How Jack Welch Brought GE To Life

Perhaps no other chief executive officer is more celebrated--some would add feared--than John Francis Welch Jr. The name of the General Electric Co. chairman routinely graces lists of the best, the toughest, the smartest bosses in Corporate America. In just over a decade, Jack Welch has transformed the GE bureaucracy, with its love for systems and planning, into a keenly competitive, even nimble, $60 billion-a-year growth machine. While the thousands of attendant layoffs haven't been easy to watch, sales and profits have handily doubled in those 10 years.

Who, then, is Jack Welch? And how did he do it? Those are questions that veteran Time writer Robert Slater answers in The New GE: How Jack Welch Revived an American Institution. More than just a lively rehash, The New GE benefits from four interviews with Welch on why he ignored the old wisdom that if it ain't broke, don't fix it.

Back in the 1970s, what Welch saw as Reginald Jones's would-be successor was a shiny, prosperous-looking facade hiding some rather rusty pipes. Under Jones, GE had become a sprawling, diversified company with annual profits surpassing $1 billion. But many of GE's businesses were either growing too slowly or not at all, and the company was saddled with a plodding culture that thwarted fresh thinking. Welch's proposed remedy was a streamlining of GE into a dozen or so high-growth units. Later, levels of management would be chopped, "speed bumps" between functions flattened.

For all Welch's vision, Slater notes, he was an improbable choice for CEO. At 45, not only would he be GE's youngest chairman ever, but he seemed too rough around the edges for the buttoned-down atmosphere at GE's Fairfield (Conn.) complex. Two factors helped: his technical background (a PhD in chemical engineering) and his appreciation for the rise of global competition.

Welch also knew how to make businesses grow. As a technician, young Welch and his team found that adding polystyrene to a hard-to-form polymer would make a plastic that was easily shaped and commercially viable. That product, Noryl, was a breakthrough in using plastic to replace metals in automotive and industrial applications. Plastics, a $40 million-a-year unit in 1968, is a $5 billion one today.

Such entrepreneurial fire stood Welch in good stead as he moved up the ladder, boosting the performance of the medical-technology unit and switching GE's finance arm from its dependence on equipment financing toward more sophisticated and profitable services.

Also, Welch was always tough, having grown up working-class in Peabody, Mass., where he roughhoused with friends in a rock formation they called The Pit. Welch recalls that fights were "a way of life." A former GE exec told Slater: "You can't say hello to Jack without it being confrontational. If you don't want to step up to Jack toe-to-toe, belly-to-belly, and argue your point, he doesn't have any use for you."

Welch expresses little regret at all the upheaval he created. In fact, he suggests to Slater that he may have moved too cautiously. For example, Welch wanted to get GE into food and pharmaceuticals but couldn't find good deals. Even so, Welch's GE stands apart from other corporate behemoths. GE's early-1980s life crisis--spurred by Welch--may have spared it the ignominies that have befallen IBM and General Motors.

But some of Welch's ideas have seemed less than 1,000-kilowatt. He stumbled badly with his purchase of the Kidder, Peabody & Co. investment firm (though the buy may yet prove astute). And blending NBC Inc. into the GE culture has been anything but smooth. From the start, in 1985, Welch treated the network like any other GE division. NBC might throw off lots of cash, but why, the bean-counters in Connecticut wondered, did an NBC finance drone get paid twice what the post might pay in Jet Engines, and why couldn't NBC News even come up with a budget plan?

No, Welch could never be accused of being sentimental. Asked by Slater about the 1984 sale of GE's venerable housewares unit--a move lamented by old GE hands--Welch replied bluntly: "In the 21st century, would you rather be in toasters or CT-scanners?"

He may well be around to see if he was right. At 56, Welch is still a decade shy of retirement. Much of his time these days is spent planning a cultural revolution to spur creativity among GE workers that could prove even longer-lasting than the one Slater documents.

This transformation probably won't be easy to watch, either. Already, one of Welch's favorite ways to prod workers is to engage them in one-on-one, no-holds-barred dialogue at the company's training center in Crotonville, N.Y. The name of the forum in which such professional combat takes place? The Pit.

TIM SMART 

-Business Week

Twelve lessons from Jack Welch’s leadership style

When Jack Welch took over GE in 1981 and became the youngest CEO in GE’s history, the legendary leader made a resolution to transform GE into the world’s most competitive enterprise. Welch is a strategic thinker, business teacher, corporate icon and management theorist. If leadership is an art, then surely Welch has proved himself a master painter. With his unique leadership style and character, Welch made history during his 2-decade journey at GE. While most leaders talk a good game on leadership, he lived it. In this article, we feature Welch’s 12 lessons and how they contributed to the largest corporate makeover in history. 

 
LEAD, Not MANAGE

 
Welch doesn’t like the term ‘manage’. To him, it conjures up negative images, such as ‘keeping people in the dark’ and ‘controlling and stifling people’. Welch’s goal is to lead, create a vision and make people passionate about their work. Leadership, according to Welch, can be found in anyone as long as they contribute, come up with good ideas and can energize, excite and inspire rather than enervate, depress and control. 

Below are tips to become a great leader like Welch:
· Articulate a vision and lead others to execute it
· Don’t manage very little details
· Involve everyone and welcome great ideas

GET LESS FORMAL 

 
When people voice their ideas, or call him ‘Jack’ instead of ‘Mr. Welch’ or when his Work-Out process is utilized, the corporation gets less formal. Jack doesn’t wear ties to work, he often holds informal meetings and encourages everyone to lighten up. Informality inspires people to have more ideas and it is one of the keys to GE’s success.
How can we get less formal?
· Brainstorm with colleagues and bosses
· Hold more informal meetings
· Consider occasional informal get-togethers

Don’t TOLERATE Bureaucracy, BLOW it Up!

 
Bureaucracy, the cancerous element of an organization, can create waste and slow the decision making process, leading to unnecessary approvals and procedures that make a company less competitive. Welch stressed that each employee should work on getting rid of bureaucracy every day. Bureaucracy can be the most stubborn disease, but we can simplify and remove complexity and formality to make a company more responsive and agile.
To ‘kick’ bureaucracy and simplify things:
· Drop unnecessary work
· Work with colleagues to streamline decision making
· Make your workplace more informal

Face REALITY. Stop Assuming

 
When Welch joined GE, the company was assumed to be in good shape, but Welch saw a sinking ship and many troubles-the company was losing its market value and there was too much bureaucracy. Instead of ‘kidding himself’ and assuming that things would improve, Welch made a resolution and created a “face reality” decree. He laid out strategies and initiatives that made things better.
Here are suggestions to help us see things as they are and not to ‘assume’:
· Look at things with a fresh eye
· Don’t fall into the ‘false scenarios’ trap
· Leave yourself with several options

SIMPLIFY Things

 
Welch didn’t think business had to be complicated, thus, his goal at GE was to de-complicate work. He developed and initiated a signature program that made GE a simpler organization. To Welch, business can be exciting and simple, without jargon and complexity.
Isn’t simplifying things great? It allows our organizations to move along faster. Let’s try Welch’s advice:
· Simplify the workplace
· Make meetings simpler
· Eliminate complicated memos and letters

CHANGE- An Opportunity, Not a Threat

 
When Welch joined GE, many didn’t understand why he needed to make changes. They saw things as ‘a bed of roses’, while Welch saw the reality and faced it. He initiated the necessary changes to make GE a far more flexible and competitive organization. He made ‘change’ a part of GE’s shared value. Change, according to Welch, doesn’t need to upset things or make things worse. It can mean opportunities, good ideas, new business or new products.
So, what are we going to do to cope with change?
· Know that change is here to stay
· Expect the least expected, but move quickly to stay a step ahead
· Prepare those around you for the inevitable change that will affect their lives

Lead by Energizing Others, not Managing by Authority
Leadership does not mean control or command. Welch called his leadership ideal ‘boundaryless’, which means an open organization, free of bureaucracy and anything that prevents the free flow of ideas, people and decisions. He did not support the ‘i-am-the-boss-and-you-will-do-what-i-say’ style. He preferred inspiring others to want to perform.
To make others passionate about doing their jobs:
· Never lead by intimidation
· Let others know exactly how their efforts are helping the organization
· Send handwritten thank-you notes to colleagues and customers

Defy, not Respect Tradition

 
As the ‘heir’ of the world’s most sacred corporate institutions, Welch had a choice of whether to respect the company’s tradition and long-standing reputation for excellence or defy a century of history, rocking the existing boat. Welch made the riskiest move - defying most every aspect of the company’s history to make GE the most competitive enterprise in the world. To him, what worked in the past would not necessarily work in the future.
Let’s look at Welch’s tips for success:
· Hold a ‘why do we do it that way?’ meeting
· Invite colleagues from your department to contribute one idea on changing something important at the company
· Don’t be afraid to buck conventional wisdom

Don’t Make Hierarchy Rule, but Intellect

 
Welch thinks it is a horrible way to run a business when managers rule and the staff listen and do what the managers say. To him, it prevents good ideas and creative solutions to problems. Welch believed business is about capturing intellect and that the organization must encourage people to articulate their ideas and solutions. To do so, Welch turned GE into a learning organization in which ideas and intellect rule over tradition and hierarchy.
How we can immerse ourselves in learning?
· Spend 1 hour per week learning what competitors are doing
· Offer a reward for the best idea
· Work for organizations committed to training and learning

Pounce Everyday, Don’t Move Cautiously
In today’s lightning-paced competitive arena and wired world, Welch knows there is no time to deliberate or consider thoughts. He wants his employees to ‘pounce everyday’, move faster than competitors to win business, please customers and snap up opportunities. His strategies were to remove the shackles from employee’s feet so they could move quickly.
How to live this edict?
· Live with a sense of urgency
· Make decisions faster
· Work harder

Put Values First, not Numbers

 
Certainly Welch cares about the numbers, but he doesn’t want to spend too much time on figures and not enough time on values. GE’s values are not based on antiquated ideas about etiquette and proper behavior. Instead, the values include pleasing customers, disdaining bureaucracy, thinking globally and being open to ideas.
To balance the attention of numbers and values:
· Don’t harp on the numbers
· Lead by examples
· Let values rule

Don’t try to Manage Everything, Manage Less

 
This means no micro managing details. Companies should encourage their employees to have their own opinions and think for themselves. Welch believes it is the responsibility of the company to provide the tools and training employees need to perform their jobs better. In the end, it is the manager’s job to create the vision and let their team act on it. It is best to stay away from ‘over management’.
To avoid being a micro-manager:
· Don’t get bogged down in meaningless details
· Manage less
· Empower, delegate, get out of the way

Source: The Welch Way 

 -Vietnam Works

 

The General Electric Turnaround: Why We Can’t All Be Jack Welch!

Jack Welch is perhaps the world’s best known improvement guru. His transformation of GE not only took genius, it took guts and determination to convince a company that was doing pretty darn well that it had to do better. Not an easy sell! But he did push GE from “Good” to “Great” and became a legend in the process.  In the 20 years that Jack led GE’s, revenues rose from $30 to $130 billion and company value went from $14 to $410 billion. Quite an impressive record! Not surprisingly, each of us would like to be the next god of corporate improvement, and follow in Jack Welch’s footsteps. That may not necessarily be such a good idea.

 First, those footsteps were made by some pretty big shoes. There are more corporations than there are genius CEOs. Second, the unique combination of genius and opportunity that drove Welch’s doesn’t come by every day. The uniqueness of Welch’s success was a reflection of the uniqueness of GE itself. Today’s blog takes a look at when we can and can’t apply the GE model.

Whenever I hear a discussion about Jack Welch and GE, the discussion always turns to removing the least productive 10% of the organization. If you’re a one f the world’s super brands, replacing staff may not be a big issue. If you’re a smaller firm with less brand recognition, recruiting top talent from better known competitors may already be your greatest challenge. Let’s take a look at details of the GE transformation and see which parts of it are transferable to your specific firm!

Are you a conglomerate of businesses? A really critical piece of information in understanding GE was that it contained a large number of essentially independent businesses. Before Welch arrived, GE operated a vast number of businesses. Not surprisingly, some businesses were not world leaders. Some might undergo  improvement, but others would continue to be under performers…… perhaps because they were in markets with declining profitability. Businesses that were never going to be #1 or #2 in their filed had to go.  And that’s just what Welch did. He sold or closed business units that could not be exceptional.

If your firm is a conglomerate with many businesses, culling your businesses is a good place to start. Independent business lines can be closed without impacting other parts of the firm. If your firm only produces a single product (or a limited number of products) this may not work. Units within a larger business might be shut down, but that could affect its operations. You might outsource an expensive or unproductive process to reduce the drain on profitability. That’s a step in the right direction, but it falls short of shutting down a group; it especially fails to release management resources that can be focused on more productive product lines.

Is there too much bureaucracy or too little structure? When you’ve worked in a big firm, you understand how crippling bureaucracy can be. Conversely, working in a smaller firm can mean negotiating and then developing new policies and practices every time a new situation arises. Clearly, Welch had to deal with an advanced and entrenched bureaucracy. Lifting this constraint was a key to his strategy. When Jack Welch took over GE when it had more than 400,000 employees spread around the world. Not surprisingly, that meant a lot of confusing and contradictory regulations and rules. But what if you are not one of the world’s largest firms? Instead of dismantling bureaucracy your firm may be focused on building it… writing policy, training staff, measuring adherence to standards, establishing gatekeepers, and installing controls.

In a firm that is still in its early growth stages, or has recently gone through a merger or an acquisition, the process of establishing controls could be far more important than the elimination of restrictions. Most firms battle to do both, getting rid of restrictions where they are not needed, while adding them where they can be of value. Because GE was well established and self-satisfied, removing restrictions was more important to Jack Welch. For the rest of us, the removal of restriction is a slower process. Without the lure of a specific business plan, a corporate reformer has little leverage to remove barriers to productivity.

You have the firm’s attention, where will you lead them? Welch needed to shake things up. GE was profitable, but it could be far more profitable. Welch’s actions gave a slightly drowsy firm a good shake. Not enough to harm, just enough to invigorate. Welch wanted GE to be #1 or #2 in every business, requiring an alert staff to deliver their maximum effort. Contrast this with managers promoting “change for change’s sake.” These managers want to see changes, but are vague about their goals and the rewards for those who deliver it. The result is churn without direction, and often without measurable results. No firm should settle into stagnation, but before you order a firm to rev up its engine, you need to know where you are headed. Without that direction, managers expend energy and workers work harder, but long-term goals are not achieved.

Churn vs. improvement: As I said before, people most often remember Welch’s ongoing removal of the bottom 10% of their staff. Continuous improvement makes sense. Getting rid of lower performing workers makes sense. But cutting staff without a well-defined plan doesn’t make sense. Before you start cutting staff, you need the plan for the new organization. Individuals today who might not be considered the top performers might be the best for the new organization. Likewise, today’s top performers might not  all want to be in the new organization. You need to define the new organization, and your staff needs to see that plan. When you go to the market for new employees, the best workers will be hard to find if your firm develops a reputation for arbitrarily terminating staff. If you genuinely want higher performing staff, you shouldn’t be too surprised if better performing workers cost more than their under performing predecessors. These costs can be dealt with in a business with rising revenues and profitability. But what if you don’t have a business plan that will deliver greater profitability? Approvals for higher salaries will be difficult to justify, and even harder to approve.

Reward performance: If improvements are being delivered, what happens to the top performers? They get rewarded… a lot! While the bottom 10% is cut, the top 20% is heavily rewarded. The spectacular rise of GE provided money for rewards. If your organization does not significantly improve profitability, how will these performers be rewarded? When your staff (and the market) continues to work harder than the staff at competing firms, your best workers will leave. Of course, compensation is just one of the factors in worker loyalty. If your firm has a spectacular reputation, there is a value to having your name on a resume. Google is known for the world-class  chefs at it (free) cafeteria, and for its other “social” programs. If you don’t have the top reputation in your industry or the best benefits, you can expect a higher premium in compensation to attract the best talent.

How does it all fit together: GE was a unique  firm in a unique  position. Jack Welch carefully leveraged the tangible and intangible assets of GE to recruiting and retaining staff. To keep up with his transformational goals, Jack’s plan required the termination of over 112,000 employees in the first five years of his tenure as CEO (25% of the firm’s staff). In most firms, this level of change (and risk) could not be sustained… unless the business plan has an equally massive benefit. If your organization is driving change, is that change part of a singular corporate goal? Does that goal cascade across your firm to deliver staff and procedural changes? If you want improvement on the scale that Jack Welch drove, you need to line up these five factors…

1. A”BIG”  business goal: Different improvement philosophies use different names, but let’s call this the “big idea.” You need a big idea in order to drive big changes. Even without a top-level  plan, change can (and does) happen. But the degree of change will be more limited. Your plan will be stopped by more internal gatekeepers because they have not been told by their managers that your plan has priority over their role as “protectors” of the organization.
2. Fewer businesses: If you did nothing more than get rid of businesses that lose money and cannot quickly be made profitable, your firm would be improved. Not all firms have multiple lines of business, but whatever change your plan is driving must free up some of their time so that they can deal with the “big idea.”
3. Churn in staff: Every firm has a unique brand. The stronger the brand, the more you can churn your staff and still attract the best talent. But don’t just churn your staff, use turnover to move towards a new model. If you turn your group into a dynamo of productivity, but you have no new goals for your re-invigorated staff…  you may just create boredom that undermines productivity.
4. Reduction of bureaucracy: Lastly, you need to sweep away unnecessary bureaucracy so that the new organization can be agile and effectively pursue new opportunities.
5. Rewards: Not just the top officers, but all the top performers who drove change needs to share the rewards.

We can’t all be Jack Welch, nor should we all try. Jack’s model for change requires a powerful business goal that the entire firm can follow. Perhaps you can use just a small part of the GE model, but it is a self-supporting model that requires the support of more than a single business group to make it successful. When all of these elements work together, you just might be able to be the next GE, at least that’s my Niccolls worth for today!

-Niccolsanddimes