Study of Jack Welch of General Electric

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Study of Jack Welch of General Electric

For this assignment, we were required to write a paper, which relates our leanings of Organizational Behavior to a current event or business of some form. After doing a wealth of research and reading many of my fortune and business week magazines, I decided that I wanted to incorporate something along the lines of leadership and organizational structure. Due to the current events of September 11, these are very important for all businesses and individuals to take in to consideration. I choose to write about one of our world leaders in the business world with an emphasis on Jack Welch. I plan to discuss how he stresses the importance of Organizational Behavior and how he has used it throughout his career as the CEO of GM, one of our worlds leading industries.

Throughout business history, industries have frequently undergone radical change in response to innovation, new thinking, or other dramatic challenges. These challenges have provided the catalyst for leaders to look closely at the ways their businesses have been conducted, the assumptions and beliefs upon which they have based their actions and decisions, and how they lead their organizations. Welch had done a superb job of embracing the challenges that he was faced with.

Organizational life cycle models assume that an organization goes through inception to growth, maturity and decline or redevelopment. (Gupta, Yash P; Chin, David CW, Dec 1994) In each stage of the organization life cycle, the strategic leadership would be different because the software and hardware resources inside the organization are different in each stage. I will take three different companies existing in different organization life cycle stages to analyze the implication of organization life cycle for strategic leadership of CEO.

When Jack Welch took office in April 1981 as the new chairman and chief executive officer of General Electric, the company had entered the stage between the maturity and decline. In 1980 right before Welch took the position, GE's organizational rigid structure, resistance to change and bureaucratic climate make it impossible to perceive important environmental changes. Moreover, the organizational structure, decision-making process and information management procedures no longer fit the organization's needs. Welch responded to the board's mandate and acted to revive the organization from the decline stage into the earlier stage of the organization life cycle. He collected GE's resources to focus on its key businesses, adjusted the organization structure and planning process to stay lean and agile, and most important, created an atmosphere, a culture where concepts like agility, excellence, and entrepreneurship are coming to life.

The motivation behind Welch's strategic leadership to take aggressive actions to transform GE could be from his strong commitment to a paradigm that earned him the job and the high task interest from the challenge of the uncertainty. Similar to most new CEOs, Welch wanted his philosophy and ideas to reach and stay at each corner of the company and he realized that he could not attain this goal without taking intense transformation. Moreover, this reengineering could help him solidify and enhance his power, which could be aided by the passage of time, to facilitate the transformation of the company. This process would generally take a long time to achieve.

GE is one of the largest and most diversified industrial corporations in the world. The Company's products include lamps and other lighting products, major home appliances, industrial automation products and components, motors, electrical distribution and control equipment, locomotives, power generation and delivery products, nuclear reactors, nuclear power support services and fuel assemblies, aircraft jet engines, plastics and a wide variety of high-technology products, including products used in medical diagnostic applications.

In general, in 1981 the industry environment where GE was involved was a declining one. The main problem in a declining industry is that falling demand for products lead to the emergence of excess capacity. (Charles W.L. Hill, Gareth R. Jones, 1988) In trying to use this capacity, GE began to cut prices, thus sparking a price war and diminishing the profit. After taking the position, Welch sold out those business in GE's portfolio that faced no potential return in the future industry and retained and added some with the potential to be number one or number two in that industry. In other words, Welch took GE out of the declining industry and put it in the growth one. In these two stages of the industry life cycle, the company has a major opportunity to capitalize and expand its capacity on the lack of rivalry and build a strong hold on the market. (Charles W.L. Hill, Gareth R. Jones, 1988) Welch changed the financial system and concentrated the organization's capital to expand the capacity for those potential business units. This could bring GE's operation into economic of scale and then lock out the potential competitors. Moreover, this strategy could help the company prepare for the shakeout stage of industry life cycle, which has intense competition. . (Charles W.L. Hill, Gareth R. Jones, 1988)

Jack Welch is known to be an icon in today's business world. He has set the standard to which many Fortune 500 companies are being benchmarked against in today's competitive market. Although he has been characterized as "not fitting the corporate stereotype" and not being "conventional," General Electric has seen their price earnings go from 7 to 16 and their value go from 326 to 498 under his direction. Obviously, he is doing something right!
Before reading these articles, I knew little about Jack Welch besides his position in society. I was amazed at what I learned through the assigned reading. He is definitely a person that "thinks out of the box" and insists that his people do the same. He believes in constructive conflict and forces managers to defend their views. Mr. Welch came up with a very specific vision to "be the most profitable, highly diversified company on earth with world quality leadership in every production line" and would accept nothing short of this. He also set the goal to be number one or two in every business that the company was in, and disengage from those where this was not possible.


1. How Jack Welch runs GE, A Close-up Look at How America's #1 Manager Runs GE,
Business Week archive online

2. General Electric, 1984, Harvard Business Review, March 24, 1993.

3. The seasons of a CEO's tenure, Donald C. Hambrick, Gregory D. S. Fukutomi, Columbia University, 1991.

4. An interview, with Jack Welch Chairman and CEO of General Electric on 21st century leadership. 2001, Dr, Lary Seen of Senn-Denally consulting group

5. Organization life cycle: A review and proposed directions, Fupta, Yash P; Chin, David CW, The Mid-Atlantic Journal of Business; South Orange; Dec 1994.

6. External Analysis: The Identification of Industry Opportunities and Threats, Charles W. L. Hill; Gareth R. Jones, Strategic Management Theory: An Integrated Approach, 1998.

7. The Anderson School at UCLA
LA Times Columnist Reports on Welch's Address to Anderson. Fortune ... Speaker Series: Nov. 14, 2001 Featuring Jack Welch Retired Chairman and CEO General ...

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