MNO2007: Leadership & Ethics conducted by Dr.

William Koh
Jack Welch: Two Decades at
General Electric





Cherry Tan Tien Tien A0071925A
Loy Shing Wei, Philip A0073040X
Tan Wei Ling A0070328L
Tang Yi Wei A0071540R
Teoh Camillia A0071663E
Tutorial A1
Dr. William Koh
Prepared by:
2

Table of Contents

1. Biographical Sketch ........................................................................................................3 - 4

2. Personality Traits The Big 5 .....................................................................................5 - 11
2.1 Extraversion .................................................................................................................................. 5
2.2 Agreeableness ............................................................................................................................... 6
2.3 Conscientiousness ......................................................................................................................... 8
2.4 Emotional Stability ....................................................................................................................... 9
2.4 Openness to Experience .............................................................................................................. 10

3. Influence Tactics .........................................................................................................12 - 25
3.1 Hard Sub-Tactics ....................................................................................................................... 12
3.2 Soft Sub-Tactics ........................................................................................................................ 13

4. Empowerment .............................................................................................................15 - 18
4.1 Mechanistic Approach ................................................................................................................ 15
4.2 Organic Approach ...................................................................................................................... 17

5. Transformational Leadership ....................................................................................18 - 24
5.1 Idealised Influence ...................................................................................................................... 18
5.2 Inspirational Motivation ............................................................................................................ 19
5.3 Intellectual Stimulation .............................................................................................................. 22
5.4 Individualised Consideration ..................................................................................................... 23
6. Impact ..........................................................................................................................24 - 26
6.1 How Personality Traits shape Influence Tactics......................................................................... 24
6.2 How Personality Traits drive Transformational Leadership ....................................................... 25
6.3 Empowerment: A Balanced Approach ....................................................................................... 26
6.4 Impact at various levels .............................................................................................................. 26

7. Conclusion ...................................................................................................................26 - 30
7.1 Leadership V.S Management...................................................................................................... 26
7.2 Organisational Culture ............................................................................................................... 27
7.3 Change Management ................................................................................................................. 29
7.4 Servant Leadership .................................................................................................................... 30

8. Endnote References ....................................................................................................31 - 37







3

1. Biographical Sketch
Jack Welch, or John Francis Welch, Jr., was born on Nov. 19, 1935 in Peabody,
Massachusetts.
1
Welch received his B. S. degree in Chemical Engineering from the
University of Massachusetts and his M. S. and Ph.D. degrees in chemical engineering from
the University of Illinois.
2


Welch started his career with General Electric as a chemical engineer for its plastics division
in 1960.
3
He was later promoted to general manager of the plastics business in 1968. Welch
was named vice-president of GE in 1972, senior vice president in 1977 and vice chairman in
1979. In 1981, succeeding Reginald H. Jones, Welch became the youngest Chairman and
CEO of GE. He served in that position for 20 years before retiring in Sept. 2001.
4


Growing Up
The only child of John and Grace Welch, a railway conductor and a homemaker, Welch grew
up Salem, Massachusetts in an Irish working class neighbourhood. He wasnt born with a
silver spoon but had something better tons of love.
5


Many of Welchs basic management beliefs can be traced to his mothers influence on him.
Described as tough and aggressive but warm and generous
6
, Grace Welch inculcated in
him the need to excel and of facing the facts of a situation. From his earliest years in school,
she also taught him the value of competition, both winning and taking defeat in stride.
7


Growing up, Grace Welch was alternatively hugging and kicking him, and this had a great
impact on his management skills. This likely influenced his practice of both being able to
reward and punish.

Welch grew up with a speech impediment and hence developed a stammer when he spoke.
He was almost always the smallest and shortest person in the sports teams he participated in.
However, Grace Welch built in him self-confidence and self-esteem such that Welch never
felt like he was disadvantaged in any way. This confidence inspired in him a belief that he
could be anyone that he wanted to be.
8


Welchs father, John Big Jack also played a significant role during Welchs childhood.
Describing John as a diligent worker who put in long hours and never missed a day of
work,
9
John provided a role model for Welch and instilled in him the value of hard work.
From acquainting Welch to the world outside of Salem to introducing him to golf, John
taught his son things that would last a lifetime.
10


School Years
Welch did relatively well in high school but was turned down for a navy scholarship to
Dartmouth or Columbia. In spite of the rejection, studying chemical engineering at the
University of Massachusetts, Amherst turned out to be a lucky break as he was outshone his
peers at UMass. After graduation, Welch attended the University of Illinois at Champaign
where he obtained his masters and Ph.D. He was fortunate to receive immense support and
guidance from his professors, hence allowing him to obtain his Ph.D. in three years.

Studying chemical engineering taught him one very important lesson in business: There are
no finite answers to many questions.
11
It allowed him to embrace the fact that very often,
there were no black-or-white answers. In running a business, like in chemical engineering,
4
there were no perfect answers. Welch also realized that he wasnt the best scientist by any
means. He was someone who loved people more than books, and that he was best suited for a
job that bridged the laboratory and the commercial world.
12
It was also in university where
Welch met his wife, Carolyn Osburn.

The Beginning
In Oct. 1960, Welch started his first day at GE in Pittsfield, Massachusetts. His boss, Coplan,
saw it as his job to try to scrimp on everything and acted as if GE was on the verge of
bankruptcy.
13
Very soon, Welch, disillusioned by the bureaucratic and penny-pinching
behaviour of his boss, decided to leave the company.

It was Reuben Gutoff, Coplans boss, who managed to convince Welch to stay. Gutoff
noticed that Welch was different and promised him a salary increase. This recognition made a
powerful impression on Welch and his belief of differentiation. From then, Welch believed
that differentiation is all about being extreme, rewarding the best and weeding out the
ineffective.
14


Moving Up The Ladder
When the opportunity presented itself, Welch went after the general manager slot and in 1968,
after working at GE for nearly eight years, was promoted to general manager of the $26
million plastics business. This position did not come easily to Welch he had gone to great
lengths in persuading Gutoff that he was capable and worthy of it. It made him, at 32, the
youngest general manager at GE.
15


In 1973, Welch was promoted to group executive where he oversaw a diverse portfolio of
products with over $2 billion in annual sales, and which employed 46,000 people. Towards
the end of 1977, Welch received a phone call from Jones offering him a promotion to sector
executive as well as a new office at Pittsfield. It was this promotion that put him in the race
for the Jones position along with five other individuals.
16


Welch received his first big break 18 months after he moved to Fairfield when Jones
narrowed the race down to Welch and two others and promoted them to be vice chairmen.
17

On Dec. 19, 1980, Welch was formally elected as chairman and on Apr. 1, officially took
over Jones position as chairman of GE.

When Welch was named as Jones successor, The Wall Street Journal reported that GE had
replaced a legend with a live wire.
18
Without a doubt, Welch was a live wire, blowing up
traditions and the bureaucracy that long defined GE. However, it was probably this energy
that managed to propel GE to success. By the time Welch stepped down as chairman, the
company had gone from a market value of $14 billion to one of more than $410 billion at the
end of 2004, making it the most valuable and largest company in the world.

5
2. Personality Traits The Big 5


2.1 Extraversion (Score: 5)
2.1.1 Competitiveness: Welch insisted that every GE business was to be number one or
number two in its industry and to that end, sold off billion dollars worth of businesses while
acquiring new ones simultaneously. He sacrificed certain lucrative businesses that historically
defined GE when they did not meet performance standards. All these measures strongly
showed that he would not let anything deter his reformation of the company.
19
In 2000,
Welch received news that one of GEs major competitors, United Technology Corporation
was about to acquire Honeywell, which would UTC control over some of the most advanced
technology in the aviation industry. Welch reacted swiftly, offering to top UTCs bid. Even
though the European Economic Community eventually intervened and stopped Welchs bid,
it demonstrated Welchs competitiveness.
20
However, while Welch was competitive, he was
levelheaded about it. Welch wanted to purchase Cox Communications cable and broadcasting
operations as he believed it was beneficial for GE. However, as FCCs approval dragged, it
became apparent that the Cox family had no intention of selling and kept on raising the price.
Being highly competitive, Welch was reluctant to forgo the deal but eventually did as he felt
that doing otherwise would be detrimental for the company.
21


2.1.2 Assertive: Welchs restructuring process was initially met with resistance from about
20,000 GE employees.
22
Despite this, Welch was deeply convicted that change was necessary.
He asserted his stand for a revolutionary reform. He aggressively put forth his ideas while
banking on extensive communication to counter resistance.
23
In 1985 when GE was
enraptured in an ethical scandal of employee dishonesty, Air Force Secretary, Verne Orr,
suspended GE from doing business with the US government. Welch was not shaken at all,
and was confident and bold in putting forth his desire to mend the situation well by admitting
to his employees folly. This won the trust of government officials as he assertively accepted
responsibility for the acts of his misguided employees.
24
Also, Welch was assertive in his
actions especially when cutting costs almost everywhere else while still spending the money,
a hefty sum of $45 million, on new buildings and improvements in Crotonville. Despite
protests and unhappiness from the employees, Welch was highly insistent on investing in
sources of future productivity, such as management training.

Extraversion
Conscientiousness
Agreeableness Emotional Stability
Openness to Experience
Fig. 2: Welch had a unique personality that shaped his bold and energetic leadership style
6
2.1.3 Likes to influence other people: Having the desire for change created a need in Welch
to want to influence others. Welchs vision of having GEs growth exceed the United States
GNP was often met with skepticism from diehard bureaucrats. His desire to influence them
made him an expert in outwitting the bureaucracy.
25
Welch did so by usually presenting with
his proposals for capital spending with a cover page that ticked off results of his previous
investments to influence others to positively accede to his requests. In another instance, when
GE ran into problems with Kidder, Welch felt that Si Cathcart would be perfect to help lead
Kidder and rebuild the publics trust in it. However, when rejected over the phone, Welch
was sure he could influence and convince Cathcart. He arranged for a meet up and managed
to get Cathart to head Kidder.
26
When Welch was a GE employee, he tried to influence his
boss, Gutoff, to consider promoting him to the position of general manager. Welch took
dramatic measures to convince Gutoff of his capabilities, as well as show how much he
wanted the position. Successfully influencing his boss, Welch got the promotion.
27


2.1.4 High level of self-confidence: Following Welchs promotion to GM of plastics, in an
interview in 1969 with The Monogram, the company magazine, Welch spoke glowingly of
his employees as a turned on bunch who generated their own electricity. He was highly
confident of his leadership and his employees as he spoke about how they grew the plastics
businesses tremendously and aimed to break all past sales and profit records.
28
During his run
for the position of the CEO, Welch had airplane interviews with Reg Jones. When asked to
name the best candidate he felt should take up the CEO position excluding himself, Welch
still answered without hesitation that he was the best candidate. Welch was so confident of
his own leadership abilities that to him, there was no other candidate more suited than
himself.
29
Welch often encouraged his employees to plagiarize through observing good
product techniques from other companies and adopting them for GEs production. He was
not at all embarrassed to admit that part of GEs success could be attributed to ideas taken
from other companies.
30
This showed that he was self-confident enough to openly declare
that some of his greatest ideas were inspired from others.
31


2.1.5 Outgoing: Welch was a leader who had no qualms about engaging his employees. He
was outspoken in his internal speeches and discussions with GE managers about the
importance of ethical practices within GE.
32
He emphasized that GEs intolerance of
anything less than 100 percent ethical behaviour in front of large groups of employees.
33
He
was also highly involved in the debates about GEs issues at Crotonville Pit. Welch would
look forward to facilitating and participating in these debates. In June 1983, at the French
Open tennis tournament, Welchs outgoing personality allowed for him to meet with Alain
Gomex, chairman of Thomson S.A., the largest French electronics company. Through their
half-hour conversation, they conceived a $3-billion-per-year Consumer Electronics business
transaction. Being highly sociable, Welch managed to clinch one of the best deals in his
career at an unlikely venue - a tennis tournament.
34


2.2 Agreeableness (Score: 2)
2.2.1 Sensitive: Welch, through understanding his employees needs, displayed a high level
of sensitivity. He acquainted himself with not only his top-level executives but with regular
employees.
35
He even understood the needs of employees that were not within his daily scope
of interaction. This highlighted his sensitivity to others needs.
36
Also, during the
restructuring process of GE, it was a difficult period of time as employees feared losing their
job. Welch was sensitive to these insecurities and found ways to explain his actions to
reassure everyone.
37
However, there were times where Welch displayed instances of
insensitivity. After becoming the chairman GE, he came up with the Three Circles strategy.
7
Businesses placed within the three circles would have access to the companys resources
while those outside did not. This generated fear and discourse amongst employees of
businesses placed outside of these three circles.
38
The employees morale was heavily
affected and many were shaken. This displayed Welchs insensitivity to the feelings of the
employees.

2.2.2 Empathetic: Welch was highly non-empathetic in incidences and was accusingly
unfeeling. Many employees were laid off because he approved the shifting of an operation
plant from California to lower cost countries. Employees felt like they were being exploited
in the pursuit of earning greater profits.
39
They felt that their loyalty was cheapened, as if
their contributions over the years were entirely disregarded. There was also the time when
Welch invested millions in Crotonville, which many thought was unproductive. He was
criticized for saving buildings but killing the workers inside.
40
Welch was thus seen as being
unable to empathize, as if he only valued performance and cost-efficiency. However, Welch
displayed some form of empathy towards his employees. He did not take issue with
employees taking time off for family or for vacation just as long as they produced satisfactory
performance and results.
41
He too, had a family he wanted to spend time with, which allowed
him to fully understand this need of his employees.

2.2.3 Cooperative: When promoted to vice-president in 1974, top management expected
Welch to relocate to GEs Headquarters at Fairfield. However, Welch was uncooperative and
insisted on remaining in the Pittsfield office so that his family did not need to relocate.
42
Also,
Jones, the previous leader of GE, had certain business strategies that Welch did not agree on
and instead of trying to cooperate with others, Welch was adamant in implementing his own
ideas.
43
Despite that, it can be said that Welch only wanted the best for the company; he
merely had a different idea on what was best. Welch was willing to listen and cooperate when
convinced and persuaded. According to those closest to him, Welch was open to different
opinions.
44
Welch was not overly uncooperative or stubborn in insisting that things be done
his way but was instead, was receptive to different opinions.

2.2.4 Friendly and Approachable: Welch was often mentioned as one of the toughest boss
in America
45
and, as recounted by an NBC worker, commanded respect and instilled fear in
others.
46
This showed that Welch had an unsympathetic way of doing things and was
unapproachable. However, there have been instances where Welch was friendly and
approachable. In training courses that he conducted, Welch got each employee to introduce
himself, and would also interact with them individually.
47
Also, he reinforced informal
channels between him and his followers with personal hand-written notes congratulating
them on their achievements.
48
It shows that Welch put much effort in building personal
relationships with followers and wanted to appear approachable to his employees.

2.2.5 Wants to be liked by others: In a Canadian Magazine, Welch was called a tough and
foulmouthed SOB.
49
Welch was often blunt, was not affected by what his employees
thought of him. In a speech he made before Elfun, a networking group considered a rite of
passage into management, Welch spoke his mind about what he felt about Elfun. Instead of
being supportive and agreeable, Welch criticized Elfun as a hierarchical, social and political
club that had no value in what it did.
50
Welch felt no need to be liked by others and often was
straightforward in speaking his mind, even if it meant offending people. While Welch was
straightforward and blunt with many, he sometimes showed a desire to be liked. Right after
Welch was announced to succeed Jones as CEO, there was a party attended by CEOs of the
countrys biggest corporations. Welch was intoxicated when he had to make a few remarks
8
and slurred while speaking. Jones was annoyed that Welch had embarrassed him and GE and
Welch was keenly disappointed that he had not presented himself appropriately.
51


2.3 Conscientiousness (Score: 4.2)
2.3.1 Credible and dependable: When one is credible, he is honest, consistent and speaks
with one voice.
52
Welch was known for his relentless consistency as seen from his belief in
regular follow-ups to ensure consistency in factory plans, training programs and even the
values of his employees.
53
Welch also believed in delivering an identical no-nonsense
message to his audience, be it to employees or to the public. By being repetitive and
consistent in his ideas and goals for GE, Welch managed to convert critics to believers and
gain employees trust.
54
Welchs actions were also consistent with his words. When he
became CEO and declared to reform GE and make it highly competitive, his actions later on
reflected what he had dictated. He questioned practices consistently, and this helped GE look
forward and change.
55


2.3.2 Planful: Welch relied on organised planning to set directions. Welch met with his top-
management team every summer for day-long planning sessions. They meticulously planned
GEs strategy for the immediate future, as well as draw-up four-year plans. In addition,
Welch would meet with the Corporate Executive Council (CEC) every quarter for updates on
individual plans.
56
The Six Sigma strategy was planned by Welch for GE businesses to
follow a defined sequence of actions to achieve specified ranges of cost-reduction or profit-
growth targets. Another mark of Welchs planful ways was the emphasis that he placed on
succession planning. Welch got GE managers to groom their subordinates so that there would
be someone ready to succeed the manager if he got promoted. A decade before his retirement,
Welch began to plan for how he would choose his successor, how the transition to a new
CEO would be carried out, and even contingency plans if mishap befell on him during his
term.
57


2.3.3 Hardworking: Welch was known for having a work hard, play hard attitude. His
high school friends remembered him as an aggressive hard worker. In college, Welch kept his
place on the deans list throughout his four years due to his diligence.
58
From his days as a
young executive in GE, Welch enjoyed working more hours than company policy required by
routinely returning to work on Saturdays. This continued throughout his term as CEO.
59
Also,
Welchs love for working was publicly known and had a reputation of being a workaholic.
Welch believed that there is no such thing as work-life balance during a speech at a Society
for HRM annual conference.
60


2.3.4 Conform to Rules: To date, there are speculations that Welch flouted laws and directed
fraudulent acts (e.g. Card Defence Scandal, and Diamond Price-Fixing Scandal). There have
been no court rulings indicating that Welch played a part in these scandals, but the many
scandals under his leadership raises questions about whether Welch played by the rules as a
business leader.
61
However, subsequently, Welch did what he could to prevent his employees
from committing integrity violations. A notable example was when Welch published an
eighty-page booklet of company guidelines entitled Integrity: The Spirit and Letter of Our
Commitment, which laid down rules for ethical conduct, including adherence to the laws of
the state. Welch refused to make any excuse for fraudulent actions by GE, and accepted
rulings that punished GE for its misdeeds. Testifying before the court, Welch agreed that
Theft of a dollar is theft and fraud is fraud.
62
In another instance, Welch did not feel a need
to conform to the traditions and do things in a particular way because thats how its always
been done. Colleagues and superiors who had worked with Welch since his early years at
9
GE called him someone who coloured outside the lines, even a wild man.
63
someone
who coloured outside the lines, even a wild man.
64


2.3.5 Goal Oriented: Welch was described as one who had a lot of drive and had an
absolute desire to win. Each success increased his desire to win.
65
Welch had his eyes set on
winning and focused in reaching them. Upon becoming GEs new chairman, Welch set
multiple goals. He wanted to make speed a virtue at GE as it would propel new ideas quickly
to the marketplace, giving GE a competitive advantage.
66
Beyond industry leadership by
GEs businesses, Welch also had high expectations for individual divisions within these
businesses. He demanded high growth margins, market leadership, and the quality leadership
of the divisions. The goals he set for followers were aptly called stretch goals, as they
challenged employees to stretch themselves to previously unknown limits.
67


2.4 Emotional Stability (Score: 3.2)
2.4.1 Calm in stressful situations: During the 1986 merger between GE and RCA, many
critics cynically predicted that GE was losing its capacity for innovation. This greatly
affected GEs reputation and caused employee unrest. Despite that, Welch remained calm
and addressed business reporters. He explained composedly that the new GE-RCA entity was
actually a true mark of business innovation as it allowed them to achieve market leadership in
multiple industries.
68
When there was a scandal at GE that tainted Welch and GEs reputation,
Welch remained calm and engaged in a step-by-step approach to deal with the problem.
69

One example was the incident where GE was granted tax exemptions. The 1981 Tax Act
allows profitable companies like GE to write off large tax concessions. The public was angry
and questioned how a big and mighty corporation could be exempted from tax when
individuals contribute a significant amount of their income to taxes. Despite the negative
sentiments from the public, Welch remained calm and stood firm in his stand. He emphasized
that tax exemptions were incentives for productive capital investments which would create
jobs and increase exports, contributing to the country in a different way.
70


2.4.2 Does not take failure or mistakes personally: Welch himself admits that he made
mistakes such as not acting fast enough to acquire a food company, and not being fast enough
to change the company. Admitting to his mistakes clearly showed that he does not take
failure or mistakes personally. At the age of 28, Welch blew up a plant that he was
responsible for. Believing that that was the end of his time in GE, Welch had to pick up the
courage and face the consequences of his mistakes. In 1983, GE took on a project on factory
automation pledged to guarantee the performance of the factory projects it took on. However,
most of the expensive parts required were computers and large machine tools, neither of
which GE made. As a result, GE lost $40m on the project and 2 years later $120m. When a
mistake was made, Welch took the blame for the losses openly.
71
Welch did not let the failure
affect him personally and readily admitted to them. He accepted that the mistakes were made,
tried to make amends and moved on.

2.4.3 Self-control: Welch had little self-control, seldom exercising restraint or control over
his feelings, emotions and reactions. This was evident in a staff meeting, where one of the
staff was about to do a presentation. Welch was angry after receiving a phone call and started
criticizing the business presentation.
72
This angry outburst displayed his lack of control over
his emotions. Welch was also easily offended and flared up when people misunderstood him.
When accused of being unable to let go of his position as CEO, Welch threatened to punch
the reporter who said that.
73
This was also evident in his adamant emphasis that he had not
laid off anybody and hence did not deserve the nickname Neutron Jack when he was
10
questioned on the restructuring of GE.
74
He had another outburst when dealing with NBC
news. When required to come up with a budget plan, Larry Grossman, president of NBC,
claimed that NBC was a public trust and should not face pressures that were faced by other
GE business units. This greatly angered Welch. He exclaimed that GE too was a public trust
and was far more important than that of NBCs. This outburst showed his low control of
emotions.
75


2.4.4 Optimistic: Welch acknowledged that GE was likely to face growing threats from the
Japanese consumer appliance manufacturers. However, he remained optimistic that GEs
current strategies in major appliances would put them in good stead for the competition, and
domestic competitors.
76
When Welch introduced Stretch
77
to get his staff to aim further, he
knew of the possible effects, such as creating a strained relationship between the manager and
employee when the employee fails to attain the higher stretch performance target. Welch,
however, was positive that Stretch would be implemented successfully in GE.
78
He believed
they would be able to bring better performance results to GE. Also, after he took over NBC,
many questioned why he would take over a media company when he had no experience
dealing with a drama or comedy production company. Welch addressed this point assuredly
saying that with the necessary human and financial resources, NBC would be a success.
79
He
was optimistic that things would work out well so long as they got the right people to do it.

2.4.5 Relaxed and secure: When Welch was running for CEO, he had no support from either
of Jones vice-chairmen. Welch was not even viewed as a competitor in the race to succeed
Jones by the rest of the candidates. Despite the lack of support, Welch remained relaxed and
secure about his capabilities and eligibility.
80


2.5 Openness to Experience (Score: 5)
2.5.1 Strategic (Big-Picture Thinker): Welch believed that the new GE could not include
the intellectual framework that defined the limits of traditional management. Welch aimed to
liberate the company and encouraged personal growth. He stripped off layers of unnecessary
management and encouraged all workers to think more and produce more. This replaced
authoritarian rigidity with openness, candour and a willingness to reach across functional and
hierarchical lines.
81
One of the most powerful images Welch created was the business
engine, which explained how each of the GE businesses fits into the corporate whole. It also
enabled security analysts and investors to distinguish GE from the other conglomerates.
82

During the ethics scandal, Welch quickly thought of a plan to regain Air Force Secretary
Verne Orrs confidence in GE. He personally called Orr to present a proposal for dealing
with the problem and preventing such failures in the future. He thought of the big picture and
promised to deliver progress reports to Orr every month. He even created a top-level review
board within GE to oversee compliance to ethics, appointing GEs ombudsman to investigate
reports of misconduct.
83


2.5.2 Broad-Minded: His broad-mindedness to ideas led him to evolve from a man who
seems unyielding to one that allows for his softness to show. Despite being persistent about
many things, Welch was willing to listen to others and readily change his mind.
84
In one of
GEs Capital board meeting, Welch saw a proposal that GE buy $1.1 billion auto loans in
Thailand, which was in its worst recession. Welch felt that the proposal was ludicrous and
intended to reject it. However, during the meeting, Welch was eventually persuaded. Welch
was open-minded enough to not allow his previous judgment affect his discernment and GE
did do well in Thailand over the next three years.
85
Welch also understood that while he was
loud, young and revolutionary, one need not be a typical Jack Welch type to succeed. He
11
was broad-minded in accepting that even careerists (the very people Welch was trying to
change), could succeed. In the nuclear power business, most were not anti-bureaucracy like
Welch was and would be considered mainstream. Yet, they managed to save a dying
business from earning $14 million in 1981 to earning $116 million in 1983. Welch
recognized their success and made heroes out of the non-Welch disciples.
86


2.5.3 Curious: Welch was an information junkie, always looking out for new information
within GE. Established procedures did not hinder him when probing for information. He
roamed freely throughout GE, cultivating his own sources of information among relatively
low-ranking executives. As a result, he sometimes knew more about a particular business
than the person who ran it.
87
Welch was often curious about how they viewed the company.
88
In 1984, Welch did surveys after Crotonville debates. In practice, these surveys were report
cards of his stewardship of GE.
89
When he first became CEO, the head of his R&D
operations presented him a series of written questions for their upcoming planning sessions
with GE business leaders. However, to Welch, these passive reviews were worthless. He was
curious to know more than what was presented in books. He wanted to know what went on in
the heads and hearts of his employees. He was curious to know how the employees really felt
about issues.
90


2.5.4 Imaginative/Creative: Welchs creativity was evident in the drafting of the GE values
statement. He wanted the final statement to be something all GEers could own, and hence,
instead of dictating to employees that these were the set of rules that they had to follow, came
up with draft values to be debated at Crotonville. These GE values are then made into guide
books and wallet-size cards which all employees are to carry them in their wallets. This was a
creative initiative by Welch to make sure his employees would remember and honour the
values.
91
When GE had difficulty getting best male graduates to join them as they establish
itself in Japan, Welch turned towards the uncommon approach of hiring women. Anne Abaya
was hired to be the head of human resources for GE Japan and they positioned GE as the
employee choice for women. This unique positioning of GE was different from what they
had always done and was different from how things were done in Japan.
92
Welch started
many initiatives like Work Out that were unheard of in those years. The GE Work-Out was a
creative approach to introducing empowerment to all levels of the company and was very
successful.
93


2.5.5 Seeks new experiences: Welch embraced reality and welcomed changes. He insisted
that his agendas were examined and changed frequently to move along with the rapid
changes in the business world. Managers were requested to act as new employees and think
of ways to improve the company. Welch was constantly seeking changes and new
experiences through.
94
There was a proposal for a $575million joint venture with a Japanese
firm Toho Mutual Life Insurance. At that time, Welch was hesitant about the deal as Toho
was a bankrupt company. Welch recounted, This was unfamiliar territory as Welch did not
know much about the laws of Japan. Despite that, Welch decided to give the go ahead.
95




12
3. Influence Tactics


3.1 Hard Sub-Tactics (Sub-Tactics Employed: 3, Average Score: 4.67)
3.1.1 Legitimating: Welch was known for instituting harsh policies. He believed that these
harsh policies were consistent with his new organisational visions, and hence enforced them
with his authority as CEO despite countless protests and resistance from employees
initially.
96
At the individual level, Welch put in place performance appraisal systems like the
GE Vitality Curve.
97
Under this system, employee performance was ranked annually. At
the business unit level, Welch enforced the rule that all GE businesses had to be the number
one or two players in their industry, or they would be sold off. Many were unhappy at his
insistence of the number one or two in their industries policy as it led to businesses that
long defined GE, such as household appliances, being sold off. Employees who lost their jobs
as a result of these policies publicly criticised Welch as being ruthless. Despite the opposition,
Welch stuck to his policies. Being CEO, he had the right to legitimate rules that he felt would
be in the companys best interest.
98


3.1.2 Pressure: The Policies legitimated by Welch were harsh and portrayed his strong
tendency to influence through the use of pressure tactics. Followers shared in interviews that
Welch was aggressive during meetings. He believed that pressure drove problem solving and
course correction when there was unsatisfactory performance.
99
By Welchs own admission,
he was impatient with subordinates who did not perform, and was always blunt and candid in
expressing his dissatisfaction. Welch felt that confronting and pressurising employees could
illicit the performance that he demanded.
100


In a meeting with a group of purchasing managers, Welch learned that GE had made little
progress in cutting down inventories. These were instructions that he gave them a month ago.
Furious, Welch immediately ordered the meeting to be halted, and reconvened in four hours.
His fury delivered an unspoken message produce results, or else be ready to lose your jobs.
In the four hours before the meeting was reconvened, the managers accomplished more than
what they had been doing in the past several weeks. This is but one of various incidents that
employees and ex-employees shared about, concerning how the CEOs unabashed pressure
and unspoken threats regarding career prospect got people working right away.
101


Legitimating
Pressure
Exchange
Rational
Persuasion
Inspirational
Appeal
Consultation
Personal
Appeal
Fig. 3: Welch used more soft influence tactics
13
3.1.3 Exchange: While the underperformers under Welch were promptly fired, the
performers in the top 20% of the GE Vitality Curve found themselves handsomely rewarded.
The top 20% of the GE employees were rewarded handsomely with bonuses and promotions
while the bottom 10% was fired.
102
Welch believed strongly in using stock options and cash
bonuses as incentives by rewarding followers who performed. Distinguishing him from GEs
previous leaders was how Welch got personally involved in the use of the carrot and stick
approach to get response.
103



Fig. 3.1.1: The GE Vitality Curve

Welch also knew how to cut deals to win non-subordinates to his side. When Welch took an
interest in getting Michael Carpenter aboard the GE team in 1983, Carpenter was already
holding a prestigious position as Vice President at the re-knowned Boston Consulting Group
(BCG). Welch offered Carpenter the weighty position of Vice President for Business
Development and Planning.
104
Carpenter liked the deal and left BCG to join Welch at GE,
becoming a significant member of GEs leadership.

3.2 Soft Sub-Tactics (Sub-Tactics Employed: 4, Average Score: 5)
3.2.1 Rational Persuasion: Welch used logical arguments and factual information to
convince his employees that higher standards could be attained. For Welch, influencing his
employees to push their performance boundaries involved a Socratic process and a deductive
thought process that showed how many of their limitations were self-imposed.
105


Welch also used rational persuasion when defending GEs corporate image against critics by
presenting hard facts. When cynics alleged that the 1986 merger between GE and RCA
Corporation was an indication that GE was losing its capacity for business innovation, Welch
addressed business reporters. He explained how the merger would enable the new GE-RCA
entity to achieve market leadership in multiple industries. This explanation convinced the
initially-skeptical that the merger was a true mark of business innovation rather than an
indication of the lack thereof.
106
Likewise, when both GE and the U.S Congress drew flak for
14
the 1981 Tax Act that permitted profitable companies like GE to write off large tax
concessions, Welch noted that the Act had enabled GE and other American companies to be
more competitive in world market. Welch explained to the public that the Act created about
two hundred thousand jobs and billions in exports for the American people.
107
Welch hence
used logic and hard facts to win the support of people both inside and outside of GE.

3.2.2 Inspirational Appeal: Welch grew up in a working class environment and this
knowledge that he was not born with a silver spoon in his mouth inspired his followers.
108

Looking at Welchs rise up the ranks of GEs management, employees could believe that by
holding fast to the values that Welch championed would give anyone the chance to get ahead
in life. As Lowe writes, the values that he so energetically espouses meritocracy, dignity,
simplicity, speed, a hatred of bureaucracy touch on universal longings that are not limited
to North America; they translate to almost anywhere, and he knows that.
109


Welchs status as an inspirational icon was not just limited to the sphere of GE employees.
Corporate leaders across the world admire Welch greatly, as his actions had appealed to their
own personal values of achieving great results while being supportive of ethics as well. Noel
Tichy, a long-time GE observer and University of Michigan Management professor claimed
that Welch was the greatest corporate leader of the twentieth century, for he had set a new
contemporary benchmark for all leaders to run their corporations by. This iconic status gave
Welch referent power over vendors, customers, and other stakeholders in GEs businesses.
Welch wielded this power to establish and strengthen key relationships that benefited GE.
110


3.2.3 Consultation: Welchs leadership was unique in that while he was extraverted and
aggressive, he was not dictatorial. Instead, Welch was a consultative leader who welcomed
what he calls constructive conflict. Welch used a process he called wallowing to generate
business ideas for GE. This process involved getting a group of people from various ranks
and functional departments around a table to wrestle with a particularly tough issue. Welch
would make sure that he got to see a matter from everyones perspective.
111


As a hockey enthusiast in his youth, Welch learned that teamwork wins games. He held to
this principle as a manager, working hard at stripping out layers of unnecessary management
so as to encourage shop floor workers to participate in thinking about improving business
processes and productivity.
112
How Welch championed consultation as the mark of a leader
was best summed up by the fact that many agreed Welch had truly Americanized GE he
brought in the democratic process and the voice of the ordinary worker into the corporate
arena while at the same time pushing GE into global leadership.
113


3.2.4 Personal Appeal: Welch did not draw lines between himself and subordinates that
made him seem aloof and unapproachable. Instead, he gave employees a sense that he knows
them, so that GEs people who were at the bottom of the hierarchy could relate to Welch on a
personal level
114
.

Big organisations like GE face the challenge of having multiple layers of management. It was
easy for subordinates below top-management to feel disengaged from the CEO, and become
disillusioned with their work. Crotonville, GEs very own leadership institute that grooms
GEs talent, invited students from GE offices all over the world. The students positions
ranged from entry-level to top-management. Welch used Crotonville sessions to break
through the hierarchy and connect with managers deep in the organisation. In personally
conducting some lessons at Crotonville, Welch made full use of his time there to engage the
15
employees in attendance. Welch would spend up to four hours in the introductory session of
first-level course respectfully listening to each student share about themselves, and present
what they like or dislike about GE, and what they would change if they were in Welchs
shoes. Students left these Crotonville sessions feeling good about the CEO who came down
to their level to engage them and take time to understand them. They returned to their offices,
inspired to help Welch bring GEs performance to a higher level.
115


Welch also relied on friendship and loyalty to get things done in GE. In one instance, Welch
was looking for someone to replace Charlier, the head of GEs medical business as he was
unsatisfied with Charliers performance. He approached Walt Robb to take on the job, an old
friend who worked together with Welch as young executives in GEs plastics. Welch felt that
Robb had what it took to turn the medical business around. However, Robb was initially
reluctant to take on the job as he had just become manager for GEs chemical and
metallurgical sales. The division was performing very well under Robb and placed him in
positive light. Switching over to medicine meant that Robb would be left running a business
with half the revenue, and the possibility of leading a business that made losses. Robb knew
that Welch would respect his decision even if he declined his offer. However, he eventually
relented to Welch persuasions as an old friend and accepted the challenge.
116


4. Empowerment

4.1 Mechanistic approach (Average Score: 4.8)
4.1.1 Clarifying Organisational Mission, Vision and Direction: When Welch became the
chairman of GE, one of the first things that he did was to deliver his big message on the new
GE. Welch presented to the company, stakeholders and the rest of the world the new GE that
was focused on being number one or number two in any industry which it did business in.
Welch made it clear that businesses that did not meet this performance level were to be sold
off.
117
Beholding the rise of Japanese manufacturing and global competition, Welch foresaw
that GE could no longer rely on its traditional product lines, and thus set a vision for GE to
break into the services sector. One of the first symbolic acts that Welch did to show
shareholders and followers that he was serious about this was to sign a contract with the
Hospital Corporation of America. This made GE responsible for servicing all medical
Clarifying
mission
Specifying
Tasks and
Rewards
Delegating
Trusting in
Employees
Building
Teams
Providng
Support and
Security
Fig 4: Welch balanced both approaches to Empowerment
16
systems and equipment provided by GE Medical. Prior to this contract, GE Medical only
focused on delivering the products, and servicing was outsourced to another vendor.
118


Welch also articulated a set of company values, and expected all followers to adhere to them.
These values were documented on a laminated card that employees were expected to carry at
all times. (See Fig. 4.1)


GEs Corporate Values
Create a clear, simple, reality-based, customer-focused vision and be able to communicate it
straightforwardly to all constituencies.
Understand accountability and commitment and be decisive...set and meet aggressive targets...always
with unyielding integrity.
Have a passion for excellence...hate bureaucracy and all the nonsense that comes with it.
Have the self-confidence to empower others and behave in a boundaryless fashion...believe in and be
committed to Work Out as a means of empowerment...be open to ideas from anywhere.
Have, or have the capacity to develop, global brains and global sensitivity and be comfortable building
diverse global teams.
Stimulate and relish change...do not be frightened or paralyzed by it. See change as opportunity, not
just a threat.
Have enormous energy and the ability to energize and invigorate others. Understand speed as a
competitive advantage and see the total organizational benefits that can be derived from a focus on
speed.

Figure 4.1: GE Corporate Values that Welch expected all employees to carry at all times
119


In a speech given in September 1989, Jack Welch outlined the direction GE should take. In
the times where Asian countries such as Japan are rising in productivity growth, he pointed
that they had to look to culture. Cultural. Thats what productivity has to become here. The
Japanese have the software, the culture which ties productivity to the human spirit which
has practically no limits. He calls for radical movements towards fundamental revolution in
approach to productivity and to work itself. In this speech, Jack Welch articulated the
direction GE should move towards.
120


4.1.2 Specify Tasks, Roles, and Rewards for Employees: Welch set specific target for
managers to hit on various key performance indicators such as growth margins, market share,
and quality.
121
Welch also defined the direction for each division using a Six Sigma business
strategy. Welchs Six Sigma strategy had divisions tasked to follow a defined sequence of
actions to achieve specifically calculated ranges of cost-reduction or profit-growth targets.
Welch executed this Six Sigma strategy with great success in terms of achieving the financial
targets.
122


Welch supported the Six Sigma targets and other specific goals that he set by tying
remuneration to how well the employees performed in terms of the goals. Welch categorised
employees according in A, B, and C performers. The As got raises that were two to three
17
times the sizes given to Bs while Bs got solid increases recognizing their contributions every
year. The A players also received large numbers of stock options at every grant while about
60 percent to 70 percent of the B players got options. C players on the other hand, were
promptly fired.
123


4.1.3. Delegating: Welch delegated tasks and responsibilities to his people, allowing them to
learn by getting their hands dirty. Welch would assign his managers specific performance
targets to meet, and then drop in when least expected to check on the progress towards
meeting these targets.
124


Welch also gave himself and GEs leaders at all level more opportunity to delegate by
increasing the span of control of GEs leaders. The span of control refers to the amount of
direct reports each manager has. A greater span of control meant that the leader had more
direct reports to delegate tasks to. Before Welchs leadership, GE and other large
corporations favoured the traditional number of about six. Welch set the ideal span of control
for GE to be between ten and fifteen.
125


Welch also made decision-making at GE more agile by delegating the task of capital
allocation to managers. Prior to Welchs leadership, GEs practice was that no executive
below the sector level could approve a major capital investment without going to the CEO.
This move gave made GE businesses such as the Major Appliances, Plastics, and Aircraft
Engines faster decision-making, and made them more competitive.
126


4.2 Organic Approach (Average score: 5)
4.2.1 Trusting in Employees: Welch trusted his employees to make the right decisions and
therefore, saw no need in micro-managing his employees. Welch was known for his hatred
for bureaucracy. He believed that managers make the right decisions when they respond to
external demands from the market, instead of relying on internal management to guide their
behaviour. He also relied on and trusted the intuition of his workers.
127


With his employees, Welch encouraged to never stop thinking about the need for change. He
encouraged his employees, even those at factory level, to make decisions themselves. He felt
that if his employees are confident in doing something, they should not hesitate to do what
they think is right. This is because they are probably right.
128

In the plastics business of GE, Welch never trained anyone too specifically. He would give a
person an assignment and provide him with wide latitude. He told those under his command
to do their own thing and never believed in placing restrictions on them.
129


4.2.2 Building Teams to Encourage Cooperative Behaviour: When Welch saw that GEs
medical business was losing money, he decided to form a winning team to rescue the
business. Welch began by placing his subordinate and long-time friend Robert Walt the
responsibility of leading the team. Walt then assembled his team of 80 with minimal
interference and micromanagement from Welch. Walt managed to turn an unprofitable
business into one of GEs jewels with an operating profit of $1.7b.
130


Boundaryless was initiated to eliminate the barriers (between suppliers and customers,
functions, and, race and gender) existing in GE. Throughout GEs history, Welch focused on
rewarding the one person who came up with the idea. However, Boundaryless would make
heroes out of people who recognized and developed a good idea, not just those who came up
with one. Boundaryless placed focus on the team ahead of individual ego and leaders were
18
encouraged to share the credit for ideas with their teams rather than take full credit
themselves
131


Crotonville was a place Jack believed would help in his cultural revolution in the company,
despite its high cost. It was a place with all kinds of people with different stages of
development and different opinions, a place to listen to talk freely and listen to feedbacks.
Many senior executives including Welch learnt about what is going on in the company in this
place. He sees this place conducive to break the ice among people so that they can work in
teams.
132


4.2.3 Providing Support and a Sense of Security: GE was a big company and one of the
advantages of being one is the ability to take on big projects with huge costs and risks but
high potential as well. Welch felt that the quickest way to neutralize that advantage is to go
after the scalps of those who dare to dream and reach but fail. That just reinforces a risk-
adverse culture.
133


Early in Welchs GE career, he became aware of the importance of providing employees with
a sense a security when taking risks. In 1963, when he blew off the roof of a factory Welch
was a nervous wreck. However, Charlie Reed, who Welch had to report to, was incredibly
understanding about the mishap. From there, Welch realized the need to avoid the GE
Vortex. The vortex occurred when leaders started to lose confidence and became unwilling
to take risks or rely on their intuition. Instead of punishment, Welch felt that when people
made mistakes, they needed to be encouraged in order to rebuild their confidence.
134


With GEs Harlarc project, a $50 million project to develop a new light bulb, it seemed to be
the perfect environmental solution. However, the project turned out to be a disappointment.
The light bulb lasted ten times longer than a typical product at a fraction of the energy but
consumers refused to pay the higher price. However, instead of reprimanding the Harlarc
players, GE made a point to reward the people on the team by handing out cash management
awards and promoting several of them.
135


Besides providing security, Welch also made a point to understand and provide support for
his employees. At Crotonville, Welch would start off by getting each employee to introduce
himself. He would try to strike a personal connection and get them talking for a minute then
listen to presentations on their likes and dislikes about the company.
136
Some of the questions
include: What are the major frustrations you deal with that I can help with? and What
dont you like about a career in GE that you would like to see changed?
137


5. Transformational Leadership

5.1 Idealized Influence (Average: 4.83)
5.1.1 Sets example for followers: Welch often advocated that GE face up to reality in all
ways possible, even if this meant going against traditions. He set an example by making
tough calls to remove businesses that were performing poorly, regardless of their historical
significance to GE. He also acquired businesses he deemed profitable which ran counter to
the way GE had been run up until his leadership.
138
Welch did not always make the right
decisions as they did not always produce immediate results of profit or stock growth. When
problems arose, Welch would take full responsibility for the results instead of blaming the
market or subordinates another behaviour which he wanted GEs people to practice even as
they took intelligent risks
139
. As GE grew, Welch exemplified empowering behaviour in the
19
way he entrusted GEs leaders with the running GEs business units. Welch leveraged on
Wrights capability by placing the entire running of NBC into Wrights hands, providing
Wright with the resources necessary to support Wrights initiatives.
140
Leadership by
example would aptly describe a large part of how Welch influenced his followers.

5.1.2 Shows high level of determination: As a manager in the plastics division, Welch was
tasked to evaluate a new plastic product line known as PPO. There was no market demand for
PPO then and Welch could have simply given up on trying to sell PPO. Instead, Welch led
his team to conduct massive research before finally modifying it to a new blend NORYL.
NORYL was so highly successful that it generated $5 million earnings in a few years
141
.
Change is never easy to accept and people within GE as well as the general public criticised
Welch harshly for going against traditions of a company that had an iconic place in
Americas history. In spite of this, Welch persevered in doing what he had to for the future of
GE because he knew that sticking to the old structures of control and bureaucracy was
detrimental to the company
142
. With determination, he was bent on winning over the hearts
and minds of his employees through many initiatives. Welch initiated Crotonville Pit debate
sessions where any employee could bring forth ideas to improve the company or voice out
their frustrations about processes. He also augmented the conduct of company social events
and meetings, making them more informal so as to reduce the gap between himself and his
employees.
143


5.1.3 Demonstrates moral and ethical conduct: During a scandal in 1985, some GE
managers engaged in fraudulent activities and shifted cost overruns under government
contracts. When Welch discovered it, he condemned these unethical acts that he was initially
unaware of. He then distributed Policy 20.10 after the incident, laying down compulsory
standards for business ethics in GE
144
. This sent a strong message to employees that ethical
conduct had to be strictly adhered to in GE.
In addition, those who worked with Welch admired his strong sense of ethics and morals.
Former GE Executive Orden recalled a staff meeting where Welch put down a business
presentation being made. A few minutes into his tirade, he stopped and calmed down. He
acknowledged that he was in a bad mood as he had just received bad news over the phone,
and apologised for taking it out on the presenter.
145

However, there were also speculations that Welch flouted laws and directed fraudulent acts
(e.g. Kidder Peabody Scandal, Time Card Defence Scandal, and Diamond Price-Fixing
Scandal) for the sake of winning. There have been no court rulings that indicate Welch
played a part in these scandals. However, the many cases of fraud that happened under
Welchs leadership raises questions about whether Welch played by the rules as a business
leader.
146


5.2 Inspirational Motivation (Average score: 5)
5.2.1 Articulates a compelling vision: Welch had a vision to make GE a boundaryless
organisation, an organisation with no communication barriers. The boundaryless organisation
would come to support another vision that Welch had for GE which was to instil a learning
culture.
147
Welch frequently shared these two broad visions at company dinners and when he
went down to the factory floor, would articulate his vision and direction to the junior
executives and workers.
148
Welch sought to develop a workforce that was highly involved in
decision-making and often focused on the betterment of everyone.
Welch did not talk about his vision or direction as a strategy in itself but instead, used them in
the grander scheme of things. Welch often focused on constantly challenging and pushing
20
employees to be better. Welch often focused on stretching beyond our limits, ... better than
we ever thought we could be.


Growing Fast in a Slow-Growth Economy

Where are we going? What will General Electric be? What is the strategy?

If I could, this would be the appropriate moment for me to withdraw from my pocket a sealed
envelope containing the grand strategy for General Electric Company over the next decade.
But I cant, and I am not going to attempt, for the sake of intellectual neatness, to tie a bow
around the many diverse initiatives of General Electric

It just doesnt make sense for neatness sake to shoehorn these initiatives and scores of other
individual business plans into an all-inclusive, all-GE, central strategy one grand scheme.
What does relate and will enhance the many decentralized plans and initiatives of this
Company isnt a central strategy, but a central idea a simple core concept that will guide
General Electrics in the 80s and govern our diverse plans and strategies.

In trying to find a way to express these ideas and to share them with you, we found a
powerful letter written by a Bendix planning manager to the editor of Fortune magazine. I
want to share it with you because it captures, in words I find difficult to improve on, much of
my own thinking about strategic planning for a company like General Electric. The letter
reads like this:

Through your excellent series on the current practice of strategic planning runs a common
thread: the endless quest for a paint-by- numbers approach, which automatically gives
answers. Yet that pursuit continually fails.

Von Clausewitz summed up what it had all been about in his classic On War. Men could not
reduce strategy to a formula. Detailed planning necessarily failed, due to the inevitable
frictions encountered: chance events, imperfections in executions, and the independent will of
the opposition. Instead, the human elements were paramount: leadership, morale, and the
almost instinctive savvy of the best generals.

Prussian general staff, under the elder Von Moltke, perfected these concepts in practice.
They did not expect a plan of operations to survive beyond the first contact with the enemy.
They set only the broadest of objectives and emphasized seizing unforeseen opportunities as
they arose strategy was not a lengthy action plan. It was the evolution of a central idea
through continually changing circumstances.

Business and war may differ in objectives and codes of conduct. But both face involve
facing the independent will of other parties. Any cookbook approach is powerless to cope
with independent will, or with the unfolding situation of the real world.

Now let me tie this thinking this notion of strategy not being a lengthy action plan but the
evolution of a central idea through continually changing circumstances to the management
of the General Electric Company.

When we talk about quality and excellence, we mean creating an atmosphere where every
21
individual across the Company is striving to be proud of every product and service we
provide. I think it really means all of us stretching beyond our limits, to be, in some cases,
better than we ever thought we could be. I see it happening everyday in almost every way
all over this Company.

This excellence theme leads to our third and final value, what I only can call the human
resource element where we have been creating and will increasingly create, atmosphere
where people dare to try new things where people feel assured in knowing that only the
limits of their creativity and drive, their own standards of personal excellence, will be the
ceiling on how far and how fast they move.


Fig. 5.1 Excerpt of speech presented to Financial Community Representatives, Hotel Pierre,
New York City, December 8, 1981.

5.2.2 Shows how the vision can be achieved: Welch had to show followers that a
boundaryless organisation was achievable. One of the ways that Welch did this was by
initiating Corporate Executive Council (CEC) meetings in 1986. The CEC brought together
about thirty of GEs top executives from the companys ten major businesses. CEC meetings
were convened quarterly and the sessions were kept loose, with just a broad topic and no
formal agendas. Junior executives were given the opportunity to make presentations at times,
and ideas would be freely exchanged between businesses in GE.
149
Welch also showed
followers that boundarylessness could be extended beyond GE through plagiarism, in the
sense that GE could adopt successful ideas from other companies and apply them to GEs
businesses.
150

Welch also showed that his vision of moving GE into the service sector was possible. He
showed employees as well as the public that this could be done when he convinced the
Hospital Corporation of America to let GE service all of the medical systems provided by GE
Medical
151
. This was hence the first major opportunity for GE to break out of reliance on
products, and move into service.

5.2.3 Shows confidence that goals can be reached: Welch showed much confidence that his
goals were attainable through his actions and speeches. In his address to the Financial
Community Representatives in 1981, Welch was confident that the central idea being
number one or number two - was more than an objective a requirement. Welch showed
much confident that the goals he set would be accomplished and that GE would be the
locomotive pulling the GNP.


In this slower growth environment of the 80s, as companies yes as companies and countries
fight for that reduced volume; fight for their own unemployment problems, there will be no
room for the mediocre supplier of products and services the company in the middle of the
pack. The winners in this slow-growth environment will be those who search out and
participate in the real growth industries ad insist upon being number one or number two in
every business they are in the number one or number two leanest, lowest- cost, worldwide
producers of quality goods and services or those who have a clear technological edge, a clear
advantage in a market niche.

The challenge for General Electric when we participate in these real growth industries, when
we are number one or number two, is to ask ourselves how big, how fast? Yes, how many
22
resources people and money can we put behind the opportunity to ensure that we can
capitalize on this leadership position.

The managements and companies in the 80s that dont do this, that hang on to losers for
whatever reason tradition, sentiment, their own management weakness wont be around in
1990. Think about the fact that in the high growth period between 1945 and 1970, almost
one-half of the companies that would have been on a Fortune 500 roster disappeared either
through acquisition, failure, or slipped quietly off the list due to lack of growth.

We believe this central idea being number one or number two more than an objective a
requirement will give us a set of businesses which will be unique in the world business
equation at the end of this decade.

General Electric is a set of diverse enterprises that has to be the envy of every single product
line business in America, from oil to high technology. Most of them have been trying to
become broader than they are, but have difficulty finding the route. We are already there a
successful, widely diversified, highly profitable, industrial and financial enterprise. By any
measure, we outperformed the GNP and S&P400 by a good margin in the 70s. We have the
commitment and the potential to do better in the 80s. For those of you who like in some way
to associate GE and the GNP, if anything, we will be a locomotive pulling the GNP, not a
caboose following it.

I predict that you will come to see this Company from the same perspective and I invite you
to measure and judge us by how well we progress along the path I have tried to describe.


Fig. 5.2 Excerpt of speech presented to Financial Community Representatives, Hotel Pierre,
New York City, December 8, 1981.

Welch also gave pep talks at Crotonville and GE Work Out Sessions, sharing his confidence
that GE could attain the goals he had in mind. He relished in success stories of how
productivity has increased through reducing bureaucracy, as well as the empowering of
workers to make decisions to inspire similar confidence in the employees.
152
Welch also put
together a Services Council that brought together business leaders in the service sector to
develop GEs service capabilities, showing confidence and assuring the initially doubtful GE
engineers that moving in the direction of service was possible and profitable.
153


5.3 Intellectual Stimulation (Average score: 5)
5.3.1 Helps followers become more innovative and creative: Welch recognized that the
employees working in the field were a vast source for innovative and creative business ideas
that could take GEs performance to the next level. For that reason, Welch dismantled a large
number strategic planning staff at GEs headquarters in Fairfield, and brought strategic
planning down to the field level at various plants.
154

While restructuring and relocating planning staff in terms of documented job titles was
necessary, Welch also personally encouraged employees at the field level to have their own
minds and speak up, rather than totally leave planning to the managerial staff and act as
mindless drones.
155
Welchs extensive scope of empowerment also supported this as it
encouraged innovative brainstorming of ideas. Hence both effects worked together to
dramatically boost productivity at GE.
156


23
5.3.2 Gets others to look at problems from different angles: Like all big companies, GE
had ranks and organisational structure that distinguished managers from lay-workers. Yet,
Welch was a transformational leader by consulting multiple opinions when problem solving.
He wanted everyone to have the same set of facts to personally get involved in shaping the
plans that would affect them.
157

A process called wallowing was commonly adopted at GE, whereby GE staff of various
ranks and functional departments came together to discuss business problems. Wallowing
brought everyones specialized knowledge and personal experiences to the table, and offered
all participants with refreshing insights on a single matter.
158

In essence, Welch wanted to make sure that everyone on the team, regardless of rank, was
thinking, and providing their take on a problem. As much as he could, Welch ensured that he
had all angles covered making decisions.
159


5.3.3 Challenges others to re-examine critical assumptions: Even as Welch was ascending
the ranks of GE, he never let himself or his subordinates settle for the status quo. He
constantly got people asking themselves fundamental questions about their business.
Questions such as Why did they have to sell the product the way they were doing Why did
it take 60 days rather than 30 to deliver the product?
160


As CEO, Welch led the way in challenging long-standing assumptions that possibly hindered
GEs growth. One example was the idea that GEs growth should comes from developing
divisions within GE, and not from acquiring outside businesses. This was the way that GE
operated and instead of following traditions, Welch began a series of acquisitions that came
to support the growth of businesses already within GE.
161

Welch exhorted his employees to carry a similar entrepreneurial spirit that refused to stay
passive and silent in the face of tradition and hierarchy. He encouraged employees at the
factory level to make decisions for themselves, and urge changes upon their direct superiors
where they thought that there could be change for the better.
162


5.4 Individualized Consideration (Average score: 4.17)
The success of Welchs individualized considerations could be seen in the number of Jack
Welch protgs that went on to take on significant roles within and beyond GE. It bore
testament to how well Welch groomed his people. Some prominent examples in corporate
America include Mark Bulriss (CEO of Great Lakes Chemical), Robert Collins (Chairman of
Scott Technologies), David Cote (Chairman of Tupperware, and Bob Wright (CEO of
NBC).
163


5.4.1 Pays attention to the developmental needs of the followers: Welchs commitment to
developing his followers was evident from the investments he made into training and
education programmes for GE staff. Under Welchs leadership, GE spent close to $1 billion
each year on these programmes.
164
Beyond making the hard capital investments, Welch got
personally involved with coaching his staff. Welch would frequent Crotonville, conducting
Manager-Development courses and engaging executives who were there on courses. He also
made use of his time at Crotonville to identify high-potential individuals.
165
Welch always
added a personal touch when giving guidance to his staff. He knew them by name, and would
often handwrite personal messages to praise them for progress made, and provide guidance as
necessary.
166


5.4.2 Delegates assignments as opportunities for growth: Welch delegated tasks and
responsibilities to his people, allowing them to learn by getting their hands dirty. He gave his
24
business heads full autonomy and the power of decision making while still occasionally
checking on the progress of their assigned tasks.
167

Welch did not just assign tasks and goals for followers to meet and got them involved in
setting the very goals that would be used to measure their progress. He challenged them to
not just settle for do-able goals, but reach for seemingly impossible ones as well. Even if
they did not fully reach their goals, he would commend them for significant progress made.
Welch not only delegated responsibility but also allowed for employees to be involved in the
goal-setting process as well. This enabled his subordinates to learn about themselves and
their business much faster than they otherwise would have.
168


5.4.3 Recognizes and leverages on individual differences in terms of needs and desires to
enhance growth and development: Welch recognized that not all his followers had the
same style or perspective as he did. Instead of trying to mould people with the same mould,
Welch provided opportunities, support and encouragement to all. He reminded all employees
that they did not have to be of a certain Jack Welch-type to be successful or recognized in the
company.
169

While Welch wanted followers to bring their own personalities and leadership styles to GE,
sharing GEs corporate values was non-negotiable. Welch could tolerate differences in the
problem-solving approach, but felt that GE had no room for those who did not share GEs
values. The strong culture in GE meant that some employees, for instance those who worked
with strong bureaucratic styles, could not be accommodated and simply had to go.
170

However, Welch did not take the needs or desires of employees especially when restructuring
the company. Welch earned the nickname of Neutron Jack amongst GEs employees when
his massive restructuring policies resulted in one hundred thousand employees losing their
livelihoods. GE insiders as well as the press often cite this statistic as a mark of how Welch
ignored employee welfare for the sake of profit.
171


6. Impact

6.1 How Personality Traits shape Influence Tactics
Through the use of both hard and soft influence tactics, Welch impacted and influenced his
employees. His personality traits shaped the way he employed these influence tactics.

6.1.1 Conscientiousness and Extraversion manifested in Hard Influence Tactics: Welch
was extremely high on extraversion. He was competitive when it came to work and assertive
when it came to people. Welch was also highly conscientious. He had the capability to
develop business plans that would help GE win and also possessed the drive to see these
plans through. This combination of traits made him a boss who was hard on his employees
who demanded results. Welch pressured his employees and legitimated harsh policies.
Managers who did not perform and employees who were in underperforming divisions lost
their jobs. On the flip side, Welchs hard tactics rewarded employees who performed well,
and ensured that these top performers were retained.

6.1.2 Low Agreeableness in relation to Hard Influence Tactics: Welchs low
agreeableness is likely to be related to the fact that Welch employed hard influence tactics
that put pressure on employees to perform. Renowned Management Consultant Tom Peters
of In Search of Excellence fame described Welchs style as Management by Fear.
172


6.1.3 Openness to Experience manifested in Soft Influence Tactics: Besides extraversion,
openness to experience was the only other trait that Welch obtained a high score for. Welch
25
was a broad-minded thinker who sought to hear ideas from his employees. The combination
of his extremely high extraversion and openness to experience made Welch a highly unique
leader. On one hand, he was hard on his employees but on the other, worked hard at stripping
out layers of management hierarchy and removing horizontal boundaries to improve the
communication of ideas within GE. He personally went down to the ground to hear ideas
from the employees. This allowed for Welch to connect with GE employees and strengthen
his referent power over them, creating an interesting mix of a fear of Welch and his harsh
policies, and respect for him as a leader who listened to followers.

Welch liked to see subordinates challenging superiors if they felt that there was a better way
to get things done. This, alongside with his assertive personality, resulted in Welch being a
leader who was both aggressively confrontational and consultative. Meetings with Welch
have been compared to fast-paced physical games of hockey where he would chase
subordinates around the room, hurling arguments and objections at their ideas. Yet, Welch
would be delighted to see his employees fight back and justify their ideas.
173


6.1.4 Low Emotional Stability manifested in both Hard and Soft Influence Tactics:
Welch was known for being temperamental and aggressive towards his employees when he
was not getting the results he wanted. His low emotional stability led unrestrained emotional
outbursts that made employees feel threatened, hence putting pressure on them to perform.
Welch also did not restrain his zeal and passion for work when communicating with
employees. Employees found his passion infectious, and this enabled Welch to exercise
inspirational appeal over them.

6.2 How Personality Traits Drive Transformational Leadership
According to Bass, transformational leaders are leaders who uplift the morale, motivation,
and morals of their followers, as well as foster autonomy and challenging work.
174
Welchs
personality traits enabled him to make the above impacts on his followers, qualifying himself
as a transformational leader.

6.2.1 Conscientiousness, Extraversion, and Low Emotional Stability enabled
Inspirational Motivation: Welch had the desire to win and the ability to plan for success.
However, Welch would not have been able to bring GE to success if he did not get GEs
employees to buy into his vision. With his extroverted personality, Welch was able to
articulate his vision as well as the plans necessary to achieve the vision to GEs employees.
Welch was convincing when he articulated his vision as he spoke with passion.

6.2.2 Extraversion and Conscientiousness compromised Individual Consideration:
Welch articulated a set of corporate values that he believed would enable GE to win. Welch
was not willing to make any accommodations for employees who had working styles that ran
counter to these values, and fired managers who exhibited values (e.g. preference for
bureaucratic reporting procedures) that opposed those present in the company vision.

Welch believed that retaining only number one or number two businesses in GE was the
way to succeed. His insistence on this approach resulted in some of GEs traditional
businesses being sold off, and one hundred thousand employees losing their livelihoods.
Many of these employees had been loyally working for GE for a long-time.

This suggests that
in Welchs eagerness to win, compromised on individualized consideration for his employees.

26
6.2.3 Openness to Experience drives Intellectual Stimulation: Welchs openness to
experience made him keen in seeking ideas and perspectives from his employees. He
encouraged employees at all levels to think of how their work processes could be improved,
and to share these ideas with their superiors.

6.3 Empowerment: A Balanced Approach
As a transformational leader, Welch shared and delegated power to subordinates in GE to
achieve results. Spreitzer and Quinns well-recognized research on empowerment suggests
that simultaneously facilitating both the mechanistic and organic approach is the key to good
leadership.
175
Our study shows that Welch balanced both approaches very well, with a slight
incline towards using organic approach to empower his employees. Welchs average score
for the mechanistic approach was 4.83, whereas his average score for the organic approach
was a full-score of 5.0.

The slight lack in the mechanistic approach score can be traced to the point of Specify Tasks,
Roles, and Rewards for Employees, where Welch only scored 4.5. Welch specified tasks
and rewards that would guide employees towards achieving his vision, but he did not do this
to the extent of micro-managing his employees.

6.4 Impact at Various Levels
Impact on Personal Level: Thus, in short as mentioned above, Welch impacted his
employees in different ways. His hard style of leadership and pursuit in winning drove his
followers to reach their fullest potential as many were inspired by traits of his. However, at
the same time, his strong focus on such goals sometimes resulted in him sacrificing his
employees, resulting in much dissatisfaction.

Impact on GE: His impact on GE was also undeniable. From a company with a value of $41
billion to a company worth more than $410 billion, Welch brought GE to where it is today.
GE is now leading in all industries they have their business in. His decisiveness and focused
pursuit of goals to make GE the most valuable company in US was the key factor. The
growth in the company not only positively affected the shareholders with increased wealth,
but also impacted his employees. Because of the positive trend of the companys growth,
wealth was given to employees through salaries and bonuses.

Impact on Corporate America: The impact of Welch has expanded to impact the nation.
Loyalty from various companies and business leaders of different sectors was evident. Welch
was not only a model to his employees but to various business leaders as well. His visions,
goals and strategic planning, the way he dealt with his employees, and how he exerted his
influence on others had great influences on many business leaders.

7. Conclusion

7.1 Leadership V.S. Management
When Welch had just become CEO, he was eager to get rid of the lengthy budgeting and
planning processes that had long been practiced at GE and wanted to focus on vision and
strategy. Welch felt that the traditional, lengthy processes for getting ideas approved caused
GE to miss out on business opportunities.
176
To allow employees to better seize opportunities,
Welch gave subordinates greater autonomy allocating their resources.
177
Also, by designing
strategies and visions, it aided employees in decision-making and effectively replaced the
previous lengthy processes. In enforcing this, Welchs most enduring challenge was winning
27
over the hearts and minds of the thousands of middle managers.
178
His initial efforts in 1981
were unsuccessful, as many could not see why Welch was straying from tradition. He
persisted in his efforts, using management de-layering, and other approaches to bridge
communication gaps with middle managers and junior executives. These efforts eventually
paid off and GE employees at all levels came to share in Welchs vision.
179


Welch realigned GE away from rigid staffing and instead towards a boundaryless
organisation. To support the granting of greater autonomy to subordinates on the ground,
Welch disbanded the rigid centralised planning staff at GEs headquarters in Fairfield. He
trusted people on the ground to do the strategic planning for their own domains of work. This
decentralisation of planning empowered employees, giving GE the best of both worlds: the
resources of a big corporation, and the agility of a small business.
180
Under Welchs
leadership, GE pioneered the boundaryless organisation. In his boundaryless organisation,
functional departments and divisions stopped competing to outshine each other but instead,
worked towards a common goal. The more employees shared their ideas and opinions, the
easier it was for them to achieve this goal.
181


Welch was a highly consultative leader who possessed an open mind, a listening ear, and
solid values. He sought to establish an open exchange of ideas amongst GE employees and
would even get shop floor workers to share ideas on how to improve the business. This
reduced emotional distance between him and his employees. He valued constructive conflict
of opinions and was open-minded.
182
While Welch welcomed different ideas on how things
could be done, he was intolerant of employees whose values were not aligned with that of GE
because of his values.
183


Management Leadership
Direction Planning & Budgeting
Keeping an eye on the
bottomline
Creating Vision & Strategy
Keeping an eye on the
horizon
Alignment Organising & Staffing
Directing & Controlling
Creating Boundaries

Creating Shared Culture &
Values
Helping Others Grow
Reducing Boundaries
Personal Qualities Emotional distance
Expert mind
Talking
Conformity
Insight into organisation
Emotional connections
(Heart)
Open mind (Mindfulness)
Listening (Communication)
Nonconformity (Courage)
Insight into Self (Character)
Fig. 7.1: Management VS. Leadership, adapted from Daft (2011).
184


7.2 Organisational Culture
GEs visible and invisible culture was shaped extensively over the years. Its rich history
goes back to Thomas Edisons founding in 1876. There were visible stories and symbols that
GE personnel proudly shared with the next generation. Young children learn in school that
GE Founder Edison revolutionised the world with his discovery of the incandescent electric
lamp while corporate America marvelled at how GE is the only company among the original
twelve stocks in the Dow Jones Industrial Average that remained there on the Dow Jones
100
th
Anniversary.
185

28

As a CEO that inherited a company with many heritage symbols, Welch put great effort into
shaping the invisible aspects of GEs corporate culture. He expressed a set of values that
he expected all GE employees to live by.
186
Welch also reshaped GEs culture towards being
achievement-oriented with his number one or number two in the industry policy. This
culture of being achievement driven was so strong that businesses that were significant as
historical symbols in GEs culture, such as household appliances, were sold off.
187


Visible symbols, stories, and ceremonies may be deeply embedded parts of a companys
culture. Welch showed that a company like GE can celebrate its rich heritage without being
held back by a need to conform to traditions. Welch created the change he wanted to see by
addressing the invisible aspect of GEs culture. He used an inside-out approach that planted
values he articulated into GEs people. GE employees still celebrate and take pride in its rich
history even though some visible heritage symbols were lost.


Fig. 7.2.i: Household Appliances and other GE businesses that
Welch sold off were heritage symbols at GE
188


Welchs GE vitality curve reinforced a strong corporate culture of high-performance and
achievement. With the vitality curve, consistent top performers found their salaries and
bonuses increasing. This motivated employees to strive for performance that would get them
in the high-end of the vitality curve.
189


Welch decisions to sell off historically significant businesses, to fire well-performing staff
who were not aligned with company values, as well as to fire underperformers in the low-end
of the vitality curve, clarified the cultural values and beliefs that GE stood for.

Fig. 7.2.ii: GE and the Four
Corporate Cultures, adapted
from Daft (2011)
190
.




Overall, GEs corporate culture has been driven by
many external factors. Academic literature on
business leadership recognizes four types of
organizational culture Clan, Bureaucratic,
Adaptability, and Achievement. Under Welchs
leadership, GE was a company that had a high external
focus the culture was a composite of Adaptability
and Achievement. Adaptability was evident in
responsiveness to consumer demands, and market
trends. Management was also responsive to the needs of
employees, empowering them and giving them
autonomy. Achievement was evident in Welchs
audacious number one or number two goal, and GEs
performance ranking systems.
29

7.3 Change Management
The new leadership paradigm places importance on change management as opposed to
the old one, which advocates the maintenance of stability in an organisation. Welch
recognized this right from the start of his tenure as GEs CEO, and knew that he had to get
rid of all old procedures that were familiar but unnecessary. He had the ability to see the need
for change as well as bring about changes successfully.

As highlighted in various evidences throughout the report, Welch had effectively emulated
change management. For instance, he had targeted modifications in the employees nature
of work in order to get them accustomed to an environment of continuous change. The fiery
debates of ideas at Crotonville Pit encouraged constructive arguments and generated
innovative ideas. The GE Work Out also involved creative analysis of critical business issues
where business leaders challenged participants to solve problems or achieve a goal.
191
All of
these initiatives headed by Welch encouraged employees to question the old way of doing
things and encouraged employees to get involved and take action.

Another two cases where Welch exemplified change management were when he targeted
changes in worker attitudes, as well as when he de-layered the hierarchical
organisational structure. He discouraged bureaucratic styles of management as it was
impedimentary in breeding creativity within GE.
192
He did a major overhaul on worker
attitudes, highly empowering them and giving each of them the power to make decisions.
Coupled with de-layering the company, this greatly sped up the companys responsiveness to
crises as information was now transmitted and accessed easily. This was crucial in the
process of change management.

While gearing the company towards major reforms, Welch faced overwhelming resistance
to change due to the fear of the unknown. To counter this, Welch utilized certain methods
in line with Kotter and Schlesingers methods.


Change Management
Fig. 7.3: A Change Management Process, adapted from Koh
193
(2011).

Competitive
environment
Fast-moving changes
in environment
Too bureaucratic &
rigid
Recognize need for
change
Employees' Nature of
Work
Human Resources &
Organizational
Structure
Target areas for
change
Education &
Communication
Participation &
Involvement
Facilitation & Support
Manipulation
Coercion
Deal with anti-
change resistance
30
One method that Welch employed was education and communication. He provided
adequate information, clearly communicating his intent and his reasons for change. This was
an uphill task given the size of GE. Welch also actively participated in the change. He
involved himself in many meetings, at the Crotonville debates, and at the ground level by
taking time out to speak to employees and guide them. By providing immense facilitation and
support, people gradually become more willing to move out of their comfort zones. This
helped increase employees understanding of change, as well as their commitment to it. As
time passed, the number of employees who supported Welchs revolution grew exponentially.
In response to the anti-Welch camp, he used the manipulation method by presenting
selective data that supported the fact that change is favourable. Whenever he had
meetings with the pro-bureaucracy employees, he would add positive results from his
initiatives to reports or handouts. He wanted to remind employees that his strategies for
change were effective.

7.4 Servant Leadership
A servant leader is defined as one who contributes to the well-being of people.
194
This is in
contrast to a leader who leads based on authority and power. While Welch was as a forceful,
ruthless and demanding leader, which earned him the nickname of Neutron Jack, he
displayed several instances of servant leadership. Servant leadership encompasses having a
strong commitment to the growth of people, possessing stewardship, good foresight, a
strong sense of awareness, as well as being able to conceptualize.

Being a servant-leader, Welch was highly committed to the growth of his people. He had
believed that the employees had unending potential, and hence highly empowered them. He
gave them much leeway to develop their own ideas and make decisions. In developing his
employees, Welch had also displayed stewardship through the strategic major allocation
of resources for training and development programmes. He utilized GEs resources
prudently and constructively, claiming it was worth the investment even though it amounted
to a billion dollars each year.
195


In addition, he was a servant leader that had high self-awareness of his own strengths and
limitations. For instance, he knew that he was strong in leadership and in competitiveness,
and hence utilized this to bring GE to greater heights. He was also aware of his weaknesses in
self-control and managing his temper, and hence made it a point to humbly apologize
whenever he lost his temper.

Coupled with his strong foresight and strong ability to conceptualize, Welch was able to
design visions and plans to align employees to his visions, for instance the 20-70-10 Vitality
Curve. He rewarded employees with company options, for instance, for their high work
performance. His foresight and conceptualization was for the good of GEs future and in the
long run provided benefits to existing employees. This proved that he was a good servant
leader.

While Welch displayed certain traits of a servant leader, he was lacking in other traits such as
empathy. Due to Welchs personality, he could not empathize with the feelings and emotions
of others and displayed much insensitivity. This was especially so towards employees in
businesses that Welch felt had low profitability. Overall, however, he had still displayed
servant leadership to a large extent.

31


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