Based on 5 articles and i give, use your own words to answer 5questions below ( each one atleast 100words).(you can just point out the point or write full sentence but only use information in my sources, no outside in internet, and paraphrase any information carefully, it will be turn it in check online)1. In the article “ National Cultures and Work-Related Values” Name and describe the 4 dimensions Hofstede identified of national culture.2.In regards to the Wendy Peterson Case, analyze the relationship between Wendy Peterson and Fred Wu. Diagnose to what degree cultural factors played a role.3. In regards to the Wendy Peterson Case, what should Wendy do about Fred’s request for an assistant (you MUST provide justification for your answer. Responses like “So he doesn’t leave” will NOT be acceptable)4.According to the article “Seven Communication Mistakes Managers Make” by Robbins (2009).List the 7 major communication mistakes managers make5. In the article “Leading Change”, Explain the eight steps for leading change delineated by John Kotter then evaluate the change process that occurred at GE during Jack Welch’s reign in the article “GE’s Two-decade transformation” – did he apply each and every step effectively?
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REV: MAY 3, 2005
CHRISTOPHER A. BARTLETT
MEG WOZNY
GE’s Two-Decade Transformation: Jack Welch’s
Leadership
On September 7, 2001, Jack Welch stepped down as CEO of General Electric. The sense of pride he
felt about the company’s performance during the previous two decades seemed justified judging by
the many accolades GE was receiving. For the third consecutive year, it had not only been named
Fortune’s “Most Admired Company in the United States,” but also Financial Times’ “Most Admired
Company in the World.” And, on the eve of his retirement, Fortune had named Welch “Manager of
the Century” in recognition of his personal contribution to GE’s outstanding 20 year record.
Yet while the mood at GE’s 2001 annual meeting had clearly been upbeat, some shareholders
wondered whether anyone could sustain the blistering pace of change and growth characteristic of
the Welch era. And specifically, many worried if any successor could generate the 23% per annum
total shareholder return Welch had delivered in his two decades leading GE. It would be a tough act
to follow. (See Exhibit 1 for financial summary of Welch’s era at GE.)
The GE Heritage
Founded in 1878 by Thomas Edison, General Electric grew from its early focus on the generation,
distribution, and use of electric power to become, a hundred years later, one of the world’s leading
diversified industrial companies. A century later, in addition to its core businesses in power
generation, household appliances, and lighting, the company was also engaged in businesses as
diverse as aircraft engines, medical systems, and diesel locomotives.
Long regarded as a bellwether of American management practices, GE was constantly undergoing
change. In the 1930s, it was a model of the era’s highly centralized, tightly controlled corporate form.
By the 1950s, GE had delegated responsibility to hundreds of department managers, leading a trend
towards greater decentralization. But a subsequent period of “profitless growth” in the 1960s caused
the company to strengthen its corporate staffs and develop sophisticated strategic planning systems.
Again, GE found itself at the leading edge of management practice.
When Reg Jones, Welch’s predecessor, became CEO in 1973, he inherited the company that had
just completed a major reorganization. Overlaying its 10 groups, 46 divisions, and 190 departments
________________________________________________________________________________________________________________
Research Associate Meg Wozny prepared this case under the supervision of Professor Christopher A. Bartlett. HBS cases are developed solely as
the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management.
Copyright © 1999 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
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399-150
GE’s Two-Decade Transformation: Jack Welch’s Leadership
were 43 strategic business units designed to support the strategic planning that was so central to GE’s
management process. Jones raised strategic planning to an art form, and GE again became the
benchmark for hundreds of companies that imitated its SBU-based structure and its sophisticated
planning processes. Soon, however, Jones was unable to keep up with reviewing and approving the
massive volumes of information generated by 43 strategic plans. Explaining that “the review burden
had to be carried on more shoulders,” in 1977 he capped GE’s departments, divisions, groups, and
SBUs with a new organizational layer of “sectors,” representing macrobusiness agglomerations such
as consumer products, power systems, or technical products.
In addition to his focus on strategic planning, Jones spent a great deal of time on government
relations, becoming the country’s leading business statesman. During the 1970s, he was voted CEO of
the Year three times by his peers, with one leading business journal dubbing him CEO of the Decade
in 1979. When he retired in 1981, The Wall Street Journal proclaimed Jones a “management legend,”
adding that by handing the reins to Welch, GE had “replaced a legend with a live wire.”
Welch’s Early Priorities: GE’s Restructuring
When the 45-year-old Welch became CEO in April 1981, the U.S. economy was in a recession.
High interest rates and a strong dollar exacerbated the problem, resulting in the country’s highest
unemployment rates since the Depression. To leverage performance in GE’s diverse portfolio of
businesses, the new CEO challenged each to be “better than the best” and set in motion a series of
changes that were to radically restructure the company over the next five years.
#1 or #2: Fix, Sell, or Close
Soon after taking charge, Welch set the standard for each business to become the #1 or #2
competitor in its industry—or to disengage. Asked whether this simple notion represented GE’s
strategy, Welch responded, “You can’t set an overall theme or a single strategy for a corporation as
broad as GE.” By 1983, however, Welch had elaborated this general “#1 or #2” objective into a “three
circle concept” of his vision for GE. (See Exhibit 2.) Businesses were categorized as core (with the
priority of “reinvesting in productivity and quality”), high-technology (challenged to “stay on the
leading edge” by investing in R&D), and services (required to “add outstanding people and make
contiguous acquisitions”). To a question about what he hoped to build at GE, Welch replied:
A decade from now, I would like General Electric to be perceived as a unique, highspirited, entrepreneurial enterprise . . . the most profitable, highly diversified company on
earth, with world quality leadership in every one of its product lines.1
But as GE managers struggled to build #1 or #2 positions in a recessionary environment and
under attack from global—often Japanese—competitors, Welch’s admonition to “fix, sell, or close”
uncompetitive businesses frequently led to the latter options. Scores of businesses were sold,
including central air-conditioning, housewares, coal mining, and, eventually, even GE’s well-known
consumer electronics business. Between 1981 and 1990, GE freed up over $11 billion of capital by
selling off more than 200 businesses, which had accounted for 25% of 1980 sales. In that same time
frame, the company made over 370 acquisitions, investing more than $21 billion in such major
purchases as Westinghouse’s lighting business, Employers Reinsurance, RCA, Kidder Peabody, and
Thomson/CGR, the French medical imaging company. (See Exhibit 3.)
2
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GE’s Two-Decade Transformation: Jack Welch’s Leadership
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Internally, Welch’s insistence that GE become more “lean and agile” resulted in a highly
disciplined destaffing process aimed at all large headquarters groups, including a highly symbolic
50% reduction in the 200-person strategic planning staff. Welch described his motivation:
We don’t need the questioners and checkers, the nitpickers who bog down the process. . . .
Today, each staff person has to ask, “How do I add value? How do I make people on the line
more effective and competitive?”2
As he continued to chip away at bureaucracy, Welch next scrapped GE’s laborious strategic
planning system—and with it, the remaining corporate planning staff. He replaced it with “real time
planning” built around a five-page strategy playbook, which Welch and his 14 key business heads
discussed in shirtsleeves sessions “unencumbered by staff.” Each business’s playbook provided
simple one-page answers to five questions concerning current market dynamics, the competitors’ key
recent activities, the GE business response, the greatest competitive threat over the next three years,
and the GE business’s planned response.
The budgeting process was equally radically redefined. Rather than documenting internally
focused comparisons with past performance, results were now evaluated against external
competitively based criteria: Do sales show increases in market share, for example? Do margins
indicate a cost advantage compared with competition?
In 1985, Welch eliminated the sector level, previously the powerful center of strategic control. (See
Exhibits 4a and 4b.) By reducing the number of hierarchical levels from nine to as few as four, Welch
ensured that all businesses reported directly to him. He said:
We used to have department managers, sector managers, subsector managers, unit
managers, supervisors. We’re driving those titles out… We used to go from the CEO to sectors
to groups to businesses. Now we go from the CEO to businesses. There is nothing else. Zero.3
Through downsizing, destaffing, and delayering, GE eliminated 59,290 salaried and 64,160 hourly
positions between 1981 and 1988; divestiture eliminated an additional 122,700. Even when offset by
the acquisitions, the number of employees at GE declined from 404,000 in 1980 to 330,000 by 1984 and
292,000 by 1989. Between 1981 and 1985, revenues increased modestly from $27.2 billion to $29.2
billion, but operating profits rose dramatically from $1.6 billion to $2.4 billion. This set the base for
strong increases in both sales and earnings in the second half of the decade (see Exhibit 5).
This drastic restructuring in the early- and mid-1980s earned Welch the nickname “Neutron Jack,”
a term that gained currency even among GE managers when the CEO replaced 12 of his 14 business
heads in August 1986. Welch’s new “varsity team” consisted of managers with a strong commitment
to the new management values, a willingness to break with the old GE culture, and most of all, an
ability to take charge and bring about change. Despite his great dislike for a nickname he felt he did
not deserve, Welch kept pushing the organization for more change. The further into the restructuring
he got, the more convinced he became of the need for bold action:
For me, the idea is to shun the incremental and go for the leap… How does an institution
know when the pace is about right? I hope you won’t think I’m being melodramatic if I say
that the institution ought to stretch itself, ought to reach, to the point where it almost comes
unglued… Remember the theory that a manager should have no more than 6 or 7 direct
reports? I say the right number is closer to 10 or 15.4
3
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GE’s Two-Decade Transformation: Jack Welch’s Leadership
The Late 1980s: Second Stage of the Rocket
By the late 1980s, most of GE’s business restructuring was complete, but the organization was still
reeling from culture shock and management exhaustion. Welch was as eager as anyone in GE to
move past the “Neutron-Jack” stage and begin rebuilding the company on its more solid foundations.
The “Software” Initiatives: Work-Out and Best Practices
Years after launching GE’s massive restructuring effort, Welch concluded, “By mid-1988 the
hardware was basically in place. We liked our businesses. Now it was time to focus on the
organization’s software.” He also acknowledged that his priorities were shifting: “A company can
boost productivity by restructuring, removing bureaucracy and downsizing, but it cannot sustain
high productivity without cultural change.”
In 1989, Welch articulated the management style he hoped to make GE’s norm—an approach
based on openness, candor, and facing reality. Simultaneously, he refined the core elements of the
organizational culture he wanted to create—one characterized by speed, simplicity, and selfconfidence.a Over the next few years, he launched two closely linked initiatives—dubbed Work-Out
and Best Practices—aimed at creating the desired culture and management approach.
In late 1988, during one of Welch’s regular visits to teach in the company’s Management
Development Institute, he engaged a group of GE managers in a particularly outspoken session about
the difficulty they were having implementing change back at their operations. In a subsequent
discussion with James Baughman, GE’s director of management development, Welch wondered how
to replicate this type of honest, energetic interaction throughout the company. His objective was to
create the culture of a small company—a place where all felt engaged and everyone had voice.
Together, they developed the idea of a forum where employees could not only speak their minds
about how their business might be run more effectively, but also get immediate responses to their
ideas and proposals. By the time their helicopter touched down at GE’s headquarters, Welch and
Baughman had sketched out a major change initiative they called “Work-Out”—a process designed
to get unnecessary bureaucratic work out of the system while providing a forum in which employees
and their bosses could work out new ways of dealing with each other.
At Welch’s request, Baughman formed a small implementation team and, with the help of two
dozen outside consultants, led the company-wide program rollout. Assigned to one of GE’s
businesses, each consultant facilitated a series of off-site meetings patterned after the open-forum
style of New England town meetings. Groups of 40 to 100 employees were invited to share views
about their business and how it might be improved. The three-day sessions usually began with a talk
by the unit boss, who presented a challenge and a broad agenda. Then, the boss was asked to leave,
allowing employees aided by facilitators to list their problems, debate solutions, and prepare
presentations. On the final day, the bosses returned and were asked to listen to their employees’
analyses and recommendations. The rules of the process required managers to make instant, on-the-
a Interestingly, Welch’s first attempts at articulating and communicating GE’s new cultural values were awkward.
For
example, in 1986 he defined 10 desirable cultural “attitudes and policies” which few in GE could remember, let alone practice.
Furthermore, he communicated his new organizational model as the GE Business Engine, a concept that many found
depersonalizing since it seemed to depict people as inputs into a financial machine. Gradually, Welch became more
comfortable articulating cultural values which he continued to refine into what he termed “GE’s social architecture.”
Eventually his concept of The Business Engine evolved to become The Human Engine.
4
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GE’s Two-Decade Transformation: Jack Welch’s Leadership
399-150
spot decisions about each proposal, in front of everyone to 80% of proposals. If the manager needed
more information, he or she had to charter a team to get it by an agreed-upon decision date.
Armand Lauzon, a manager at a GE Aircraft Engine factory, described to Fortune how he felt as
his employees presented him with their suggestions in a room where they had carefully arranged the
seating so his boss was behind him. “I was wringing wet within half an hour,” he said. “They had 108
proposals; I had about a minute to say yes or no to each one. And I couldn’t make eye contact with
my boss without turning around, which would show everyone in the room I was chickenshit.” In
total, Lauzon supported all but eight of the 108 proposals.
By mid-1992, over 200,000 GE employees—over two-thirds of the workforce—had participated in
Work-Out, although the exact number was hard to determine, since Welch insisted that none of the
meetings be documented. “You’re just going to end up with more bureaucracy,” he said. What was
clear, however, was that productivity increases, which had been growing at an average annual rate of
2% between 1981 and 1987, doubled to a 4% annual rate between 1988 and 1992. b
As Work-Out was getting started, Welch’s relentless pursuit of ideas to increase productivity
resulted in the birth of a related movement called Best Practices. In the summer of 1988, Welch gave
Michael Frazier of GE’s Business Development department a simple challenge: How can we learn
from other companies that are achieving higher productivity growth than GE? Frazier selected nine
companies, including Ford, Hewlett Packard, Xerox, and Toshiba, with different best practices to
study. In addition to specific tools and practices, Frazier’s team also identified several characteristics
common to the successful companies: they focused more on developing effective processes than
controlling individual activities; customer satisfaction was their main gauge of performance; they
treated their suppliers as partners; and they emphasized the need for a constant stream of highquality new products designed for efficient manufacturing.
On reviewing Frazier’s report, Welch became an instant convert and committed to a major new
training program to introduce Best Practices thinking throughout the organization, integrating it into
the ongoing agenda of Work-Out teams. As a result of the Best Practices program, many GE
managers began to realize they were managing and measuring the wrong things. (Said one, “We
should have focused more on how things get done than on just what got done.”) Subsequently, several
units began radically revising their whole work approach. For example, the head of the corporate
audit staff explained: “When I started 10 years ago, the first thing I did was count the $5,000 in the
petty cash box. Today, we look at the $5 million in inventory on the floor, searching for process
improvements that will bring it down.”
Going Global
During the early- and mid-1980s, internationalization had remained a back-burner issue at GE,
but strong advocates of globalization such as Paolo Fresco, the Italian-born president of GE Europe,
understood why Welch had to concentrate his early efforts on the rationalization of the U.S.
operations. “It’s very difficult to jump into the world arena if you don’t have a solid base at home,”
said Fresco, “but once the solid base was created, we really took the jump.”
The first rumblings of the emerging globalization priority came in Welch’s challenges to his
Corporate Executive Council meetings during 1986. Reflecting his own early experience in GE
b In GE, productivity was defined by the following calculation: Productivity = Real Revenue (net of price increases)/Real Costs
(net of inflationary increases).
5
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