leadership - jack welch (ge transformation)
TRANSCRIPT
“Before you are a leader, success is all about growing yourself.When you become a leader, success is all about growing others.”
~ Jack Welch
Manoj Bhargava
The Art of Leadership
William Muir’s Chicken Experiment
EXAMPLES OF DIFFERENT TYPES OF LEADERSHIP
EXAMPLES OF DIFFERENT TYPES OF LEADERSHIP
GE’S TWO-DECADE TRANSFORMATION: JACK WELCH'S LEADERSHIP Founded in 1878 by Thomas Edison General Electric is one of the world’s leading diversified industrial companies. GE’s
primary business divisions include: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Capital and Digital
GE underwent many changes prior to Jack Welch Leadership, In 1930 it was considered as highly centralized, tightly controlled corporate form.
1950’s to greater extent GE decentralized its hundreds of departments 1960 was the duration when profitless growth become the concern and caused the
company to strengthen its staff and corporate strategy During 1970 and 80’s Reg Jones raised strategic planning to an art form and made GE
the benchmark for hundred of companies In 1981 Jack Welch’s performance and earnings record ultimately won him the position
over six other candidates. Even though he had no formal master plan for GE's reorganization, he did have a vision of what he wanted the company to be.
Welch: Leadership StyleVision: Build a market-leading company
• Lead more, Manage Less• Motivating Employees• Constantly identifying other leaders
at GE• Aggressive Leadership• Communication• Charismatic• Stayed visible at GE• Succession Planning
Jack Welch was born in Peabody, Massachusetts America's most recognized and controversial chief executives Qualified chemical engineer Began his career in a junior position at General Electric During his 41 years at General Electric (GE) Welch rose from his
position as an entry-level junior engineer to become the company's youngest vice president and later its youngest CEO and chairman
Make company more lean and agile
GE’s employee strength declined from 404,000 in 1980 to 2,92,00 by 1989
Revenues increased modestly through this downsizing but profits increased considerably
Welch built a new team of managers who innovative, committed to target & company values & were ready to take the responsibility
Destaffing
Welch set the standard for each business to become the #1 or #2 competitor in its industry - or to disengage
This management practice helped GE to free up of over 11billion of capital by selling around 200 business between 1981-1990 but at the same time they also acquired 370 business by investing over 21 billion to some major purchases
#1 Or #2: Fix, Sell, Or Close
Real Time Planning
• Welch developed a five page playbook for each business
Re-structuring
of budgeting
process
• Welch wanted his managers to compare sales figure with respect to market share & competitive cost advantage of operating margins
Work -Out
• A forum through which employees can share their honest, energetic & innovative ideas
• This eventually led to a considerable increase in the growth rate of GE
Best Practices
• Identify the tool and practices adopted by successful companies and implement the same
• This policy ended up in making employees realize that they should focus on how things got done than just what got done
GOING GLOBAL
Welch Challenged his manager to focus towards evaluation of "#1 or #2" concept on world market position.
GE started acquiring numerous international business Every economic downturn was seen as a fresh opportunity to acquire new business.
By 1998 international revenues were 42.8billion, just double the value 5 years back.
Globalisation lead to generation of global revenues which were growing at 3 times more than domestic sales rate
The compensation package was made more rewarding through stock option allocation
Welch increased number of such allocation from 300 to 3000
REWARDING COMPENSATION PACKAGE
Use of session c in Welch's style
Top most executives were asked to identify the future leaders, outline training and development plan etc
This policy helped managers across GE to develop their staff & understand their coaching needs
Developing Leaders
IDENTIFYING AND ELIMINATE RANK4 MANAGERS Welch ranked managers into 4 categories Category 1: Delivered on commitment and shared company value Category 2: Failed on commitment and failed on sharing company value Category 3: Failed on commitment but shared company value category 4: Delivered on commitment but failed on sharing company value Welch devised a mechanism to evaluate managers not only on the basis of some quantifiable targets but also to the extent to which they lived GE values.
This practice was used by other managers to rank their employees & identify their coaching needs & if coaching failed, they were eliminated.
Eventually this practice evolved into a 360 degree feedback process
Concept of stretch was introduced
Managers not only had to hit the basic target, set depending upon current situation but also during the budgetary cycle targets were increased
ACHIEVING THE IMPOSSIBLE
An environment where people would learn & share ideas irrespective of the geographical boundary, class of employee or line of business
GE now rewarded its employees not only for idea creation but also for idea sharing & idea seeking
Boundaryless Behaviour
ADD VALUE TO PRODUCTS-SERVICE BUSINESS Concept of in-site was introduced. GE through some automation technologies started producing on line monitoring &diagnostic support to its products like MRI SCANNER,JET ENGINES & many more.
Welch stressed on the fact that their service business can grow only by making their customer’s business more profitable through innovative service supports.
By 1996 GE had developed 8 billion service based business which was growing much faster than their underlying product business
The service business finally started contributing for two thirds of GE’s revenue
FOCUS ON QUALITY IMPLEMENTATION OF SIX SIGMA Analysis showed that GE was losing 8-10 billion a year in efficiencies and lost
productivity Objective behind six sigma-improved quality, lower cost & increased
productivity Six sigma was launched describing it as “biggest opportunity for growth” Six sigma was made mandatory for all employees Massive training programme were introduced & employee were categorized
into green belt, Black belt and master Black belt in six sigma quality Implementation of six sigma helped GE to significantly increase the
operating life of many of its products and further give the company unexpected return of 750 million over an investment of 500 million for implementation of six sigma
A programme entitled by Welch as destroyyourbusiness.com was launched
Fundamental support for E-business – strong brands, top product reliability, great fulfilment capability and excellence service quality
Launch of E-Business
Welch wanted only “A Players” with 4 “E’s” in GE4 “E’s” – energy ability to energies others edge & executionNew appraisal system was launched - every manager was required to rate their employees into one of five categories based on their long time performances> > Top 10%-1s>> Strong 15% - 2s>> Most Valued 50% - 3s>> Borderline 15% - 4s>> Least effective 10% -5s
“A players” with 4”E’s”
THANK YOU!!
“Leaders must be close enough to relate others, but far enough ahead to motivate them.”
~ John C Maxwell