How Does Such a Large, Complex Diversified Conglomerate Defy the Critics and Continue to Grow So Profitably?
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How does such a large, complex diversified conglomerate defy the critics and continue to grow so profitably? Have Welchs various initiatives added value? If so, how?
An organization in general will drastically increase revenue if the organization values and appreciates their staff members like Welch demonstrated through his competitive leadership style. GE has ventured into new opportunities, enhanced their global markets and expanded the realm of their service industry thus adding value of a 60% increase.
GE grew so big in its business portfolios that many critics became suspicious about its future, doubting how GE could add more value in its businesses. The answer from Welch was that GE was going to “grow bigger, but not smaller”. The opportunities of growth, according to Welch, lied in quality improvement in both productions and human capital.
Through a detailed study of impact of quality programs in well-known companies like Motorola and AlliedSignal Inc, Welch found out GE was suffering $8 billion to $12 billion a year due to inefficiency. Welch saw great opportunity to launch Six Sigma Quality Initiative, a quality program aiming to improve quality, lower costs and increasing productivity. This initiative was a well-developed program covering detailed planning, resource allocation, reviews and forecasts in every business unit. To equip managers with the skills in achieving Six Sigma objectives, Welch assigned Reiner, vice president of Business Development, to design a massive training with three types, “Green Belts”, “Black Belts” and “Master Black Belts”. Moreover,
the emphasis of Six Sigma Initiative was seen by tying 40% of individuals bonus, which was a pretty high proportion, to his or her Six Sigma objectives so that managers were highly motivated to implement, monitor and achieve Six Sigma plans.
Through Six Sigma Initiative, the company as a whole centred more on quality to add value to their exiting businesses. Lower production cost, improved productivity and increasing capacity were achieved smoothly and willingly in the whole company thanks to the solid foundations such as low bureaucracy, shared values and entrepreneur spirits in every business unit that had been built through the last decade. Some results were astonishing. For instance, Medical Systems saw a tenfold increase in the life of CT scanner x-ray tubes via Six Sigma designs. The return on investments for the company as a whole was also a great positive.
Quality became the key to compete in a business environment with more demanding customers and stronger competitions. As long as there was inefficiency and low productivity, there was the opportunity for improvement. We see the growing role of Six Sigma Initiative for such a well-diversified company like GE to compete in the years to come.
High quality in human
capital was also a key differentiation factor Welch tried to achieve for creating more value for the company. Welch embraced “A players” with “Four