There were several challenges faced by General Electric during and after the year 1981. Several issues which existed in the company were brought to light and prompted by CEO Jack Welch. Several competitors of Welch who left the job when he became the CEO were required to be replaced by the new management. The priority was to reduce hierarchical bureaucracy and communication barriers between managers and workforce to eliminate the elements which made acceptance of plans and proposals difficult for the managers. The workforce employed by the company was redundant with work and the efficiency that was achieved was not worth the cost being paid (Heskett, 1-23).
OVERCOMING CHALLENGES
The new strategic management of General Electric designed strategies and plans to suggest measures to overcome the challenges. The policy designed was not central but it revolved around goals and objectives set by the management for the growth of the company. General Electric planned diversified acquisitions for the company. Downsizing was planned to reduce the inefficiencies of the employees. Incompetent layers of management which were major obstructions towards growth were reduced (Heskett, 1-23).
Empowerment of the employees with certain basis decisions is very important to ensure that new and innovative ideas are promoted. This was done by developing a sense of ownership for the employees. Authority was delegated to the operational staff of the organization to enhance excellence and effectiveness of the decisions which were intended to be implemented. Strategic management also agreed on proposing incentives and recognition to the managers who were appropriately accepting changes (Heskett, 1-23).
The company promoted talent and recognized the efforts of people who depicted Self-Confidence, Simplicity and Speed. Sharing same values at all levels for the company and eliminating barriers between the workforce and hierarchy within the organization. Finding ways to spread the market reach of the organization and expanding globally were the major objectives of the company.
EXPLANATION
“Breaking up is the right answer for some big companies. For us it is the wrong answer, "Why" is the subject of our letter to you this year.”
As discussed above, the company emphasized on diversifying and making expansions in 1981 through various mergers and acquisitions. In 1995 companies engaged in multiple businesses observed that diversification is affecting their competitiveness. This drove the companies towards breaking up and emphasize on their core competencies (Heskett, 1-23).
In the case of General Electric it had strived for expansion and diversification for over a decade. The breaking up practices applied by other companies engaged with multiple businesses created questions that whether General Electric will do so or not. General Electric gave its view that there will be no change in its progress plan and that it will pursue its expansion. Its aim was to become an organization which has all the classical advantages of a big company. Acquiring these goals had become a strategic objective of the company. Diverting from this goal would affect the plan being followed by the company for over more than a decade. This was the philosophy adopted by the company for expansion after 1995 (Heskett, 1-23).
SWOT ANALYSIS
STRENGTHS
The strengths of General Electric as a company are (Heskett, 1-23):
- The business has shown a record growth with the passage of time. The revenues of the company grew substantially with the passage of time.
- The company is acquiring new businesses which are increasing its overall revenues. Diversification of the company in various businesses has improved its functionality.
- The returns for the investors and the Earning per shares of the company are growing at a significant pace.
Maintaining the core functions of the business is the key to sustaining success. Potential organizations try to utilize their strengths and constantly expand to find new ways to maintain those strengths.
WEAKNESSES
The weaknesses which General Electric was facing were (Heskett, 1-23):
- Over employed workforce makes the tasks performance redundant and reduces efficiency.
- There are barrier of communication between management and the workforce.
- Elements of bureaucracy within the organization.
These weaknesses of the company led it towards inefficiencies. The strategic management found ways to overcome the challenges so that the efficiency of the company can be revived.
OPPORTUNITIES
The opportunities for General Electric as a multiple business organization are (Heskett, 1-23):
- Globalizing the business and encouraging expansion.
- Launching new products and diversifying product range.
- Using information technology for promoting products and forming strategies
- Expansion can be made by the company in the service sector.
Expansion of the company is only possible if the right opportunity is availed at the right time. Certain areas where the business can work to achieve expansion are mentioned above. Since the trends of the businesses are changing it is permissible and expansion is encouraged.
THREATS
The threats which may impact on General Electric are that (Heskett, 1-23):
- The company may face problems with downsizing the inefficient workforce.
- All the multiple business organizations are starting to focus on their core operations but General Electric plans to expand and diversify.
- This may lose the focus of the company towards the products which are being offered and may affect its sustainability.
These weaknesses and threats of the company may form potential risks for the company in the future. These challenges which the company may face can be because of many reasons. All the inefficiencies within the company may be rectified to overcome such challenges.
POTENTIAL RISKS FOR GENERAL ELECTRIC
Potential risk for General Electric is its competitors which are shifting from diversification towards focusing on core operations. This will bring a major change in the business practices. General Electric has designed the three circle vision. This focuses on services, technology and core of the company. With this the company is aiming to target on all the three segments it plans to diversify in. The core businesses include Lighting, appliance, transportation, construction equipments etc.
General Electric is planning to see changes as an opportunity. The major problem with this is that the diversification in the changes may change the objectives of the company from its core. The management also does not possess the expertise which may be required to operate such diversified operations.
General Electric planned workouts to enhance the contribution of staff with the decisions of the company. The evaluation of management with the workout was implemented by the management in such a way that it even became career threatening in some cases.
GENERAL ELECTRIC’S POSSIBLE CONTINGENCIES
Considering the weaknesses and realizing the opportunities that are available in the industry there were several contingencies that were adopted by General Electric. This made it possible for the company to overcome the challenges. The strategic management formulated several strategies to be implemented so that the challenges can be overcome.
This was done by the management by proposing changes in the structure of the organization and aligning all the employees towards a single goal. This boosted self confidence, involvement in decision making of all individuals at all levels of the organization and ensure working out of the plans so that growth and expansion can be made possible in an effective manner.
General Electric designed three phases for the implementation process. The first phase was implemented in the 1988 by the strategic management of the company. These were designed by the management to ensure that trust was built between the employees and the management and the employees had the ownership to empower them to the operational decisions without depending on the managers. This would eliminate the aspect of bureaucracy between the managers and the workforce. The response of these actions was that the unneeded workforce which was contributing to the inefficiencies was dealt with appropriately.
The second phase was implemented in the year 1990. This was the initiation of the workout plans. These started taking place in all the departments of the organization to ensure that the management. The workout plan was initiated to address the major issue which the employees were facing and the impact of management on those conditions. This phase included more analysis and identifying of major problems. Tools like process mapping were used to identify the problems. Facilitators were hired to train and guide the employees with overcoming those challenges. The outcomes of these actions were useful for the organization. This was because all the major issues were clearly addressed and ways to resolve them were also formed.
Phase three which was implemented in 1992 was called the CAP program. The aim of this program was to initiate change and encourage managers to adapt to new methods of managing their workforce. The goal was to align the managers with the goals of the company and train them with appropriate methods of supporting and enhancing the performance of their employees. This workout plan was designed to encourage continuous improvement.
Six sigma quality improvements were also initiated to Measure, Analyze, Improve and Control the performance of the staff. Six sigma quality improvement programs divide the work force in minor groups and trains the relevant skill in them to increase the output of the company. The workout plan was made compulsory for the workforce or else it became career threatening for the employees.
The responses for the contingencies that were suggested by the strategic management had a positive result and contributed to the growth of the company. The inefficiencies of the company were minimized after the implementation of these measures.
SIX SIGMA
Six Sigma qualities involve a reduction of defect or inefficiencies within an organization. It was implemented in the United States based companies (Antony and Banuelas, 20-27; Schroeder et al, 536-554). Many large companies gained popularity because of it. It reduces the defect level to six standard deviations from average. It only permits 3.4 defects per million operations (Eckes, 1-13). The implementation of Six Sigma on General Electric required it to employ 3,000 new employees. Implementation of the system and the time required to go defect free was high (Henderson and Evans, 260-282).
Several companies had implemented elaborate procedures and had designed organizational procedures. An estimation of General Electric’s position and its goals it was estimated that the firm would require to employ 3000 new employees. The companies which have successfully implemented Six Sigma expect an increase of 10% in the after tax profits (Henderson and Evans, 260-282).
During the initiation of the implementation it was assessed by the members of General Electric about the effectiveness of the process and that whether the goals of the company would be achieved or not. It was assessed that the program was only effective if it was applied with other initiative application of the company. Earlier it was assumed that Six Sigma was applicable to all the processes and transactions. The objective needs of the application of the process and the relevance of it can be measured by application of the process on other companies. Without implementation of Six Sigma only less than half of the organizations succeeded in achieving their objective with initiatives (Henderson and Evans, 260-282).
IMPORTANCE OF LEADERSHIP
Leadership and control is very important for application of Six Sigma because it is directly related to managing the existing strength and weaknesses of the work force and aligning them to the Six Sigma process to minimize defects (Linderman, 193-203). Without proper leadership the excellence in work performance cannot be achieved (Kwak and Anbari, 708-715).
OPINION AS A MEMBER OF GENERAL ELECTRIC
Being a member of the GE corporate executive council I will agree with the application of the Six Sigma Quality to enhance the performance and achieve excellence with completing the goals of the organization. The additional workforce which the company had employed and was resulting in the inefficiencies of the company and the disintegration between the management and the workforce of can be overcome. The current application of the initiative taken by the company took a longer period of implementation and overcoming the inefficiencies. If Six Sigma had been applied then the process application would have been a lot quicker and easier.
Works Cited
Antony, Jiju, and Ricardo Banuelas. "Key ingredients for the effective implementation of Six Sigma program." Measuring Business Excellence 6.4 (2002): 20-27.
Eckes, George. The Six Sigma revolution: How General Electric and others turned process into profits. Wiley. com, 2002
Henderson, Kim M., and James R. Evans. "Successful implementation of Six Sigma: benchmarking general electric company." Benchmarking: An International Journal 7.4 (2000): 260-282
Heskett, James. GE: we bring good things to life (A). Harvard Business School, 2000: 1-23
Kwak, Young Hoon, and Frank T. Anbari. "Benefits, obstacles, and future of six sigma approach." Technovation 26.5 (2006): 708-715
Linderman, Kevin, et al. "Six Sigma: a goal-theoretic perspective." Journal of Operations management 21.2 (2003): 193-203
Schroeder, Roger G., et al. "Six Sigma: definition and underlying theory."Journal of operations Management 26.4 (2008): 536-554
