were referred to as the “hardware” and “software” phases. Over the next five years, General Electric under the command of Welch would go through some extensive changes. In
September 1981, in an internal GE publication, Welch articulated the corporate strategy that each division would be number one or number two in their industry, and that GE would remain lean , agile and able to respond to changes in its environment. Welch’s early priorities would be extensive restructuring of General Electric’s infrastructure. Welch began selling those business in GE’s portfolio that faced no potential return in the future and retained and added some with the potential to be number one or number two in that industry. This could bring GE’s operation into economies of scale and then lock out the potential competitors. During the 80’s, GE had bought 338 businesses and product lines for $11.1 billion and sold 232 for $5.9 billion during the 1980s. Among his most noble feats was restructuring the company’s 350 businesses into twelve divisions of the company and reducing the management structure from twenty-nine levels to only six. By 1989, 12 out of 14 GE units were leading their markets both in the U.S. and abroad. His first years were also marked by “destaffing”, or reduction of the workforce . He did this by removing unnecessary layers of middle management and laying off thousands of employees. By 1984, he had reduced the workforce by almost 100,000 in order to streamline the company and to increase efficiency. Each year he would terminate the bottom 10% of his managers. However, he would reward the top 20% with bonuses and stock options . At the end of 1980, GE had 411,000 employees and by the end of 1985, GE had 299,000 employees By the late 80s, Welch was confident that that hardware part of his restructuring was almost complete so he wanted to begin focusing on the software phase. Welch admitted his priorities were changing, “A company can boost productivity by restructuring , removing bureaucracy and downsizing , but it cannot sustain high productivity without cultural change.” Welch’s approach for this phase focused on three main areas. These areas of focus would include goal setting and competition, empowering employees , and increasing corporate communication . An underlying theme for Jack Welch’s tenure as CEO of GE was his use of goal setting to motivate higher levels of achievement throughout the company. Welch set companywide goals, as well as specific performance objectives for individual companies and divisions. He often supplemented his goal setting by creating a sense of competition within the organization, as well as against all competitors.
Welch preached a philosophy he called “planful opportunism,” whereby GE employees were given an over-reaching stretch-goal and permitted to do whatever it took to reach the target. Welch used this same technique in an effort to improve product quality. This led Welch to introduce GE to Six Sigma, a defect reduction program . Six Sigma is a process, which consists of the rigorous application of statistical tools to improve profits, reduce costs and improve speed . It begins by asking hard questions regarding level of defects, time required to perform operations, and customer expectations. It is a
You've reached the end of your free preview.
Want to read all 25 pages?
- Spring '17
- Dr. Chris Rose
- Jack Welch