Case 1 GE s Two Decade Transformation Essay

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GE’S TWO DECADE TRANSFORMATION: JACK WELCH’S LEADERSHIP 1. How difficult a challenge did Welch face in 1981? How effectively did he take charge? When Reg Jones retired and Jack Welch became GE’s CEO in 1981, the country was facing a major recession, with high inflation and unemployment rates, reminiscent of those 50 years earlier during the Great Depression. Thousands of businesses were failing, not only affected by the national economic conditions but also due to increased competition from other countries such as Japan. At the time, GE was highly structured, with numerous management layers and several macro businesses. The company followed very orthodox practices, with 43 different strategic…show more content…
Welch’s rationale was to focus on leveraging, growing and investing on those businesses who were competitive and profitable, releasing the rest. Some claim that Welch had no mercy in this initial portfolio management” stage, closing down businesses that were unprofitable and had little potential of turnaround. However, he believed that this emphasis on effectively managing the company’s portfolio would make better use of the company’s capital for appropriate investments. During the mid-1980s, GE went global by making significant pushes into Europe and Japan. In the late 1980s, he turned hierarchy upside down, pioneering a program known as Work Out where employees would tell their bosses their suggestions to make the company better. This challenged employees and management to discover creative ways to streamline the organization, simplifying work and removing unnecessary processes. Ultimately, in 1995, Welch initiated GE’s Six Sigma initiative to eliminate the common cause variation found in business and work processes. Still a part of GE’s strategy 20 years later, Six Sigma is a “highly disciplined process that helps focus on developing and delivering near-perfect products and services”. In other words, the idea behind it is to measure how many "defects" there are in a process in order to figure out how to

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