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Case Study by Harvard Business School
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CONTENT
GE OVERVIEW
ALL ABOUT JACK WELCH
INITIATIVES TAKEN BY JACK WELCH
GE’S VISION FOR 2013 & BEYOND
TWOS ANALYSIS
OVERVIEW
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2
3
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FOUNDED1878, Thomson Houston Electric Company (THEC)
MERGER1892, Between GE and THEC formed General Electric
HEADQUARTERSFairfield, Connecticut, U.S
REVENUE$ 147.300 Billion (as of 2012)
imagination at work
ACHIEVEMENTS (2012-13)OVERVIEW
3rd Largest Company in the world (Forbes)
5th Best Global Brand (Interbrand)
6th Largest in USA (Gross Revenue)
7th Best company for Leaders (Fortune)
14th Most profitable company in the world (Fortune)
15th Most admired company (Fortune)
19th Most Innovative company (Fast Company)
REG JONES (1973 - 1980)PREDECESSOR
43 strategic units: To support strategic planning.
GE was benchmark for
others companies (Imitated its SBU based structure & planning process).
Unable to review and approve
massive volumes of Information
generated by 43 SBU’s.
Formed a covering on GE’s
departments, divisions, groups and SBU’s with
“SECTORS”.
Country’s leading business
statesman.
YEAR ACHIEVEMENTS
1970 “CEO of the Year” 3 times by his peers.
1979 “CEO of the Decade”
1981 “Management Legend” by WSJ
BRIEF INTRODUCTIONJACK WELCH
John Francis "Jack" Welch, Jr. (born November 19, 1935),
Peabody, MA
ALMA- MATER
•Salem High school
•University of Massachusetts (Bachelor of Science in Chemical Engineering, 1957)
•University of Illinois at Urbana-Champaign (M.S and PhD, 1960)
YEAR ACHIEVEMENTS
1997 National business hall of fame
1999 Manager of the 20th century
2001-2004 Forbes 400 richest Americans
CHALLENGES AS A CEOJACK WELCH
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ECONOMY IN RECESSION
HIGHEST UNEMPLOYMENT RATES SINCE DEPRESSION
HIGH INTEREST RATES
WELCH’S EARLY PRIORITIES INITIATIVES
HARDWARE INITIATIVE
#1 or #2 - Fix, Sell or Close
o Three Circle Concept
o De-Staffing & Real Time Planning
SOFTWARE INITIATIVE
o Work Out
o Best Practices
THREE CIRCLE CONCEPTINITIATIVES
SERVICES
GECC Information
Construction & Engineering
Nuclear Services
CORE
Lighting
Major Appliance
Motor
Transportation
Turbine
Construction
Equipment
TECHNOLOGY
Industrial Electronics
Medical Systems
Materials
Aerospace
Aircraft Engines
OUTSIDEHousewares
Central Air-Conditioning
TV & Audio
Cable
Mobile
Power Delivery
Radio Stations
SUPPORT
Ladd Petroleum
Semiconductor
GE Trading Co.
Utah Mining
VENTURES
Calma
DISCIPLINED DESTAFFINGINITIATIVES
“We don’t need the questioners & checkers, the
nit-pickers who bog down the process.….
Today each staff has to ask, “How do I add
value?” How do I make people on the
line more effective and competitive?.”
LEAN & AGILE: Making people productive and competitive
REAL TIME PLANNINGINITIATIVES
FIVE PAGE STRATEGY PLAY BOOK
ONE PAGE ANSWERS TO 5 QUESTIONS:
1. Current Market Dynamics
2. Competitors’ Key Recent Activities
3. The GE Business Response
4. Greatest competitive threat over next 3 years
5. GE’s Business’s Planned Response
BENEFITS OF “HARDWARE” INITIATIVEINITIATIVES
Number of Employees (1981-89)
•404,000 to 292,000
Revenue
(1981-85)•$27.2 Billion to $29.2 Billion
Operating Profits (1981-85) •$1.6 Billion to $2.4 Billion
THE FIRST “SOFTWARE” INITIATIVE WORK OUT
Implementation Team (24
consultants)
Group of 40-100 employees
3 day sessions
On the spot decision on 80%
proposals.
IMPLEMENTATION
To design a process to get
unnecessary bureaucratic
work out of the system.
To create the culture of a
small company, where all felt engaged and
everyone had voice.
OBJECTIVE
An open discussion
forum
Employee could give ideas and
suggestions on
business and get immediate
responses to it.
OVERVIEW
THE SECOND “SOFTWARE” INITIATIVE BEST PRACTICES
FOCUS MORE ON HOW
THINGS GET DONE
LEARNING FROM OTHER INDUSTRIES
IMPLEMENTATION
RES
ULT Productivity Increase
Managers realized the key focus areas of business
GO GLOBAL
Appointing Paolo Fresco as Head,
International Operations
Rampant
Acquisitions
Taking advantage of global economic slow down
• European Crisis- $17.5Bn
• Mexican Peso collapse
• Asian Economy Crisis (1997-98)
DEVELOPING LEADERS FOR TOMORROWEMPLOYEES
Keeping close tabs on top 3000 Executives
Succession Planning
Improved Packages/Stock Options
Training institute at Croton Ville
360 Degree Feedback
“A” Players (Characterized by 4Es – Energy, Energize, Edge, Execution)
PERFORMANCE APPRAISAL SYSTEMEMPLOYEES
RANK RATING REWARD
1 Top 10% TOP Stock Options
2 15% STRONG Stock Options
3 50% HIGHLY VALUED Training
4 15% BORDERLINE Improve or Move
5 Bottom 10% LEAST EFFECTIVE Weed Out
Employees were dissatisfied with the quality of its product.
GE was operating at error rates 10,000 times the six sigma quality level of 3.4 defects/million costing $8-12 billion/year.
Series of planning, resource allocation, review, and communication meetings were done.
Participation in initiative was compulsory, 40% Bonus was tied with it.
QUALITY INITIATIVE SIX SIGMA
MASTER BLACK BELT
BLACK BELT
GREEN BELT
Training- 6 weeks in statistics, data
analysis and other six sigma tools.
Training – 4 weeksImplementation- 5
Months project aimed at improving
Quality.
Full time Six Sigma instructors.
RESULTS10 Fold increase in life of CT scan X-ray tubes.
62% reduction in time at service stations.
30,000 Six Sigma projects were initiated a year.
IMPLEMENTATION SIX SIGMA
SUMMARY
PR
OD
UC
TIV
ITY
Restructuring
Removing Bureaucracy
Downsizing
Changing Attitude
CULTURAL CHANGE“going for the leap”
COMPARISON
• Promoted internal communication
• Focus on performance & strictly quantifiable results
• mostly promoting from within
• Focused on production
• demanding and intimidating
• External communication (Investors & Third Parties)
• Allowed employees to come up with innovative ideas
• Brought a number of outsiders into Organization
• Focused on marketing
• Made GE more environmentally conscious
• Friendlier and more approachable
JAC
K W
ELC
HJEFF EM
MELT
TOWS ANALYSIS
TOWS ANALYSIS
T O
SW
Competition
Information security
Financial crisis
Media depictions
Evaluation and Analysis
Under-performing energy sector
Threat to flexibility
Mergers and acquisitions
Research and development
Global recognition
Global strength and competitiveness
Excellent Management
Diversified lines of operation
Environmental initiatives
PERFORMANCE2012
180154 150 147 147
2008 2009 2010 2011 2012
CONSOLIDATED REVENUES (In $ Billions)
16.9
9.912.4
14.916.1
2008 2009 2010 2011 2012
OPERATING EARNINGS(In $ Billions)
• Total Industry Segment Revenue + GE Capital Revenue (45%)
• Change in portfolio• Sale of 49% stake of NBCU
• Rising profit from selling Air craft engines and transportation equipments
• Acquisition of Lufkin Industries• Rise in orders from aviation and oil
GE’S VISION FOR 2013 & BEYONDSTRATEGIES
Margin Expansion
Growth from Emerging Economies
Product and Service launches
Energy, Healthcare and Aviation to drive growth
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