Jack welch transformational leadership

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C H R I S T O P H E R A . B A R T L E T T

M E G W O Z N Y

GE’s Two-Decade Transformation: Jack Welch’s Leadership

On September 7, 2001, Jack Welch stepped down as CEO of General Electric. The sense of pride he felt about the company’s performance during the previous two decades seemed justified judging by the many accolades GE was receiving. For the third consecutive year, it had not only been named Fortune’s “Most Admired Company in the United States,” but also Financial Times’ “Most Admired Company in the World.” And, on the eve of his retirement, Fortune had named Welch “Manager of the Century” in recognition of his personal contribution to GE’s outstanding 20 year record.

Yet while the mood at GE’s 2001 annual meeting had clearly been upbeat, some shareholders wondered whether anyone could sustain the blistering pace of change and growth characteristic of the Welch era. And specifically, many worried if any successor could generate the 23% per annum total shareholder return Welch had delivered in his two decades leading GE. It would be a tough act to follow. (See Exhibit 1 for financial summary of Welch’s era at GE.)

The GE Heritage

Founded in 1878 by Thomas Edison, General Electric grew from its early focus on the generation, distribution, and use of electric power to become, a hundred years later, one of the world’s leading diversified industrial companies. A century later, in addition to its core businesses in power generation, household appliances, and lighting, the company was also engaged in businesses as diverse as aircraft engines, medical systems, and diesel locomotives.

Long regarded as a bellwether of American management practices, GE was constantly undergoing change. In the 1930s, it was a model of the era’s highly centralized, tightly controlled corporate form. By the 1950s, GE had delegated responsibility to hundreds of department managers, leading a trend towards greater decentralization. But a subsequent period of “profitless growth” in the 1960s caused the company to strengthen its corporate staffs and develop sophisticated strategic planning systems. Again, GE found itself at the leading edge of management practice.

When Reg Jones, Welch’s predecessor, became CEO in 1973, he inherited the company that had just completed a major reorganization. Overlaying its 10 groups, 46 divisions, and 190 departments

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399-150 GE's Two-Decade Transformation: Jack Welch's Leadership