General Electric Company’s Incentive System

Subject: Employee Management
Pages: 1
Words: 289
Reading time:
2 min
Study level: Master

It is important for any leader to be able to motivate the followers and subordinates in order to ensure that there will be the necessary improvements put in place. In the case of an incentive system, it reinforces behaviors, such as competition, equity seeking, avoidance of negative reinforcements, and adherence to positive ones. Jack Welch’s application of the extrinsic motivation framework was not in accordance with General Electric’s (GE) culture, but his continuous efforts resulted in a cultural paradigm shift in the company.

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Incentive systems are based on the notion of using the environment or outside influences in order to promote operational efficiency and effectiveness. Extrinsic motivators can take the form of pay raises, pay for performance, scoring, alignment with company goals, and competition. In other words, people put under the pressure of the incentive system will exhibit behaviors, such as competitiveness, organizational goal orientation, and avoidance of punishment. Such behavior was not originally in accordance with GE’s culture, because prior to Welch, employees had perceived lifetime employment (Bartlett & Wozny, 2005). However, he forced this inward type of behavior to become outward, which focuses on the competitive world. In other words, he was able to shift the cultural paradigm in favor of the company’s effectiveness, which was built on incentivizing of workers through extrinsic factors.

In conclusion, Jack Welch was a highly successful leader and CEO of General Electric because he was able to transform the company into a highly effective and efficient machine. He achieved it by implementing a wide range of practices, among which was the extrinsic motivation of employees to either be productive or stop being an employee. He changed the original culture of GE by making the inward looking culture become an outward type.

Reference

Bartlett, C. A., & Wozny, M. (2005). GE’s two-decade transformation: Jack Welch’s leadership. Harvard Business School.