GE’s Two-Decade Transformation: Jack Welch’s Leadership
When Reg Jones, Welch’s predecessor, became CEO in 1973, strategic planning was central to GE’s management process. Soon, however, he was unable to keep up with reviewing and approving the massive volumes of information generated by 43 strategic plans, and a new organizational layer of “sectors” was introduced to cap GE’s departments, divisions, groups, and SBUs. At this time, GE was operating under the control-oriented approach.
The control-oriented approach to work-force management took shape in response to the division of work into small, fixed jobs for which individuals could be held accountable. Management organized its own responsibilities into a hierarchy of specialized roles. Worker’s compensation followed the rubric of “a fair day’s pay for a fair day’s work”. There was generally little policy definition with regard to employee voice. At the heart of the traditional model is the wish to establish order, exercise control, and achieve efficiency in the application of the work force.
Recently, however, changing expectations among workers have prompted a growing disillusionment with the apparatus of control. An intensified challenge from abroad has also made the competitive obsolescence of this strategy clear. A model that assumes low employee commitment and that is designed to produce reliable if not outstanding performance simply cannot match the standards of excellence set by world-class competitors.
In this new commitment-based approach to the work force, jobs are designed to be broader than before, to combine planning and implementation, and to include efforts to upgrade operations. Teams, not individuals, are often the organizational units accountable for performance. With management hierarchies relatively flat and differences in status minimized, control and lateral coordination depend on shared goals, and expertise rather than formal position determines influence. Under the...