GE’s Two-Decade Transformation: Jack Welch’s Leadership

Brief Summary

One of the greatest and most effective business leaders of all time was Jack Welch, Chief Executive Officer (CEO) of General Electric (GE). Over his 20 years as CEO, he established himself as one of the most admired business leaders in the world. His initiatives of Six Sigma, globalization, and e-business have defined the modern corporation. He relied on boundaryless organization erasing group labels such as “management,” “salaried,” or “hourly,” which he thought only got in the way of people working together. He had an intense focus on people. Jack Welch led with integrity and had a true passion for GE. With Welch’s retirement approaching fast, GE found itself asking the question, “Where do we go from here?”

The Issue at Hand

In September 2001, Welch resigned his seat as CEO of General Electric. The company’s performance during his tenure was astonishing. Looking back, he took great pride in the accomplishments of the company. For the third consecutive year, GE had been named Fortune’s “Most Admired Company in the United States” and Financial Times’ “Most Admired Company in the World.” For his personal contribution to GE’s exceptional 20 year record, Welch was named Fortune’s “Manager of the Century” on the eve of his retirement. Many wondered how GE would replace such a leader. Specifically, many worried if any successor could keep up and/or sustain the successful, rapid pace of change and growth typical of the Welch era. In his two decades leading GE, Welch had delivered a 23% annum total shareholder return. It would be a tough act to follow.

The Alternatives

There are several answers to the question “Where do we go from here?” GE could hire a “Superstar” CEO from outside the company in an effort to maintain shareholder confidence. The company could run the organization by committee. The committee would be made up of a group of top executives within the organization that helped lead the company during the Welch era. In other words, GE could put together a committee of leaders whom have already bought into Welch’s management philosophies. Finally, GE could promote a single leader from within.

The best alternative would be to promote a leader from within. Welch’s successor should work diligently on maintaining customer and shareholder confidence. There are four main areas of development that should be managed carefully.

* The business portfolio. GE should continue to reposition itself to maximize growth opportunities and achieve growth targets through solid acquisitions just as Welch had done throughout his tenure. GE should look to divest in at least some of the low-growth parts of its portfolio.

* Technology. Jack Welch saw this arena as GE’s “greatest opportunity yet.” GE should continue to explore its potential in the internet market place. This will be a major driver in GE’s growth. The R&D center should focus here.

* Internationalization. GE should continue to seek opportunities in its overseas operations particularly in the fast-growing arenas of China, India, and Europe.

* Marketing and customer service. GE should continue its tradition of building relationships with its customers and working closely on their problems.

Will Welch’s successor have the ability to take GE to the next level? Only time will tell.