What Were Key Challenges That Welch Faced in 1981?

1. What were key challenges that Welch faced in 1981?

The major challenge that Welch faced once appointed as CEO was to meet the expectations that everyone had on him. I was going to be the successor of the man called by the Wall Street Journal a “management legend” while he was a “live wire” the replacement of the legend. Secondly, he inherited the leadership of the company in a moment of particular economic turmoil. The U.S. economy was in recession and the companies in the country were facing high interest rate and a strong dollar, not the perfect contingencies for a business to thrive.

2. What was the strategy Welch pursued in the late 1980s and the early 1990? What were

his objectives?

After concentrating his effort on building solid foundations for the company through a huge business restructuring initiative, Welch started to focus on rebuilding the company. His strategy was towards the culture and the way of doing things at GE. He started with initiative such as Work-Out and Best Practices in order to bring on-board as much employees as possible in the effort of changing the business structure of the company creating at the same time a new culture and management approach. One of the main goal of this strategic move was to prepare the company to go global and as stated in the case “It’s very difficult to jump into the world arena if you don’t have a solid base at home”. Going global was a necessity dictated by the particular time frame, when globalization was starting to kick off, and some market contingency in Europe and Asia made the process easier, making cheaper a great deal of acquisitions operated during those years. Having a boundary less behaviour was another of the main objectives for Welch, very linked to the aim to make GE a global company, in order to be able to do business worldwide in a comfortable way learning from other units and subsidiary located in a different geographical location. Moreover, developing leaders internally was considered by Welch one very important point in his strategy. He decided to achieve this objective investing intensively in the Crotoville management development facility, where also experienced academic from important business schools were hired to revolutionize Crotonville’s activities, and redefining the compensation package of many employees, being a strong believer in incentives increased the recipients of stock-options from 300 to 30,000.  Furthermore, in order to achieve goal that often would be considered impossible, he implemented the goals stretch policy where goals were set to an almost impossible target in order to push people to do their best. The last point was to shift the company focus from products to services because of the higher margins and growth opportunity of the sector.