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Transformational Leadership

Managing the Multi-line Business & Corporate Leadership

Jeff Stats asked:

Numbers say more than words especially if we are considering business world and profit figures as a proof of being a successful business. GE’s numbers in the last two decades have been on the highest level since the foundation of the company. Jack Welch has been in charge of the company’s operations during all this time. Under his leadership GE has undergone numerous transformations that made it number in the field of their operations today. Welch is renowned as one of the best managers of the century for not only meeting the forecasted figures but for changing the minds of his employees and being the greatest inspiration for them.

His famous “hardware” reduction and remodeling took place almost immediately after he stepped into his CEO office. Taking into consideration economics’ recession and drastic restructuring of the company Welch met strong criticism of his politics, but GE’s future was the ultimate goal for his actions. The company was delayered and destaffed greatly. These were the first important steps on the path of accumulating potential and its distribution in the right direction. Instead of having seven layers in the company with hundreds of divisions and sectors with even more managers, Welch rebuilt GE So that there were only three layers underneath so that it was possible to directly communicate with each division and know each top manager. All of that was done for better control, free flowing communication and higher level of responsibility of everyone in the company.

The “software” component change was taking place after GE dramatic structural innovations. Welch knew that without inner understanding of every employee of the importance of maintaining productivity levels, there would be no change. “Work-outs” and “Best practices” were the first performance boosters implemented by Welch in late 80’s. The real difference was seen in a few years when productivity increased first by 2% and than by 4%. By integrating the efforts of employees on all levels and considering their suggestions, GE was able to reach such amazing results, especially taking into account the amount of money it saved-thus earned. “Best practices” was continuing to fight for higher productivity levels, as it brought the understanding that they needed better processes planning and better customer satisfaction, they also needed to develop friendly relationships with their suppliers. Those actions combined together led to higher productivity and realization of doing certain things wrong, which in turn made possible to make them right in the future.

It becomes clear that Welch had a new vision was his company by firstly implementing drastic changes in the skeleton on the firm and than the organs of the “body” were undergoing changes. Those changes were aimed at giving people tasks that would integrate knowledge and experience and desire of self-development. The combination of such techniques made GE one of the strongest companies in the world, one of the best employers. The power of being a great place to work at led GE to actually being number one, the task that Welch was pursuing since he became the CEO.

Integrate diversity, the so called “boundaryless” company was another challenge that Welch sought to overcome. The company’s employees did not have to look for advice or new technologies outside GE, it all was available in their own company. With this newly adopted system, the players of the team learned quickly from each other and cooperated successfully among each other. An integration model was developed on the basis of the hundreds of post-acquisition reviews in order to guide manager in any part of the company, who are responsible for integrating a newly acquired operation. Those activities could range from taking control of the account to realigning the organization.

Stretch programs- there was a unique way to set high goals and employees were inspired to be as good as it is possible or even better to achieve them. Managers were not responsible for those goals but those who got it done were greatly appreciated and awarded accordingly. This was the way Welch saw an open and trusting environment in the company which guaranteed as practice have proven to be the best performance accelerator and creativity source. The results of this system did not make the management wait too long. People with no boundaries to the excellence started aiming at the highest possible level of performance and let their imagination free. The differences in numbers were not about a few hundredth, but about whole numbers of 10 inventory turns, which seemed impossible till the system. The success of this newly originated system laid in “no-punish-failure”, where people were not afraid of being fired because of unachieved goals. Rather is was stated that they should be aiming at what they see as their best and thus they were driven by their own ambitions to get to the desired number but not work a sixty hour week for the sake of having this number written on their time sheets. Because this idea found such a great implementation in real business it is definitely a brilliant way to make people take interest in their work and perform on a better level.

Another great discovery in the business world of GE were service businesses that took GE’s view of what they do to a new level. No more they were just manufacturers of high quality equipment, they were the follow up services that took care of any difficulty a customer might face in the course of using their product. Multi-billion investments into services business equipment for monitoring Aircraft Engines while in flight or medical diagnosis in real time, led the company to having two thirds of their business in services rather than in manufacturing. This goal was a far fetched Welch’s dream and finally it came true in the late 90’s. With the integration of this new business line, GE made their customers almost fully dependable on them. This was a perfect strategic move, which gave the company much more power as their services were needed as much as their products and combined together they were the core of success. Value-added benefits that customers received from GE’s services were of great importance and provided both companies with strong partnership ties, on several levels. It not only caused profits for both parties but generated trusting and reliable conditions for cooperation.

Apart from high productivity, correct strategic politics and necessary employee satisfaction there is another essential factor in the core of every successful business. Product quality is blood of the company and if it is not clean, company cannot function properly. In 1995 the company’s survey showed that most employees were dissatisfied with the product quality they were making. When products and services were analyzed it turned out that GE was operating at a rate of ten thousand times the Six Sigma quality level. It meant a lot of money being lost and a lot of productivity as well. GE invested huge amount of money into educating its managers which was not optional as Welch wanted to have only the best people he could get. As a result in two years, GE’s performance was greater than expected. For instance their repair shops were operating three times faster than the shops of their immediate rivals. Also medical equipment showed tenfold increase in the products’ life the fact that in turn provided strong customer trust and loyalty toward GE products. The returns on the investment were well over the expected amount and meant that the investment was a very successful one.

Welch as a leader of a big multi-business company desired to see only highly professional people working in it. This was the goal of another project that also became a success. The new model of the company requited only those with highest standard
s and big dreams for the future. A player of the team which could not match the requirements of the “4E’s”
was let free. The essence of GE was to take a lot from their employees but also to give a lot. Welch believed that such people ought to be paid well, loved and respected. They need to feel that they are the most recourse of the company, they need to be constantly educated and challenged. Jack Welch was such an employee himself and wanted to see the same attitude toward work and company from his team. Such philosophy was the secret of a huge success story called Jack Welch. His innovations and reforms were dramatic at times, but always proved to be the right thing. He took each of his business entities as a separate most important one and gave it the most attention, thus the GE empire is going to grow and develop in the future, in case of GE being guided by such leaders as Jack Welch.

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