Corporate Strategy

When Welch arrived :

Phase 1 - Réarrangement of portfolio

 Divesting of businesses that were not number 1 or 2 on the market. Fixed those that had
potential to be leaders.
 Aquired 21 billions of companies. Desinvestement of 11 billions
 Implemented Business playbook (strategic planning system) : simpe one page answers to 5
questions
 Budgeting process: in the past- based on past performance : now – based on potential of
increase in performance of the business unit

Phase 2 - Reduction of bureaucracy

 Reduction of hierarchical levels: from 8 levels to 4 – took out the sector level from the
hierarchy – Welch ensured that all businesses reported directly to him – before businesses
went through a sector and sector did communication for them – Reduction of cost, timing
and flexiblitly.
 High reduction of human resources 120’000 and also reduced 120’00 staff with divestitures
– Dramatic increase of profits
 Reduction of Culture shock – changed 12 out 14 business heads

1988 – Managing the culture

Hardware in place – Restructuring and downsizing done- now they focus on software :
management of the culture.

Culture : objective was to create the culture of a small company – bilateral communication –
where people felt engaged and all had a voice

Work out (3 day procedure): a process designed to get unnecessary bureaucratic work out
of the system and providing a forum where employees and bosses worked out solutions
together. No documentation in order to increase speed.

Best practices: how can we learn from others who are achieving better productivity growth?
Advantage : realised they were managing and measuring the wrong things – they should
have focues on things got done than what should get done.

Mid 1980s – Going global

Going global was not a general plan that the whole corporation had to go throough, it was up to
each business unit to see if necessary
Acquiring/joint venture / partnerships with major companies in countries where the economic
situation is going downwards (or economic certainty) – more growth in foreign markets than
domestic (exhibit 6)

Developing leaders

Implemented a culture – moving from implicit psychological contract based on perceived lifetime
employement – moved to engaging people emotional energy focused outward on a competitive
world

Top executives commit to develop employees, prepare succession plans (=session c).

For each business welch asked top executives to identify the future leaders, outline planned training
and development plans, and detail succession plans for all key jobs (welch spent 70% of time
teaching and developing staff)

Focused on creating an environment in which people could be there best:

Place where people have freedom to be creative

This implementation was tested in Crotonsville

4 type managers: fit or do not fit, implement tools (360 feedback - ) to select which one to keep and
develop. When coaching did not work hop they go.

360 feedback became the mean for identifying training needs, coaching opportunities, career
planning.

1990 – third wave

Boundary less company : erase group labels such as management, salaried and hourly wich get on
the way of working together. No distinction between domestic and foreign operations. Trying to
insataur collaboration of employees between businesses (knowledge sharing). Study
accomplishements from other business(visit the business). Global team corporation and no
competition between business units.

“if turf oriented, self centred, don’t share with people, you lose your job”

Implemented bonuses and options awards to reward idea seeking and sharing.

Stretch – achieving the impossible

Program setting an atmosphere of making people ask “how good can you be?” high trust is given to
the employees, also an open environment, employees don’t want to deceive the company. People
like problem solving, they want to go to the next level. Important to not punish failure. It’s a
stimulating process to push people to think better ways of better performing their work.
Service businesses

Early 1980s started product services – in 1995 60% profits come from services – solution for slowing
growth products – creating value by adding services – they already have a wide range of customers
from whom more value can be extracted – providing customer with products for becoming more
productive

Acquisition and joint ventures of service based companies

High profit margins

6 sigma quality initiative:

Consists of improving quality, lower cost and increase productivity –

Training program – green, black, master belts –

4e–

Performance appraisal system that required manager to rank employees in 1 of 5 categories.

1 and 2 received stock options. More than 5 had to go.

Continuesly upgrading the quality of employees and management