.
¡ They won’t need followers. They’ll signal that they can do it all themselves.
¡ Communicating a weakness also builds solidarity between followers and leaders.
¡ Sharing an imperfection is so effective because it underscores a human being’s
authenticity.
¡ That said, the most effective leaders know that exposing a weakness must be done
carefully.
¡ The golden rule is never to expose a weakness that will be seen as a fatal flaw—by
which we mean a flaw that jeopardizes central aspects of your professional role.
BECOME A SENSOR

¡ Indeed, great sensors can easily gauge unexpressed feelings; they can very accurately judge
whether relationships are working or not.
¡ The process is complex, and as anyone who has ever encountered it knows, the results are
impressive.
¡ Sensing can create problems.
¡ That’s because in making fine judgments about how far they can go, leaders risk losing their
followers.
¡ There is another danger associated with sensing skills. By definition, sensing a situation involves
projection—that state of mind whereby you attribute your own ideas to other people and things.
¡ Sensing capability must always be framed by reality testing.
¡ Even the most gifted sensor may need to validate his perceptions with a trusted adviser or a
member of his inner team.
PRACTICE TOUGH EMPATHY

¡ Real leaders empathize fiercely with the people they lead.

¡ Tough empathy means giving people what they need, not what they want.
¡ At its best, tough empathy balances respect for the individual and for the task at hand.
¡ Attending to both, however, isn’t easy.
¡ Those more apt to use it are people who really care about something.
¡ Those leaders will show that they are doing more than just playing a role.
¡ People do not commit to executives who merely live up to the obligations of their jobs.
¡ They want someone who cares passionately about the people and the work—just as they do.
DARE TO BE DIFFERENT

¡ Another quality of inspirational leaders is that they capitalize on what’s unique about
themselves.
¡ In fact, using these differences to great advantage is the most important quality of the
four we’ve mentioned.
¡ Most people, however, are hesitant to communicate what’s unique about themselves, and
it can take years for them to be fully aware of what sets them apart.
¡ Some leaders know exactly how to take advantage of their differences.
LEADERSHIP IN ACTION

¡ All four of the qualities described here are necessary for inspirational leadership, but they
cannot be used mechanically.
¡ So the challenge facing prospective leaders is for them to be
themselves, but with more skill.
¡ That can be done by making yourself increasingly aware of the four leadership qualities we
describe and by manipulating these qualities to come up with a personal style that works
for you.
¡ Remember, there is no universal formula, and what’s needed will vary from context to
context.
UNRAVELING THE MYSTERY

¡ The four leadership qualities are a necessary first step.

¡ Taken together, they tell executives to be authentic.
¡ As we counsel the executives we coach: “Be yourselves—more—with skill.”
¡ There can be no advice more difficult to follow than that.
Discovering your
Authentic
Leadership
How can people become and
remain authentic leaders?
u Their leadership emerged from their life stories, they constantly
tested themselves through real world experiences to understand
their core.
u Observe your life stories not as passive observers but as individual
who can develop self awareness from these experiences
u Authentic leaders practice self awareness through their values and
principles
u Requires a commitment to developing yourself (realizing your
potential like athletes and musicians do)
u Take responsibility for developing yourself
When 75 members of Stanford
Graduate School of Business’s Advisory
Council were asked to recommend the
most important capability for leaders to
develop, their answer was nearly
unanimous: SELF AWARENESS
Practicing your values and
principles
u Values are derived from your beliefs and convictions
u Leadership principles are values translated into action.
Eg: a value such as concern for others
Balancing your Intrinsic and Extrinsic
motivations
u Two types of motivations
u Intrinsic Motivations are derived from the sense of meaning of life
and are closely linked to life story
u Extrinsic motivation is measured against outside world’s parameters
like promotions and financial rewards
u Intrinsic motivations are more fulfillinf
Denial can be the
greatest hurdle that
leaders face in
becoming SELF-AWARE
Building you Support Team

u The team counsels in times of uncertainty

u Includes spouses, families, mentors, close friends and colleagues
u They build their networks over time, as the experiences, shared
histories and trust develops
u You tell your honest truth to them
Many leaders have
had a mentor who
changed their lives
Integrating your Life by Staying
Grounded
u Greatest challenge leaders face
u Balanced life – woek, family, community, and friends
u Authentic leaders have a steady and confident presence
u Integration takes discipline
u They are aware of the importance to stay grounded
Think of your life as a house.
Can you knock down the
walls between the rooms and
be the same person in each
of them?
Empowering people to lead

u They know that leadership is not about their success or loyal

subordinates following them – its about empowerment at all levels.
u To achieve superior long term results
Superior results over a
sustained period of time is
the ultimate mark of an
authentic leader
For authentic leaders, there are special rewards.
No individual achievement can equal the
pleasure of leading a group to achieve a worthy
goal. When you cross the finish line together, all
the pain and suffering you may have experienced
vanishes. Its replaced with a deep inner
satisfaction that you have empowered other and
made the world a better places. That’s the
challenge and fulfilment of authentic leadership.