General Electric Case

General Electric

How did GE perform economically and socially under Jack Welch? Do you think that Welch's controversial actions were necessary for GE to remain competitive? How would you have modified any of these if you were Immelt (Welch's successor)?

The Welch era began in 1981 when Jack Welch took over as CEO of General Electric. Welch's business strategies are based on cutting costs or expenses, increasing productivity, acquiring and selling businesses. He bought hundreds of other businesses large and small, chop them up and sell them one by one to eliminate competition. Within GE business, he eliminated jobs through attrition, layoffs, and outsourcing. Welch also reshaped the whole GE bureaucracy by laying off thousands of central staff in strategic planning, personnel, and other areas. His most remarkable move was the "vitality curve", which ranked managers of each GE business and classified them into three areas: top 20 percent, middle 70 percent, and bottom 10 percent. The process was repeated annually, and each time the bottom 10 percent had to go.

Under Jack Welch, GE grew rapidly at high rate of profitability, and shareholders were enriched. Even with five stock splits, earning per share rose from $0.46 in 1981 to $1.07 in 2000. In 2000 GE reported a net operating margin of 19 percent and earned 27 percent on invested capital, both are high figures for a large multinational corporation.

GE also performed socially under Jack Welch by engaging in a broad range of philanthropy and community activity. The GE foundation made $40 million in grants to colleges, universities, and nonprofit groups in the United States and worldwide. It also helped lowering budgets for schools by pressuring cities, countries, and states to lower taxes.

GE's performance was significant under Jack Welch. However, "In the Welch system… wealth was transferred from workers to shareholders". I do not agree with the controversial actions