GE’S Two-Decade Transformation

1.How difficult a challenge did Welch face in 1981? How effectively did he take charge?

When Jack Welch assumed as CEO of GE in April 1981, he had the challenge of revitalizing the competitiveness and productive competency of the company. In 1981 the economy was in a recession and high unemployment combined with high interest rates exacerbated GE’s problems. GE needed to be restructured and this entailed the modernization and streamlining of operations, downsizing the organization, reduction of payrolls and stringent efficiency measures.

Welch Early Priorities: GE’s Restructuring

1 or 2: Fix, Sell or Close

Each business needed to be 1 or 2 competitor in industry. It had to be a broad strategy because it was a broad corporation.

Circle Vision: 
Services (acquisition), 
Technology (leading edge), Core (re-invest in productivity)
Support, Outside, Ventures.

Internally wanted company “lean and agile,” chip away bureaucracy example laborious strategic planning system or budgeting process (targeted towards competitors), reducing hierarchical levels from 9 to 4 ensured all business reported directly to him

Downsizing, de-staffing, de-layering 123,000 staff cut, operating profits rose dramatically, and set base for strong increase in sales and earnings for second half of decade (exhibit 5)

Replace 12 of 14 business heads, called “Varsity Team,” all strong commitment to new management values, and willingness to break old culture, and ability to take charge and bring change.

2.What was Welch’s objective in the series of initiatives he launched in the late 1980’s and early 1990’s? What was he trying to achieve in the round of changes he put in motion in that period? Is there a logic or rationale supporting the change process?

In the late 1980’s GE’s restructuring was complete. But still culture shock and