General Electric

Problem Statement: A firm and authoritarian leadership that once worked became obsolete in GE’s management culture.

After two decades under the management of Jack Welch, the employees had adapted Welch’s leadership style as part of the organizational culture. Welch was a ruthless taskmaster and during his 20 years at GE he developed a ranking system that placed employees in various categories. The employees that were appointed top 20 percent were under the stars category, the middle 70 percent were the crucial majority and the bottom 10 percent were cleared out. Through his policy of differentiation, Welch was able to separate those who wished to be stars in the organization and placed them in key positions. This approach is excellent in spotting and investing in future leaders in the early stage of the employee’s career in the company. Also, this technique allowed Welch to ensure the stars at GE would be groomed and ready once needed to assist those in the crucial majority. The latter also guaranteed all organization objectives would be met with positive results.

Nevertheless, this approach its extremely controversial and harmful for some companies since after just a couple of rounds of dismissing the bottom 10 percent, the crucial 70 percent will start shifting towards the bottom. This effect will cause the organization to lose valuable employees and organizational knowledge in the long run. In extreme cases of firm management practices, the employees begin to engage in unethical or illegal activities just to keep their job. According to Hala (2003), too much pressure on employees can lead to fraud and Enron was a classical case of this behavior. Enron used to lay off employees in its bottom 15 percent creating an immense pressure for the remaining employees who would eventually engage in creative accounting to maintain their jobs. Rowe & Guerrero (2013) mentioned that a high achievement-oriented leader, like Welch, will provide the best approach in...