Presentation on theme: "General Electric – Two-Decades of Transformation"— Presentation transcript:
1General Electric – Two-Decades of Transformation Corporate strategy Group 8 Ravinder 121 Ashutosh 131 Hitesh 132 Sunny Duggal 117 Rahul Singh 158 Himanshu Mishra 136
2The GE Heritage Founded in 1878 by Thomas Edison Its core business was electricity generation and distributionIt constantly underwent change1950s- DecentralizationIt encountered profitless growth in 1960’sReg Jones ,( Welch’s predecessor) started the transformation process by rationalizing Groups, Divisions and SBUsCentralized and sophisticated planning processReg Jones spent a great deal of time on government relations .Reg Jones was regarded as management legend ( WSJ).
3GE’s Restructuring by Jack Welch- Revolution Jack Welch became CEO in April 1981 at the age of 45 when US was undergoing recession.He brought the culture of ‘ better than the best’He had a vision and he would let it be known to everyone.He set the standard of being No.1 or No.2 in the industry or it would disengage.He insisted on being lean and agile through de-staffing process and hence he was known as ‘Neutron Jack’.He brought in the concept of ‘How do I add value’ and curtailed bureaucracy in the system by removing various layers .His five page strategy playbook comprised of following :-1) Current market dynamics 2) Competitors key activity (recent)3) GE’s Business response 4) The greatest competitive threat over next 3 years 5) GE Business’s planned response.He stressed on growth by leap rather than being incremental and hence wanted the organisation to stretch itself.
4The GE/McKinsey Matrix: #1 or #2: Fix, Sell or Close
5The Late 1980s: Second Stage of the Rocket Work-outManagement style based on openness, candor and facing realityWhere all felt engaged and everyone had voiceOff-site meetings where groups of employees were invited to share their views about their business and how it might be improvedManagers had to make instant decisions on 80% of the proposals.Process designed to get unnecessary bureaucratic work out of systemBest PracticesOrganizational Culture characterized by Speed, Simplicity and Self-confidenceStudied the different tools and practices followed by other successful companiesAlso identified characteristics common to successful companies : Focus on developing effective processes, Customer Satisfaction as measure of performance, Treating suppliers as partners and constant innovation.Training program to introduce Best Practices Thinking throughout the OrganizationFocus on effective processes than on individual activities
6Businesses are Global , not Companies No Corporate Globalization Strategy: Each Business responsible for implementing a plan appropriate for its particular needs.From 1987, GE’s performance standard “#1 or #2” evaluated on world market positionPaulo Fresco, a strong advocate of Globalization, became member of Welch’s four-man corporate executive office. He became the locator and champion of new opportunities.Invested $17.5b in Europe during the economic downturn. Similarly, acquired 16 companies in Mexico during the Asian crisis and spent $16b on acquisitions in Japan.
7DEVELOPING LEADERSWelch recognized that his challenge was nothing short of redefining the implicit contract that GE had with it’s employeesNew Psychological Contract – Jobs at GE are the best in the world for people willing to compete.Session C – Comprised of rigorous management appraisal , development and succession planning reviews.Overhauling of the Compensation Package – stock options became a primary component of management compensation with allocations strongly tied to the individual’s performance on the current program.Crotonville management development facility – became the main institution that Welch harnessed to bring about the cultural change at GE.360 degree feedback – became the means for identifying training needs , coaching opportunities and career planning.
8Top managers at GE were rated not only on their performance against quantifiable targets but also on the extent to which they lived GE valuesDelivers on Commitments and shares company’s valuesDoes not deliver on Commitments and does not share company’s valuesDoes not deliver on Commitments but shares company’s valuesDelivers on Commitments but does not shares company’s valuesHis or her future is an easy call – onwards and upwards.Not a pleasant call, but equally easy to deal withUsually gets a second chanceThe autocrats, the big shots, the tyrants – they are the ones to be removed.
9Into the 1990s : The Third Wave Boundary less behaviorWelch articulated his vision for GE in the 1990s as a boundary less company characterized by an open environment , friendly towards the seeking and sharing of new ideas, regardless of their origin.It will remove the barriers between engineering, manufacturing, sales, and services and will recognize no distinctions between domestic and foreign operations.Changed the criteria for bonuses and options awards to reward idea seeking and sharing not just idea creation.
10I M Possible ‘Stretch’ to set targets. Doable is not enough. operating margins – 8.5% to 15%inventory turns – 4.73 to 10Reward success but don’t punish failure.Process is of prime importance.Results –14.4% operating margin.inventory turn of 7.
11Service Business 1980- 15% of revenue from service business %, 2000 forecasted- 75%Supplementing slow product growth with added value services“In Site” tech for medical business, online diagnostic technology for other businessesService council to exchange ideasService related acquisitionsInverting the pyramid- focus on service, product just a part
12Raising the Bar Six Sigma Quality initiative:- Cost of lost production and inefficiency:- $8- $12 billion p.a.Defect times more than 3.4 per millionSix sigma participation not optional40% bonus tiedMassive training- green, black and master black beltsReduced turn around time, efficiency improved, profits increased$ millions
13A player with 4 E’s E-business Energy- excited by ideas Energy- ability to energize othersEdge- ability to make tough callsExecution- consistent ability to turn vision into resultsHigh emphasis on promotion of A players- stock options etc.Performance appraisal – 5 categories- 1s to 5s1s and 2s got the stock options and 5s had to goE-business
14GE’S Two Decade Of Transformation Jack Welch’s Leadership (achievements)23% per annum shareholder return (Ex-1)Employee productivity increased by 500% ( Exhibit-1)GE became the most diversified company from electricity generating and distributing companyFortune’s most admired company in USGE was transformed from a product company to service company( Ex- 9)ROE- 14.8% to 28.7%ROS- 5.1% to 9.8%
15in the end……..Transformation though started from the top management but unless it percolates down to the individual employee of the company it is not successful…………..