General Electric Performance over a Half Century

5271 words 22 pages

ISSN: 1083−4346

General Electric Performance over a Half Century:
Evaluation of Effects of Leadership and Other
Strategic Factors by Quantitative Case Analysis
Richard H. Frankea, Anthony J. Mentob, Steve M. Prumoc, and
Timothy W. Edlundd abc Department of Management and International Business, The Sellinger School,
Loyola College; 4501 North Charles St., Baltimore, MD 21210,, d Morgan State University; 720 West 34th St., Baltimore, MD 21211-2604 ABSTRACT
We conducted quantitative case analysis of inflation-adjusted profitability and relative market value at General Electric over a
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Although GE attained a record 14.5% operating margin and a 25% return on equity in 1997, Welch still was not satisfied. He planned a major restructuring because he did not believe General Electric to be sufficiently competitive in several of its business units. Moreover, he was not a proponent of incremental change; to him this was not significant or revolutionary enough to be able to maintain competitiveness
(Locke, 2000).

Other Views of Jack Welch

However, Jack Welch was not without critics. While CEO, he made unpopular decisions, such as divesting historical but low profit margin GE product lines, eliminating almost 200,000 employee positions between 1982 and 1994--nearly half the labor force in 1981 when he assumed control. Welch also was at the helm during the failed acquisition of Kidder Peabody (Byrne, 1998).
O'Boyle (1998) noted downsides of Welch's transformation of GE in real but hidden costs from downsizings, from numerous acquisitions, and from a diminished role for manufacturing and related R&D at GE. O'Boyle examined government documents and private correspondence, and conducted 320 personal interviews. He concluded that the basis of Welch's success was a kind of financial gamesmanship rather than superior management or technical innovation. Elliott (2003) describes the beginning of a reemphasis on


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