Jack Welch: Leadership Process and Organizations in Context

Introduction

Organisations that operate in the present-day business environment have invested heavily in leadership as a way of remaining competitive and profitable. Renowned leaders have demonstrated exceptional traits and skills that can be emulated by current and prospective leaders. Such individuals have also displayed a desirable level of work ethics and attitudes that can be deployed to empower followers to bring about positive change. Success in the business world is also attributed to the effectiveness of organisational leadership. This paper focuses on Jack Welch, the former Chief Executive Officer (CEO) of General Electric (GE).

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As revealed in this report, Welch’s areas of good practice included leading more and managing less to building a market-leading corporation. Some of the areas that need to be improved include his much focus on position one or two in the market, growth through acquisitions, and stack ranking. Recommendations offered in this report would have seen the former CEO of General Electric realise significant success in the company’s diverse business lines, which include power, renewable energy, lighting, and transportation, among others.

The Choice of Welch as a Leader

Welch was selected due to his exceptional organisational leadership qualities that saw General Electric record impressive performance during his two-decade period as the CEO. As the Chief Executive Officer of General Electric, Welch demonstrated an array of positive traits that align with the concept of organisational leadership. According to Yung and Tsai (2013), organisational leadership is a dual-focused strategy that aims at attaining the best outcomes for both individuals and groups. Areas of good practice that influenced the choice of Welch in this report include his ability to foster individual and collective support at GE include his strategy of emphasising leadership, as opposed to management, and developing a market-leading corporation.

Surprisingly, Welch did not focus on micromanaging since he believed that greater results could be attained if the management did not constantly tell people what they needed to do (Smith, Lewis, & Tushman, 2016). Hence, by creating an effective vision for General Electric, Welch believed saved the time that managers spent when instructing employees regarding what the company expected of them. The vision communicated this message effectively.

The Scope of Welch’s Performance Assessment

The impressive financial performance of GE during the two decades when Welch was at the helm of this organisation depicts him as a great organisational leader. According to Tichy and Sherman (2018), Welch managed to increase this company’s revenue from $25 billion to $300 billion while the profit rose from $1.5 billion to $15 billion. Welch was successful in setting goals for both individuals and groups of people at GE, a strategy that indicated his mastery of institutional leadership. As implied by Radomska (2014), Welch’s simplified leadership strategy resulted in ineffective decision-making processes, especially regarding financial administration and human resource management.

As a result, simple messages and straightforward designs depicted his desire to get rid of clutter at General Electric. Such a manner of communication also ensured that every manager and subordinate staff at the organisation understood what needed to be done to achieve individual and organisational goals and objectives (Weber & Tarba, 2014). Consequently, General Electric attained a substantial market share within a very short period after Welch assumed office as the CEO. Such performance levels boosted satisfaction among customers and employees.

Areas of Good Practice

Welch’s Traits

Welch embraced leadership more than supervision to influence managers positively. According to Cleavenger and Munyon (2013), Welch believed that leaders inspire workers whereas managers confuse them and hence his idea of implementing the transformational leadership theory that sought to change this situation in General Electric. Tarasovich and Lyons (2015) agree that General Electric’s former CEO led in a way that encouraged both employees and managers.

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The concept of leading more and managing less implied focusing on strategic issues, disregarding micromanagement, involving everyone, and setting a good example to his followers. As Welch (2014) reveals, the former CEO’s leadership approach concentrated on strategic issues that required resource allocation to foster the growth of General Electric in the market. This strategy turned out to be very useful to GE because it expanded its market share significantly within two decades.

Welch practised informality, which turned out to be a crucial trait that contributed to his success at GE when he served as the CEO from 1981 to 2001. Surprisingly, Welch removed the “boss element” out of General Electric after ascending to the helm of leadership at this corporation. His goal was to create a balance between freedom and control, a strategy that redefined the traditional concept of management (LeCounte, Prieto, & Phipps, 2017).

Additionally, Welch abolished customs and rigidity at General Electric by removing unnecessary titles, rules, and approvals as a way of allowing employees and managers to voice their ideas and opinions freely. Furthermore, Welch introduced casual dressing at GE workshops to blur differences between workers and administrators. According to Hammett (2018), the practice of informality was also encouraged at GE by the former CEO, especially when he organised informal meetings and get-togethers, which provided managers with the opportunity to brainstorm frequently with workers.

Faced with the certainty of a failing organisation, the new CEO realised that the decision to get rid of official procedures was one of the situations that highlighted Welch’s realist trait. The elimination of counterproductive systems of governance was a manifestation of his nature as a pragmatist since it is was not a popular decision but a real one based on the challenges faced by GE. Therefore, according to Stewart (2017), Welch portrayed exceptional organisational leadership practices as he inspired people to adopt factual options, as opposed to assumptions, before taking actions.

Welch demonstrated transformational leadership traits. As revealed by Odumeru and Ogbonna (2013), he initiated drastic changes at GE that led to positive results, as denoted by the impressive financial performance of this company during his tenure. For instance, he sold businesses that were performing poorly and acquired new ones to ensure that GE realised greater competitiveness in the industry. The reduction of basic research is also another change initiative that proved instrumental for the success of this company. Welch viewed change as an opportunity instead of a threat. Thus, he embraced positive alterations to boost the performance of GE in the long term (Welch, 2014). He is depicted as the leader who managed to make change a shared value at GE.

Welch and the Leader-Member Exchange Theory

During his days at GE, Welch embraced a simplified approach to leadership in line with the leader-member exchange (LMX) theory. Erdogan and Bauer (2015) present LMX as “a relationship-based dyadic theory of leadership” (p. 641). This exceptional leader upheld straightforwardness, which he regarded as one of the important keys to success in the business world due to its potential of influencing positive and close relationships among workers, administrators, and their boss (Erdogan & Bauer, 2015).

In line with the LMX theory, Welch involved and energised everyone in the organisation. His ability to uplift others and influence workers positively is one of the good leadership practices he demonstrated during his stint at GE (Russette, Scully, & Preziosi, 2008).

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Welch involved and motivated the workforce at GE through granting employees more freedom and responsibility, never leading by intimidation, acknowledging actively contributing employees, and sending hand-written thank, your notes. Furthermore, by refraining from intimidating others, Welch could create a workplace environment characterised by inspiration and motivation emphasised in the LMX theory, thereby influencing the workforce to perform better, which is in line with the participative leadership theory (Arnold & Loughlin, 2013). The creation of reasonable reward systems coupled with hand-written appreciation comments highlighted Welch’s willingness to continuously strengthen employees, hence enhancing their commitment to the laid-down institutional goals.

The LMX school of thought depicts leaders as agents who influence workers based on the nature of connections they establish with them (Erdogan & Bauer, 2015). As a realist and a doer, Welch developed constructive interactions with GE’s staff amid the challenges they experienced when working at this organisation. For instance, Welch supported his team to use facts before taking action on any given issue (Segal, 2014).

From Welch’s perspectives, managers should consider all options available prior to embarking on a particular task that is based on their unfounded assumptions. As a result, this former CEO of GE faced reality in every situation to ensure that his organisation took the right course of action to achieve its objectives and goals. When Welch took the chief executive position, managers in this company assumed that GE was performing remarkably. However, this new leader regarded General Electric as being in trouble due to the prevailing ineffective bureaucracy and its fading market share (Yang, Young, Li, & Huang, 2017). In most instances, Welch welcomed change to foster the growth and development of GE in the market.

His emphasis on institutional values instead of profitability is another good leadership practice demonstrated by Welch. This renowned leader underlined the need for providing high-value goods and services to customers before considering the underlying revenue-related figures. He sought to highlight the consequences of LMX theory, including job contentment, employee engagement, and reduced turnover levels (Erdogan & Bauer, 2015).

Galli (2017) stresses the same values that Welch established to foster customer satisfaction, disregard bureaucracy, think globally, and demonstrate openness to new ideas. Therefore, by letting values rule, Welch highlighted his desire to change the leadership approach at GE to create a new organisational culture (Onatolu, 2013). He encouraged the workforce to communicate effectively, thus fostering the generation of brilliant ideas.

Areas of Improvement on Welch’s Leadership

Amid displaying impressive leadership practices during his tenure as GE’s CEO, Welch also revealed several areas that require improvement to enhance his organisational leadership capabilities. The notable weaknesses of Welch’s leadership at GE include too much focus on position one or two in the market, growth through acquisitions, and stack ranking. Welch developed a strategy that required GE to only stay in industries where it had either the largest or second-largest market share.

The CEO’s approach to marketing was problematic. He disregarded strategies that could guarantee the competitiveness of this company in segments where it lacked a finer edge. Consequently, the market definitions approach also influenced Welch to view acquisitions as the key strategy for market share growth (Bower, 2001). Hence, he needs to improve his organisational leadership practices as far as the identification of factors that undermine the competitiveness of a business such as GE is concerned instead of addressing the issue when it is too late.

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The stack-ranking management philosophy adopted by Welch raises concerns regarding the effectiveness of his leadership (McDermott, Conway, Rousseau, & Flood, 2013). Welch observed the practice of terminating employment contracts of poor-performing employees and managers in his company. As a result, talented managers and employees could be fired just for the sake of meeting arbitrary dismissal quotas (Beenen, 2014). Consequently, Welch may consider changing his attitude regarding the recruitment and firing of employees to ensure that he acquires and retains a highly talented workforce.

Recommendations

As revealed in this report, Welch needs to improve on his leadership approach. For instance, he may need to advance his knowledge of factors that influence the performance of a company in the market. This strategy will strengthen Welch’s influence on individuals and groups in any given organisation.

He will also acquire the appropriate knowledge regarding the obstacles of market share growth in a particular segment, hence standing a better chance of identifying the respective remedies instead of pulling out of a market just because the company is performing poorly. In addition, it is imperative for Welch to develop his talent management skills as a leader because the idea of firing underperforming managers and employees is not always a strategic decision. The adoption of a management policy that focuses on investing in the development of human resources to bolster their motivation and productivity is recommended because it is more effective when compared to stack racking.

Reference List

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