General Electric Firm’s Organizational Change & Leaders

Introduction

GE introduced a number of changes that saw it increase its revenues substantially from the early 1980s when John Welch entered the leadership as the CEO, to the late 1990s (1999) when he was approaching retirement. Managerial as well as organizational changes in the company saw it hit the highest mark in terms of revenues in 1999 (over $100 billion for the first time). Among the changes carried out were those of cutting down the hierarchical structures, downsizing, and restructuring, as well as general organization of the company. The paper discusses the changes as well as the organizational change theories that apply to the specific cases. It will discuss the leader aforementioned in relation to these changes as well as the related leadership theories.

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General Electric and the Changes

GE Company has had major restructuring in its history, which resulted in improvement, not only in respect to its operations but also in regard to the returns from those operations. The company hit over $100 billion in revenues in 1999 for the first time in history. During this year, the company obtained higher earnings per share, which represented an increase of 14% as compared to that of 1997. Under the leadership of a very influential CEO, Jack Welch, the company yearned this level after very tremendous changes that will be reviewed in this study.

The initial operations of the company involved dealing with generating, distributing, and use of electricity. Later on, there were initiatives that made it become a diversified company. In the 1930s, the company exhibited a highly centralized structure, but this model was changed with attempts to decentralize through the delegation of management responsibilities to a number of departmental managers. The company had experienced profitless periods in the 1960s and was ready to become transformed in various aspects including the development of complicated strategic planning systems. The company also transformed the corporate staff. Under the leadership of Jones Reg, the company established a planning strategy that featured “10 groups, 46 divisions, and 190 departments” (Bartlett & Wozny, 2004), and which became the basis of the management process in the company.

John Welch was a very influential leader in General Electric Company and had a passion and desire to initiate several changes in the company. He became the CEO in 1981 and drove in a number of changes that would see the transformation of the company. After he became the CEO, he challenged that every business unit needed to become number one or number two in performance or face sale. Through this ideology, a number of business units that comprised the company’s 25% sales in 1980 were disposed of due to high competition from Japanese firms and those around the world. An example of the lost business units included the company’s electronic business, central; air conditioning, and housewares business units among others. The company adopted three categorizations of business operations, core, high technology, and services. The first category included those units that would involve reinvestment in productivity and quality. Investment in R&D was categorized in the second class of units, which were those units that needed to stay on the leading edge. The third category involved “adding outstanding people and making contiguous acquisitions” (Bartlett & Wozny, 2004). At the same time when it was closing some units, the company invested in 370 units which took away $21 billion in investments. Some of these business units included Westinghouse’s lighting company, Kidder Peabody and RCA among others.

Welch introduced a number of strategic ideas including “real-time planning” which saw the company engage in de-staffing, de-layering, and downsizing, cutting out expenses on labor by eliminating a total of 59, 290 salaried and 64,160 hourly positions between 1981 and 1988, and through divestiture that saw the removal of additional 122, 700 employees. The company also brought in new heads and replaced 12 of the fourteen heads in 1986 through the “varsity team” which was supposed to take charge in a management change that would see the break of the company’s old culture (Bartlett & Wozny, 2004). The Company also managed to reduce hierarchies in the management through the leadership of Welch. The reduction of hierarchies was from nine to four, and every business unit reported directly to Welch. The company engaged through “real planning” strategy to study and know their competitors in business, their activities, their threats, and current dynamics in the market, and devise how the company responded to them. In the 1980s, the company was experiencing a management shortage and culture shock that would be eliminated through improving the company software. The CEO was glowing so much in success during the Annual General Meeting in 1999, but everybody was worried about who would take over as the CEO (Bartlett & Wozny, 2004). Welch also participated in training management through class sessions.

GE can be said to have gone through a revolutionary change in management and restructuring. Patterns of operations that are significantly different will be required for the strategic orientation of the firms (Tushman & Romanelli, 1985; cited in Burke, 2002). Revolutionary change happens when there is unpredictable interaction between system parts realized during times of transition (Punctuated equilibria) (Prigogine & Stengers, 1984)-Grand Theory. In many organizations, change will exhibit a gradual mechanism where leaders or individuals perceive the need for change, then initiate change, and finally evaluate the change to see if it fits the targets. Lewin theorizes three stages of change, namely, motivation to change; where past cultural and learning influences have their role in initiating change, and that change is fueled by new forces. In the case above, the leadership of GE can be seen as a new force to change. The incoming of the new ideas of change with Welch played an important role in initiating change (Ross, 2004). The present conditions are said to bring dissatisfaction and; changing what needs to be changed, where a real desire exists to eliminate what brings dissatisfaction; and the third stage where there is an attempt to make the change permanent. Welch theorized the idea of changing the “company software” after carrying out restructuring, which could have been an effort for stamping change.

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The theory supports the need for leadership for every change. The top executives need to direct major changes in the cultures, strategies, and missions according to Burke (2002) this is the case with GE. The organization could not manage the substantial change it went through if a strong leader like Welch was not there to have great ideas such as the elimination of hierarchies, introduction of the many change agent ideas and leaders (such as the replacement of 12 heads of business units) among others. Indeed, it is his leadership that people noticed him and his success, so much that they were worried when the time for his departure approached (Bartlett & Wozny, 2004). The theory has given support for the purpose of workgroups in achieving organizational goals (Burke, 2002). We see GE implement the change through groups and achieve the new targets such as “become number one or two in performance or close business”, “real time planning” and other ideologies.

Many theories o leadership have been put forward. There is every reason to believe that organizations require leadership models that are influential. As discussed earlier, Welch was a very influential leader and can be described under transformational leadership where he seeks to achieve certain visions and targets to spur growth in GE. He introduces such ideologies as requiring a business to perform and take the first or second place in order to have the organization produce good results. Through this, people are challenged to work hard. Transformational leaders develop visions and seek to achieve those visions and find the way forward, as well as lead the change (Syque, 2010).

Conclusion

In initiating and achieving change, Welch dictates some ideas such as that requiring great performance of business units (to become number one or two) or close, and in other cases, he is very participatory-such as requiring people to report to him and participating in the training of management team, personally; which is a model displayed by situational leaders (Bolden, Gosling, Marturano, and Dennison, 2003).

References

Bartlett, C., and Wozny, M. (2004). GE’s Two decade transformation: Jack Welch’s leadership. Harvard Business School. Web.

Bolden, R., Gosling, J., Marturano, A., and Dennison, P. (2003). A review of leadership theory and competency frameworks. Center for Leadership Studies. Web.

Burke, W. (2002). Organizational change: Theory and practice. London: Sage Publications, Inc.

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Prigogine, I. and Stengers, I. (1984). Order out of chaos: Man’s new dialogue with nature. New York: Bantam.

Ross, A. (2004). Lewin/Schein’s change theory. Web.

Syque (2002). Transformational Leadership. Syque. Web.

Tushman, L., and Elaine R. (1985). Organizational evolution: A metamorphosis model of convergence and reorientation. In Cummings, L., and Barry, S. (eds.). Research in Organizational Behavior. Greenwich: JAI Press, Vol. 7: 171-222.

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