Jack Welch and Transformational Leadership

It is also useful in identifying the personal characteristics, the leader and follower values and the situational factors that contributed to his success. This paper will analyses Wheel’s leadership of GE using the framework of transformational leadership. Conclusions will be drawn regarding Wheel’s leader behavior and effectiveness, taking into account the situation, the nature of the followers, Wheel’s values and the international and cultural context. Jack Welch Welch performed a number of leadership roles that contributed to his achievements as CEO.

Gardner (1 989, as cited in Dahlias & Evans, 2005 ) identifies nine main tasks of leadership: envisioning goals, affirming values, motivating, managing, achieving workable unity, explaining, serving as a symbol, representing the group and renewing. When Welch took over at GE, corporate America revered large bureaucracies as critical for close monitoring of personnel and it had placed great faith in a command-and-control management system (Slater, 2003). Although GE was regarded by many as a model organization, Welch recognized that new global competition and poor economic conditions had changed the game.

He set about ransoming and reinventing the company from top to bottom, with a goal to make GE ‘the world’s most competitive enterprise” (Kramer, 2002). One of his first steps was to envision goals. In September 1981, in an internal GE publication, Welch articulated the corporate strategy that each division would be number one or number two in their industry, and that GE would remain lean, agile and able to respond to changes in its environment. In his first decade of leadership, GE pursued these strategies as it divested hundreds of businesses, removed layers of management and laid off more than 150,000 workers.

By 1989, 12 out of 14 GE units were leading their markets both in the U. S. And abroad (Atwater & Atwater, 1994). Welch referred to these years as his ‘hardware phase’. Although this period boosted Gee’s bottom line, it also disconcerted many employees. Having almost achieved the position he had envisioned in 1981, Welch then set about developing a strategy that would allow GE to remain successful and continue growing. To do this, Welch believed that the focus had to shift to the people side of the organization, and embarked on a period of renewal that he called the ‘software phase.

According to Atwater & Atwater (1994), the strategic objectives he presented were twofold: a accompanied drive to identify and eliminate unproductive work, and transforming the attitudes of employees to encourage creativity and feelings of ownership and self-worth. Both objectives sough to motivate employees; the first, by removing frustrating obstacles, such as bureaucracy and hierarchy that forced people to focus inward on the organization, killing the company’s competitive spirit (Atwater & Atwater, 1994), and the second, by creating employees who would be able to deal with the halogens of global diversity and opportunity.

In pursuing these objectives, Welch spent a great deal of time affirming values. While they were never completely rewritten, Welch and GE revised the values every few years to encompass the latest ideas and initiatives. By the late sass the values included the key beliefs at the core of Wheel’s revitalization of the company. Having excellence and disdaining bureaucracy were at the top of the list. Creating a ‘boundaries’ organization, free of rigid hierarchy and any other barrier that prevented the free flow of ideas, people and decisions was included.

Being open to ideas, living quality, and having self-confidence followed. (Kramer, 2002). He created the cultural initiative ‘Work-Out’, a process in which managers listened to workers and gave employees a voice in decision-making. It helped to eliminate vertical and horizontal barriers and forever changed the way people behaved at the company (Kramer, 2002). This process assisted Welch to achieve workable unity within the organization, creating an environment of trust and openness that had not existed before.

According to Atwater and Atwater (1994), Wheel’s orchestrated transformation f GE is testimonial to his ability to perform the role of explaining – to develop, articulate and effectively communicate a vision of what the company should be. Transformational Leadership Transformational leadership is an expansion of transactional leadership, which emphasizes the transaction or exchange relationship between leaders and follower, such as money for work (Bass & Rigor, 1994).

Transformational leadership adds to this exchange by addressing the follower’s sense of self worth to engage their commitment and involvement in the job at hand (Bass & Rigor, 2005). Bass (1985) describes the transformational leader as one who empowers followers and motivates them to work on collective goals instead of focusing solely on immediate personal interests. According to Burns (1978, as cited in Dahlias & Evans, 2005), transformational leadership occurs within a specific value system. It involves change whereby followers participate in activities that are motivated by end values.

Transformational leadership has a lot in common with charismatic leadership, although charisma is only one part of transformational leadership. A critical concern for both theories involves what is referred to as the ‘dark-side’ of harms – those charismatic leaders who inspire and lead followers to selfish, destructive and sometimes evil ends (Bass & Rigor, 2005). According to Bass (1998, as cited in Bass & Rigor, 2005), transformational leaders who work primarily towards personal gains as opposed to focusing also on the outcomes of followers are inauthentic transformational leaders.

This is in contrast to authentic transformational leaders who transcend their own self interests for either utilitarian or moral reasons. Transformational leaders display one or more of the following four personal characteristics (Dublin et al. 2006; Bass & Rigor, 2005): Idealized Influence Transformational leaders are, above all, charismatic and behave in ways that allow them to serve as role models to their followers. They have vision and emphasis the importance of a collective sense of mission (Bass & Rigor, 2005).

Followers identify with the leaders and as a result they have faith, pride, enthusiasm and trust in what they are trying to accomplish. Inspirational motivation According to Bass and Viola (1994), transformational leaders motivate and inspire those around them by providing meaning and challenge to their follower’s work. Team spirit is aroused, and enthusiasm and optimism are displayed. They involve followers in envisioning attractive future states, create clearly communicate expectations and demonstrate commitment to goals and a shared vision.

By providing emotional support and making emotional appeals, transformational leaders inspire group members to exceed their initial expectations (Dublin et al. , 2006). Intellectual stimulation Transformational leaders stimulate group members’ efforts to be innovative and creative by questioning assumptions, reframing problems, and approaching old situations in new ways. They create an environment in which creativity is encouraged. Followers are included in the process of addressing problems and finding solutions.

Group members are encouraged to try new approaches and are not criticized if their ideas differ from their leaders (Dublin et al. , 2006; Bass & Rigor, 2005). Individualized consideration Transformational leaders treat their employees as individuals and pays special attention to each persons needs for achievement and growth. They act as a coach or mentor, developing followers to successively higher levels of potential (Bass & Rigor, 2005). The leader listens effectively and invests time in one-on-one communication, helping followers to feel respected (Dublin et al. 2006). Analysis To varying degrees, Welch displayed all four qualities of a transformational leader in bringing about change at GE. Certainly, as CEO of one of the world’s largest corporations, Welch possessed office-holder charisma (Dahlias & Evans 2005). However, throughout his tenure, Welch also displayed some of the key behaviors of a charismatic leader. Above all, Welch was willing to take risks, a behavior typical of a charismatic leader (Dublin et a’, 2006). In 1981, GE produced profits of $1. 5 billion.

Wheel’s decision to restructure the company and put thousands of GE employees out of work at a time when the company didn’t appear to be in trouble was a risky tactic that made him one of the most controversial Coo’s in America at the time. And he again went against conventional business wisdom when his focus moved to involving and engaging all workers during the software phase of his leadership. Another behavior consistent with that of a charismatic leader was Wheel’s ability to remember names and people (Dublin et al, 2006). According o Byrne (1998), Welch knew by sight the names and responsibilities of at least the top 1,000 people at GE.

There is little evidence to suggest that employees had faith, pride, enthusiasm and trust in Welch while he was implementing his ‘hardware phase’ during early 1 ass’s. In fact, an employee later confessed to Welch, ‘We spent 90 percent of our time on the floor figuring out how to screw the management. That was alright, because you guys spent 95 percent of your time figuring out how to screw us. ” (cited in Slater, 2003, p. 78) However, although implementing the strategy invoked fear throughout Gee’s inks, Welch was persistent, another characteristic of a charismatic leader (Dublin et al, 2006).

He never veered from his vision and was fiercely committed to making all of Gee’s businesses winners. According to Itchy and Deviant (1990), after three or four years, Wheel’s vision of the company he wanted GE to be began to come into focus for more and more people. As Welch proceeded to reinvent GE, leading it from one earnings and revenue record to another, his idealized influence grew. In 1999 Fortune magazine called him ‘manager of the century’ (Fortune Selects, 1999) demonstrating that he had aimed the respect of the business world.

Although there is no evidence that this translated into his employees having respect, faith, confidence and trust in what he was trying to accomplish, his direct reports appear to have identified with their leader. Describing Wheel’s performance evaluation process of his direct reports, Byrne (1998) observes: “As if in lockstep, each business chieftain then emulates the behavior of his boss, and their reports, in turn, do the same. ” A key aspect of Wheel’s leadership was his practice of inspirational motivation.

He involved his followers in envisioning attractive future states. According to Atwater and Atwater (1 994), Gee’s corporate values statement was developed with the input of 5000 GE employees. The statement described the corporate characteristics of the new company (lean, agile, creative, a sense of ownership, and reward), and individual characteristics of the leaders GE wanted to be running the company (faces reality, candid, open, strives for simplicity, demonstrates integrity, encourages individual dignity). Welch clearly communicated his expectations to his employees.

He always said that GE was a meritocracy, meaning that hiring and promotion decisions were eased on ability and achievements. Those who were rewarded were those who lived the values, showed ‘guts’ and in doing so, made the numbers (Kramer, 2002). As an example of his commitment to goals and the shared vision, Welch held that even those managers who made their numbers should be fired if they did not subscribe to the company’s value system (Kramer, 2002). The software phase of Wheel’s leadership centered on creating an organization in which intellect ruled over bureaucracy and hierarchy, shifting authority from managers to employees.

Wheel’s managers had to empower their workers to sake decisions, contribute ideas and organism their own workdays (Kramer, 2002). In doing so, Welch was attempting to create an environment that provided people with opportunities to be creative, take risks and win, and to make sure that employees’ work had meaning by demonstrating how they contributed to the overall effort (Slater, 2003), although it is unclear from the literature whether the desired effect was obtained.

To challenge his employees and help them tap into their unlimited potential, Welch set what he termed ‘stretch goals’ that included impossible targets. Importantly, however Welch did not punish for not meeting big targets, and said that even coming close to a stretch goal was worthy of celebration (Slater, 2003). According to Kramer (2002), stretch became a way of life at GE, and there is evidence that by challenging and empowering employees, Welch provided the emotional support needed to inspire group members to exceed their initial expectations: “Before at GE, we generally used to tell people what to do.

And they did exactly what they were told to do and not one other thing. Now we are constantly amazed by how much people will do when they are not told what to do by management. ” (as cited in Slater, 2003, p. 78-79). There is a great deal of evidence that points to Welch providing intellectual stimulation to his employees. Through his cultural initiative, ‘Work-Out’, Welch ensured that all group members were involved in the process of addressing problems and finding solutions.

The central objective was to ‘grow a culture where everyone’s ideas had value. In a ‘Work-Out’ session, cross-functional teams of employees and managers came together to identify problems. All participants focused on ways to reorganize work and maximize return on time. The session ended with individuals and names signing written contracts to implement new procedures (Atwater & Atwater, 1994). Welch credited ‘Work-Out’ with establishing the ‘boundaries’ culture that helped reinvent GE as a learning organization (Slater, 2003).

This was in stark contrast to Gee’s ingrained “NIH’ or ‘Not Form Here’ culture of the early sass’s that apparently disdained ideas that did not originate at GE (Slater, 2003). At the heart of Wheel’s new learning organization was the assumption that “somewhere, someone else has a better idea, and that the quality of the idea does not depend on its altitude in the organization…. An idea can be from any source” (Slater, 2003, p. 78-79). By devising programs and initiatives that fostered learning, Welch ensured that everyone knew that the company was committed to learning (Kramer, 2002).

This created an environment in which group members were stimulated to be creative and innovative by questioning assumptions, reframing problems and approaching old situations in new ways. For example, while Welch had assumed that GE could maintain quality through its existing strategies such as Work Out, his employees argued that greater productivity was not possible without higher laity standards. In response GE introduced the quality program Six Sigma that had been pioneered at Motorola (Slater, 2003). Furthermore, group members were not criticized if their ideas differed from their leaders.

For example, at Correctional (Gee’s management training center), employees participating in management classes challenged Wheel’s thinking face-to-face, and if they had the better idea he did it their way (Kramer, 2002). Evidence of Jack Wheel’s individualized consideration is difficult to obtain, however the literature reviewed gives some clues that he practiced aspects of it tit certain employees. For example, every one of Wheel’s direct reports received a handwritten, two- page evaluation of his or her performance at the end of every year (Byrne, 1998). They also received an appraisal every time the got a raise, a promotion or stock option.

Welch ensured that special attention was paid to these individuals’ need for achievement and growth by communicating clearly what behavior contributed to success: “C’mon; it’s an exchange; it’s a time to engage them; a time to get people involved. It’s about developing a relationship with an employee when you give them an award. You should be telling them why you gave it to them and what they can do to get more. ” (as cited in Kronor, 2006) By practicing two-way exchange communication and by personalizing these interactions, Welch was demonstrating individualized consideration of his direct reports.

No evidence was obtained regarding his ability to listen effectively. Welch put a great deal of effort into developing leaders to higher levels of potential at GE. For example, during Gee’s three-week leadership development course at Correctional, Welch acted as a teacher and coach to his high-potential managers (Byrne, 1998). However, not all GE employees saw that side of Welch. According to Byrne (1998), some rank-and-file employees felt unhappy about the unrelenting pressure on them to perform: “No matter how many records are broken in productivity or profits, it’s always ‘What have you done for me lately?

The workers are considered lemons, and they are squeezed really dry. ” (as cited in Byrne, 1998). Such a sentiment suggests that Welch did not always treat his employees as individuals. Furthermore, while Welch urged all managers and GE business leaders to ‘nurture’ all GE employees who shared the company’s values, e also urged them to move quickly to get rid of those who did not (Kramer, 2002). This demonstrates that Welch was not accepting of individual differences where a conflict of values was concerned.

Conclusion During his 20 years as CEO of GE, Welch consistently displayed the characteristics of transformational leader. He effectively achieved his initial goal of making GE the world’s most competitive enterprise, and it has been demonstrated that his qualities of idealized influence, inspirational motivation, intellectual stimulation and individualized consideration contributed to this effectiveness. He may be considered an authentic transformational leader, as he transcended his own interests for the utilitarian goal of improving the organization he was charged with leading.

However, not all of the qualities of a transformational leader were present at all stages of his tenure. For example, little evidence was found to suggest that Welch practiced inspirational motivation, intellectual stimulation or individualized consideration during the hardware phase of time at GE. Doing so however would likely have been impractical. Attempting to inspire and empower a bureaucracy t a time of massive restructuring would have sent mixed messages to his workers and may have jeopardized his efforts at strengthening Gee’s businesses.

The fact that Welch did not practice individualized consideration with all of his employees is not inconsistent with the theory of transformational leadership, which as noted earlier allows that some leaders classed as transformational may not have all four characteristics.