Leadership examples learned from Jack Welch

Nov 6, 2005

The Bottom Line The organizational leadership that Welch was able to employ at GE also could be passed along to other organizations across the globe.

Though the controversy that General Electric often found themselves in might have cast a paltry cloud of the organization, when Jack Welch took over leadership of the organization, Welch brought a keen emphasis on promoting functional leadership to the organization and turned GE into one of the smoothest run corporations in the country. As any good organization must have in order to strive, GE needed to have a strong leader in place to ensure that the organization would succeed. Welch was the right man for the job and introduced a dynamic new model of leadership and organization to GE that both boosted profits at GE and also transformed GE organizationally to be a more successful company.

Love him or hate him, Jack Welch was CEO and chairman during the growth of one of the world's most successful companies, General Electric. Whereas other competitors floundered, died, or became takeover targets, GE forged ahead with impressive results in a wide variety of industries. That alone, is worthy of respect. ("Rank and Yank", 2005)

Welch introduced a fresh and innovative organizational leadership style to GE during his time at GE. During his 20-year reign at GE, based in Fairfield, Connecticut, Welch developed a ranking system that put employees in one of three categories. The top 20 percent were "stars," the middle 70 percent were the crucial majority and the bottom 10 percent were weeded out. ("Jack Welch discusses winning method for cultivating leadership," 2005).

This style of leadership might find itself closely mirrored to some of the tenets of Rensis Likert’s management style. In his theory, Likert suggests that, "...high producing supervisors, 'make clear to the employees what the objectives are and what needs to be accomplished and then give them freedom to do the job'." (Hersey, 95) Through his policy of differentiation, Welch was able to separate those who wished to be stars of the organization and place them into the high producing supervisor position that Likert established. In so doing, Welch was able to ensure that the stars at GE would be able to assist those in the crucial majority and guarantee that all organization objectives would be met with positive results.

Under this model, Welch employed a practice known as differentiation. Although the process might be able to manage an organization more effectively, it also is known to create some controversy. "It asks people to do what schoolteachers have always done with children: evaluate people. Why should people stop being evaluated at age 23 or 24? It makes no sense to me. It’s the best system I know to be fair to people. It’s not a perfect system. You can have politics and friendships, but it's the best I know." ("Jack Welch discussed winning method for cultivating leadership," 2005)

One reason that Welch was able to gain such acclaim for his work done at GE is because of the fact that he completely embraced the principle that sometimes leaders must make tough and unpopular decisions. Katherine Benzinger discusses that often times, "Gaining power in organizations requires confrontation." (Hersey, 222) Welch needed to be able to handle the personal toll of going into an organization and weeding out the 10 percent of the workforce there that simply was underperforming and serving as more of a cost to GE than an asset to the company.

Anyone that might be within an organization that is focused on achieving will agree that one of the essential elements of organizational success is having educated and well trained individuals that make up the organization. Jack Welch knew that in order for his organization to succeed he needed to focus efforts on making sure he had a trained and educated staff that worked for him. Welch changed the GE environment and made training and learning the cornerstones for growth. ("Jack Welch on leadership", 2005)

Welch's thoughts on the intricate and symbiotic relationship between education, leadership and organizational strength closely matched s the thoughts of Joy Day, managing principal in the consulting firm Colby Day & Day. Day theorizes that educating the employee should not just entail textbook education, but also education focused on empowerment, "Employees must have comprehensive knowledge of the organization including finances, sales, and operations if they are to contribute." (Hersey, 223) Day takes Welch's idea of ensuring that education is a key leadership tenet and passes on to mean entail not only education done externally from the organization, but also promotes education internally within the organization.

Many great organizational leaders draft leadership theories that they apply not only to their own organization, but also that can be passed on to other organizations. Jack Welch is just that type of leader. One of the theories of leadership that Welch perfected as CEO of General Electric was his theory of the 4 E's. Officially known as "E to the fourth power," Welch created a leadership dynamic that he employed both at GE and hopes others will employ at their own organizations. His program is, "...for people who have enormous personal energy, the ability to motivate and energize others, ''edge''--the GE code word for being instinctively competitive--and the skill to execute on those attributes." ("How Jack Welch runs GE", 1998)

There is an interesting links between Jack Welch's 4 E's and Amitai Etzioni's theories on position power and personal power. Personal power is the extent to which followers respect, feel good about, and are committed to their leader and to which they see their own goals as being satisfied by the goals of their leader. (Hersey, 206) Welch, through the principle of "energize" in his "E to the fourth power" dynamic, discusses how the leader must be able to "motivate and energize" those around him/her within the organization. Welch realizes that the leader is only as effective as those with whom he/she surrounds him/herself with. That being said, Welch, as well as Etzioni both feel as though this principle is of utmost importance and should be considered for all organizations.

There comes a time in almost every organization when the best thing that could happen to the organization would be a complete organizational revamping by a leader that knows how to put organization theories into practice. When GE needed to be overhauled, Jack Welch was able to come into the organization and transform the company into one of the most powerful organizations in the world. Welch did not simply bring to GE an increase in profits and solely monetary gains, rather, Welch brought to General Electric a completely new way of operating organizationally. Fortunately, the organizational leadership that Welch was able to employ at GE also could be passed along to other organizations across the globe. Welch's theories on leadership and the organization are principles that are closely related to other successful theories and are perfect principles that will go down as being equally great in organizational effectiveness.

Byrne, John A. (1998) How Jack Welch runs GE. Business Week Cover Story.

Hersey, Paul. (2001) Management of Organizational Behavior (Eighth edition). Upper Saddle, New Jersey: Prentice Hall.

Rosenzweig, Stan. (2005) Jack Welch on Leadership. Westchester County Business Journal, 44.

Sedam, Scott. (2005) Rank and Yank. Professional Builder, 33.

Shanley, Will. (2005) Jack Welch discusses winning method for cultivating leadership. The Denver Post.

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