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Posted on April 21st, 2012, by

The General Electric Co. is one of the largest companies of the USA. Today, the company takes the leading position in the market and it is one of the largest employers nationwide. However, the position of the company was not always stable and by the early 1980s the company faced a number of challenges which threatened to the normal development of the General Electric Co. At any rate, in the late 1970s it was hardly possible to speak about the General Electric Co. as one of the leading companies of the USA. In contrast, the company suffered from financial problems and rapidly deteriorating marketing performance. In such a situation, Jack Welch leadership became a panacea for the company since Jack Welch has proved to be the leader capable to solve organizational problems of the company, increase the effectiveness and productivity of work of employees and make the company one of the largest companies in the USA.

Jack Welch was one of the most successful CEO of General Electric Co., who headed the company for twenty years.

His work and his personality are highly controversial and evoke absolutely different feelings and emotions that vary from the total condemnation and contempt to admiration and great respect. In this respect, his policies in regard to the personnel of the company were particularly noteworthy since it was due to the change of the corporate culture and relationships between Jack Welch and the rest of the personnel as well as between all people working at the company General Electric Co had managed to make a considerable progress in its financial and market performance, though the costs of such a progress are still severely criticized by the opponents of Jack Welch, whose era at General Electric is viewed as a turning point in the history of the company.

In order to better understand the role of Jack Welch and his contribution to the development of the company, it is necessary to point out that he became the CEO at the period when the company had suffered from serious financial and economic problems. To put it more precisely, the major problems the new CEO had started to solve practically immediately after his appointment were the problem of bureaucracy and the low effectiveness of functioning of the company. It is worthy of mention the fact that Jack Welch almost lost his job at General Electric because of bureaucracy and rigidity of its structure.

As a result, when Jack Welch became the CEO he started his twenty year reign with the radical changes, which, to a significant extent, affected social policy of the company. In fact, his first steps as the CEO perfectly illustrate his attitude to the corporate social responsibilities. In this respect, it is necessary to emphasize that he started the radical changes within the company from a series of dramatic restructurings and layoffs. In terms of this policy, from 1981 to 1985, he cut 100,000 jobs (The Jack Welch Era at General Electric). This policy evoked a sharp criticism of his actions but, in spite of protests of workers and the growing dissatisfaction of ordinary employees as well as manager, Jack Welch continued his policy.

Basically, the consistent reduction of jobs contributed to the increasing effectiveness of the performance of the company, which focused on the market expansion. In terms of this strategy of the development of the company, General Electric acquired RCA in 1985 (The Jack Welch Era at General Electric). In such a way, the company started the realization of the strategy of Jack Welch which attempted to make the company the leader of any industry where it operated.

Nevertheless, the considerable reduction of the personnel was rather the corporate social irresponsibility than responsibility because many lost their jobs. Obviously, the reduction could be conducted in less radical way so that the number of jobs cut could be smaller or, at least, it was possible to prolong the period of job cuts making it not so abrupt and unexpected for employees. From the point of view of corporate social responsibilities such policy would be more employees friendly.

In addition, Jack Welch view on corporate social responsibility was basically limited by the focus on increasing profits. In this respect, it should be said that he expanded the broadness of the stock options program at General Electric from just top executives to nearly one third of all employees. In such a way, Jack Welch increased the motivation of employees to improve their productivity and effectiveness of their work. However, at this point, it is possible to argue that such an improvement of financial position or, to put it more precisely, new form of material motivation of employees, cost too much for thousands of other employees who lost their jobs. Anyway, this trend proves that high profits were the priority in Welch’s corporate social responsibility policy.

Nevertheless, it should be said that Jack Welch managed to meet the major goals of his corporate social responsibility strategy since, in spite of layoffs and significant redundancy, he improved the position of employees and managers whose performance constantly improved and whose contribution in the development of the company was significant. On the other hand, those who failed to progress or who were viewed as ineffective for the company would simply lost their jobs as the bottom 10% of managers did.

However, the policy of permanent job cuts concerning the bottom 10% of managers was quite a severe measure. At any rate, today, the application of such a measure is likely to provoke a strong opposition from the part of the personnel. Even at the time of Jack Welch’s leadership it was an unparalleled policy, which was apparently quite controversial. On the one hand, this policy proved to be highly efficient due to the layoff of inefficient managers. In addition, this policy allowed the company to optimize its marketing performance through the selection of best managers who were the most capable to lead the company through numerous challenges it had faced in the course of its development. They could ensure the efficient implementation of policies and strategies developed by Jack Welch.

On the other hand, this policy was apparently unjust in regard to the social security of the managers who turned out to be among 10% whose positions were to be cut. In fact, the process of permanent selection of the best employees and layoffs of ineffective ones stimulated the competition between employees and forced to work better and harder.

However, the permanent competition created a very stressful environment for managers and employees since they did not have much margin for errors, being under a threat of the job cuts. Hence, the stressful environment could decrease the efficiency of work of employees and managers. On the other hand, those who could afford such a stressful environment were really the most effective and productive employees and managers. Nevertheless, on analyzing the social responsibility policy of Jack Welch as a leader of the General Electric Co., it is important to lay emphasis on the fact that he proved to be a very strict and pragmatic leader who used the principle, according to which ends justified means.

Thus, taking into account all above mentioned, it is possible to conclude that the Jack Welch was a key figure in the development of the General Electric Co. as one of the leading companies in the USA. At the same time, his leadership in the General Electric Co. was extremely controversial. On the one hand, he managed to make the company the leader of all the industries the company operated in, he improved the position of a considerable part of employees and managers minimizing bureaucracy and including a large part of the personnel in the stock options program, while on the other hand, he was “Neutron”¯ Jack for thousands of employees who lost their jobs. Nevertheless, Jack Welch has proved the fact that the role of leader in contemporary organizations is of the utmost importance since it is due to the leader the General Electric Co. has overcome its problems and become one of the largest companies in the USA.

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