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Reflection – Impact of the CEO in General Electric (GE) – Sowjanya Kodidala

by on October 17, 2007

The impact of CEO in General Electric (GE)
The class discussion about the CEO of GE was so interesting that it made me to think about the following questions –
What was the impact on GE while Jack Welch was the CEO of the company?
How was the new CEO elected after Jack Welch?
Who was the new CEO after Jack Welch? I did research on GE using online resources and found some related answers:
General Electric Company
In 1878 GE was founded in New Jersey. GE is into many different fields of businesses. GE produces transportation equipment, aircraft engines, medical imaging equipment kitchen appliance, laundry appliances etc:-
GE with CEO Jack Welch
Jack’s career in GE
Welch received M.S and a PhD at University of Illinois. Immediately after receiving his PhD in 1960 he joined GE. Welch worked for $10,500 per year as a chemical engineer. After his first year, he planned to leave the company as he was displeased with the $1,000 raise.
Reuben Gutoff, an executive thought that Welch was a valuable resource to lose. So Reuben took Welch to dinner and tried to convince him. Reuben also assured to work with Welch to change GE to a small company environment.
After 12 years at GE, Welch was elected as company Vice President. He was the youngest vice president of the company. In 1979 he became Vice chairman and in 1981 he became the company’s Chairman and CEO.
Jack as CEO of GE
Welch was the company’s CEO and chairman from1981 to 2001.
Welch tried to make GE a more competitive company. Welch wanted all the managers to be more productive and he made sure every manager became more productive.
Welch trimmed the inventories, shut down factories, salary cut offs and layoffs to cut inefficiencies. Due to all these actions, he was treated with disrespect and anger by his employees but in no time the employees learned respect to him due to his strategies. His strategy was so successful that it was practiced by many other CEO’s across Corporate America.
Welch had a reputation for his terrible straightforwardness in his meetings with executives. He would fire 10% of his managers every year and would also reward the top 20 % of managers with incentives like bonuses and stocks. He was responsible for expanding the stock options program from top executives to one third of all employees. He has also brought informality to the company by wiping out the nine layered management hierarchy.
In 1986, Welch had an office in GE building and also acquired NBS located in Rockefeller center. Through numerous merging, Welch helped GE to shift from manufacturing to financial services. In 1995, Welch adopted Motorola’s Six Sigma quality program with success.
The year before Welch became CEO GE had $26.8 billion in revenues and the year before Welch left GE their revenues increased to $130 billion.
As a chairman and CEO, his trademark was to create an organization, not just to drive the performance in the individual businesses. In 1999 Jack Welch was named Manager of the Century by Fortune magazine. Welch received a salary of $4 Million per year at the time of his retirement and received $8 Million a year as his retirement plan.
Jack retirement
There was a length planning prior to his retirement between James McNerney, Robert Nardelli, and Jeffrey Immelt. Nardelli resigned in 2007 and became CEO of Home Depot. McNerney left to serve Boeing and became CEO of 3M. Immelt was selected to become as chairman and CEO after Jack Welch.
When Welch became CEO, his earlier boss Reg Jones announced the news. In the same way Welch announced Immelt as new CEO. Later Welch with his experience wrote a book Jack: Straight from the Gut
GE after CEO Jack Welch

After Welch, Jeff Immelt was selected as Chairman and CEO by GE’s Board of Directors in 2000.
Summary
However, the analysis shows that there were performance differences of GE’s different business in terms of growth and profits.

References –
1. http://premium.hoovers.com.offcampus.lib.washington.edu/subscribe/co/overview.xhtml?ID=ffffrfjycffryjksjf
2. http://www.ge.com/company/history/bios/john_welch.html
3. http://en.wikipedia.org/wiki/General_Electric
4. http://en.wikipedia.org/wiki/Jack_Welch
5. http://en.wikipedia.org/wiki/Jeff_Immelt
6. http://premium.hoovers.com.offcampus.lib.washington.edu/subscribe/co/people/bio.xhtml?ID=ffffrfjycffryjksjf&OID=1086212
7. http://www.blackwellpublishing.com/grant/5thEdition/docs/16GE.pdf

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