General Electric: From Jack Welch To Jeffrey Immelt

S w 908M09 GENERAL ELECTRIC FROM JACK WELCH TO JEFFREY IMMELT pot Mark wrote this case under the super romance of Professor Stewart Thornhill solely to erect material for class discussion. The authors do non intend to illustrate some(prenominal) effective or ineffective handling of a grapplerial situation. The authors whitethorn have disguised certain names and former(a) identifying information to encourage confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmission system with unwrap its written permission. Reproduction of this material is non covered under ascendency by any reproduction rights formation.To point copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey instruct of commerce, The University of western Ontario, London, Ontario, backada, N6A 3K7 phone (519) 661-3208 fax (519) 661-3882 e-mail emailprotected uwo. ca. Copyright two hundred8, Ivey Man agement Services recital (A) 2008-04-18 INTRODUCTION planetary electric automobile (GE) was a U. S. conglomerate with contrastes in a wide range of industries, including aerospace, former systems, health c ar, commercial finance and consumer finance. In 2007, GE gain US$22. one one thousand thousand million in net cyberspace from US$170 billion in sales. In 2008, GE anticipate to generate US$30 billion in hard cash from operations. driving quarter GEs process was what umpteen commentators considered to be the deepest bench of executive talent in U. S. business,1 the result of cardinal decades of investment in its management training programs by its former chief executive ships slayicer ( chief executive officer), John F. ( jackstones) Welch, Jr. The received chief executive officer, Jeffrey Immelt, to a faultk over from yap Welch four geezerhood before September 11, 2001, and had spent the last few years preparing the only for its nigh stage of growth. GENERA L ELECTRICGEs roots could be traced stick erupt to a Menlo Park, smart Jersey laboratory where Thomas Alva Edison invented the in muck takees cent galvanic lamp. GE was founded when Thomson-Houston galvanic and Edison General Electric merged in 1892. Its offshoot few products included light bulbs, motors, elevators, and toasters. Growing organically and done acquisitions, GEs revenues reached $27 billion in 1981. By 2007, its businesses sold a wide variety of products such as lighting, industrial equipment and vehicles, materials, and services such as the generation and transmission of electricity, and as dance orchestra finance.Its di tidy sums included GE Industrial, GE root word, GE Healthcare, GE Commercial Finance, GE Consumer Finance, and NBC Universal. 2 1 Diane Brady, rapscallion 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. wik ipedia. org/wiki/General_Electric, accessed November 12, 2007. at Page 2 9B08M009 For to a greater extent than 125 years, GE was a attracter in management practices, establishing its strength with the disciplined oversight of some of the concepts some effective business great deal. 3 When he became electric chair and chief operating officer in 1972, Reginald Jones was the seventh man to lead General Electric since Edison. Jones foc determinationd on shifting the bon tons attention to growth areas such as services, transportation, materials and natural resources, and away from electrical equipment and thingumajigs. He implemented the c erstwhilept of strategic planning at GE, creating 43 strategic business units to oversee strategic planning for its groups, divisions and de divulgements. By 1977, in order to manage the information generated by 43 strategic plans, Jones added a nonher management storey, sectors, on diadem of the strategic business units.Sectors represented s enior advanced school direct groupings of businesses consumer products, power systems, and technical products. 4 In the 1970s, Jones was voted chief executive officer of the Year ternion clock by his peers, with one leading business journal dubbing him chief operating officer of the Decade in 1979. When he retired in 1981, the fence in Street ledger proclaimed Jones a management legend. Under Joness administration, the victuals smart sets sales to a greater extent than than duplicate ($10 billion to $27 billion) and boodle grew even faster ($572 million to $1. 7 billion). 5 bull Welch Becomes CEO In terms of his early meshing life, Welch hadWorked for GE not often epochs(prenominal) more than than a year when in 1961 he abruptly waive his $10, d telephone line as a junior engineer in Pittsfield, Mass. He matte up stifled by the corporations bureaucracy, underappreciated by his boss, and offend by the civil service-style $1,000 raise he was given. Welch wan ted off, and to get by he had accepted a job offer from International Minerals & Chemicals in Skokie, Ill. But Reuben Gutoff, then a young executive a layer up from Welch, had other opinions. He had been impressed by the young arriviste and was shocked to hear of his impending departure and farewell party retri yetory two days away.Desperate to keep him, Gutoff coaxed Welch and his wife, Carolyn, out to dinner that night. For four consecutive hours at the Yellow Aster in Pittsfield, he discharge his pitch Gutoff swore he would prevent Welch from macrocosm entangled in GE red videotape and vowed to create for him a small-company purlieu with queen-sized-company resources. These were themes that would later dominate Welchs profess view as CEO. 6 In his memoirs, Welch tell that the CEOs job was close to 75 per cent nigh people and 25 per cent nigh other stuff. 7But Welch k sensitive that his path to plump CEO of GE was anything precisely smooth. As he recalled 3 Gene ral Electric, Our History Our Company. Available at http//www. ge. com/company/history/index. html, accessed June 4, 2007. 4 Christopher A. Bartlett and trillion Wozny, GEs Two-Decade Transformation turd Welchs Leadership, Harvard Business School Case, May 3, 2005, pp. 12. 5 Christopher A. Bartlett and Meg Wozny, GEs Two-Decade Transformation shit Welchs Leadership, Harvard Business School Case, May 3, 2005, p. 2. 6 John A.Byrne, How twat Welch Runs GE, Business Week, June 8, 1998. Available at http//www. businessweek. com/1998/23/b358 hundred1. htm, accessed June 4, 2007. 7 Jack Welch, straight person from the Gut, Warner Books, spic-and-span York, 2001, p. xii. Page 3 9B08M009 The odds were against me. Many of my peers regarded me as the musical rhythm peg in a square hole, too antithetical for GE. I was brutally honest and outspoken. I was impatient and, to many an(prenominal), abrasive. My behavior wasnt the norm, oddly the frequent parties at local bars to celebrate business victories, capacious or small. 8For Welch, there was a seven-person horse race to suffer CEO that was, in his words, brutal, complicated by heavy politics and big egos, my avouch included. It was awful. 9 In the end, however, Welch prevailed, proper CEO in April 1981. Later, he perk that he had been left off the rook list of commodedidates until late into the process. Welch recalled I didnt know that when the list was narrowed to ten names by 1975, I close up wasnt on it. . . . whiz official HR human resources view of me stated at the period Not on outflank go offdidate list despite past operating winner.Emerging issue is enkindle results nidus. Intimidating subordinate relationships. Seeds of company stewardship concerns. Present business adversity leave alone severely test. Watching closely. 10 1981 to 1987 bit One or Number Two and Delayering Welch wanted the company to do away with its formal describe structure and unnecessary bureaucracy. He wanted to recreate the firm a unyielding the lines of the nimble plastics organization he had come from. He stated I knew the advantages of closureing small, even as GE was getting bigger. The good businesses had to be sieve out from the bad ones. . . We had to act faster and get the damn bureaucracy out of the way. 11 Welch collapseed this strategy based on contrive by Peter Drucker, a management regarder, who gestateed 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 insisting that any GE business be the come one or subdue two business in its industry, 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, steep technology, and core could attain (or had attained) top positions in their industries. The selected few included many service businesses, such as financial a nd 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 flatten from 404,000 in 1980 to 330,000 by 1984 and 292,000 by 1989.The changes prompted hale reactions from former employees and community drawship. Welch was the locate of further criticism when he invested nearly $75 million into a major upgrade of Crotonville, GEs management reading center. 13 Welch saw lead training as key to GEs growth. 8 Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. xii. Ibid, 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 take aims between the factory floor and the CEOs office. The se ctor take aim was choosed, and a massive downsizing effort nonplus into place. Compared with the traditional norm of louvre to eight direct reports per manager, GE aged(a) managers had 15 or more direct reports. Successful senior managers shrugged off their workload, indicating that Welch liberated them to behave the like entrepreneurs. They argued that the extra pressure forced them to set strict priorities on how they spent their sequence, and to abandon many past procedures.Observers believed GE was running two main risks having inadequate essential communication between senior managers and people who now reported to each of them and the overwork, stress, demotivation and inefficiency on the part of managers down the line who had extra work assigned by their in a bad way(predicate) superiors. In 1989, an article in the Harvard Business Review reported more than bitter internal frustration and ill- whole tone among the troops at GE. 14 During this period, Welch earned hi s Neutron Jack moniker, a quoteence to a pillowcase of bomb that would killing people while leaving skeletal systemings intact.On the other hand, Welch could see that changes had to be made to make GE more rivalrous. He recalled Truth was, we were the early big healthy and lollyable company in the mainstream that took actions to get more competitive. . . . on that point was no stage set for us. We looked too good, too infrangible, too profitable, to be restructuring. . . . However, we were facing our own reality. In 1980, the U. S. economy was in a recession. 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 change magnitude their exports into many of our mainstream businesses from cars to consumer electronics. 15 But Welchs strategy was not plain a cost-reduction effort from 1981 to 1987, while 200 businesses were sold, 370 were acquired, for a net strike down of $10 billion. The turmoil that these changes caused earned Welch the title of toughest boss in America, in a Fortune magazine survey of the 10 virtually realistic senior executives. In tallying the votes, Welch received 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 meetings so precipitously that people tremble. 16 But Welchs credibility was bolstered by GEs memory board implementation After years of being stuck, GE tenor and the market place began to take off, reinforcing the idea that we were on the right track. For many years, linage extracts werent worth all that much. In 1981, when I became chairman, options gains for every(prenominal)one at GE totaled only $6 million.The next year, they jumped to $38 million, and then $52 million in 1985. For the first clock time, people at GE were jump 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 estates 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 train of management skills and to instill a rough-cut 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 cannistert we get the Crotonville pioneerness everywhere? . . . We have to re-create the Croton ville Pit a circular, tiered lecture hall at Crotonville all over the company. . . The Crotonville Pit was functional 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 lower take aim 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, specially approvals, reports, 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 teams manager would simoleons the session with a presentation, after which the manager would leave the facility. Without their superior present, the rest employees, with the wait on of a neutral facilitator, would list problems and develop solutions for many of the repugns in the business. Then the mana ger returned, listening to employees present their many ideas for change. Managers were judge to make an immediate yes-or-no decision on 75 per cent of the ideas presented.Welch was pleased 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 whole organization and take idea sharing to the next level. . . . I unplowed talking about all the boundaries that Work-Out was breaking down. Suddenly, the word boundaryless popped into my head. . . . The boundaryless company . . . would gain all the barriers among the functions engineering, manufacturing, marketing and the rest.It would acknowledge no distinction between domestic help and fo triumph operations. . . . Boundaryless would also open us up to the outflank ideas and practices from other companies. 19 Welchs relentless pursuit of ideas to increase productivity from both inside and outside of the compa ny resulted in the birth of a associate achievement 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 case nine companies with different best practices, including Ford, Hewlett-Packard, Xerox and Toshiba. In addition to proper(postnominal) tools and practices, Fraziers team also identified several(prenominal) characteristics common to the favored companies they concentrate more on development effective processes than on unconditional individual activities they used customer rapture as their main smoke of performance they treated their suppliers as partners and they emphasized the charter for a eternal stream of high- pure tone new products designed for cost-effective manufacturing.On reviewing Fraziers report, Welch became an instant exchange and committed to a major new traini ng program to come in Best Practices thinking by means 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 govern extra effort into compass their goals, Welch instituted the idea of stretch. He was frustrated with the via media that was occurring as work teams attempt 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 insurgent 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 tot. Their stretch target keeps them reaching. . . Sometimes we found cases where managers at lower levels took stretch numbers game and called them budgets, punishing those who miss. I dont think it happens much anymore, precisely I wouldnt bet on it. 21 1990s hexad Sigma and the Vitality Curve One long-familiar 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 onlyiedSignals Six Sigma quality program was ameliorate quality, lowering 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 luck for growth, increased profit might, and individual employee satisfaction in the history of our company. 22 Subsequently, every GE employee underwent at least minimal training in Six Sigma, whose terms and tools became part of the orbicular language of GE. For example, expressions like CTQ, were used to refer to customer filmments that were critical to quality in new products or services. 3 Whereas Six Sigma was concentrate on process improvement, to develop GEs talent pool, Welch looked to differentiate 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 large organization was not a simple task. GE began using what became cognise 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 make out, he said. Nor did he evaluate the top executives immediately below him. 24 Next, Welch put in place an assessment based on a animation curve, ro ughly shaped like a bell curve. He asked his managers to rank all their staff into the top 20, the Vital 70 and the cigarette 10, with the intent to force executives to differentiate their employees. The top 20 were groomed for bigger 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 high-octane way we sort out As, Bs, and Cs. . . . Ranking employees on a 20-70-10 storage-battery grid forces managers to make tough decisions. The vitality curve doesnt perfectly infer 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(prenominal) Conductor L ike Jack Welch? The circumvent 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 built the importance of the ranking system by matching it with an appropriate fee 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 brand ish. on that points no cruelty like waiting and telling people late in their careers that they dont belong. 6 In GEs people review process, cognize 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 qualification quick judgment calls on talent, and these snap decisions could be perceived both positively and negatively. An observer commented Welch is impetuous, run to make lightning strikes and 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 conflicting 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 assoilly foreign.If you were in investment banking or work and your group had a good year, it didnt matter what happened to the firm overall. 28 In addition, Kidder Peabody was hit by two public scandals insider trading and pretended affairs that led to a $350 million writedown. some other example was NBCs confederation 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 worn down by the agelessly evolving programs.A chemist who once worked for GE Power Systems stated Its management by buzzword. plenty chant Jacks slogans without thinking intelligently about w hat theyre doing. Ive been stretched so much I feel like Gumby. All Welch understands is increasing network. That, and getting rid of people, is what he considers a vision. Good people, awing people, have been let go, and it is hurting 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/xfl_demise/index. html, accessed January 11, 2008. 26 Page 8 9B08M009 Im trying to meet the competition, but his policies arent component part 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 morsel 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 certify 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 worldwide frugal slowdown. 33 scorn GEs consistent earnings growth even during the frugal downturn, GEs stock had fallen 33 per cent from its high of about $60 per share in August 2000. Many attributed this starchy 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 seve ral global loss leadinghip positions in GEs Plastics, Appliance and medical exam businesses. 5 At GE Medical, his last assignment before becoming CEO, Immelt became a star by persuading a ontogeny 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 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 ontogeny GEs market share from 25 per cent to 34 per cent and moving the company into services such as selective information mining. 36Only the ninth man to lead GE since 1896, Immelt followed in the footsteps of his predecessors by abandoning the leading approach favored by Welch. In contrast with Welchs need to control and cajole his management, Immelt was less a commander than a arbitrary presence. 37 If you, say, missed your numbers, you wouldnt leave a meet ing with him feeling beat up but more like you let your public address system 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 loss 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 warmness 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/ leading/ceo. html, 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 fortunate person Ive ever known has in common. 39 Immelt aimed to report 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 demands a back seat to long-term strategy. Whereas Welch quickly rotated managers through different divisions to develop generalists, Immelt wanted to k eep them in place prolonged to develop specialists.Immelt explained I absolutely loathe the notion of overlord management. Which is not an endorsement 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 leave 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 base technology, according to Immelt, was a $70 billion business that forget 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 cogitate on growing revenues in emergent markets such as China, India, Turkey, Eastern Europe, Russia, and Latin A merica. Immelt believed that the international arena was where GEs prox 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 pull up stakes for grow between 15 per cent and 20 per cent next year. Were a $172 billion company. In 2008, with the U. S. economy growing at 1. 5 per cent, well grow revenue by 15 per cent because were in the right places with the right products at the right time. 44 39 David Lieberman, GE Chief Sees Growth Opportunities in 2008, USA Today, declination 14, 2007, p. B1.Daniel Eisenberg and Julie Rawe, Jack Who? Time, September 10, 2001, p. 42. 41 Ibid. 42 Jerry Useem, Another Boss Another Revolution, Fortune, April 5, 2004, p. 112. 43 David Lieberman, GE Chief Sees Growth Opportunities in 2008, USA Today, December 14, 2007, p. B1. 44 Ibid. 40 Page 10 9B08M009 EXHIBIT 1 GE Selected Information from 1981 to 2008 ($ 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 showtime 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 shrill for GE to continue to grow and prosper in the actual economic conditions of global expansion and constant change. Immelt can also benefit GE by be coming a level 5 leader by tensenessing on development and puting employee value and intrinsic motivations kinda than facilitating initiatives to carry out his own vision. By Immelt development into a level 5 leader and creating an open and bank surroundings, he leave empower employees to rebuild GEs infrastructure that can harmonise strong and prosper through the new and demanding global expansion.Jack Welch led the way that was received to him and what economic conditions valued at the time. He was successful by bighearted the company of GE a clear vision and opening up opportunities for employees to efficiently carry out his objectives. He gave stableness 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 ship on new and ripe wanders.Immelt is faced with the challenge of getting the GE employees to develop a practiceing and open relationship that can grow GE into new markets and hold stable in a time of constant change. His humility and professional get out 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 dependable way by being people-oriented and concentrating on intensity rather than efficiency.If he can continue to stay true to his authentic set while create 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 ineluctably of GEs talented employees. GE seemed to be thriving under Welchs reign with stock damages continually rising and its mar ket 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 parkway success from extrinsic motivators and short-term returns. After radical evaluation of the movement of CEOS from Jack Welch to Jeffrey Immelt, lays the fundamental management problem of a change of company determine led by a foregoing level 4 leader, Welch, to a level 5 leader, Immelt. The GE company needs to recognize and be led to the different set that Jeffrey Immelt believes in order to begin 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 ultimately reach the high numbers and stock price returns that come along with the change to a strong infrastructure. While Welch was CEO he stimulate the G E 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 yield for the employees of GE to develop and grow the intrinsic set 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 sooner 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 th eir past performance and deliverables. Although Welch implemented a number of leadership development programs, they ironically did not focus on work 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 kinda of using their own talents and ideas to grow the companys infrastructure that could give way 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 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 reservation which would deliver high, unquestionable 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 dependableness and stability in a time of occult and economic turmoil.This focus wo rked 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 alter the executing 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 total company follows, but to advocate GE employees to evaluate their own visions that delay 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 place 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 press cutting 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 aspiration to facilitate outside(a) growth by moving markets into developing countries through risk taking, sophisticate marketing, and innovation. He can prove to employees tha t 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 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 come across 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 Immelt 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 hi m 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 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 conc entrating 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 co mpany 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 completi ng 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 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 econ omy 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 w ill 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 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 enviro nment. 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.