MBA Program
Organizational Behavior 634
Final Exam
Professor:
Dr. Grace C. Khoury Fall,
2003
1. CASE INCIDENT – Can
a Leader’s Means Justify the Ends?
By any objective measure,
Jack Welch’s 20-year reign as CEO of General Electric would have to be called
an overwhelming success. When Welch took over the head job at GE, the company
had a market value of $13 billion. When he retired in 2001, the company was
worth $400 billion. Its profits in 2000 of $12.7 billion were more than eight
times the $1.5 billion it earned in 1980.
Welch’s performance paid off for stockholders. Including
dividends, the value of GE shares rose an average of 21.3 percent a year since
he took over. This is compared with about 14.3 percent for the S&P 500
during the same period.
How did Welch achieve such
success? On a strategic level, he redefined GE’s objectives for every
business in which it operated. He said GE would either be No. 1 or No. 2 in all
businesses or get out of them. He dropped those with low growth prospects, like
small appliances and TVs, while expanding fast-growth businesses such as
financial services and broadcasting. During his tenure as CEO, Welch oversaw
933 acquisitions and the sale of 408 businesses. He was obsessed with improving
efficiency, cutting costs, and improving performance. To achieve these ends,
Welch completely remolded GE in his style—impatient, aggressive, and
competitive.
In the 1980s, as Welch began
his remaking of GE, he picked up the nickname of “Neutron Jack.” A
play off of the neutron bomb, which kills people but leaves buildings
standing. Welch cut more than
100,000 jobs—a fourth of GE’s workforce—through mass layoffs,
divestitures, forced retirements, and relocating
Welch’s demanding
goals and penchant for closing down poor-performing units upended the lives of
thousands of employees and severely strained the bonds between the company and
many of the communities in which it operated. There were also a number of
scandals that surfaced under Welch’s watch at GE. These ranged from the
company’s 1985 admission that it had submitted time cards for too much
overtime on government contracts to the 1994 bond-trading scandal at its former
Kidder Peabody & Co. investment-banking unit.
Welch’s style was a
blend of restlessness, bluntness, sarcasm, emotional volatility, and teasing
humor. As one former GE vice chairman said about Welch, “even when he has
fun, he’s driving himself. He won’t give up till he has won, whatever
he does.” Welch regularly put in days of 12 hours or more but he expected
the same kind of dedication from his employees. When he got angry, he could
lash out with personal attacks that sometimes left shamed managers hurt and
speechless.
Questions
1.
Describe Welch’s leadership style using
(a) the
Welch was expecting from his workers to maintain his goals and achieve
them according to his standard and in his defined deadlines. He is a directive
autocratic leader who does not allow for any deviation from his goals or
standards. His major concern was the production and the profit but he did not
pay much attention to the employees’ needs or abilities. According to
(b) the managerial grid, and
As stated before, Welch has high concerns for production and very small
one for people. This appears from his aggressiveness on achieving the tasks and
his cares about profits. His leadership pattern is more based on task
management pattern which has very low concerns for people.
(c) LMX theory.
Welch preferred employees like him, those who are welling to work hard with overload and achieve their tasks on time. Other employees that show some sort of weakness or do not have the same standard of work aggressiveness as Welch, are fired.
2.
Assess Welch’s leadership effectiveness as assessed by
(a) stockholders,
“Could
not be better”. Money is always what matters most to him. His strategic plans,
high need for achievement and the pressure he put on the employees enabled him
to increase the profits of company, which in turn increased the stockholders
satisfaction.
(b) GE managers,
Although
managers are rewarded for their achievements but they are always under stress
of Welch’s high need for achievements. He always wants more achievements
and keeps asking “what’s next?”
He
empowered them and so they start to deal with their subordinates with the same
way he was dealing with them, which could cause some conflicts with the
employees.
(c) GE employees, and
No one felt safe in GE. He was not hesitating of firing anyone who does not achieve his target goals. He was so tough with the employees and put hard work on them which increased the stress and so reduced their innovation and creativity.
(d) communities where GE operations are
located.
The
social communities around GE and specially that have employees there are
affected by much. Due to the high demands from the employees and over time work,
they can not spend much time with their families and communities. They could
transfer the stress at their work to homes.
3.
Would you describe Jack Welch as a successful leader at GE?
Explain.
In spite of his toughness with employees, he was a successful leader. He made great use of his coercive power to influence his employees on achieving his goals.
He put strategic plans and fight for achieving them (Be No.1 or No2 or else get out of the market) this is his main objective. Toughness is very important to for managers and leaders to achieve their goals specially in the productivity. He was not care much about creating innovation in his firm; instead he was dealing well with buying innovations from entrepreneurs. He succeeded in reducing the costs because he was following the idea of “reduce the cost before you have to”. He does not like to leave chances for anything to happen against his goals.
In short his leadership style was toward increasing productivity and not people.
4.
How would you rate the ethics of Welch’s leadership?
He is using much of his power in leading his employees. In my idea this is ethical and he must use it to achieve the company’s goals. The only comment is that he could focus more on employees’ needs and limitations.
5.
Would you have wanted to work for Jack Welch? Why or why
not?
No I’d like not to work for
Welch because of his toughness that creates stress and overload employees. This
results in the reduction of the creativity. Besides that there is no place for
emotions or personal goals in GE other than GE’s goals.
For more information about General Electric visit its site
at http://www.ge.com/ibinta18.htm
to see what its leaders value.
Conflicts in organizations are inevitable because they
reduce cohesiveness, increase competitiveness, improve quality of decisions,
boost innovation and promote self-evaluation. Besides that, they help releasing
stress.
The conflict must be controlled; otherwise, it will harm
the organization and reduce the employees’ performance.
Personally I do not consider the organization to be healthy
without conflicts, otherwise something is wrong, possibly the employees are not
satisfied or stressed or even do not have loyalty to the company because they
do not care about making suggestions or show their ideas.
Employees should be encouraged to express themselves and
discuss their ideas. This can be done only by providing them with trust and
autonomy. Good communication and honesty should enable people to discuss their
ideas freely. It is not enough to give autonomy to employees but
organization’s goals must be clearly defined.
Constructive conflict must clarify issues and provide
solutions and alternatives. Other kind of conflicts should be avoided and
eliminated, even by management authority. Conflicts that lead to the domination
of someone over others should be avoided also because it create win-loss
conflicts that may affect on the performance of employees.
Small business is easier to manage and to drive faster
success because it can focus on few issues and small market. Mergers and
acquisitions are vital for business to increase the market share or open new
markets. Besides that, the overall cost will be lowered because the forces can
be combined together to face other competitors, or even competitors can be acquired
and eliminated in this way.
Talents, experience and new technologies are gathered to a
single large business are a result of merger or acquisition, which could
increase the advancement of the technology and provide better services for the
customers if the merger is planed and managed and the most important is how the
strategy is executed.
On the other hand, mergers lead to larger organizations
that are harder to manage and needs to deal with large diversity of employees and
customers having different needs. The lack of focus on different sides of
business may generate loses.
Besides that, mergers creates major changes in
organizations and so their cultures. People should adapt to the new culture,
which will take time and may cause some stress on employees and internal
conflicts. This would in turn increase the turnover rate during the merger and
possible loss of talents from the organization.
As a result, mergers and acquisitions do not always produce
better performance because they could fail producing the suitable synergy.
After all, all successful businesses will grow up some time
and look for new markets and new suppliers. Mergers and acquisitions are the
easiest ways for the business to grow up but special attention must be taken to
the human resources and plan for the change carefully to get the best of the
merger or acquisition.
5.
SUMMARY
Tammy Reinhold didn’t believe
the rumors. Now that the rumors were confirmed, she was in denial. “I
can’t believe it,” she said. “I’ve worked as a greeting-card
artist here for 17 years. I love what I do. Now they tell me that I’m
going to have to do all my work on a computer.” The company’s other
two artists, were just as concerned. Each had graduated from art school near
the top of their class. They chose the company, which had been around for more
than 50 years, because of its reputation as a good place to work.
Wisconsin
Art & Greetings is a small maker of greeting cards and specialty wrapping
paper. It has modest resources and modest ambitions. Management has always
pursued progress slowly. Maybe that’s why it was so late in introducing
computerized technology to its production operations. Courtland Gray, the
company’s owner, called Tammy, Mike, and Maggie into his office this
morning. He told them about the changes and acknowledged that the three were
going to have a lot to learn to be able to do all their work on computers. But
he stressed that the changes would dramatically speed up the art-production and
result in significant cost savings. He offered to send the three to a one-week
course specifically designed to train artists in the new technology. Technology
was coming to Wisconsin Art & Greetings and there wasn’t much Tammy
could do about it. Other than complain or look for another job!
1.
Explain Tammy’s resistance.
Tammy has a fear from the unknown new technology and its
effects on her future. She gets used on the way she performs her work and feels
that this is the best way for her. On the other hand, she feels the insecurity
and that the younger employees could replace her because they are more
acceptable and could learn better the new technology.
2.
Evaluate the way Courtland Gray handled this change.
Gray let the rumors about the new technology go around the
company which was not good because this would increase the resistance to the
change due to ambiguity. Lately, he informed the employees and that they will
get trained on the new technology and that it will improve the overall output
of the company.
The company culture does not assist in introducing the
change because everything seems to go slow and so any change should be
introduced slowly to the company to enable the employees to adapt on it.
3.
What, if anything, would you have done differently if
you had been Gray?
I would inform the employees in advance about the
importance of the change in the long run because of the market is changing and
the competition is increasing. I would put a strategic plan to introduce this
change and let the employees share in defining the steps and the objectives.
I would get feedback from employees during and after the
course and see how employees are thinking.
6.
“
Politics isn’t inherently bad.
It’s merely a way to get things accomplished within
organizations.” Do you agree or disagree? Defend your position. (Optional)
7.
The SAS
Institute believes that its corporate culture makes a difference. Many others agree, and cite it as one of
the best places to work in
“If you treat employees as if they make a difference
to the company, they will make a difference to the company”. SAS
organizational culture is employee-focused culture. Its objective is to keep
the talents and the experience in their company by focusing on employees’
satisfaction to improve the products and better serving the customers. It tries
to keep the business objectives and employees’ personal needs integrated
by offering several work/life programs like childcare and less working hours
(only 35 hours a week). The work-family programs reduced the turnover rate to
as low as 4% which increased company’s savings to about $60 million (Bankert). The work life satisfaction increases the focus on work and
so the efficiency, effectiveness and productivity.
SAS hierarchy is almost flat (only four layers) and so the
communication in the company is easy and friendly. SAS culture can be
considered as a communal culture. The social relation between employees is very
strong. The social programs SAS is offering increased the sociability between
the employees.
Because the care of SAS to create common objectives between
its business and employees’ concerns, the solidarity and loyalty to the
company has increased and everyone in the company care about achieving the
companies objectives.
In short, SAS business model is “Satisfied employees
create satisfied customers” as what is stated on their web site.
References:
- C. Higgins & L. Duxbury. “The 2001 National Work–Life Conflict Study”
- Y. Allarie. (2001). “Jack Welch: Business Jock”. Ivey business Journal.
-
R.
-
Entrepreneur.com A. Hiam. “When and
how to be tough”. Retrieved
- NSBA.org, Dealing with Conflict, Retrieved October, 26, 2003 from World Wide Web at http://www.nsba.org/sbot/toolkit/Conflict.html
-
Fleetcapital.com, Study reveals the long
and the short of successful mergers, retrieved
- www.ge.com General Electric
- www.sas.com SAS institute