Neutron Jack: The Success Story of GE

It is difficult to even begin to comprehend the hard work and managerial decisions that are required to go from a small company to a massive multinational corporation. To get to where it is today, General Electric had to undergo many changes to its culture, corporate strategy, and the entire structure of the organization itself. During the 1970s, Reginald H. Jones became the CEO and inherited a company that was extremely complex with numerous divisions and strategic business units. He utilized strategic planning to effectively manage the different divisions and set up intermediate management that would accommodate the needs of each business unit. In turn, he was voted CEO of the Year three times, and eventually the CEO of the Decade.

In 1981, Jack Welch took over the reins of GE and was negatively viewed as a hothead. However, he is responsible for the GE we know today by drastically reinventing the firm. He took on a company during a recessionary period where unemployment was high, and decided that the best thing to do was to create efficiencies. However, efficiencies to Jack Welch meant a culture change. GE was supposed to be similar to some of the larger Japanese firms such as Nissan and Toyota, where once you got in, you were a member for life. But Welch cared more about performance, especially in a down economy. Though what was in place worked just fine, Welch noticed that the levels of bureaucracy were creating problems. The reporting structure was all over the place, and the executives had difficulties properly executing their strategy because of the inability to communicate the massive amounts of information.

Instead, Welch saw it fit to replace that structure and create flexibility for the firm so that the firm can be even better. He challenged each business unit to be #1 or #2 in its respective industry, and if they failed to do that, they would be wound down or sold off. He restructured the entire company by removing the bureaucracy put in place by Jones, finding it cumbersome and inefficient. Rather than utilizing the delegated structure where each unit would report to their respective manager, he wanted select groups to report to him by putting various business units together into core businesses, such as GE Capital and GE Aerospace. Through this downsizing and delayering, he removed about 250,000 workers, thus giving him the name Neutron Jack. 

However, it was clear that through this transition, people were deathly afraid of losing their jobs. To regain the confidence of his employees, Welch enabled the Software Initiatives. Under the Software Initiatives were two programs, Work Out and Best Practices, which both sought out ways to increase performance. Work Out was a forum in which employees of all levels would communicate their ideas and create proposals, while Best Practices was an initiative that sought to explore their competitors’ processes and copy them. He also added appropriate incentive systems through stock-based options, consistent throughout each level of the organization. He also added a six-sigma system and stretch goals to make sure that the employees strove for efficiencies and also pushed themselves. But his greatest implementation is probably the Crotonville management development facility. At Crotonville, people would be assisted through the change and experience new managerial traits that would help them perform better. Not only did professors of top universities instruct them, they were also provided measurable goals that would enable them to understand their progress.

Through Welch’s promotion as the CEO, GE drastically changed from being a bureaucracy-heavy company to one that is more flexible and efficient. It was a change that nobody welcomed, and one that might not have been needed at the time. But in order to continue to outperform their competitors, Welch knew that the firm had to remove the problems before they became too big. Though many people were not happy about it, they soon began to realize the benefits of the process, and progressed with the change. GE’s sales went from $24 billion in 1980 to $129 billion in 2000, a testament to the progress that GE made.