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John Francis Welch

Essay by review  •  February 3, 2011  •  Research Paper  •  3,045 Words (13 Pages)  •  1,219 Views

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John Francis Welch, Junior was born on November 19, 1935 in Peabody, Massachusetts. He received his B.S degree in chemical engineering from the University of Massachusetts in 1957 and his M.S. and Ph.D. degrees in chemical engineering from the University of Illinois in 1960. Explaining his choice of subject, Welch has said: “I had an uncle who was an engineer at a power station in Salem, so an engineer was something. I took chemistry and engineering went together.” As being the first one from his family to go to college, Mr. Welch later joined GE’s Plastic division in Pittsfield, Massachusetts as a chemical engineer in 1960. Twelve years later, he was named the company’s youngest Vice President and was then named Vice Chairman in 1979. Shortly after, the company also announced that he would succeed Reginald H. Jones as the eighth CEO the company had appointed in 92 years.

In 1984 Fortune called Welch the “toughest boss in America” as GE virtually invented downsizing. A whopping of 37,000 jobs had been cut by end of 1982 and a total of nearly 200,000 GE employees left the company throughout the next two decades. After whipping out an entire middle management sector, casting out business divisions that are not performing at number one or two of their market, GE started to focused new core business in the platform such as healthcare, aircraft engines, information services and broadcasting. GE had also bought 338 businesses and product lines for $11.1 billion and sold 232 for $5.9 billion during the 1980s. In 1986 GE made several extremely important purchases. The biggest deal in GE acquisition history was RCA $6.4 billion, the company GE had helped to found in 1919. RCA’s National Broadcasting Company (NBC) as leading U.S. television network has brought GE into the broadcasting business in full force.

Although RCA’s consumer electronics production line overlaps with GE Consumer & Industrial, the match was concluded by analysts as beneficial since GE had been shifting from old-fashion manufacturing business into service and high technology. And as Welch indicated to his employees that the business will be sunken under if they are not performing at number one or two in their field, RCA’s television manufacturing businesses was the first example after the acquisition, sold in 1987 to the French company Thomson in exchange for Thomson’s medical diagnostics business and $800 million dollars in cash.

In the meanwhile factory automation had also become a major renovation at GE’s production plant during the early 1980s. Acquisitions of Calma and Intersil were essential to this program; later GE entered into an agreement with Japan’s Hitachi, Ltd. To manufacture and market their industrial robots in the United State not mentioning GE had spent over $300 million on itself to robotize its locomotive plant in Erie, Pennsylvania. And two years later GE’s aircraft engine business were also involved in an aircraft engine plant modernization as GE later produces the engines for the controversial B-1B bomber.

As regard to GE Financial Services, it purchased the Employers Reinsurance Corporation in 1986, for $1.1 billion, and an 80% interest in Kidder Peabody and Company, an investment banking firm for over $600 million. In an entity, GE finished the fiscal year of $42 billion dollars in revenue with a net income of $2.5 billion dollars and a total of 373,000 employees by end of 1986 compared to $27 billion in revenue with a net income of $1.6 billion dollars and a total of 404,000 employees in 1981, a 56% increase in net income.

Despite all the hardware of countless acquisitions and automations, the real GE revolution has targeted toward against is the organizational structure, the famous scientific management module and most importantly - the employees. Throughout the next twenty-one years after Welch became CEO, the GE revolution led by him has taken under the three-act drama: awakening, envisioning, and rearchitecting by pushing the message throughout to get everyone’s understanding on the same page and committed to work for GE with a new set of psychological contract.

Act I was largely complete by late 1985, five years after Welch became CEO. At first, the ideas took the form of demands, such as requiring that “we’re going to be No.1 or No.2, or fix/close/sell,” ideas that are simplified down to something you could get across easily at a cocktail party with strangers. Communication was extremely important considered by Welch, during his twenty-one year as GE’s eighth CEO, communications with executive elites, top managers and floor employees has taken some more than fifty percent of his officer hours, and as he concludes in 1987 speech to employees:

We’ve learned a bit about what communication is not. It’s not a speech like this, or a videotape. It’s not a plant newspaper. Real communication is an attitude, an environment. It’s the most interactive of all processes. It requires countless hours of eyeball-to-eyeball back and forth. It involves more listening than talking. It is a constant, interactive process aimed at creating consensus.

As a result, Welch’s No.1 or No.2 concept has been reinforced so frequently and so broadly that the GE employees slur it into one single word, number-one-or-number-two.

GE people were also talking about boundarylessness, integrated diversity and candour, values that underlies GE’s new organizational style, undercutting the bureaucracy structure and scientific management module from the very root and break down virtually any internal barriers of hierarchy, geography, and function that exists.

“Our dream for the 1990s is a boundaryless company, a company where we knock down the walls that separate us from each other on the inside and from our key constituencies on the outside,” he said. “The boundaryless company we envision will remove the barriers among engineering, manufacturing, marketing, sales, and customer service; it will recognize no distinction between domestic and foreign operations вЂ" we’ll be as comfortable doing business in Budapest and Seoul as we are in Louisiana and Schenectady. A boundaryless organization will ignore or erase group labels such as вЂ?management,’ вЂ?salaried,’ or вЂ?hourly,’ which get in the way of people working together. A boundaryless company will level its external walls as well, reaching out to key suppliers to make them part of a single process in which they and we join hands and

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