Jack Welch and Jeffrey Immelt: Continuity and Change in Strategy, Style and Culture at GE
History and Background of Welch and Immelt
The origins of GE go back to 1879 with the invention of the first successful incandescent electric lamp by Thomas Edison. Edison merged his company, the Edison General Electric Company, with the Thomas-Houston Electric Company in 1892 to form General Electric which was headquartered in New York. Over the years since GE was created, the company has had some very capable leaders running the show. Two of those leaders, Jack Welch and Jeffery Immelt, were responsible for many of the innovations and developments at GE in modern times.
Jack Welch was born in Salem, Massachusetts in 1935. He studied chemical engineering and the University of Massachusetts and graduated in 1957. After graduating, Welch went on to the University of Illinois where he received his master’s and PhD in chemical engineering. Welch joined GE in 1960 and resigned in 1961 due to disappointment at the workplace. Welch’s immediate supervisor convinced him to return and ensured him that he would create a better work atmosphere for him. Welch quickly climbed the ranks and became the youngest CEO in GE’s history in 1981, serving until 2001.
Jeffrey Immelt was born in Cincinnati, Ohio in 1956. Immelt majored in mathematics at Dartmouth College in the late 1970’s and afterward joined Proctor and Gamble as a member of its brand management team. Immelt worked at Proctor and Gamble for about a year before enrolling in Harvard’s MBA program. Upon graduation, Immelt went to work at GE as a marketing executive. In the late 1990’s Immelt was being considered for the CEO position along with two other candidates. Immelt was appointed as CEO of GE in September of 2001.
Immelt’s Steps to Prove that GE is not Dependant on Acquisitions
GE took on a large number of acquisitions during Jack Welch’s tenure as CEO. In fact, by the time that Welch retired in 2001, he had supervised GE’s acquisition of more than 600 companies. Although the acquisitions were a significant factor in the success of GE, some critics felt that GE’s earnings were inflated through acquisitions and cheap debt rather than organic growth. To combat this, Immelt launched a program called Innovative Breakthrough. Immelt wanted employees to come up with ideas to improve GE’s existing products or develop new products under the Innovative Breakthrough Program. The program required all business leaders to submit at least three innovative product ideas per year. In order for the idea to qualify under the program the idea would have to take GE into a new line of business, new geographic area or a new customer base as well as have the potential to give GE incremental revenue of $100 million. Since the program has launched, GE has invested more than $5 billion into 80 projects and estimated that the products would generate $25 billion in revenue. This program was developed as an avenue to allow GE to grow internally and organically and not just through acquisitions.
Immelt’s Leadership vs. Welch’s Leadership
Although both Immelt and Welch are both highly effective leaders, they achieve their respective success through utilization of different strategies for the organization. Welch promoted internal communication and made it easy for employees at every level to communicate with one another. Immelt focuses more on external communication and makes a point to communicate with investors and third parties. Another difference between Immelt and Welch is Immelt’s focus on more abstract aspects of the business rather than focus on performance and strictly quantifiable results like Welch. Immelt felt that this would allow employees to come up with innovative ideas and generate customer satisfaction rather than just focus on performance targets. In regards to compensation, Immelt removed emphasis from the bottom line in an effort to get employees to take risks and develop more innovative ideas. Immelt also got away from mostly promoting from within as Welch had done. Immelt brought a number of outsiders into the organization and explained that outsiders brought new ideas, creative energy and a new perspective to the company. Under Welch, GE was focused more on production. Immelt shifted the focus from production to marketing. Another thing that Immelt did was make GE more environmentally conscious and he accomplished this by investing large amounts of money into technologies that would lead to cleaner and environmentally responsible products and processes for GE.
There was a also significant difference in the leadership styles of both men. Welch was considered to be demanding and intimidating, while Immelt is seen as friendlier and more approachable.
There were also some similarities in the methods that were used by Immelt and Welch. During his tenure, Welch utilized a “Fix it, sell it or close it” approach as a way to ensure that only GE’s best businesses remained active while the underperforming businesses were done away with. Immelt implemented a similar strategy upon his arrival selling off less profitable GE businesses. Both men also participated in the practice of firing the least effective 10 percent of the workforce each year. Another similarity is that Immelt and Welch both borrowed winning ideas from other companies and utilized them to improve GE’s operations.
Both Welch and Immelt are great leaders that have displayed different approaches concerning the direction of GE as well as differences in their leadership styles. That just goes to show that there is not an exact formula to running a business. A CEO must have the ability to take into consideration, the needs of consumers, employees and constantly changing market factors when making decision. Both Welch and Immelt were able to utilize different approaches to accomplish this.