Page 47 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Entrepreneurship and Small Business Management

Notes

Case Study GE the Jack Welch Way

In September 6, 2001, John Francis Welch Jr. (Jack Welch), Chairman and Chief Executive
Officer of General Electric Co. (GE), retired after spending 41 years with GE. During the
period, he made GE the most valuable company in the world. Analysts felt that, with his
innovative, breakthrough leadership style as CEO, Jack Welch transformed GE into a
highly productive and efficient company. During Jack Welch’s two decades as CEO, GE
had grown from a US$13 billion manufacturer of light bulbs and appliances in 1981, into
a US$480 billion industrial conglomerate by 2000. Analysts felt that Jack Welch had become
a ‘deal-making’ machine, supervising 993 acquisitions worth US$13 billion and selling
408 businesses for a total of about US$10.6 billion.
Jack Welch was in fact described as ‘the most important and influential business leaders of
the 20th Century’ by some Wall Street analysts and academics alike.
Management experts felt that Jack Welch’s reputation as a leader could be attributed to
four key qualities; he was an intuitive strategist; he was willing to change the rules if
necessary; he was highly competitive; and he was a great communicator.
The Making of a CEO
Jack Welch graduated in chemistry from the University of Massachusetts and in 1959 got
a Ph.D. in chemical engineering from the University of Illinois. In 1960, he started his
career at GE as a Junior Engineer.
However, in 1961, Jack Welch decided to quit the US$10,500 job as he was unhappy with
the company’s bureaucracy. He was offended that he was given a raise of only US$1000,
the same amount given to all his colleagues. He had even accepted a job offer from
International Minerals and Chemicals in Skokie, Ill. However, Reuben Gutoff, an executive
at GE convinced Jack Welch to stay back. Reuben Gutoff promised that he would prevent
him from getting entangled in GE red tape and would create a small-company environment
with big-company resources for him. This theme of ‘small-company environment’ with
‘big-company resources’ came to dominate Jack Welch’s own thinking as the leader of GE.
Jack Welch quickly rose to become the head of the plastics division in 1968. He became a
group executive for the US$1.5 billion components and materials group in 1973. This
included plastics and GE Medical Systems.
In 1981, Jack Welch became GE’s youngest CEO ever (Refer Exhibits I & II). His predecessor,
Reg Jones said, “We need entrepreneurs who are willing to take well-considered business
risks - and at the same time know how to work in harmony with a larger business
entity…The intellectual requirements are light-years beyond the requirements of less
complex organizations.”
The Welch Era at GE: 1981-2001
During the first five years as CEO, Jack Welch emphasized that GE should be No.1 or No.2
in all businesses or get out of them.
He disposed off the businesses with low-growth prospects, like TVs and toaster ovens. He
expanded the financial-service provider GE Capital into a powerhouse. He also entered
the broadcasting industry with the acquisition of RCA Corp., the owner of NBC TV network.

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