HRM Case Study: General Electric in Hungary

HRM Case Study: General Electric in Hungary
Coming up next: Five Phases of Strategic Human Resource Metrics Analytics

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:05 GE in Hungary
  • 1:00 Cultural Shock
  • 2:11 Changes Made by GE
  • 3:15 Results of the Changes Made
  • 3:49 Better Approaches
  • 4:29 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed
Lesson Transcript
Instructor: Bob Leahy

Bob has taught for the military, various government agencies and public/private corporations, and has an education specialist's degree in career & technical education

General Electric (GE) is an American corporation with many different business units and global locations. This lesson discusses GE's experience purchasing control of a company in a former communist-led country.

GE in Hungary

Shortly after the fall of the Berlin Wall in 1989, General Electric (GE) agreed to buy 51% of Tungsram, a Hungarian lightbulb manufacturer. This purchase was before the final collapse of communism in the former communist states of Central and Eastern Europe and the Union of Soviet Socialist Republics (USSR). GE reasoned that this purchase would allow them to gain a production base close to Western Europe, take advantage of a low-cost workforce, and ultimately increase their share of market in all of Europe.

GE did not see the true picture of Tungsram. When they stepped in, the company was financially weak and had run-down and outdated facilities. It also suffered from overstaffing at all levels, and had ineffective managers and practices. In part, Hungarian accounting methods disguised the losses Tungsram was experiencing.

Cultural Shock

GE's due diligence, the investigation into Tungsram's business and practices with full disclosure, was lacking. After the purchase, they soon found out that a former communist-run company with a culture of waste, inefficiency, and indifference about customers and quality would not be cheap or easy to convert to American-style business practices. American managers encountered employees who were used to a system with a lot of bureaucracy, where the workers did not communicate with management, and who appeared to have a laid-back attitude towards their work and customers. GE believed in strong sales and marketing functions to promote products and support customers.

Tungsram management and employees found American management uncomfortably aggressive. Americans were risk takers, where the Hungarians were reluctant to change. Teamwork and decisions made by teams, rather than individuals, were unfamiliar to them. They were used to having no motivators to produce quality products and had an attitude that customer care and customer satisfaction took care of itself. One thing expected by the Tungsram workers were the higher wages their Western counterparts were paid. Similar work done in the United Kingdom paid almost ten times what the Hungarian workers were making.

Changes Made by GE

Over the next five years, GE made changes to Tungsram. They invested a total of about $600 million, acquiring all the shares of Tungsram, upgrading buildings and equipment, retraining employees, restructuring and reorganizing. Changes over time included layoffs of about half of the nearly 18,000 employees, including a majority of Tungsram's original management. Positions eliminated included those considered excessive or redundant. Employees resistant to change also found themselves without a job.

Initially, GE thought that only two of the nine factories owned by Tungsram were worth keeping. But outside Budapest, Tungsram was the community's largest and often only employer. Wanting to be a good corporate citizen, GE decided to keep six factories in operation, sold two, and closed one.

To create a team of American-trained managers in Hungary, hundreds of Tungsram employees received English lessons, quality training, and management courses. By 1994, wages incrementally increased to approximately twice their original levels.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create An Account
Support