Contingency And Path Goal Theory

I truly believe that if there is anyone in this world who inspired the new generation leaders to dare to think and go beyond the conventional way of leading an organization, it is the legendary Jack Welch. John F. “Jack” Welch Jr. was born in 1935, after his graduation he got into General Electronics and later was named the company’s youngest ever chief executive officer in 1981. Later, he built GE into the most successful American corporation of the late 20th century. He accomplished this by focusing on quality, insisting on innovation and devising a series of unconventional business strategies that transformed GE from an overly bureaucratic snail’s paced organisation into an energized company ready to face world competition.

Welch’s one of the greatest achievements is; he argued that leaders should not be spending their time by managing every torturing detail but rather leaders should formulate a vision and then get out of the way…. This will inturn energize others to execute it. He always wanted the best men to work under him for General Electronics, so he never had to worry about execution and success of his policies. He always inspired his employees to stay ahead of the competition and to harness the power of change. He never had the habit of ‘sitting on one’s on laurels’, for instance he changes his policies and strategies based on his intuition even though the company is in a winning position. Because he thinks it is the best way to reinvigorate the business.

Apparently, Jack Welch had to make some difficult personnel decisions early in his tenure as the CEO, which included sloughing more than 100,000 employees. According to Welch, it wasn’t cruel to fire the employees; it would be cruel to others to keep them around. He would push his managers to perform, but he would reward those in the top 20% with bonuses and stock options, which resulted in the growth and success of General Electronics that is unparalleled in business history.

Since Welch’s childhood he was known as, “nice regular guy but always very competitive, relentless and argumentative”. This clearly states that Welch had some inborn talents and traits to become a great leader.

The reason why Welch is still considered to be one of the best leaders of all time is because he practised almost what he preached. His ideologies were so simple that even the layman could easily understand their role and how to carry out their job effectively towards the success of the organisation. His vision, charisma and enthusiasm were always a class above when comparing to other contemporary leaders. On the other side, Welch could be pitiless and abrasive if the desired results are not achieved. However, Welch’s staffs were inspired by him and they were certainly glad he was leading them. Whether they liked him or not, they respected him, they admired him and they followed him.

Contingency Theory

The contingency theory is based on the assumptions that a leader’s ability to lead is contingent upon various situational factors, including the leader’s default style of leading, the capabilities and behaviours of followers and also various other situational factors.

During the initial period, it was very obvious that Welch was a “contingent leader”. He was considered as someone who was highly concerned about reaching the ultimate goal or in other words he was very goal oriented as GE needed someone to deliver the goods. Welch adopted a leadership approach which enabled him to get the ‘best out of people’. Sooner, he became the Vice President of GE and he wanted to break the traditional way of running and working inside an organisation. As a result, GE started achieving impressive results as the time progressed, most of them due to team who was extremely goal oriented.

For this purpose, Welch always wanted all his followers to think the unthinkable and reach for the unreachable, which was his way of asking his teams, “never doubt or give up your hopes” on the GE goals . Moreover, he made aware an entire generation of GE managers never to accept mediocrity. However, Welch also insisted that no-one should be punished for failing to hit a stretch goal, which is targeted above the standard goals. In reality, your days were numbered if you missed more than one!!!!!!!!!

Welch almost followed a “no nonsense” leadership approach which gave him a reputation of being gruelling, even pitiless at times, but also fair when making and formulating business decisions and strategies. Welch hated bureaucracy and had very little time for traditional old school business tactics. If Welch feels that the managers and other followers are not living up to the expectations they were replaced with someone that could deliver what the GE needs. Managers were given free will and power as long as they followed the ethics and shared values of GE. He had always seen GE like a small dynamic business, which is very flexible to the changing and challenging business and economic conditions.

Welch introduced a fresh and innovative organizational leadership style to GE during his time at GE. During his 20-year reign at GE, Welch developed a ranking system that put employees in one of three categories. The top 20 percent were “stars,” the middle 70 percent were the crucial majority and the bottom 10 percent were weeded out. “Jack Welch discusses winning method for cultivating leadership,” 2005).

During this time some of his leadership and management prophesies were as follows.

Put the right people for the right job.

Have a very few ideas… stretch them until it becomes realities.

Hate bureaucracy.

Always make your numbers

Talk straight

During initial period as a leader, his ultimate goal was to make GE profitable by implementing the above given leadership prophesies. The reason why I believe Jack Welch leadership style was contingent during these days is that, if he feels something or someone is not working out he does not give a damn about it, he would just kill the project or even fire the entire bunch of employees. But at the same time he was very particular about listening to the employees who actually do the work and share GE values.

There are many critics about Jack Welch’s leadership style. Especially, his way of achieving goals “at any cost”. The critics call him, “a consummate corporate villain, willing to sacrifice anyone’s job to turn a higher profit”. They say it is not fair from a leader to lay off more than 100,000 employees just for the cause of reducing the cost and making the organisation more profitable. But in my perceptive, when Jack Welch was elected to the position of CEO for GE in 1981, most of the company’s businesses were doing really good. GE was always ranked amongst the top five. But Jack Welch knew just staying somewhere in the rank list is not enough. He was very quick to grasp the imperativeness for them to be number one or two in any business that they were in. He keeps everything very simple; to remain as the best, you need the best out of your people. That was the reason why Jack Welch decided to redundant more than 100,000 employess who were not willing to share this GE values. On the other hand, it inspired the other employees to stand up against the challenging environment and to come out of it with flying colours, and gave them the confidence of moving against the tide.

Path Goal theory

The Path-Goal Theory of Leadership was developed to describe the way that leaders encourage and support their followers in achieving the goals they have been set by making the path that they should take clear and easy. The variation in approach will depend on the situation, including the follower’s capability and motivation, as well as the difficulty of the job and other contextual factors.

Since he had become CEO in 1981, he evolved himself into a Path Goal oriented leader.

Achievement-oriented leadership

In Path Goal, Welch adopted the achievement – oriented leadership style by setting challenging goals, both in work and his personal life. He sets high standards and expects the same from the workers in return. The most important thing was that despite Welch knew the goals are very challenging and hard to achieve, he had faith in his follower’s capabilities to succeed.

During1981 Welch was named as CEO of GE, and some of these become much more important. It was very obvious that he transformed his leadership style to a more “path oriented” one. In his all leadership prophesies a strong recognition to the necessity to change the people’s mind was very evident.

” Welch discovered that you cant will things to happen, nor can you simply communicate with a few hundred people at the top and expect change to occur”.

Welch motivated his teams to be flexible and expect change at any moment to gain the competitive advantage. He relentlessly told his people to strengthen the business though GE was miles ahead of the competitors. Thus, he often amazed his staff and his competitors by changing things whilst still in a winning position. As a result, GE became a moving target for the competitors to aim at. It was hard for the other competitors to benchmark GE and counter attack them since GE never stopped growing. He was very quick to recognize that GE was over crowded with too many employees and layers of management and too many people duplicating the job. To rectify this issue, Welch had to take many tough decisions which include firing more than 100,000 people and withdrawing GE from than 200 business lines. According to Welch, he got rid of the fat that was slowing down the company’s growth. As an immediate step, he ensured to nurture a mechanism of allowing the employees to talk straight with their bosses, ask questions to them, give suggestions etc. Initially, the employees were not really convinced about the goals or fairness of the program but slowly but surely everything started falling in place and the relationship and conversations between the workers and the managers begun to improve. The most important thing is that the leaders were asked to value, treasure and nourish the voice dignity, and individuality of each and every individual.

Power and Influence of Jack Welch

Power may be thought of as either positional or personal. Welch was quick to realize that in order to be an effective leader he can not rely exclusively on positional power. Thus he chose to practice a combination of both positional and personal power for managing his followers.

Well, people around the world know little about how Jack Welch was able to manage so much influence and power over the most widespread, multifaceted organization in all of American business. While, Many managers struggle daily to inspire and just motivate few subordinates under him, Welch had effectively managed 276,000 employees scattered in more than 100 countries around the globe. It was no doubt that he did it through sheer force of his personality, along with an untiring passion for winning the game of business. The natural power and influencing behaviour of Welch had enormously helped him in successfully moving the giant GE onto the next level level. Although, he had to take some harsh and merciless decisions, it was all for the betterment of GE. The power and influence of Welch was such that his staffs were inspired by him and they were undoubtedly delighted when considering the fact that he was captain of their side. Whether they liked him or not, they respected him, they admired him and they followed him.

Analysis of Jack Welch’s leadership style. General Electric has achieved tremendous results and growth under Jack Welch’s leadership. One of his exceptional qualities was that he ensured that each business under the GE umbrella was one of the best in its field. He also made sure that GE always had competitive advantage over other organisation by acquiring new businesses and making strategic business moves. While analysing a leader it is necessary that one should analyse his Dark-Side also. Here are some insights onto the dark side of his personality.

Evolutions of Welch’s leadership style

Period -1

Evidently, Welch was a “contingent leader” when he became the the Vice President of GE. The organisation was in a bad position when he took over the position. Thus, Welch adopted a leadership approach which enabled him to get the ‘best out of people’. The results were amazingly astonishing because the teams were extremely motivated to perform and deliver the goods for GE.

Period – 2

Since he had become CEO in 1981, he evolved himself into a Path Goal oriented leader. In Path Goal, Welch adopted the achievement – oriented leadership style by setting challenging goals, both in work and his personal life. He sets high standards and expects the same from the workers in return. The most important thing was that despite Welch knew the goals are very challenging and hard to achieve, he had faith in his follower’s capabilities to succeed

.

Period -3

In his later career, Welch stayed as a transactional leader, who supports the new vision and culture of GE. Welch’s transactional leadership styles were very evident when he rewarded those in the top 20% with bonuses and stock options, which resulted in the growth and success of General Electronics that is unparalleled in business history.

Conclusion

After carefully analysing Jack Welch’s leadership style I would say, most times, he adopted the style of ” Jack’s way or the highway”. He never bothered about what the other person thought about his decisions. As I’ve stated before he had to take many harsh and merciless decisions, but, it was all for the betterment of GE. The leadership influence of Welch was such that his staffs were inspired by him and they were undoubtedly delighted when realizing the fact that he was captain of their side. Whether they liked him or not, they respected him, they admired him and they followed him.

The Dark Side

Both in his personal and professional life there was a lack of human touch. The lack of childhood or college friends is a good indicator of Welch’s inability to make long term relationship and live as a social person. While closely analysing all these I assume that Jack Welch was least bothered about his social responsibility . He believed that leadership is always about numbers, if that is the case GE would never be able to pay off social cost for laying off more than 100,000 employees. He adopted “at any cost” leader style, which means he would go to any extent to achieve the desired target.

As the old saying goes, “every person has a dark side , sometimes it makes a person better”.