MSHR 610 – Case Study
Please refer to the Harvard Business Review’s “GE’s Two-Decade Transformation: Jack Welch’s
Leadership” case study. Read this document and answer the following questions:
1. How difficult a challenge did Welch face in 1981? How effectively did he take charge?
Beauracracy, paperwork and defined worker roles was the standard norm, “…it was a
model of the era’s highly centralized, tightly controlled corporate form (Bartlett & Wonzy,
2005, p. 1). During the 1970’s to early ‘80s, what once was a progressive and daring
business model (multilayer management and business structures) became a bogged
down system of too many teams generating a wide spectrum of business plans.
According to Barlett & Wonzy, the CEO before Welch was “…unable to keep up with the
reviewing and approving the massive volumes of information generated by 43 strategic
plans” (2005, p. 2).
“By 1981 the economy was in a recession” (Bartlett & Wonzy, 2005, p. 2), with high
interest rates, high unemployment—which would indicate less consumerism and
spending on goods and services (GE was more of a product company at that time—
Welch would later turn this model around).
Welch created a very aggressive plan to restructure the organization—from the bottom
up. The “be #1 or #2 in the industry (third place is last place)” was a difficult business
model during the recession and especially in the global market—Japanese competition
forced the company in many instances to resort to the last option which was the “fix, sell,
or close” model. (Bartlett & Wonzy, 2005, p. 2). “Between 1981 and 1990, GE freed up
over $11 billion of capital by selling off more than 200 businesses”, which also resulted in
a “…destaffing process aimed at all large headquarters groups…a 50% reduction in the
200 person strategic planning staff” (Bartlett & Wonzy, 2005, p. 2-3).
Welch’s method of constantly seeking to improve the business model is reminiscent of the
Taylor’s Scientific Management Theory–“His notion of scientific management focused on
the most efficient way of managing and making the workers more productive. It offered a
systematic approach that managers could apply to their own organization” (n.p.). Find the
best way to do a job, with the best people to do the task, with equal division of tasks
between worker and management” (Scientific Management, n.d., n.p.). The difference
with Welch is he specifically sought employee involvement and feedback and encouraged
employees to be a part of the solution building processes.
Welch restructured management, made it leaner and he did this quickly (in the first five
