The Most Pivotal Organizational Change of the 20th Century “Jack Welch the Man With the Plan”

By: Schavalia A. Holmes

HR587, Professor: M. Luckett

TABLE OF CONTENTS

PAGE
INTRODUCTION 3
JACK WELCH BECOMES GE’s CEO 4-5
JACK WELCH ON GLOBALIZATION 5
JACK WELCH, LEADER, HIS MANAGEMENT STYLE REVEALED 5-7
JACK WELCH OUTLOOK ON WHAT MAKES A GOOD LEADER 7-11
JACK WELCH METHODOLOGY INCORPORATES KELLER’S MANAGING ORGANIZATIONAL
CHANGE COURSE TCO’S ……………………………………………………………………………………………………12-13

JACK WELCH BEST CEO (MANAGER) EVER, OR IS HE THE “GRINCH WHO STOLE MASSIVE
EMPLOYEES LIVELIHOODS? 14-16

CONCLUSION 16-17
BIBLIOGRAPHY 18

INTRODUCTION
How do you take a company through restructuring and enable it to sustain the change and make it one of the largest multinational corporations in the world? Well, John F. Welch Jr. (Jack Welch) succeeded in doing just that. Welch climbed the corporate ladder and became Chief Executive Officer (CEO) of GE. Jack Welch (Welch) used integration techniques, well developed strategies, and made many acquisitions, while selling off or closing down its less productive companies and divisions. His task was to reinvent GE’s culture and change business operation by converting managers into leaders. He empowered his employees, gave them special rewards, devised training programs and opened the door for employees to acquire stock options. Welch’s mission was to transform the GE organization into a “boundary-less company that will become No. 1 or No. 2 in their market. Welch made GE an intense global competitor, but lagged in the e-commerce world. In the 20 years that Welch was CEO of GE, the company had grown from $26.8 billion in 1980, to a $66 billion-strong portfolio upon his retirement. Welch also experience many set-backs that he had to overcome. Welch has several nicknames; including the nickname “Neutron Jack.” Welch has been featured in all business magazines and news papers. Welch was one of the most “Controversial—and praised—bosses in the American Industry. Not everyone was happy with Welch’s decisions; many jobs were lost. Welch’s methodology was his own and he employed many of Keller’s Managing Organizational Change course TCO’s. Is Jack Welch the best CEO of all times and/or could he be best coined as the “Grinch” who stole massive employee’s livelihoods? Jack Welch Becomes GE’s CEO
April 1, 1981 was a special day in the business world, for that was the day that Jack Welch was promoted to the top position at GE, yes, Welch was appointed as GE’s CEO. Welch took his position very seriously, and was ready to put his vision for GE into play. When Welch was an employee for GE he felt there was too much bureaucracy. So, when Welch unleashed his master plan, the first decision he made was the dismantling of the company’s bureaucracy. GE’s administration was huge; it was built around 300 separate businesses. Welch felt GE’s administration was inefficient, and he decided to change the corporate structure. Within four years he had overseen 120,000 layoffs. This action is how he earned the nickname “Neutron Jack” because he eliminated people, leaving the business and equipment intact. Welch dismantled or sold off businesses that were not first or second in their field. The business community looked at Welch’s methodology as controversial, but billions of dollars was made, or saved through sales and layoffs. Welch put these funds to work in a fast competitive motion. He reinvested the money to acquire businesses that he felt would be a good fit into the GE’s organization. Welch bought RCA and merged it with GE; he wanted to keep the Japanese competition from making RCA one of their acquisitions. Welch wanted to maintain integrity of the American manufacturing in those fields. Less than three years RCA workforce was cut down to half, and RCA had to say bye-bye to its radio network, which was created virtually since radio was born. A couple of years later, only the National Broadcasting Corporation (NBC) television network and RCA’s defense business remained integral (Advameg, Inc, 2011). Ten years after Welch took the helm as CEO, GE’s annual growth rate increased to over 8%, profits in the same period, had grown by 11% a year, from $1.5 billion to $4.3 billion (Economist, 91).
JACK WELCH ON GLOBALIZATION
“Welch greatest foreign growth markets are Europe, and Asia. In Europe, GE revenues grew by 42 percent per year from 1994 to 1996—and almost tripled profits. As of 1996, there was an $18 billion “European GE,” In Asia where there was double-digit growth, there was an $18 billion “Asian GE,” making it a sizable player in the fastest growing market in the world. Welch hoped to reach $20 to $25 billion in sales in Europe by the year 2000, producing between $2 to $2.5 billion in net profits (Slater, 2010)“

JACK WELCH, LEADER, HIS MANAGEMENT STYLE REVEALED
Welch’s past work experience at GE, gave him insight to what he sought to change about the GE’s organization. Welch introduced a fresh innovative organizational leadership style to GE. Welch did not like the term manager he preferred to use the term leader. So, all of the managers he appointed were leaders, and their objectives were to mentor, train, and guide the employees, while allowing them to have a voice and to retain their creativity. Welch was based in Fairfield, Connecticut, throughout his tenure at GE. Welch wanted to see how motivated his staff was so he devised a ranking system that put employees in one of three categories; top 20 percent were "stars," the middle 70 percent were the crucial majority and the bottom 10 percent were weeded out. Welch was dedicated in getting rid of the weakest links in the GE organization (Stanley, 2005). This style of leadership is similar to the beliefs of Rensis Likert’s management style. In his theory, he suggests that, supervisors that produce high results, clearly define the company’s objectives to the employees, and what needs to be accomplished, and then give them freedom to do the job' (Hersey, 2001).” Welch implemented a policy of differentiation; this policy separated who wished to be stars of the organization to be placed into the high producing supervisor position. The stars would be placed assist the majority group to reassure that the organizational objectives would be met with positive results.
Under this model (policy of differentiation), it would be easier to manage an organization more effectively. Welch’s policy of differentiation was controversial within the GE’s organization and the business community. Welch wanted his managers to do what school teachers have always done with children: “evaluate people.” Welch asked the question “Why should people stop being evaluated at age 23 or 24?” “It makes no sense to me.” “It’s the best system I know to be fair to people.” “It’s not a perfect system.” “You can have politics and friendships, but it's the best I know (Stanley, 2005)." Welch gained high recognition for his accomplishments at GE, due to the fact that he completely embraced the rule that a leader’s must make tough and unpopular decisions when the situation calls for such actions (Hersey, 2001). Welch considered it necessary to weed out the 10 percent of the workforce that simply was underperforming, thus being more of a non-productive liability to GE than an asset. Educated, well trained leaders and employees are the back-bone to an organization, because they are responsible for assisting the organization with accomplishing their objective and goals. This is why Welch focused his efforts on acquiring trained and educated staff to pave the road to successful organizational ventures. Welch changed the GE environment and made training and learning the cornerstones for growth (Hersey, 223), ("How Jack Welch runs GE", 1998). Welch believes in the hands on method to grooming his future leaders. He follows the methodology that he sets for his leader’s, to evaluate whom you think could move up through the ranks. Welch called his visits to educational institutes “Workout” they were modeled on the “Traditional New England—style town meeting. He made over 300 “Workout” visits (Reference for Business Encyclopedia of Business, 2nd ed.)
JACK WELCH’S OUTLOOK ON WHAT MAKES A GOOD LEADER
According to Welch, leaders must possess distinct behaviors and attitudes, which may come naturally to an individual in some cases, but many do not possess these virtues. Most people have difficulties adapting to the mindset that is required to be a leader. Before one can become a leader, an individual success rate is determined by their inner self assessment and growth. Leadership success is measured by the growing of others, for that is the main objective for a leader. A leader can be quiet or charismatic, and including the other entire personal characteristics in between. Welch don’t prescribe one way of acting, he believes that an effective leader tend to embrace eight “rules.” Welch believes that it is imperative for a leader to know what a leader responsibility is.
Welch believes that Leaders do several things to be successful including but not limited to the following:
1. Leaders relentlessly upgrade their team, using every encounter as an opportunity to evaluate, coach, and build self-confidence.
2. Leaders make sure people not only see the vision -- they live and breathe it.
3. Leaders get into everyone’s skin, exuding positive energy and optimism.
4. Leaders establish trust with candor, transparency, and credit.
5. Leaders have the courage to make unpopular decisions and gut calls.
6. Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
7. Leaders inspire risk-taking and learning by setting the example.
8. Leaders celebrate.
According to Welch “We look at the practice of leadership from four angles: What Makes a Leader, Leading People, Organizational Structure, and Tough Spots.” “In each of these sections, the advice may cover a wide swath, but the rules reverberate (Welch, 2007)
Welch created a 4-E model in which, is his framework for building winning teams. The 4-E model from 1-4 are as follows as Welch stated them:
The first E: Positive Energy
“This characteristic means the ability to thrive on action and relish change. People with positive energy are generally extroverted and optimistic. They make conversation and friends easily. They start the day with enthusiasm and usually end it that way too, rarely seeming to tire in the middle. They don't complain about working hard; they love to work.
They also love to play. People with positive energy just love life.”

The second E: The ability to Energize others
“Positive energy is the ability to get other people revved up. People who energize can inspire their team to take on the impossible -- and enjoy the hell out of doing it. In fact, people would arm wrestle for the chance to work with them. Now, energizing others is not just about giving Patton-esque speeches. It takes a deep knowledge of your business and strong persuasion skills to make a case that will galvanize others.”
The third E: Edge, the courage to make tough decisions
“Look, the world is filled with gray. Anyone can look at an issue from every different angle. Some smart people can—and will—analyze angles indefinitely. But effective people know when to stop assessing and make a tough call, even without total information.” “Little is worse than a manager at any level who can't cut bait, the type that always says, "Bring it back in a month and we'll take a good, hard look at it again," or that awful type that says yes to you, but then someone else comes into the room and changes his mind. We called these wishy-washy types "last-one-out-the-door bosses."
“Some of the smartest people that I've hired over the years—many of them from consulting—had real difficulty with edge, especially when they were put into operations. In every situation they always saw too many options, which inhibited them from taking action. That indecisiveness kept their organizations in limbo. In the end, for several of them, that was a fatal flaw.”

The fourth E: Execution, the ability to get the job done
Maybe this fourth E seems obvious, but for a few years, there were just the first three Es. Thinking these traits were more than sufficient, we evaluated hundreds of people and labeled a slew of them "high-potentials," and moved many of them into managerial roles.
“In that period, I traveled to personnel review sessions in the field with GE's head of HR, Bill Conaty. At the review sessions, we would refer to a single page that had each manager's photo on it, along with his or her boss's performance review and three circles, one for each E we were using at the time. Each one of these Es would be colored in to represent how well the individual was doing. For instance, a person could have half a circle of Energy, a full circle of Energize, and a quarter circle of Edge.”
“Then one Friday night after a week-long trip to our Midwestern businesses, Bill and I were flying back to headquarters looking over page after page of high-potentials with three solidly colored-in circles. Bill turned to me. "You know, Jack, we're missing something," he said. "We have all these great people, but some of their results stink." “What was missing was Execution.”
“It turns out you can have positive energy, energize everyone around you, make hard calls, and still not get over the finish line. Being able to execute is a special and distinct skill. It means a person knows how to put decisions into action and push them forward to completion, through resistance, chaos, or unexpected obstacles. People who can execute know that winning is about results.”

The final P: Passion
“If a candidate has the four Es, then you look for that final P: passion. By passion, I mean a heartfelt, deep, and authentic excitement about work. People with passion care—really care in their bones—about colleagues, employees and friends winning. They love to learn and grow, and they get a huge kick when the people around them do the same.”
“The funny thing about people with passion, though, is that they aren't excited just about work. They tend to be passionate about everything. They're sports nuts or they're fanatical supporters of their alma mater or they're political junkies.”
“Whatever -- they just have juice for life in their veins (Welch, The 4Es: Traits That Get You Hired And Promoted). Although the 4-E’s were created by Welch, they do embrace other theories, approaches and models.”
In an interview Jack Welch and his advice to grads: "Don't be a jerk"
His advice for the graduating students was sharp. Success in business is based on "a bunch of lucky calls," Welch said. "Clapping, cheering, meeting, talking and laughing—that's what you're going to have to do in business. You're going to clap for every achievement, no matter how small, with everybody around you. That's your job. It's a helluva lot more important than some finite strategy."
He doesn't like to deliver speeches on commencement days or class days, he said, because he doesn't think the occasions should be about "imparting great wisdom."
"What I would tell every student in this place is that you've been here for a couple of years, and you know when you've been a jackass and when you've been smart, and when you've been right and when you've liked what you did," Welch said.
"Remember when you're a jackass. Remember the things you did that you wished you didn't do. Look yourself in the mirror in the morning and leave all those things behind you. Leave all the stuff that you know didn't work. And take all the great stuff you learned here and take all the good parts—because rarely do you get a clean slate. ...
"Your basic role in life is take all the good stuff, don't be a jerk, and get on with it.”
"I always say that the distance between the horse's brain and the backside of the horse is a pretty short distance, and it's very important that you know when you were at the back of the horse—and don't take it with you as you go forward," Welch added.”
"Not very profound. It's pretty simple (Lagace, 2001)."
JACK WELCH METHODOLOGY INCORPORATES KELLER’S MANAGING ORGANIZATIONAL CHANGE COURSE (TCO’s)
Welch images of change were mostly intended he is a man that leaves very little to chance. There are six images of managing change and Welch incorporated each and every one of them into his managing of change at GE. He managed as a director with his “star” program, he weeded out the employees with less potential, making the performance outcome better and better-aligned in his organizational vision. Welch managed as navigator stressing to his leaders about the external influence while teaching them about the internal process of being a leader, in doing this Welch covered managing as a caretaker. As I stated before Welch was a hands on CEO/Manager, he coached his leaders in lectors and taking them step—by—step of what it takes to be a leader grooming them as an interpreter. Welch is also seen as a nurturer, but it was hit or miss in this image. For if you strived for excellence, you would be nurtured, if not your life would be chaos and soon you would be weeded out (Palmer I, 2009). Welch believed that the environment warranted some of his decisions, and the decline in the market is why Welch dismantled some of GE companies and departments. I found information on such pressures in Chapter 3 of my course textbook (Palmer, 2009).
Welch used many diagnostic models he employed the “star” model to weed out his less productive employees, this is discussed in Chapter 5 of my course textbook (Palmer, 2009). Welch is a true businessman he incorporated many strategies, images, approaches and theories from the business arena. He was a master in organizational change and he changed everything about GE; from its high level bureaucracy, underperforming divisions, departments and companies, employee/leaders mindsets, to rewarding his employees in ways they had never seen. So, Welch did utilize some if not all of Kottler’s eight approaches to managing change (Palmer, 2009). Welch although he incorporated many other theories, approaches, and strategies he always made them his own by adding a little of Welch’s special business recipes into his methodology pot.

JACK WELCH BEST CEO (MANAGER) EVER OR IS HE THE GRINCH WHO STOLE MASSIVE EMPLOYEES LIVELIHOODS
I worked for GE briefly; I left the company because of the change to my department. I was a product/sales person; the change split the department in two leaving me just a product specialist, I lost making commission. I was low on the totem pole as far as seniority and people that were placed in sales had at least five years of experience.
Welch layoff practice exceeded one company layoffs to this date. The ironic part is that he wanted GE to be No. 1 or No. 2 in the market. He did not build the company up to accomplish that, he only kept departments and companies that were already No. 1 and No. 2 in their fields (Reference for Business Encyclopedia of Business, 2nd ed.), but he did make an astounding presence in the global market. “The characterization of the waves as hard or soft refers to the means Welch employed. In the hard waves, the lives of the employees are physically disrupted by mass dismissals, divestments, acquisitions and major organizational changes. In the soft waves, the minds and habits of the employees are disturbed, because they must absorb new ways of operation and new working practices. Physical disruption is minimal, except for those who cannot cope with the new company environment (Abetti, 2006).”
Welch did give positive reinforcement to his employees for good ideas, hard work, and for just being able to be an employee that he did not have to weed out. His employees were subjected to bonuses, promotions and stock options.
The executive was GE's legendary John F. “Jack ” Welch Jr., who last year took home a pay package worth $21.4 million. The union man was AFL-CIO investments director William Patterson.
“You have been awarded by the Board of Directors, along with your base pay package, 320,000 stock options,” Patterson told the chief executive officer at the April 23 meeting in Charlotte, N.C. “And this is on top of 2.2 million unexercised options. My question to you is, do these options motivate you to bring more ideas, commit more value and more time to the growth of the company?” Welch replied by explaining how all GE employees are motivated by owning stock options in their own company, and how under his tenure, the number of employees who've been awarded options has grown from a couple of hundred “fat cat” executives to 22,000 workers. “I get the most stock options because I happen to be lucky enough to have the top job,” he said.
“Do [the stock options] motivate you, Mr. Chairman?” Patterson pressed.
“Absolutely,” Welch said to laughter and applause.
“Why stop at 320,000 shares? Why not double that? You would be more motivated.”
“I think that is a good suggestion for the board,” Welch said to more laughter. “They are all here.”
Such exchanges are becoming more and more common in corporate America following the annual springtime announcement of the latest, often mind-boggling executive paychecks. And though GE shareholders rejected a proposal from the Teamsters union to curb executive pay, the proposal garnered 9 percent of the vote, which union activists hailed as a sign that executive-pay critics are making headway (Clark, 1997).
I really cannot judge whether or not if he was the best CEO/Manger ever or the “Grinch that stole livelihoods, because I am not an expert in business or economics but in my opinion I think he was both.
Conclusion
In conclusion Jack Welch was hired as CEO of GE in 1981, he implemented change like a mad scientist. His strategies was straight forward take no prisoner style he performed extensive S.W.O.T. analysis, because Welch was well informed to his internal strengths and weaknesses and his external opportunities and threats, in the American market as well as the global market. He empowered his employees by allowing them to keep their voice, creativity, gave them opportunity to be a “star, “promotion opportunity, and stock options. He was a hands-on manager/leader, and he advised his other managers to be leaders. He defined to them what he thought a leader should do and how they should lead in language that had only one way to be interpreted. Most of Welch’s decisions were considered controversial, especially the decision to layoff so many individuals from his employment. Welch’s Methodology was his own, but he incorporated approaches, theories, and images from others, that are taught in Keller’s Managing Organizational Change course. Was Welch the best CEO in business history? Well he was named just that in several journals, magazines, business reviews, newspapers and schools. Businesses incorporated his business model into their organizations. So, I guess the answer to that question is yes. Was Welch the “Grinch” who stole GE’s and affiliates livelihoods? Welch layoffs affected over 150,000 individuals. So, I guess the answer to that question is also yes.

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