Professional Documents
Culture Documents
Welchs Leadership
Welch Transformation Framework- Business Simplification &
Portfolio Planning:
1. Welch set the standard for each business to become the #1 or #2
competitor in its industry- or to disengage. Businesses having low
potential or weak competitive position were sold, which helped
company to make major acquisitions.
2. Three circle concept for categorizing businesses:
A. Core( priority is reinvesting in productivity and quality)
B. High Technology(stay on the leading edge by investing in R&D)
C. Services(add outstanding people and make continuous
acquisitions)
It set clear priorities for businesses and helped them to plan the future
roadmap.
3. The company did major acquisitions of $21 billion and major
divestitures of $11 billion.
The prime focus was on becoming industry leader in growing industries
like medical equipment, container leasing etc.
4. By providing products with added-value services, GE became a service
oriented company, with services adding 75% of its total revenues. It
could build an ecosystem around its products, which gave it an edge
over competitors.
5. The company started focusing on products and services having high
profit margins, which meant better return on assets.
6. There was no imposition on corporate globalization strategy on
businesses, each business was responsible for implementing a plan
appropriate for its needs. This decentralized approach on globalization
meant that company was thinking global but acting local.
Strategy Playbooks:
The removal of lengthy processes made them to have focus on the right
businesses and also very efficient decision making process.
Also this process has a probability of over sighting a few factors as it involves
quick decision processing
Delayering:
Mr. Welch eliminated sector level which used to be the powerful center of
strategic control
This actually creates a lot of problem to middle level managers as they have
to communicate the corporate strategy to lower level employees and should
try to get the work done, though they have no complete power on them.
Huge layoffs also create negative impression on the employer as it creates a
lot of insecurity among employees who are working and also who are
aspiring to become a part of the company
Coming to investor sentiments, this process may increase their belief in the
leadership and might have a positive effect on stock price.
Work outs and Best Practices:
Work outs helped company to get unnecessary bureaucratic work out of the
system and devise new ways of employees and their bosses work style.
Adopting best practices from leading companies and small companies at the
same time helped GE to improve its practices and make them more efficient.
Performance Management:
1. Performance appraisal system, as per below table:
Ra
nk
1
2
3
4
5
Rating
Category
Reward
Top 10%
15%
50%
15%
Bottom
10%
Top
Strong
Highly valued
Borderline
Least Effective
Stock Options
Stock Options
Training
Improve or Move
Weed Out