Feb 23, 2020
folder_opencategory: Business

General Electric (GE) is a legendary company that faced significant transformations under the management of Jack Welch who became its CEO in 1981. The company had to reconsider its organizational structure and policies in order to meet the management goals and objectives of the new CEO. The initiatives implemented by Jack Welch reached the goal of simplicity; however, they created serious ethical dilemmas for GE employees who felt the lack of confidence in their further performance at the company.

Business Simplicity

Jack Welch became a legendary CEO in the history of GE and managed to reorganize the company and lead it to the new level of development. After the significant reduction of staff, Jack Welch started to focus on simplicity by altering leadership to the scope of openness. It became the first step in making the company’s performance simpler and more productive at the same time. The downturn involved not only departments’ employees, but also corporate staff. Welch focused on reducing checkers and questioners at GE (Bower & Dial, 1994). He decided to focus on keeping only those employees in corporate staff who could become advisors and mentors in the decision-making process.

The way to simplicity continued to a significant reduction of monthly, quarterly, and yearly reports, which took away half of the working hours of the majority of managers. Welch found it necessary to not only downsize some managerial positions but also encourage managers to share qualitative information in an oral way with their subordinates and members of top management. In this way, Welch strived to achieve his first goal, which was accelerating every process in the company. In fact, speed became the primary goal of guiding the company towards absolute leadership in the business area.

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GE had 14 branches of different businesses, so Welch wanted to simplify the decision-making process by improving the communication system (Bower & Dial, 1994). His desire to simplify the business resulted in the division of business into three areas, including core, high technology, and service divisions. Every division focused on analyzing the company’s opportunities in success achievement based on the initiatives used by the company in every division. This way, Welch saw many projects and operations as wasteful and decided to move away from them instead of insisting on their implementation.

Communication became another way of boosting the decision-making process at GE. First, Welch introduced informal and direct communication as the primary way of solving any problems arising within the company. He reduced the number of unnecessary meetings and presentations, which were wasting the company’s precious time. As a result, business issues, which used to take a year to resolve, found successful outcomes in a matter of days. In particular, the decision-making process led to a new approach in the culture of GE. Welch introduced Work-Outs as an initiative to hold communication sessions with employees for three days (Bower & Dial, 1994). The meetings took place at hotels and had an informal character, which allowed managers of the divisions to speak about the most obscure of problems and ways of solving them. Welch agreed or disagreed with problems and their solutions, which simplified and improved the performance of every division.

Another significant change took place in transformation of the payment system. Welch decided to reward those employees and top managers who contributed majorly to the company’s development. As a result, Welch escaped equal payments by aiming to raise employees’ willingness to build their career within GE.

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Ethical dilemmas

The major ethical dilemma occured when Welch introduced the new payment system. According to Bower and Dial (1994), “Widespread 10% to 15% bonuses at the top levels were replaced by 30% and 40% bonuses to fewer managers – and more who were awarded no bonus.” From the point of ethically appropriate business management, it is unacceptable to make payments and rewards unequal because it is an automatic discrimination of staff’s performance. On the one hand, Welch was right by inspiring employees to make their contributions to the company’s development in order to receive bonuses. On the other hand, if some employee managed to contribute more than the others, it did not mean that others did not work with full dedication and persistence. Welch intentionally created an environment of competition and severe jealousy, which could become the end of the company’s performance.

Another ethical dilemma in the Welch’s management worldview happened due to the chaotic assignment of tasks and responsibilities leading to overloads at GE. Unequal payments and bonuses meant that employees had to overwork in order to have a chance at receive the deserved bonus. However, there was no guarantee that the company would mark such dedication by a significant bonus.

Finally, the main ethical dilemma refers to the downsizes in the company’s staff for the sake of increased productivity. If Welch saw this initiative as inevitable, employees might have had fear in losing their job position if their CEO saw a new purpose for downsizing. In addition, Welch intentionally created a risk-reward tension by imitating the threats in the competitive environment faced by the company. As a result, employees did not feel confident and safe in their workplace any longer.

Conclusion

The evaluation of the changes introduced by Welch showed that even the most beneficial and fresh decisions may have disadvantages, which destroy the morale of employees. Welch successfully achieved simplicity in human relations and boosted productivity. However, the ethical side of his decisions might have put a significant moral burden on employees who did not want to face chaotic downsizing.

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