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Downsizing the company

How difficult a challenge did Welch face in 1981? How effectively did he take charge? When Jack Welch assumed as CEO of GE, he had the challenge of revitalizing the competitiveness and productive competency of the company. This entailed the modernization and streamlining of operations, downsizing the organization, reduction of payrolls and stringent efficiency measures. Though there was significant criticism and resistance to Welch’s management in his early years as CEO, he was able to earn the support and respect of not only GE managers but other companies as well.

What is Welch’s objective in the series of initiatives he launched in the late 1980s and early 1990s? What is he trying to achieve in the round of changes he put in motion in that period? Is there logic of rationale supporting the change of process? His management decisions were motivated by his opinion that leadership of the industry was the only option for the company. Like many other American companies in their industry, GE was not associated with modern management practices and considered conservative.

With the entry of stiff competition from Asia, GE was being challenged not only to assert to protect its existing markets and at the same time develop

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new competitive competencies. Welch believed that GE needed to mitigate these advantages by implementing its own efficiency measures. How does such a large, complex diversified conglomerate defy the critics and continue to grow so profitably? Have Welch’s various initiatives added value? If so, how? Welch has been credited for the success of GE during his tenure as CEO.

Under his management GE was considered not only as an industry leader but also became a model for other companies. However, there should also be realization that the company’s success can not be attributed solely to Welch or to the measures that he implemented. Moreover, there should also be realization that his choices, particularly those that involved downsizing the company and reducing pay, had its price. What is your evaluation of Welch’s approach to leading change? How important is he to GE’s success? What implications for his replacement?

For a large company such as GE, the implementation of these measures need to be universal but at the same responsive to unique requirements of individual business interests. Critics of Welch point out that the degree of success of the measures was distorted since Welch would often opt to sell or to shut down operations when outcomes did not suit his measures. When Welch turned over the reigns of the company, there was great deal of expectation that his replacement, Jeffrey Immelt, to be continue Welch’s success.

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