General Electric and How They Espouse Organizational Behavior Concepts Essay
In this age where globalization and empowerment seem to be mantra of all organizations, more and more companies have come to realize the importance of breaking away from the traditional organizational hierarchies. Most people would like to function more effectively in organizations and to contribute to more effective functioning of the organizations themselves. It seems logical that the more we know about organizations and the way they operate, the better should be our chances of coping with them adequately and of achieving our own goals within them and for them.
This process of creating knowledge is what theories of organizational behavior attempt to do (Miner, 2002, p. 4). Established in 1892, General Electric Co. (GE) has emerged to be one of the most successful companies that has already spanned in a global scale. Like all organizations, GE has experienced some ups and downs within their organization throughout their history. Despite the squabbles that transpired, GE survived and is presently a diversified industrial corporation. The company primarily develops, manufactures, and markets electric generation, transmission, distribution, control and utilization products.
The company also manufactures products such as major appliances; lighting products; industrial automation products; medical diagnostic imaging systems; bioscience assays and separation technology products;
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The company primarily operates in the US, Europe, Pacific basin and other parts of Americas. As its main office is in Fairfield, Connecticut, GE employs about 319,000 employees. Still a profitable company, GE recorded revenues of $163,391 million during the fiscal year that ended December 2006, an increase of 10. 4% over 2005. The operating profit of the company was $43,906 million during fiscal year 2006, an increase of 16. 2% over 2005. The net profit was $20,829 million in fiscal year 2006, an increase of 24. 6% over 2005 (Datamonitor, 9 May 2007). The immense success of GE is recognized worldwide.
Throughout the years, its former chief executive officer Jack Welch had strived to build the multinational company for more than 40 years. In fact, he claimed that he never had a fulltime job anywhere else. During Welch’s career, the public image of a chief executive officer was subject to numerous transformations and reincarnations. Certainly, Welch was an important figure that engineered General Electric to be one of the best American companies ever (Harris and Power, 1986). General Electric’s greatest advantage is that it is a well-known a global brand.
A BusinessWeek-Interbrand ranking of top 100 global brands in 2005 ranked General Electric at fourth position, behind Coca-Cola, Microsoft and IBM. The BusinessWeek-Interbrand combine valued General Electric brand at $46,996 million in 2005. General Electric is known more for its industrial products such as jet engines and gas turbines, but it has a significant presence in consumer businesses such as home appliances and consumer finance. The company sells products such as refrigerators and dishwashers to consumers. In addition, General Electric markets financial products such as credit cards and, mortgages.
A global brand strengthens General Electric’s competitive position in the consumer markets. Fact remains that GE’s secret to success is how their company and leaders stick to their imbibed organizational behavior principles. Organizational behavior principles have helped its managers understand the complexity within organizations and that most organizational problems have several causes. Organizational behavior principles play an essential role in assessing and increasing organizational effectiveness, which is a central responsibility of and focus for all managers (Sims, 2002, p.
2). This is why this paper will explore three of the major organizational behavior principles that GE has incorporated that had spelled their unprecedented successes for the past years. Group Behavior As organizations are composed of people, every organization has a group that is typically management-directed. A group is defined as two or more freely interacting individuals who share collective norms, share collective goals, and have a common identity (Kinicki & Williams, 2003).
Although organizations typically form groups in order to accomplish work-related tasks, work groups may serve a variety of other purposes for their members, such as affiliation and social support. In GE’s case, it was Jack Welch who established the set of group behaviors that the company espouses to this very day. In 1984, Welch established 150 GE businesses worth more than $5 billion. By 1986, he had axed 130,000 jobs — a quarter of the company’s personnel. But returns for 1985 proved he was on the right track. That year, GE was the fifth-most profitable U. S. company (Slater, 1994).
Tyner (2000) had written that some critics saw beyond GE’s strong performance to evaluate Welch’s career. Tyner cited James J. O’Toole, in his book Leadership A to Z (1999), said that Welch’s leadership missed the mark in one significant area. He said that there should be “a moral component to leadership and that moral component has to do with gratitude” to your subordinates. It should deal with “how they are treated, viewing the organization as something larger than merely a moneymaking machine”. O’Toole (1999) thought that Welch ignored that aspect of when it comes to hi decisions.
However, Tyner evaluated that Welch’s transformation initiatives involved retooling employees’ mind-sets that affected their group behavior: We are trying to get the soul and energy of a start-up into the body of a $60 billion, 114-year-old company,” he said. “We must have every good idea from every man and woman in the organization; we cannot afford management styles that suppress and intimidate (O”Toole, 1999). More importantly, it was Welch who insisted on using Six Sigma approach to their business General Electric’s dedication to Six Sigma has resulted in significant improvements.
In 1995, he launched the Six Sigma program to find defects in GE processes and pare them to as close to zero as possible. Tens of thousands of GE workers were trained in this statistical approach. It saved GE hundreds of millions of dollars and surpassed Welch’s expectations. Jack Welch credited the Six Sigma initiative with raising the company’s operating profit margins. Success stories abound within GE. GE Medical Systems introduced a $1. 25 million diagnostic scanner, a product designed from start to finish using Six Sigma design principles.
The chest scan that took 3 minutes (180 sec. ) now takes only 17 seconds. At GE Plastics, a Six Sigma team improved a process to increase production of plastic by 1. 1 billion pounds. Not only did this add to general increased revenue, but the increased production influenced acquisition of the contract for the coverings of the new Apple product, iMac (Eckes, 2001, p. 6). GE has attributed a host of other benefits to Six Sigma. Inventory turns were at 5. 8 and now are at 9. 2, and getting better. At the core of Six Sigma is improvement in effectiveness and efficiency.
The ratio of plant and equipment expenditures to depreciation is one measure of efficiency. At GE this number dropped to 1. 2 and is anticipated to be below 1 as Six Sigma projects uncover and remove the “hidden factory” of processes that have to rework parts and services. How does an organization achieve Six Sigma methodology? Many of its proponents have made this approach seem more difficult than it needs to be. A common theme that Jack Welch has echoed in his many talks to GE employees is practicing the “rigor and discipline” of Six Sigma (Eckes, 2001, p. 6).
As a leader, Tyner (2000) shared that Welch’s secret was to look at his role as that of a facilitator. He said: “My job is to put the best people on the biggest opportunities and the best allocation of dollars in the right places. That’s about it. Transfer ideas and allocate resources and get out of the way. ” In establishing group behavior within and organization, leaders need to be energetic and to operate on an even keel. Leaders should not crave power as an end in itself but as a means to achieving a vision or desired goals. Leaders have to be very ambitious and have a high need for achievement.
At the same time, they have to be emotionally mature enough to recognize their own strengths and weaknesses and they are oriented toward self-improvement. Leaders also must not be easily discouraged when they make the wrong decisions. They need to stick to a chosen course of action and to push toward goal accomplishment. This why Jack Welch exemplified a good decision maker as he lead his company to its desired status today. Although he axed numerous employees before, his decision was respected and highly regarded by his group because he took that risk. Instead of lowering their morale, GE even performed better as a group.
Communication Based on a synthesis of successful management experiments by General Electric and its partners, a group of consultants and scholars put together a list of the changes firms need to consider if they are to compete globally in rapidly changing technical settings (Ashkenas et al. , 1995). They used the buzz words of GE and labeled their package the “boundaryless organization. ” In essence, the challenge to management is to eliminate barriers vertically, horizontally, externally, and geographically that block desired action. Specifically, an overemphasis on vertical relations can block communication up and down the firm.
An overemphasis on functions, product lines, or organizational units blocks effective coordination. Maintaining rigid lines of demarcation between the firm and its partners can isolate it from others. And, of course, natural cultural, national, and geographical borders can limit globally coordinated action. The notion of a boundaryless organization is not to eliminate all boundaries but to make them much more permeable. The concept of “boundarylessness” has been GE’s way of improving their communication as they took in a virtual organization in itself.
According to Welch, a boundaryless company is one in which “We knock down the walls that separate us from each other on the inside and from our key constituents on the outside”, in other words, a company where there are no “turf” issues between people or groups of people (Slater 1994, p. 107). A boundaryless company removes barriers between company functions, removes barriers between organizational levels, removes barriers between company locations, and reaches out to important suppliers and makes them part of a single process (Slater 1994, p.
108). To remove “horizontal boundaries” between different company functions and locations, or “internal barriers,” Welch introduced cross-functional teams, project teams, and partnerships (Tichy 1993, p. 118). To remove “vertical boundaries” between organizational levels, or the “ceilings of a hierarchy”, Welch “delayered” the hierarchy by removing unnecessary levels of management, reduced perks for executives such as preferred parking spaces, and broadened gain-sharing incentive systems to include all employees (Tichy, 1993, p.
118). To remove “external boundaries” between GE and its suppliers, customers, and other external stakeholders, Welch created strategic alliances, measured customer satisfaction, and built teams with GE customers and suppliers (Tichy 1993, p. 118). The concept of a boundaryless GE was far more than merely getting rid of waste, Welch felt that it was the only way for GE to achieve its high productivity goals (Slater 1994, p. 108). Knowing what an organization needs was GE’s goal. The next phase is to begin a process of improvement.
Employees, managers, and executives need to ask how they can improve with others both inside and outside the firm. They need to prioritize before they begin implementation. And once improvements are started, they need to recalibrate to ensure that a new set of boundaries does not emerge. Of course, the notion of a virtual and boundaryless organization is very different from the conditions found in and across most corporations. A movement toward cooperating to compete and removing barriers calls on firms to learn. So we now turn to how firms do this.