Ge Case Study - Challenges

The challenge that GE is currently facing is to choose a right person to replace Jack Welch who stepped down from the CEO of GE on September 7, 2001. This has left a question weather GE would be able to sustain the success realized during the past twenty years under Welch leadership. Since Jack Welch became the CEO of GE in 1981, he has made a successful transition from a corporate model that was highly centralized and bureaucratic to one that is dynamic, flexible, and many times more profitable. The problem is that no suitable candidate has yet been determined. This is becoming a concern for shareholders who want to realize the same returns (23% per annum total shareholder return) they have been receiving under the Welch regime for last 20 years. The new CEO needs to be dynamic to lead this complex organization, and sustain the rate of growth realized during the Welch era.

The main cause of the problem of GE not being able to find appropriate successor is because what Welch have done for GE was too great for other people to imitate. Even though there is still some growth potential it might be impossible to generate the similar growth achieved under Welch in today's more competitive and turbulent environment. Additionally, even though Welch had prided himself in reducing bureaucracy and cutting corporate layers of management, it has created a situation where corporate governance seems to be lacking. Welch changed the organization structure to stay lean and agile by reducing hierarchical levels and thus the CEO of each business unit directly reports to corporate CEO, which is likely going to become unmanageable if GE continues to expand its business units. Moreover, the controls do not appear to be in place to monitor management because Welch didn't promote unnecessary documenting processes creating needless bureaucracy. It might be difficult for new CEO to understand all of the business lines in order to properly allocate resources. GE must pick a right person as a next CEO who has an insight into the future and strong leadership and wisdom to lead the complex organization in the dynamic business environment. Otherwise, it will hardly maintain the performance shown under Welch's leadership.

The Board of Directors at GE must make a clear list of requirements for new CEO, which may include honesty, excellent leadership, charisma, and communication skills, and above all, a thorough understanding of all aspects of the business. Two possible alternatives can