General Electric: From Jack Welch To Jeffrey Immelt

S w 908M09 GENERAL ELECTRIC FROM JACK WELCH TO JEFFREY IMMELT Ken Mark wrote this case under the lapse of Professor Stewart Thornhill solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may wear disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal with break by means of its written license. Reproduction of this material is not covered under authorization by any reproduction declines organization.To indian lodge copies or request permission to reproduce materials, cont deport Ivey Publishing, Ivey Management Services, c/o Richard Ivey tutor of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7 phone (519) 661-3208 fax (519) 661-3882 e-mail emailprotected uwo. ca. Copyright 2008, Ivey Management Services Version (A) 2008-0 4-18 knowledge qualifiedness superior general voltaic (GE) was a U. S. conglomerate with taskes in a capacious range of industries, including aerospace, power systems, health cargon, commercial finance and consumer finance. In 2007, GE pull in US$22. billion in net profit from US$170 billion in sales. In 2008, GE expected to generate US$30 billion in cash from operations. Driving GEs stand upth was what some(prenominal) another(prenominal) commentators considered to be the deepest bench of executive talent in U. S. business,1 the expiry of two decades of investment in its management training programs by its former chief executive souricer ( chief executive officer), fanny F. ( cocksucker) Welch, Jr. The flow CEO, Jeffrey Immelt, took over from mariner Welch four days before September 11, 2001, and had spent the last few years preparing the firm for its next stage of begetth. GENERAL ELECTRICGEs roots could be traced back to a Menlo Park, New Jersey laboratory where Th omas Alva Edison invented the in sack updes penny electric lamp. GE was founded when Thomson-Houston Electric and Edison General Electric merged in 1892. Its first few products included light bulbs, motors, elevators, and toasters. Growing organic all in ally and by means of acquisitions, GEs revenues reached $27 billion in 1981. By 2007, its businesses sold a replete(p) variety of products such as lighting, industrial equipment and vehicles, materials, and improvements such as the generation and transmission of electricity, and as placed finance.Its di piles included GE Industrial, GE Infrastructure, GE Healthcare, GE Commercial Finance, GE Consumer Finance, and NBC Universal. 2 1 Diane Brady, jacks Welch Management Evangelist, Business Week, October 25, 2004. Available http//www. businessweek. com/magazine/content/04_43/b3905032_mz072. htm, accessed November 12, 2007. 2 http//en. wikipedia. org/wiki/General_Electric, accessed November 12, 2007. at page 2 9B08M009 For to a g reater extent than 125 years, GE was a go oner in management practices, establishing its strength with the disciplined oversight of some of the worlds well-nigh effective business masses. 3 When he became chairman and CEO in 1972, Reginald Jones was the seventh man to lead General Electric since Edison. Jones foc put ond on shifting the bon tons attention to growth areas such as services, transportation, materials and natural resources, and a counselling from electrical equipment and appliances. He implemented the concept of strategic planning at GE, creating 43 strategic business units to oversee strategic planning for its groups, divisions and departments. By 1977, in order to manage the information generated by 43 strategic plans, Jones added another management layer, sectors, on top of the strategic business units.Sectors represented high level groupings of businesses consumer products, power systems, and technical products. 4 In the 1970s, Jones was voted CEO of the Year th ree times by his peers, with one leading business journal dubbing him CEO of the Decade in 1979. When he retired in 1981, the Wall lane Journal proclaimed Jones a management legend. Under Joness administration, the bon tons sales more than doubled ($10 billion to $27 billion) and earnings grew even faster ($572 one thousand thousand to $1. 7 billion). 5 seafarer Welch Becomes CEO In terms of his early working life, Welch hadWorked for GE not much more than a year when in 1961 he abruptly quit his $10,500 job as a junior locomotive engineer in Pittsfield, Mass. He felt stifled by the companys bureaucracy, underappreciated by his boss, and offended by the civil service-style $1,000 raise he was given. Welch wanted out, and to get out he had accepted a job offer from world-wide Minerals & Chemicals in Skokie, Ill. But Reuben Gutoff, then a young executive a layer up from Welch, had other ideas. He had been impressed by the young spic-and-span-fashioned and was shocked to hear o f his impending departure and farewell party just two days away.Desperate to keep him, Gutoff coaxed Welch and his wife, Carolyn, out to dinner that night. For four straight hours at the Yellow Aster in Pittsfield, he made his pitch Gutoff swore he would prevent Welch from world entangled in GE red tape and vowed to wee for him a small-company surroundings with rangy-company resources. These were themes that would later dominate Welchs suffer thinking as CEO. 6 In his memoirs, Welch noted that the CEOs job was close to 75 per cent about wad and 25 per cent about other stuff. 7But Welch knew that his path to generate CEO of GE was anything exactly smooth. As he recalled 3 General Electric, Our History Our Company. Available at http//www. ge. com/company/history/index. html, accessed June 4, 2007. 4 Christopher A. Bartlett and jillion Wozny, GEs Two-Decade Transformation Jack Welchs Leadership, Harvard Business School Case, May 3, 2005, pp. 12. 5 Christopher A. Bartlett and Meg Wozny, GEs Two-Decade Transformation Jack Welchs Leadership, Harvard Business School Case, May 3, 2005, p. 2. 6 John A.Byrne, How Jack Welch Runs GE, Business Week, June 8, 1998. Available at http//www. businessweek. com/1998/23/b3581001. htm, accessed June 4, 2007. 7 Jack Welch, heterosexual from the Gut, Warner Books, New York, 2001, p. xii. Page 3 9B08M009 The odds were against me. Many of my peers regarded me as the forget me drug peg in a square hole, too different for GE. I was brutally honest and outspoken. I was impatient and, to many, abrasive. My behavior wasnt the norm, especially the browse parties at local bars to celebrate business victories, large or small. 8For Welch, thither was a seven-person horse race to become CEO that was, in his words, brutal, heterogeneous by heavy politics and big egos, my witness included. It was awful. 9 In the end, however, Welch prevailed, decorous CEO in April 1981. Later, he learned that he had been left off the short list of candidates until late into the process. Welch recalled I didnt know that when the list was narrowed to ten names by 1975, I still wasnt on it. . . . One official HR human resources view of me stated at the time Not on best candidate list despite past operational victory.Emerging issue is overwhelming results focus. Intimidating subordinate relationships. Seeds of company stewardship concerns. Present business adversity will severely test. Watching closely. 10 1981 to 1987 Number One or Number Two and Delayering Welch wanted the company to do away with its formal reporting structure and unnecessary bureaucracy. He wanted to recreate the firm on the lines of the nimble plastics organization he had come from. He stated I knew the benefits of staying small, even as GE was getting bigger. The good businesses had to be sorted out from the bad ones. . . We had to act faster and get the damn bureaucracy out of the way. 11 Welch catched this schema based on work by bastard Drucker, a m anagement thinker, who asked If you werent already in the business, would you enter it today? And if the answer is no, what are you going to do about it? 12 Welch communicated his restructuring efforts by press that any GE business be the number one or number two business in its indus decide, or be fixed, sold or closed. He illustrated this concept with the use of a three-circle tool.The businesses inside the three circles services, high technology, and core could attain (or had attained) top positions in their industries. The selected few included many service businesses, such as financial and information systems. Outside of the three circles were organizations in manufacturing-heavy sectors facing a high degree of competition from lower cost rivals, such as central air conditioning, housewares, small appliances and semiconductors. Employment at GE fell from 404,000 in 1980 to 330,000 by 1984 and 292,000 by 1989.The switchs prompted strong reactions from former employees and co mmunity attractions. Welch was the shoot for of and criticism when he invested nearly $75 trillion into a major upgrade of Crotonville, GEs management discoverment center. 13 Welch proverb lead training as key to GEs growth. 8 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. xii. ibidem p. xiii. 10 Ibid, p. 77. 11 Ibid, p. 92. 12 Ibid, p. 108. 13 Ibid, p. 121. 9 Page 4 9B08M009 In addition, Welch undertook a streamlining exercise.By his estimate, GE in 1980 had too many layers of management, in some cases as many as 12 levels in the midst of the factory floor and the CEOs office. The sector level was removed, and a massive downsizing effort put into place. Compared with the traditional norm of five to octonary direct reports per manager, GE senior managers had 15 or more direct reports. Successful senior managers shrugged off their workload, indicating that Welch liberated them to behave corresponding entrepreneurs. They argued that the extra ram ramp d them to set strict priorities on how they spent their time, and to abandon many past procedures.Observers believed GE was running two principal(prenominal) risks having inadequate cozy intercourse fiddleween senior managers and people who now reported to each of them and the overwork, stress, demotivation and in readiness on the part of managers down the line who had extra work assigned by their hard put superiors. In 1989, an article in the Harvard Business Review reported much bitter internal frustration and ill-feeling among the troops at GE. 14 During this period, Welch earned his Neutron Jack moniker, a reference to a type of bomb that would kill people while leaving buildings intact.On the other hand, Welch could see that changes had to be made to make GE more competitive. He recalled Truth was, we were the first big healthy and productive company in the mainstream that took actions to get more competitive. . . . There was no stage set for us. We looked too good, too s trong, too profitable, to be restructuring. . . . However, we were facing our own reality. In 1980, the U. S. thrift was in a break. Inflation was rampant. Oil sold for $30 a barrel, and some predicted it would go to $100 if we could even get it.And the Japanese, benefiting from a weak yen and good technology, were increasing their exports into many of our mainstream businesses from cars to consumer electronics. 15 But Welchs strategy was not simply a cost-reduction effort from 1981 to 1987, while 200 businesses were sold, 370 were acquired, for a net spend of $10 billion. The turmoil that these changes caused earned Welch the title of toughest boss in America, in a set magazine survey of the 10 most hard-nosed senior executives. In tallying the votes, Welch reliable twice as many nominations as the runners-up. Managers at GE used to hide out-of-favor employees from Welchs gun sights so they could keep their jobs, Fortune said. According to former employees, Welch conducts meeti ngs so aggressively that people tremble. 16 But Welchs credibility was bolstered by GEs stock performance After years of being stuck, GE stock and the food market began to counter off, reinforcing the idea that we were on the right track. For many years, stock options werent worth all that much. In 1981, when I became chairman, options gains for everyone at GE totaled only $6 million.The next year, they jumped to $38 million, and then $52 million in 1985. For the first time, people at GE were starting to feel good times in their pocketbooks. The buy-in had begun. 17 14 General Electric Learns the Corporate and Human Costs of Delayering, Financial Times, September 25, 1989, p. 44. Jack Welch, Straight from the Gut, Warner Books, New York, 2001, pp. 125126. 16 Fortune Survey Lists Nations Toughest Bosses, The Washington Post, July 19, 1984, p. B3. 17 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 173. 15 Page 5 9B08M009Late 1980s Work-Out, Boundaryless and Best Practices Welch used GEs Crotonville facility to upgrade the level of management skills and to instill a common corporate culture. After reading comments from participants, Welch realized that many of them were frustrated when they returned to their offices because many of their superiors had discounted the Crotonville experience and worked actively to maintain the status quo. Welch wondered Why cant we get the Crotonville dedicateness everywhere? . . . We have to re-create the Crotonville Pit a circular, tiered rile hall at Crotonville all over the company. . . The Crotonville Pit was working because people felt free to speak. While I was technically their boss, I had little or no impact on their personal careers especially in the lowerlevel classes. . . . Work-Out was patterned after the traditional New England town meetings. Groups of 40 to 100 employees were invested to share their views on the business and the bureaucracy that got in their way, particularly approvals, report s, meetings and measurements. Work-Out meant just what the words implied taking unnecessary work out of the system. 8 Work-Out sessions were held over two to three days. The groups manager would start the session with a presentation, after which the manager would leave the facility. Without their superior present, the remaining employees, with the serve up of a neutral facilitator, would list problems and conk out solutions for many of the challenges in the business. Then the manager returned, listening to employees present their many ideas for change. Managers were expected to make an immediate yes-or-no decision on 75 per cent of the ideas presented.Welch was blithe with Work-Out Work-Out had become a huge success. . . . Ideas were flowing faster all over the company. I was groping for a way to describe this, something that might capture the all told organization and take idea sharing to the next level. . . . I kept talking about all the boundaries that Work-Out was breaking down. Suddenly, the word boundaryless popped into my head. . . . The boundaryless company . . . would remove all the barriers among the functions engineering, manufacturing, marketing and the rest.It would recognize no distinction between domestic and foreign operations. . . . Boundaryless would also expand us up to the best ideas and practices from other companies. 19 Welchs relentless pursuit of ideas to increase productivity from both inside and outside of the company resulted in the birth of a related movement called Best Practices. In the summer of 1988, Welch gave Michael Frazier of GEs Business Development department a simple challenge How can we learn from other companies that are achieving higher productivity growth than GE?Frazier selected for study nine companies with different best practices, including Ford, Hewlett-Packard, Xerox and Toshiba. In addition to specific tools and practices, Fraziers team also identified several(prenominal) characteristics common to the successful companies they focused more on maturation effective processes than on controlling individual activities they used customer comfort as their main gauge of performance they treated their suppliers as partners and they emphasized the need for a never-ending stream of high- grapheme new products designed for efficient manufacturing.On palingenesising Fraziers report, Welch became an instant change and committed to a major new training program to introduce Best Practices thinking by dint ofout the organization, integrating it into the ongoing agenda of Work-Out teams. 20 18 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 182. Ibid, pp. 185187. 20 Christopher A. Bartlett and Meg Wozny, GEs Two-Decade Transformation Jack Welchs Leadership, Harvard Business School Case, May 3 2005, p. 5. 19 Page 6 9B08M009 To encourage employees to put extra effort into reaching their goals, Welch instituted the idea of stretch. He was frustrated with the compromise tha t was occurring as work teams tried and true to lower targets and top management tried to raise targets. With stretch, teams were asked to develop two plans the first reflecting what they expected to do and the second that reflected the toughest targets they thought they had a chance of reaching. Welch explained The team knows theyre going to be measured against the prior year and relative performance against competitors not against a highly negotiated internal number. Their stretch target keeps them reaching. . . sometimes we found cases where managers at lower levels took stretch numbers and called them budgets, punishing those who missed. I dont think it happens much anymore, but I wouldnt bet on it. 21 1990s Six Sigma and the Vitality Curve One well- cognize program popularized by GE was process improvement, or Six Sigma. As a result of GEs Best Practices program, Welch learned from Lawrence Bossidy, a former GE executive, how AlliedSignals Six Sigma quality program was improv ing quality, baleful costs and increasing productivity. Welch asked Gary Reiner, a vice-president, to lead a quality initiative for GE.On the basis of Reiners findings, Welch announced a goal of reaching Six Sigma quality levels company-wide by the year 2000, describing the program as the biggest opportunity for growth, increased profitability, and individual employee satisfaction in the history of our company. 22 Subsequently, every GE employee underwent at to the lowest degree minimal training in Six Sigma, whose terms and tools became part of the globose language of GE. For example, expressions like CTQ, were used to refer to customer requirements that were critical to quality in new products or services. 3 Whereas Six Sigma was focused on process improvement, to develop GEs talent pool, Welch looked to recognize his people. He remarked In manufacturing, we try to stamp out variance. With people, variance is everything. Welch knew that identifying and ranking people in a lar ge organization was not a simple task. GE began using what became known as 360-degree evaluations, in which managers and supervisors were evaluated by their subordinates and their peers as well as by their bosses. One exception was Welch. He did not get evaluated by his subordinates. Ive gain out, he said. Nor did he evaluate the top executives immediately below him. 24 Next, Welch put in place an sagaciousness based on a vim flex, roughly shaped like a bell curve. He asked his managers to rank all their staff into the top 20, the Vital 70 and the bottom 10, with the intent to force executives to differentiate their employees. The top 20 were groomed for larger assignments, and the bottom 10 were coached out of the organization. In addition, Welch advocated categorizing employees as A, B or C players.He explained that how both assessment tools worked together The vitality curve is the dynamic way we sort out As, Bs, and Cs. . . . Ranking employees on a 20-70-10 grid forces manag ers to make tough decisions. The vitality curve doesnt perfectly translate to my A-B-C evaluation of talent. Its possible even likely for A 21 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 386. Christopher A. Bartlett and Meg Wozny, GEs Two-Decade Transformation Jack Welchs Leadership, Harvard Business School Case, May 3, 2005, p. 12. 23Matt Murray, Can GE Find Another Conductor Like Jack Welch? The Wall Street Journal Europe, April 13, 2000. 24 Frank Swoboda, Up Against the Walls, The Washington Post, February 27, 1994, p. H01. 22 Page 7 9B08M009 players to be in the vital 70. Thats because not every A player has the ambition to go further in the organization. Yet, they still want to be the best at what they do. Managers who cant differentiate soon find themselves in the C category. 25 Welch reinforced the importance of the ranking system by matching it with an appropriate compensation structure.The A players received raises that were two to three times the increases given to Bs, and the As also received a significant portion of the stock option grants. C players received no raises or options. Welch admitted Dealing with the bottom 10 is tougher. . . . Some think its cruel or brutal to remove the bottom 10 per cent of our people. It isnt. Its just the opposite. What I think is brutal and false kindness is keeping people around who arent going to grow and prosper. Theres no cruelty like waiting and telling people late in their careers that they dont belong. 6 In GEs people review process, known as Session C, managers were expected to discuss and defend their choices and rankings. During these sessions, Welch was known to challenge his managers talent decisions aggressively, expecting them to defend their choices with passion. Welch was prone to making quick judgment calls on talent, and these snap decisions could be perceived both positively and negatively. An observer commented Welch is impetuous, inclined to make lightning strikes an d wage blitzkrieg.His decisions on people, assets, and strategies can be made in a heartbeat one bad review with Jack may be the end of a long career. And the record shows that many of Welchs snap decisions have turned out to be stupendous blunders. 27 One example was Welchs purchase of Kidder Peabody, then one of Wall Streets most prominent investment banks. Although his board of directors was opposed to the idea, Welchs persuasive arguments carried the day. But merging the two cultures proved more difficult than he imagined. Welch stated that at Kidder Peabody, the concept of idea sharing and team play was completely foreign.If you were in investment banking or trading and your group had a good year, it didnt takings what happened to the firm overall. 28 In addition, Kidder Peabody was hit by two public scandals insider trading and fictitious trades that led to a $350 million writedown. Another example was NBCs partnership with Vince McMahon in January 2001 to launch the XFL, an alternative football league to the NFL. After losing $35 million on the venture in four months, and accompanied by falling viewership, the league shut down in May 2001. 29 Some managers were emaciated down by the constantly evolving programs.A chemist who once worked for GE Power Systems stated Its management by buzzword. sight chant Jacks slogans without thinking intelligently about what theyre doing. Ive been stretched so much I feel like Gumby. All Welch understands is increasing profits. That, and getting rid of people, is what he considers a vision. Good people, tremendous people, have been let go, and it is bother our business. 25 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 160. Ibid, 2001, pp. 160162. 27 Thomas F. Boyle, At Any Cost, Vintage Books, New York, 1998, pp. 112. 28 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 222. 29 Eric Boehlert, Why the XFL Tanked. Available at http//archive. salon. com/ent/feature/2001/05/11/xf l_demise/index. html, accessed January 11, 2008. 26 Page 8 9B08M009 Im trying to meet the competition, but his policies arent helping me. Its crazy, and the craziness has got to stop. 30 Welch believed otherwise No one at GE loses a job because of a missed quarter, a missed year, or a mistake. Thats nonsense and everyone knows it. . . . People get second chances. 31 Over his tenure as CEO, Welch had grown GEs market capitalization by 27 times, from $18 billion to $500 billion. The company was trading 28 times forward earnings versus about 24 for the Standard & Poors 500. 32 See Exhibit 1 for selected GE information over 25 years. After two decades as GEs CEO, Welch retired, nominating Jeffrey Immelt as his successor. Immelt was one of three candidates short-listed for the job. Observers noted that Immelt was starting his tenure at the end of an unprecedented bull market and in the midst of a world(a) frugal slowdown. 33 Despite GEs consistent earnings growth even during the economi c downturn, GEs stock had fall 33 per cent from its high of about $60 per share in August 2000. Many attributed this steady drop to the anticipation surrounding Welchs departure. 34 Immelts first day on the job was September 7, 2001, four days before the terrorist attacks in the united States. The Transition from Welch to Jeffrey Immelt Immelt joined GE in 1982 and held several global lead positions in GEs Plastics, Appliance and Medical businesses. 5 At GE Medical, his last assignment before becoming CEO, Immelt became a star by persuading a growing number of cash-strapped hospitals to trade in their old-fashioned equipment for digital machines that were capable of generating more dynamic images much faster. He inked lucrative, long-term deals with such hospital giants as HCA and Premier, and bought a number of smaller companies to round out his product line, all the while growing GEs market share from 25 per cent to 34 per cent and moving the company into services such as data mining. 36Only the ninth man to lead GE since 1896, Immelt followed in the footsteps of his predecessors by abandoning the drawship approach favored by Welch. In contrast with Welchs need to control and cajole his management, Immelt was less a commander than a commanding presence. 37 If you, say, missed your numbers, you wouldnt leave a meeting with him feeling beat up but more like you let your dad down, said Peter Foss, a longtime friend and colleague of Immelts and president of GE Polymerland, part of GEs plastics business. 38 Immelt believed that leaders exhibited three traits 30 Thomas F.Boyle, At Any Cost Jack Welch, General Electric, and the Pursuit of Profit, Vintage Books, New York, 1998, p. 223. 31 Ibid, p. 274. 32 William Hanley, An mettle on GE as Jack Bows Out, National Post, August 23, 2001, p. D01. 33 Daniel Eisenberg and Julie Rawe, Jack Who? Time, September 10, 2001, p. 42. 34 Ibid. 35 Jeff Immelt, CEO. Available at http//www. ge. com/company/leadership/ceo. ht ml, accessed January 6, 2008. 36 Daniel Eisenberg and Julie Rawe, Jack Who? Time, September 10, 2001, p. 42. 37 Jerry Useem, Another Boss Another Revolution, Fortune, April 5, 2004, p. 112. 38Daniel Eisenberg and Julie Rawe, Jack Who? Time, September 10, 2001, p. 42. Page 9 9B08M009 Its curiosity. Its being good with people. And its having perseverance, hard work, thick skin. Those are the three traits that every successful person Ive ever known has in common. 39 Immelt aimed to exsert GEs transition from a low-margin manufacturer to a more lucrative services company. 40 During Welchs tenure, although revenues from services had grown from 15 per cent of revenues to 70 per cent, the majority of the revenues came from GE Capital (renamed GE Consumer Finance and GE Commercial Finance).In 2001, Immelt believed there was still room to grow services in many of its divisions, such as aircraft maintenance and monitoring contracts, and medical software and billing services. 41 There were differences in strategic approach as well. Whereas Welch had courted Wall Street by setting and hitting pinpoint earnings targets, Immelt gave the Streets short-term petitions a back seat to long-term strategy. Whereas Welch rapidly rotated managers through different divisions to develop generalists, Immelt wanted to keep them in place longer to develop specialists.Immelt explained I absolutely loathe the notion of professional management. Which is not an stock warrant of unprofessional management but a statement that, for instance, the best jet engines are built by jet-engine people, not by appliance people. Rotate managers too fast, moreover, and they wont experience the fallout from their mistakes nor will they invest in innovations that dont have an immediate payoff. 42 By 2007, Immelt had divested GE units representing 40 per cent of revenues.To grow $20 billion a year and more, new investments were made in areas where sizeable players had an advantage. Infrastructure and infrastructure technology, according to Immelt, was a $70 billion business that will grow 15 per cent a year for the next five years. Thats a business where small people need not apply. 43 In addition, Immelt was focused on growing revenues in emerging markets such as China, India, Turkey, Eastern Europe, Russia, and Latin America. Immelt believed that the international athletic field was where GEs future growth would comeIn 2007, for the first time in the history of GE, well have more revenue outside the United States that well have inside the United States. Our business outside the United States will grow between 15 per cent and 20 per cent next year. Were a $172 billion company. In 2008, with the U. S. economy growing at 1. 5 per cent, well grow revenue by 15 per cent because were in the right places with the right products at the right time. 44 39 David Lieberman, GE Chief Sees Growth Opportunities in 2008, USA Today, December 14, 2007, p. B1.Daniel Eisenberg and Julie Rawe, Ja ck Who? Time, September 10, 2001, p. 42. 41 Ibid. 42 Jerry Useem, Another Boss Another Revolution, Fortune, April 5, 2004, p. 112. 43 David Lieberman, GE Chief Sees Growth Opportunities in 2008, USA Today, December 14, 2007, p. B1. 44 Ibid. 40 Page 10 9B08M009 EXHIBIT 1 GE Selected Information from 1981 to 2008 ($ billions) Revenues Net Profit 1981 27. 2 1. 7 1986 36. 7 2. 5 1991 52. 3 2. 6 1996 79. 2 7. 3 2001 125. 9 14. 1 GE Stock Price 1975-2008 (Logarithmic, Adjusted for Dividends and Splits) 000 W elch announces retirement in 2001 Stock $9. 31 Jack Welch becomes CEO Stock $0. 65 Jeffrey Immelt becomes CEO Stock $32. 58 $ 100 Best Practices Delayering, Six Sigma Bought 370 businesses Sold 200 businesses 10 e-business Stretch 1 Work-Out Boundarylessness 1 or 2 ancestry Case writers. Stock information from finance. yahoo. com, accessed January 5, 2008. 1/2/2007 1/2/2005 1/2/2003 1/2/2001 1/2/1999 1/2/1997 1/2/1995 1/2/1993 1/2/1991 1/2/1989 1/2/1987 1/2/1985 1/2/1983 1/2/1981 1/ 2/1979 1/2/1977 1/2/1975 0. 1 2006 163. 4 20. 7General Electric From Jack Welch to Jeffrey ImmeltThe need for Jeffrey Immelt to develop into a level 5 leader is imperative for GE to continue to grow and prosper in the current economic conditions of global expansion and constant change. Immelt can also benefit GE by becoming a level 5 leader by cogitate on developing and empowering employee value and unalienable motivations rather than facilitating initiatives to carry out his own vision. By Immelt developing into a level 5 leader and creating an open and swear environment, he will empower employees to rebuild GEs infrastructure that can hold strong and prosper through the new and demanding global expansion.Jack Welch led the way that was current to him and what economic conditions valued at the time. He was successful by giving the company of GE a clear vision and opening up opportunities for employees to efficiently carry out his objectives. He gave stability to shareholders at a time of economic worry and more than doubled GEs market cap. Although his practices deemed profitable he did not build internal company infrastructure that would carry GE into the future. Instead he weakened internal relationships and did not empower employees to use their talents to embark on new and innovative projects.Immelt is faced with the challenge of getting the GE employees to develop a trust and open relationship that can grow GE into new markets and hold stable in a time of constant change. His humility and professional will create a new environment for GE that will be profitable from long-term investments, social responsibility, and employee empowerment. Immelt is already leading in his own authentic way by being people-oriented and concentrating on effectiveness rather than efficiency.If he can continue to stay true to his authentic set while developing them further into a level 5 leader, GE will manage to stay competitive in the new economic market. Although auth entic in his actions, Jack Welch had uprooted the GE internal infrastructure to become a number generating, cash focused conglomerate that did not serve the intrinsic need of GEs expert employees. GE seemed to be halcyon under Welchs reign with stock scathes continually rising and its market cap growing from $18 million to $500 billion. However there are more factors to a company that tell about its success than its cash generating enterprises.Many of the employees at GE felt worn down and stretched too far with their expectations being forced to drive success from extrinsic motivators and short-term returns. After thorough evaluation of the movement of CEOS from Jack Welch to Jeffrey Immelt, lays the total management problem of a change of company values led by a previous level 4 leader, Welch, to a level 5 leader, Immelt. The GE company needs to recognize and be led to the different values that Jeffrey Immelt believes in order to drive success under a new environment.Immelt i s focused more on long term strategic investments that will require invested energy and cooperation from his employees to finally reach the high numbers and stock price returns that come along with the change to a strong infrastructure. While Welch was CEO he inspired the GE company by providing them with the vision that GE was meant for big returns, rapid expansion, and continually expanding market caps. He proved he was a level 4 leader by being focused on efficiency, and committing to a clear vision that emotional higher performance standards.Everyone was aware of Welchs vision to act fast, push bureaucracy out of the way, and to generate numbers and cash. People who did not meet the results-delivered mind-set were let go and ideas that did not deliver immediate results were abandoned. This level 4 leadership did not allow for the employees of GE to develop and grow the intrinsic values of the company and themselves because they were too nervous and focused on delivering result s from small-risk projects. Welch did not focus on developing people or else he focused on developing numbers.For example, his vitality curve program cut the bottom 10% of employees and rewarded the top 20%. The Vitality Curve organized people into three categories based on their past performance and deliverables. Although Welch implemented a number of leadership development programs, they ironically did not focus on form leaders but borderline opportunities for profit-centered growth. The underlying problem was that the employees of GE were expected to carry out Welchs vision and return high profits to stockholders.It wasnt that Welch wasnt clear on his objectives or ways to complete objectives it was the fact that employees were focused on completing work to produce Welchs vision instead of using their own talents and ideas to grow the companys infrastructure that could endure future economic conditions. By Welch being a level 4 leader he facilitated employees to meet expectati ons in an efficient and demanding manner, which crushed innovation and employee self- fulfillment. According to Fortune Magazine Welch conducts meetings so aggressively that people tremble.Although this type of tough leadership produced high profits, it left employee satisfaction and infrastructure stability wounded. Welch was constantly implementing new projects and workshops that supported his vision and gave employees clearer objectives of his vision that produced results. Each time he implemented a new project GE stock prices rose but this was at a time where the environment GE was competing in was domestic and results driven, which didnt demand long term company infrastructure but rather thrived on short term high profits.Welch led the way the economy demanded, which led him to success and high numbers. Welchs methodology was based upon cost cutting, efficiency, and deal making which would deliver high, reliable profits. Welch led at a time of an economic recession with high u nemployment, high bear on rates, and domestic competition. The idea of developing society and GE employees was put aside to develop high profits, which gave stockholders a sense of reliableness and stability in a time of unknown and economic turmoil.This focus worked at the time, but would not continue to work in the current economy that holds new values and expectations. It is pivotal that Immelt become a level 5 leader that invests in long term, strong infrastructure to continue to be able grow, expand, and stay profitable. For Immelt to become a level 5 leader he must discard the idea that leaders must be the ones providing the direction or vision and instead alter the implementation of additional drivers, such as employees or opportunities, that will take GE from good to great.Immelt is leading at a time of economic global slowdown and increased global competition, which demands an infrastructure that can endure a change of markets and compete at a global level. Immelts respo nsibility isnt to have one vision that the entire company follows, but to inspire GE employees to evaluate their own visions that correspond to their intrinsic values and allow them to act upon them with trust and resources. To alter and inspire employees to re-create the GE infrastructure Immelt needs to pave the way for employees to re-build their trust with GE and himself by increasing their motivation through a more open environment.Immelt can act upon becoming a level 5 leader and making GE into a growth engine for the future by investing in leadership programs that focus on developing employees as leaders and allowing them to create their own vision through their own intrinsic values. Welchs leadership development programs focused on trimming the companys edges instead of developing them to pave the way for number growing opportunities and profit based endeavors. Immelt can have leadership programs that ask employees to evaluate what values they have for their work and what a re areas that can be improved to help them reach their goals.Immelt can also share his inspiration to facilitate external growth by moving markets into developing countries through risk taking, sophisticated marketing, and innovation. He can prove to employees that he wants them to embark on meaningful, long-term projects by notifying them that rotations will be removed to allow for specialists that are the most knowledgeable in their field, and therefore have the ability to produce the most effective long-term projects and returns.Immelt can teach the employees of GE of his values and leadership practices through company wide meetings, emails, or letters. He then needs to be mindful to follow through with his values to foster an open and trusting environment. Jeffery Immelt is leading as CEO in a time of worldwide growth and expansion that demands a different type of leadership style than the efficiency based style of Jack Welch in order for GE to stay profitable, and continue to b e a leader in the business market.In addition to ever-changing leadership styles in order to keep GE growing profits, Immelt has the opportunity to make GE employees jobs more meaningful and fulfilling by creating an open and trusting environment that will enable them to use their talents to carry out visions of their own that resonate with their intrinsic values. It is imperative that Immelt become a level 5 leader that will force GE to move from being a cash generator to a growth engine that will thrive in the current global expansion.General Electric From Jack Welch to Jeffrey ImmeltThe need for Jeffrey Immelt to develop into a level 5 leader is imperative for GE to continue to grow and prosper in the current economic conditions of global expansion and constant change. Immelt can also benefit GE by becoming a level 5 leader by focusing on developing and empowering employee values and intrinsic motivations rather than facilitating initiatives to carry out his own vision. By Immel t developing into a level 5 leader and creating an open and trusting environment, he will empower employees to rebuild GEs infrastructure that can hold strong and prosper through the new and demanding global expansion.Jack Welch led the way that was authentic to him and what economic conditions valued at the time. He was successful by giving the company of GE a clear vision and opening up opportunities for employees to efficiently carry out his objectives. He gave stability to shareholders at a time of economic worry and more than doubled GEs market cap. Although his practices deemed profitable he did not build internal company infrastructure that would carry GE into the future. Instead he weakened internal relationships and did not empower employees to use their talents to embark on new and innovative projects.Immelt is faced with the challenge of getting the GE employees to develop a trusting and open relationship that can grow GE into new markets and hold stable in a time of cons tant change. His humility and professional will create a new environment for GE that will be profitable from long-term investments, social responsibility, and employee empowerment. Immelt is already leading in his own authentic way by being people-oriented and concentrating on effectiveness rather than efficiency.If he can continue to stay true to his authentic values while developing them further into a level 5 leader, GE will manage to stay competitive in the new economic market. Although authentic in his actions, Jack Welch had uprooted the GE internal infrastructure to become a number generating, cash focused conglomerate that did not serve the intrinsic needs of GEs talented employees. GE seemed to be thriving under Welchs reign with stock prices continually rising and its market cap growing from $18 million to $500 billion. However there are more factors to a company that tell about its success than its cash generating enterprises.Many of the employees at GE felt worn down and stretched too far with their expectations being forced to drive success from extrinsic motivators and short-term returns. After thorough evaluation of the movement of CEOS from Jack Welch to Jeffrey Immelt, lays the fundamental management problem of a change of company values led by a previous level 4 leader, Welch, to a level 5 leader, Immelt. The GE company needs to recognize and be led to the different values that Jeffrey Immelt believes in order to drive success under a new environment.Immelt is focused more on long term strategic investments that will require invested energy and cooperation from his employees to finally reach the high numbers and stock price returns that come along with the change to a strong infrastructure. While Welch was CEO he inspired the GE company by providing them with the vision that GE was meant for big returns, rapid expansion, and continually expanding market caps. He proved he was a level 4 leader by being focused on efficiency, and committing to a clear vision that stimulated higher performance standards.Everyone was aware of Welchs vision to act fast, push bureaucracy out of the way, and to generate numbers and cash. People who did not meet the results-delivered mindset were let go and ideas that did not deliver immediate results were abandoned. This level 4 leadership did not allow for the employees of GE to develop and grow the intrinsic values of the company and themselves because they were too nervous and focused on delivering results from small-risk projects. Welch did not focus on developing people instead he focused on developing numbers.For example, his vitality curve program cut the bottom 10% of employees and rewarded the top 20%. The Vitality Curve organized people into three categories based on their past performance and deliverables. Although Welch implemented a number of leadership development programs, they ironically did not focus on molding leaders but molding opportunities for profit-centered growth. The underlying problem was that the employees of GE were expected to carry out Welchs vision and return high profits to stockholders.It wasnt that Welch wasnt clear on his objectives or ways to complete objectives it was the fact that employees were focused on completing work to produce Welchs vision instead of using their own talents and ideas to grow the companys infrastructure that could endure future economic conditions. By Welch being a level 4 leader he facilitated employees to meet expectations in an efficient and demanding manner, which crushed innovation and employee self- fulfillment. According to Fortune Magazine Welch conducts meetings so aggressively that people tremble.Although this type of tough leadership produced high profits, it left employee satisfaction and infrastructure stability wounded. Welch was constantly implementing new projects and workshops that supported his vision and gave employees clearer objectives of his vision that produced results. Each time he impl emented a new project GE stock prices rose but this was at a time where the environment GE was competing in was domestic and results driven, which didnt demand long term company infrastructure but rather thrived on short term high profits.Welch led the way the economy demanded, which led him to success and high numbers. Welchs methodology was based upon cost cutting, efficiency, and deal making which would deliver high, reliable profits. Welch led at a time of an economic recession with high unemployment, high interest rates, and domestic competition. The idea of developing society and GE employees was put aside to develop high profits, which gave stockholders a sense of dependability and stability in a time of unknown and economic turmoil.This focus worked at the time, but would not continue to work in the current economy that holds new values and expectations. It is crucial that Immelt become a level 5 leader that invests in long term, strong infrastructure to continue to be able grow, expand, and stay profitable. For Immelt to become a level 5 leader he must discard the idea that leaders must be the ones providing the direction or vision and instead enable the implementation of additional drivers, such as employees or opportunities, that will take GE from good to great.Immelt is leading at a time of economic global slowdown and increased global competition, which demands an infrastructure that can endure a change of markets and compete at a global level. Immelts responsibility isnt to have one vision that the entire company follows, but to inspire GE employees to evaluate their own visions that correspond to their intrinsic values and allow them to act upon them with trust and resources. To enable and inspire employees to re-create the GE infrastructure Immelt needs to pave the way for employees to re-build their trust with GE and himself by increasing their motivation through a more open environment.Immelt can act upon becoming a level 5 leader and making GE into a growth engine for the future by investing in leadership programs that focus on developing employees as leaders and allowing them to create their own vision through their own intrinsic values. Welchs leadership development programs focused on trimming the companys edges instead of developing them to pave the way for number growing opportunities and profit based endeavors. Immelt can have leadership programs that ask employees to evaluate what values they have for their work and what are areas that can be improved to help them reach their goals.Immelt can also share his inspiration to facilitate external growth by moving markets into developing countries through risk taking, sophisticated marketing, and innovation. He can prove to employees that he wants them to embark on meaningful, long-term projects by notifying them that rotations will be removed to allow for specialists that are the most knowledgeable in their field, and therefore have the ability to produce the most ef fective long-term projects and returns.Immelt can teach the employees of GE of his values and leadership practices through company wide meetings, emails, or letters. He then needs to be mindful to follow through with his values to foster an open and trusting environment. Jeffery Immelt is leading as CEO in a time of worldwide growth and expansion that demands a different type of leadership style than the efficiency based style of Jack Welch in order for GE to stay profitable, and continue to be a leader in the business market.In addition to changing leadership styles in order to keep GE growing profits, Immelt has the opportunity to make GE employees jobs more meaningful and fulfilling by creating an open and trusting environment that will enable them to use their talents to carry out visions of their own that resonate with their intrinsic values. It is imperative that Immelt become a level 5 leader that will force GE to move from being a cash generator to a growth engine that will thrive in the current global expansion.