Welch Early Priorities: GE’s Restructuring

1981 Economy in recession, high unemployment, high interest rates… company needed restructuring

1 or 2: Fix, Sell or Close

Welch each business needed to be 1 or 2 competitor in industry… had to be broad strategy because it was a broad corporation.

3 Circle Vision:
Services (acquisitions, note 370 exhibit 3),
Technology (leading edge),
Core (re-invest in productivity)
Support, Outside, Ventures (exhibit 2)

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… Bold Action

Late 80’s: Second Stage of Rocket

- Restructuring complete, but still culture shock and management exhaustion… needed more solid foundations
- “Software” Initiatives: Work-out and best practices: software changes = cultural changed (too sustain high productivity)
- Norm to be an approach based on openness, candor and facing reality
- Core elements to be speed, simplicity, and self confidence
- 2 initiatives, Work-out and Best Practices

Workout
- Create a culture of small company
- Forum where employees could not only speak their mind, but get immediate response
- Designed a process ride of unnecessary bureaucratic work out of system
- 24 outside consultants, company-wide program
- Style New England town meetings, three days, bosses out of room, but then