General Electric is one of the oldest conglomerates that are still actively present on the market. It consists of a wide variety of businesses and is involved in the production of a great multitude of items, resources, and services. The main segments of the company are focused on oil and gas production, renewable energy, aviation, additive manufacturing, lighting, healthcare, power generation, venture capital and finance, transportation, digital technologies, and lighting. General Electric is also involved in a variety of smaller enterprises which diversify its product line even further. The company was originally established in 1892 after Tomas Edison’s Electric Light Company and Thomas Houston Company were merged to create General Electric. The management of the company was focused on utilizing the numerous patents that Edison’s company held, especially those that were related to electricity generation and distribution.
The company grew quickly by focusing on the adaptation of its technologies, a combination of research and development with effective business strategies. By 1970’s it became one of the most diversified organizations in the world. This case study will focus on two of the most prominent leaders of the company in the modern era. The first is Jack Welch, who was responsible for the success that the company achieved in the 1990s. His management style is often stated to be one of the reasons behind this success, but he may also be responsible for some of the difficulties that the company experienced immediately after his departure. The second is Jeff Immelt, who managed to resolve some of the most difficult situations in the history of General Electric while using a completely different approach to management.
Comparison of Jeff Immelt’s and Jack Welch’s Management Approaches
Jeff Immelt became the CEO of General Electric shortly before the organization experienced some of its most difficult events. The first happened in the days following his assignment as a CEO. On September 11, 2001, the World Trade Center was destroyed in a terrorist attack. This event had a profound effect on the global market. The aviation industry experienced a severe crisis because of new concerns for safety and higher control of air travel. The aviation subsidiary of General Electric was put in the same danger as all the airlines that were not able to sustain themselves after the 9/11 attacks. General Electric stock price fell 10.7 points which is the second-largest decline in stock price since the Black Monday market crash occurred in 1987. The second major problem happened during the following month. Enron scandal caused a great disturbance in people’s confidence regarding the ethics of financial reporting. General Electric previously utilized similar tactics to Enron’s, which brought additional negative attention to the company. In the following years, General Electric had to pay millions of dollars after it was revealed that some of the reports provided by it were not representative of reality. Another difficult period came with the financial crisis of 2008. The company was put into a critical state once more and had to look for an equity injection from any available source. Otherwise, it would be unable to continue operating in its current state. The equity injection was received in the form of $3 billion dollars from Warren Buffett’s Berkshire Hathaway group.
Despite these issues, Immelt did not let the company fall apart. He took a very approachable attitude toward leadership. His approach was people-oriented, with a lot of positive attention being given to the employees. Positive reinforcement, encouragement, and respect towards the workers were used to increase productivity and reduce stress during this period. Immelt took personal responsibility for his actions and any issues that could occur because of them. He put a larger focus on innovation, research, and emerging markets while limiting diversification to only successful sectors of operation. Immelt removed a lot of complex and ineffective business systems that the company utilized and simplified them to reduce overhead and improve productivity. It was important for him to have a clear understanding not only of company operation but also of the context in which it operates. He saw time management as a very important aspect of business and made sure to carefully plan his schedule. Immelt’s approach could be identified as democratic leadership due to his close attention to employees and their heavy involvement in the operation of the company. However, its focus on responsibility also reflects the practice of authentic leadership. Nevertheless, this approach saved the company from dissolving multiple times during these events without utilizing unethical practices.
Jack Welch’s approach was almost completely opposite to Immelt’s. Welch became the CEO of General Electric in 1981. Unlike Immelt, he was not approachable. Welch presented himself as an authoritative figure of the company. He had large ambitions and confidence which led him to mostly rely on himself for guidance. He was the one to remove excessive bureaucracy from the company. With the simplified hierarchies, General Electric was able to work more efficiently. Welch also began to exit all sectors in which the company was under-performing. This element of this strategy was later continued by Immelt. However, his treatment of employees was actively negative, with taunts and confrontations being common.
Performance targets were constantly monitored and used to determine the value of the employee. Especially successful employees were rewarded with bonuses and incentives, but those who were not as efficient were not treated well. The combination of these factors created an atmosphere of intense pressure within the company. Welch was also less focused on the ethical elements of the business. After his resignation, it was revealed that some General Electric financial reports were incorrect. His approach to finance also resembled Enron, which shows a possible malicious motive to his actions. His style of leadership is autocratic. It led the company to two decades of success and put its stock price to its peak, but his actions had a negative effect on the company in the long run and almost left it in an unsustainable state.
Table. Differences in leadership.
Welch’s approach was more entrepreneurial due to the large acquisitions that were performed by General Electric during his leadership. However, it is clear that his strategy was unsustainable for long periods of time. The current state of the world is volatile, uncertain, complex and ambiguous. An unsustainable strategy would resolve in severe consequences at the first instance of a crisis. Welch would not be able to handle the issues that Immelt had to solve, and it is unlikely that he would be ready for any upcoming problems. A careful and measured approach that Immelt took would allow for a more accurate business strategy to form around problems that the company may experience.