Empowering Leadership in Management Teams: General Electric - Case Study Example

General Electric Case Name Course Institution Instructor Date General Electric Case Introduction Jeff Immelt, took control of GE from its legendary leader, Jack Welch, in 2001, Immelt presided over the slowest development year in decades and a stock value half of what it was in 2000, with not a single solid recuperation to be found. What's more, the organization had been managing terrible press and a crotchety disposition from investors over Welch's liberal severance bundle. One examination demonstrated GE's corporate slipping from twelfth to twentieth place in 2002, due to poor managment.”3 The atmosphere at the April 2003 stockholders’ meeting was adversarial, Immelt’s compensation was under scrutiny, and GE’s corporate governance practices were in question. Immelt needed to decide what to do next. According to a Wall Street Journal article published in November 2003, Immelt sought counsel that summer from Warren Buffett. During the last several years, Buffett had championed the thought that official pay ought to be attached to long haul execution and that investment opportunities could just work on the off chance that they were joined by measures deflecting administrators from controlling stock costs for here and now pick up. Buffet had also pushed for companies to expense options, thus raising visibility of such pay practices. Over a steak dinner in Omaha, Nebraska, according to the article, Buffett advised Immelt to stay away from tying compensation to stock price, instead basing it on “simple targets.”4 Shortly after the meeting with Buffett, the remuneration council of GE's board, led by Andrew C. Sigler, reported a radical move in how Immelt was to be rewarded. Gone were the investment opportunities, customer rights, and limited stock units. While in 2002 Immelt had gotten practically $9 million in investment opportunities and confined stock units, in 2003 he was to get 250,000 performance share units worth $7.5 million. Each performance share unit was convertible into a GE share in 2008, provided certain cash flow and shareholder-return conditions were met. Critics hailed the move as a step forward and in keeping with better corporate governance. Immelt GE’s resources & capabilities Immelt’s first years in office were tumultuous. GE was greatly impacted by the events of 9/11. Two employees were killed, and GE’s employer’s reinsurance unit, insurer for some of the hijacked jets and World Trade Center businesses, expected a $600 million loss. GE’s share price dropped, creating a loss of $80 billion in market capitalization. The following year, the outrages of misrepresentation, and broken corporate administration emitting at aggregates Tyco, WorldCom, and Enron put GE under investigation. The organization's money related divulgence hones were reprimanded as invulnerable, and its reputation of immaculate income, until then a wellspring of pride and stock esteem, ended up noticeably suspect. One article clarified: GE's capacity to [smooth earnings] frequently relies on its enormous fund unit, GE Capital. Amid an outstandingly decent quarter, GE Capital can essentially redirect overabundance income from at least one of GE's other 11 units, as a rule by taking stores against issue credits. Amid lean circumstances, GE Capital can diminish these stores, or it can auction acknowledged ventures . . . furthermore, utilize the increases to pump up quarterly benefits. By smoothing the pinnacles and valleys, GE maintains a strategic distance from either a profit shortage in a present quarter or a number that will be difficult to beat in a future one. GE management argued that earnings management was a way to insure predictability—worth a premium on the stock market—by using the resources available to them. Critics believed this practice was “blatantly improper” and “deliberate attempts to deceive the reader of financial reports.” Welch’s acrimonious and much publicized divorce allowed the details of his severance package to be made public in 2002, a year after Welch retired. Plus his $9 million yearly annuity, the severance bundle incorporated a $80,000 a month New York loft, autos, air ship, security frameworks, mobile phones, blossoms, wine and vitamins. The controversy over the package threatened to lump GE into the “sullied corporate image” category. Soon after the story broke, Welch decided to reimburse the company for the perks. Welch explained his point of view in a September 17, 2002 editorial in The Wall Street Journal. Immelt's Strategy Immelt tried to differentiate himself from Welch by cultivating an image that was more inclusive and responsive to stockholder concerns. Welch refused to allow directors to meet without him. Immelt, in contrast, insisted on it. Immelt championed responsible corporate governance and the idea of the morally responsible CEO: “I think sometimes CEOs forget what their job really is, which is to serve investors, serve employees and lead companies. That’s what turns on the very best CEOs I know. Money and power are just an outcome of that.”11 In the first year of his presidency, Immelt made changes to GE’s corporate governance and reporting methods that were designed to appease worried and angry shareholders. In 2003, Immelt, believing that long-cycle and short-cycle categorizations gave the impression the company was at the mercy of the economy, organized the company around businesses based on what they could contribute to the company. The “growth engines” were: Commercial Finance - loans and financing for major capital assets, real estate, and investments Consumer Finance - credit services to consumers, retailers, and auto dealers in 38 countries Energy - technology to the energy industry Healthcare - diagnostics and interventional medical imaging, information and services technology Infrastructure - high-technology protection and productivity solutions for manufacturing plants NBC - first and highest-ranked broadcast network, with 29 owned and operated stations Transportation - aircraft engines, rail engines, gas turbines GE owned four more companies it considered “cash generators”: Advanced Materials - silicon-based, fused quartz, ceramics, and thermoplastics Consumer and Industrial - appliances, lighting products, industrial equipment, systems and services Insurance - insurance and investment products Equipment Services - services to help medium- and large-sized companies finance, manage, and operate business equipment Immelt planned to sell off the low-performing insurance companies, organized under an umbrella called Genworth. He put priorities on businesses that could bypass distributors and create service revenue. He made plans to supply China with energy and medical products. Where Welch invested in management training and liked to rotate managers quickly, Immelt kept people in place longer, creating more depth in the management ranks, and poured more money into research and development. He initiated two large acquisitions: $10 billion for British medical-imaging company Amersham, and $14 billion for the U.S. assets of Vivendi Universal, creating NBC Universal. He also bought two cable channels, Telemundo and Bravo; three water treatment companies; three security technology firms; and Enron’s wind-power business. Even with these changes GE struggled. Softness in both the gas turbine and plastics market, along with skittishness caused by September 11, corporate scandals, and the Internet bubble, depressed the company’s stock price. It was trading in the $20.00 range in 2002, a little under 60% of its peak in 2000. Rather than hitting short-term earnings targets, Immelt seemed to accept the fact that earnings were sluggish and would remain so in the immediate future. In his 2003 letter to stakeholders, Immelt pointed out “future economic growth will be uneven,” and “a more volatile and uncertain world” will impact valuation. He also admitted that “earnings in 2003 trailed our long-term goal of double-digit growth” but that he planned to “generate consistent double-digit growth starting in 2005.” Requirements of the 21st century business environment The most important thing a company can adopt is to learn and improve, GE is a learning company since the management has understood how to learn and also transfer the learning from individual to corporate routine. The key to GE ability to outlive its function and not be changed by other agents controlling adverse changes, even though that could be deemed “objectively” in their interest is not in the GE tradition. But in the learning and change frameworks GE is embedded in, and the interplay between internal and external. In addition to the preceding idea, the GE management are not the best for current challenges because they were crafted during a period when competition was minimal while customers were not switching with the abandon of today. Social systems have no physical structures but rather a structure of events instead of physical parts. These trends have had an impact on GE rendering it vulnerable due to the rate of change in technologies. This renders technologies in which GE have been made obsolete in no time. Technology is also leading to lower costs and higher productivity, tipping the balance in GE. GE in a borderless global marketplace” has characteristics like minimized use of a command and control style of leadership, different management system and collapsed hierarchies, high use of technologies, effective teamwork and knowledge centres that are interdependent based on mutual interest and governance systems rather than authority systems. This interaction could lead to dynamics of "positive feedback," where GE engage in an arms race with societal trends which threaten them, trying to outrun them by strengthening individual elements within the GE themselves. While it is common for scholars to describe “positive learning and change” as a source of stability, GE use system of real learning to drive inexorably forward. Positive learning, on the other hand, pushes the company forward, and may very well lead it to a tipping point which leads to substantial systemic change. But the interplay of internal and external factors may also result in more gradual, "sideways" adaptation, where company respond to challenges by partially incorporating them into their system. For example, on July 15, 2016, the Federal Permitting Improvement Steering Council introduced changes in the GE. This eventuality is the result of a discursive process wherein experienced users of discourse generate desired results by triggering those ideas that are closer to such results and relying on the public desirability of consistency to new infrastructures from the company. The upshot of good learning and adapting positive changes is that the company culture does not necessarily come out of persuasion. But rather from modifying possible changes and deploying them in a manner that will trap their competitors in a corner from which they cannot escape without losing face with the public. This ability to learn this change, of setting the contours thus limiting the ability of competitors from participating in offering services efficiently, is crucial for the stability of discourse. "Learning and changes are easy to mount. Amending the terms of what is learned is exceedingly difficult, since the dominant definition of the problem acquires, by repetition, and by weight and credibility of those who propose the change.” For this reason, the generation of new ideas does not mean the ability of agencies ability to learn. Alternative strategies One of the greatest strengths that the GE could identify was the cohesiveness of the group. There was always open communication from the director and supervisor to the members of the committee that aided in the efficient functioning of the company. The willingness of the Administrator of GE to go above and beyond was also a strength the company could identify. He was willing to do whatever was needed to be done to ensure that the objectives set out by and for the company were met. Another strength is that the responsibilities of each member were clearly defined. That way each member knew what was required of them and when it was required. An example of this is that each member was assigned a speaker each week and would summarize the speaker’s presentation and provide it for the company Journal (The United States & United States, 2012). One of the weaknesses identifiable within GE was that some members would commit to doing the alternative methods of securing general electric such as big promises and then would not deliver when the time came. As a result of this, the burden was left on a few of the members and the lost public trust on the company. Another weakness is that effective planning was difficult to take place. The reason for this is because the GE meetings were scheduled for Thursdays as well as the executive meetings. As a result, the meetings were very short and rushed, and only a few items on the agenda would be discussed. This weakness was however managed by Technology. This is because even though the meeting was not kept or were not long enough to facilitate all that was necessary, the company members were updated on all matters via emails or telephone calls. An opportunity that was foreseeable to the GE was that the general electric to be gained is not limited to only government institutions. General electric no matter how small its infrastructure, is still a service. The GE learned of this opportunity when the responses from the public when there were some negative responses (The United States, 2010). The committee had to find other means of securing general electric because that was the task imposed upon the company. In brainstorming what to do the company identified various infrastructures such as providing robust in and around government and citizens this resulted in successfully securing infrastructure that when combined was substantial. One threat always faced by the GE was that of negative responses from those asked to be sponsors. This is a threat to the company as without securing sponsors, the objectives, as well as the reason for the organization, would not be accomplished. Another threat the company faced with was late and often miscommunicated information with which they were provided. This was a threat because it could mean the loss of sponsors who were given wrong information or the loss of potential investors due to the same false information. There was direct competition from other private bodies who were seeking to bring on general electric services. This is a threat as not all sponsors were willing to support more than one company. Conclusion The study has revealed that GE is an independent company that helps to manage general electrics. Most importantly, GE offers opportunities for general electric’s professionals in the United States to acquire new knowledge from outside professionals, know global trends about the general electric’s profession, obtain new information from other general electric’s professionals, and to get information about general electrics from other companies. This means that GE professionals in the United States can immensely impact on their knowledge capacity building. More so, a professional body that can bring general electric’s services in the country under one umbrella is required, not only to regulate the activities of its members but to create the opportunity for members to interact to share important ideas that help in their operations. GE try to get their staff to fit in thereby stifling their creativity and initiative. An example is where in GE, all staff are expected to work certain regular hours and adhere to a certain work ethic. This will certainly not bode well for the GE since the workers will be agitated and not comfortable. Creative problem solvers can work from a variety of work environments so it is essential that management of GE where creative problem solvers are required appreciate this and do not stifle the creative energies of their staff. Many creative problems will not or cannot be effective if they are regulated by standard employment or supply terms. It is therefore imperative that depending on the sector in which the GE finds itself, management is aware of such underlying factors and shies away from a standardization or reckless benchmarking process. The current study focused on identifying leadership, management, critical resources, competitive advantage, organization structure and strength, weakness and opportunities for GE. 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