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Business the Jack Welch Way by pengxiang


									                           Business the Jack Welch Way
                 10 Secrets of the World‟s Greatest Turnaround King
                                   By Stuart Craner

In Summary
      1. Make your job description easily understood…and then tell everyone
      2. Revolutionize, don‟t tinker
      3. Change continually
      4. Think positive
      5. Surround yourself with quality
      6. Learn, always
      7. Keep it simple, stupid
      8. Look after your people
      9. Plan succession
      10. Make mistakes

The life and times of Jack Welch
    At the age of 33 he became GE‟s youngest general manager
    Jack Welch was an “entrepreneur …willing to take well considered business
        risks – and at the same time know how to work in harmony with a larger
        business entity”
    The natural average life span of a corporation should be as long as two or three
        centuries, however the reality is that companies usually die young – 12.5 years
        or 40 years, for a multinational
    Failure is attributed to the focus of managers on profits and the bottom line
        rather than on the human community that makes up their organization
    For a company to survive, it has to be more like Ronald Reagan than James
    A successful company is one that can learn effectively
    GE‟s genius has been the faultless succession planning of CEOs
    Success is also dependant on the climate of the company: respect for one
        another and working at our jobs to have as much fun as possible, keeping it
        simple and not being too smart
    It is better and cheaper to nurture and promote from within
    Jack Welch was considered to be a prophet/crusader whose management
        perspective…brought a renewed sense of purpose to the company
    During the 1980s, Welch overhauled the whole business, throwing some
        entities out and acquiring others. Nearly 200,000 GE employees left the
        company and over $6b was saved
    The leader who tries to lead a large organization counter to what his followers
        perceive to be necessary has a very difficult time
    By the end of the 1980s, GE was leaner, fitter and devoid of complacency
    Shun the incremental and go for the leap
    Jack Welch doesn‟t understand halfway measures
    Work-out: the relentless company-wide search for a better way to do
        everything we do
    Six Sigma: the spread of responsibility for quality – quality was an issue for
        everybody in the company
   The GE business:
        o Aircraft engines
        o Appliances
        o Capital services
        o Industrial systems
        o Information services
        o Lighting
        o Medical systems
        o Broadcasting
        o Plastics
        o Power systems
        o Transportation systems
   Welch set a new contemporary paradigm for the corporation that is the model
    for the twenty-first century
   GE wasn‟t ailing in the first place, but it wasn‟t going anywhere either
   The essential ingredients of the Jack Welch style of management:
        o Invest in people: He talks, pontificates, cajoles and educates. But most
            of all, he connects.
        o Dominate your market…or get out: He wants to be first or a close
            second. Gain leadership, take the market by the scruff of the neck and
            lead it forward.
        o Never sit still: GE never rests on its laurels. It changes and then
            changes again. It is always nearer to achieving its goals by never
            staying in one place
        o Think service: GE used to be a manufacturing company that was also
            a service company. Under Welch, GE is now a service company that is
            also a manufacturing company. Quality and service link its activities
        o Forget the past; love the future: GE embraces the new. Welch speaks
            enthusiastically about the future. GE creates the future.
        o Learn and lead: the new model leader is not a corporate dictator. The
            leader is committed to learning, deciding and moving forward.
            Learning from failure is more important than wallowing in success.
        o No bull: talk straight – whether it be to higher level managers or the
            lowest level employee.
        o Kill bureaucracy: eradicate bureaucracy with a vengeance
        o Stick around: you don‟t have to move from company to company to
            be successful
        o Manage the corner store: The same things matter in GE as in a corner
            store – quality, service, cash flow, keeping abreast of what sells, what
            parts of the business are doing well and people. The fact that you are
            selling a nuclear power plant and not candy bars is immaterial.
Chapter 1: Invest in people
    Your most precious possession is the people you have working there, and what
       they carry around in their heads, and their ability to work together
    People are the bread and butter of Welch‟s managerial style
    We are betting everything on our people – empowering them, giving them
       resources and getting out of their way
    Welch spends at least half his time talking to people (he knows 1000 people
       by name and has a good idea of their job responsibilities)
    The idea flow from the human spirit is absolutely unlimited
    At the leadership level an A player is a man or woman with a vision and the
       ability to articulate that vision to the team, so vividly and powerfully that it
       also becomes their vision. A person with the courage to make tough decisions
       with fairness and integrity
    Reward packages are geared towards individual and company success
    Developing people is too big a task to delegate to business schools or training
    GE has effectively cherry-picked management ideas
    GE has Crotonville – a management development complex designed to teach
       management and to inculcate the corporate culture in newer managers –
       business schools are considered too far from the pulse of the action and
       developing people is too important to be delegated elsewhere
    It is important to put a succession plan into place so that the business lives on
       long after retirement
    Succession planning is good management practice – effective leaders realize
       that the ultimate test of leadership is sustained success
    Learning is one of the cornerstones of Jack Welch‟s leadership style
    Leadership is about commitment to people
    All that matter is talent – talent wins
    Attracting the best people revolves around four baits:
           o People want to join winning companies
           o People are attracted to high risk, high salary jobs
           o People like industry leading/world changing companies
           o People want to join a company that complements their lifestyle
    Good leaders grow people

Chapter 2: Dominate your market…or get out
    The most effective use of cash is to defend cash cows
    “Stars” will require the most cash investment to hold or gain relative market
    Taking money from cash cows and investing in question marks is the second
       lowest priority
    The lowest priority for use of money is investment in dogs
    Market share is now not commonly used as a measure of success/corporate
    Welch has unequivocally placed his faith in simple measurement of market
    Jack Welch demands that his businesses rank either a 1, 2 or 3 in their
      Welch resurrected the concept of measurement by market share when others
       denounced it as an ineffective measurement because everybody can
       understand what market share means, people know where they stand and it is
       not an overriding philosophy – just a convenient rationale
      GE also tends to be in businesses where market share matters and is important
       for competitive success.
      GE has avoided businesses where market share is of little benefit
      Welch thinks beyond the product to the entire economic equation of the
       customer‟s use of the product
      GE looked to the future and reinvented itself to continue to increase the
       shareholder value
      “Value” has become the new rallying cry of GE, but market share remains an
       important measure
      Identify clear measures for success: sales, profit, shareholder return, ROI,
       market share?
      Make sure people know what the rallying point of the company is: people
       know what market share means so it is easily used as a measurement. Provide
      De decisive: measurements need to be acted upon rather than collected ad

Chapter 3: Never sit still
    Welch‟s trademark is to change everything, then change it again
    Executives must develop new skills to make themselves more employable and
       to keep up with the heady pace of development
    Leaders are energetic – they have to be
    Effective leadership and high energy go hand in hand
    Quantity is no longer vital – it‟s a combination of quantity and quality
    Do the important things more often and more intensively and you will be
       working smart
    Jack Welch‟s guide to working smart:
           o Every day is different, every day is a challenge: when you are a
               $70billion company you are doing so many things wrong that the
               possibility for improvement is infinite
           o Peel away the layers; reverse engineer: leaders have to dig deep and
               deeper and deeper still. Ask questions and figure out what is really
           o Love your job: The job must matter. Leaders look beyond the narrow
               motivation of money alone.
           o Get a life: Use after hours to relax and do the things that you want to
               do. Work enough to get the job done well – don‟t neglect your need to
    Jack Welch has kept on learning through his entire career – never become
    He has changed and then changed some more
    The people who reach the top are high performers who don‟t make mistakes.
       They are often better at the skill than the people who work for them. For
       CEOs, managing people is the source of their greatest frustration and often
       their greatest area of ignorance
      Only immersion in an environment of learning, constant questioning and
       openness can create a culture geared to transformation.
      There are four indicators that tell us how a company is likely to adapt:
           o Power: do employees feel that they have some influence on the course
                of events
           o Identity: to what extent do individuals identify with the organization as
                a whole, rather than with a narrow group?
           o Contention: is conflict brought out into the open and used as a learning
           o Learning: how does the organization deal with new ideas
      Jack Welch believes that you should never get comfortable in your comfort
      Get fit: today‟s corporate giants have constitutions as formidable as their
      Pick people with energy
      Know your job: distill your job down to a couple of lines. Jack Welch‟s
       answer is: to find great ideas, exaggerate them and spread them like hell
       around the business with the speed of light… what counts is what you deliver
      Motivate through energy
      Nothing must stay the same – keep the company moving constantly

Chapter 4: Think service
    Our job is to sell more than just the box
    There are seven principles to becoming intimate with your industry:
           1. Know your customer
           2. Strive for one-and-done servicing: condense the interaction with their
              customers to involve the minimum numbers of people and processes
           3. Promote value enhancing self servicing: allow customers to do more
              for themselves if they choose to do so
           4. Provide one-stop shopping: if you really understand your customers
              you can provide associated services
           5. Service competence must be institutionalized: don‟t rely merely on the
              competence of individuals
           6. Let customers design the product: customers increasingly require the
              ability to tailor the product to their own needs
           7. Build long term customer relationships
    Jack Welch wants to move from industrialized service to customer intimacy.
       He did this in a number of ways:
    Developing the softer side of GE‟s business: GE Capital provides credit to
       customers purchasing equipment from GE‟s other businesses. It complements
       almost every other business under the GE umbrella
    Making multiple channels work: GE developed a better system of servicing
       and meeting the needs of its customers, especially the smaller ones. GE also
       provided the opportunity for the smaller customers to take advantage of
       business loans, store remodeling kits and software to help manage their stores
       more effectively. GE became a business partner to the smaller customers
    Developing customer knowledge: Gather invaluable market research on
       evolving product and service preferences
      The Six Sigma Initiative: The quality program. “Quality is something you
       work at. It is a learning process”. Six Sigma revolves around 5 basic activities:
           o Defining
           o Measuring
           o Analyzing
           o Improving
           o Controlling processes
      GE no longer only sells the product, it sells the product as a lure to get you to
       sign up for other GE services
      Lead quality initiatives from the top – the very highest echelons of the
       company should be actively involved in quality control and improvement
      Steal the best ideas – six sigma was an idea originally used in Motorola and
       Allied Signal
      Do it yourself: don‟t use consultants for things like quality control – they may
       end up buying a brand new carpet and just laying it down on top of the dirt

Chapter 5: Forget the past; love the future
    The further you look, the better the future is going to be
    There are four preconditions to wealth creating strategies:
           o New Passions: people inside the organization must care deeply about
              the future
           o New Voices: young people are often disenfranchised from strategic
           o New conversations: more people need to become involved in the
              process of strategy creation
           o New perspectives: you cannot make people any smarter, but you can
              give them new lenses
    “We need antidotes to Dilbert”
    Focus on the future, the past is history
    Yesterday‟s achievements will mean nothing tomorrow
    Any organization has to shift, develop and move forward or face becoming
       immersed and immobilized in the past
    Envision the future then seek to create it
    A vision should be a real raison de‟etre
    A vision is a sense of direction that we need to keep in mind when assessing
    Vision is central to ensuring that everyone in an organization knows what the
       goals of the enterprise are and how their particular job contributes to them
    Companies are in business to achieve goals
    Good business leaders create a vision. They articulately drive it to completion.
       Above all else, good leaders are open. They go up, down and around their
       organization to reach people…They make a religion out of being accessible
    The importance of IT should be recognized – companies shouldn‟t just lie
       back and think of the balance sheet
    An IT chief with a business background is more valuable than one with an
       engineering background
    IT needs to be perceived as a driver of revenue
    Make the future today: don‟t fall into the trap of feeling that the future is too
      Get ready but be flexible: plan all you like but you have to be prepared for
      The future is going to be different: you can never plan the future by the past
      Look outside: leaders have to be able to look over the walls, to look outside
       for new perspectives, examples and inspirations
      Utilize technology: use technology wisely – only fools rush in
      Be optimistic: Jack Welch is positive and relentlessly optimistic. He sees
       potential for growth and discovery and efficiency everywhere he looks

Chapter 6: Learn and lead
    The interesting quality of Jack Welch is that he is an ever-growing, ever-
       evolving character
    Don‟t focus on short term events and charismatic leaders; concentrate on
       systematic forces and collective learning
    The traditional myth of a leader is one who helps those who are seemingly
       unable to help themselves. The new idea of a leader is one who helps his
       people to help themselves, grow and learn
    A leader‟s role has become complex and involves:
           o Ensuring high performance levels are achieved and sustained
           o Handling growing complexity and ambiguity
           o Initiating and leading change processes
           o Ensuring that the organization and its processes constantly develop
           o See that people within the company are motivated, developed and
               rewarded to produce outstanding results
    Today‟s leaders have to be pragmatic and flexible to survive – be people rather
       than task oriented
    Now the foot soldiers are encouraged to voice their opinions and shape how
       the organization works – followers are becoming more powerful
    The new leaders must add value as coaches, mentors and problem solvers,
       must allow people to accept credit for success and responsibility for failure
       and must continually evaluate and enhance their own leadership roles.
    Leaders have the ability to excite people within their organization
    Leading by example is not dead
    Leaders find good people who can fill the areas in which they themselves are
    The ability to delegate effectively is critically important – empowerment and
       leadership are not mutually exclusive
    Leaders that are addicted to power kill companies
    Business leaders must be able to involve themselves in the nitty-gritty while
       maintaining an overall perspective – this is the prerequisite for success
    Get beneath the surface to identify where the cultural problems lie
    A leader must recognize that change causes stress and distress
    Leaders must maintain disciplined attention – leaders must help others to
       maintain focus
    People must be involved in any process of change and must be allowed to
       express their opinions even if they are discordant
    Leaders need to ask the right questions, but not necessarily know the right
      Welch lost $1.2 billion in buying Kidder Peabody. He says that if the CEO can
       make a $1.2 billion mistake and still survive, others in the company should be
       encouraged to take risks wherever they feel that they can pull it off. Even if it
       fails, you can hardly do worse than a $1.2 billion mistake.
      Build a culture where failure is accepted as a positive thing – punishing
       failures assures that nobody dares
      We learn the most from our mistakes
      Fear of failure is a fundamental instinct, one that organizations only serve to
      “When I stop learning something new and start talking about the past versus
       the future I will go” – says Jack Welch
      Today‟s leaders must lead and learn
      Learning involves taking risks and taking risks makes us vulnerable
      Leaders will win by their ideas, not by whips and chains
      Increasingly CEOs have to be coaches to their managers and to help people
      The skill of being able to influence people is the most important skill for those
       at the top
      Business is a series of trial and error
      GE‟s Work-Out
            o Work-Out is an adaptation of “Action Learning”
            o Work-Out uses action teams to solve problems
            o This is all about a group of people coming together to learn with and
                from each other as they confess failures and expand victories
      Add the human touch – central to the leadership role: marshaling, motivating
       and engaging everyone in the organization is one of the prime responsibilities
       of the leader
      Learn and learn some more – “I am always ready to learn although I don not
       always like being taught” said Sir Winston Churchill
      Set direction and build values – the leader needs to carry out a precarious
       balancing act: setting the long term objectives and vision of an organization
       and connecting with people throughout the organization
      Change things: the leader‟s hob is to help everyone see that the platform is
       burning, whether the flames are apparent or not
      Create tomorrow‟s leaders - “the function of leadership is to create more
       leaders, not followers” – Ralph Nader

Chapter 7: No bull
    “It is vital for the success of our companies that businessmen and women
       emerge as real leaders and demonstrate their ability to communicate
       effectively, internally and externally” – Sir Colin Marshal (Chairman B.
    Welch has an uncanny ability to simplify things and that makes it easier to
       communicate more effectively. Jack Welch talks straight (no management
    Jack Welch communicates continually - a few scribbled words from him is a
       powerful message. It shows that he has taken time that the person matters.
      “Real communication is an attitude, an environment…it involves more
       listening than talking. It is a constant interactive process aimed at creating
      The rules of communication as defined by Heinz Goldman:
            o Empathy: managers must be able to put themselves in someone else‟s
            o Commonality: managers have to find a common denominator with
               their target group
            o Projection or impact creation: the impact created is base on projecting
               a strong message, portraying a powerful personality, impressing by
               determined persuasion
      Face to face communication is 90% more effective than written or printed
      Disagreement is inevitable and vital
      Welch suffers fools badly and is impatient if results don‟t come. He pushes
       and then pushes some more.
      Welch has created an environment of constructive confrontation –
       communication means exchanging ideas. Exchanging ides means that people
       are going to have differing views and there will be conflict. Constructive
       confrontation is when you accept that there will be conflict, listen to the other
       arguments and consider them - especially when they are at odds with your
      Agreeing to disagree is crucial
      Take “yes” for an answer but then ask “why?”
      Most companies are conflict averse and need to open themselves up to
       flexibility and variety – to learn to disagree without being disagreeable – to
       keep the company on its toes
      A threat avoided is more harmful than a threat tackled
      Distrust consensus and embrace contention (“Why is there no conflict at this
      Leaders need to surround themselves with people who counter their
       weaknesses and supplement their strengths
      Invest in communication
      Communication is the best route to innovation
      Clear communication creates clear expectations
      Communication makes life simple
      Be straight, tell them the truth first because it is the right thing to do and
       because they will find out anyway

Chapter 8: Kill Bureaucracy
    “A boundaryless organization will ignore or erase group labels such as
       “management”, “salaried”, “hourly” which get in the way of people working
    Welch has communicated his message of the “boundaryless organization” so
       often that it borders on an obsession. Obsession is one of the unspoken facts of
       business life
    There are culturally acceptable obsessions, such as musicians practicing 12
       hours a day; there are culturally unacceptable obsessions such as being a
      We encourage the young to become obsessed with things like sports. When
       they become managers we expect them to be obsessed with their jobs. When
       they achieve senior management positions we expect them to throw away their
       obsessions and take a wider view
      Managers often lead by obsessional example eg: working longer and longer
       hours to motivate staff
      When you start a new business, you have to have boundless enthusiasm which
       is an obsessive behavior in order to succeed
      Henry Ford believed that all people wanted a low-cost uniform car. His
       obsession with this belief cost him a huge number of customers as GM sped
       past with an ever-changing array of models in different colours and styles
      Psychologists say that there is a fine line between commitment and enthusiasm
       (which is healthy) and obsessive behavior (which is unhealthy)
      Managers can become obsessed with searching for promotions or obsessed
       with corporate politics. This obsession has to be diverted into productive
       channels and harnessed for the good of the company.
      GE developed an array of management layers and internal systems. Jack
       Welch wanted to take down some of the walls that divided the layers and
       departments within GE. “if we do that, we will be getting more people coming
       up with more ideas for the action items that a business needs to work with”
      “During the 80s we eliminated layer after layer of management. We took
       down wall after wall separating functions. We reduced staff – the checkers,
       kibitzers. As we did this, we found…that people who were given space-
       trusted, allowed to make their own decisions – worked harder at making sure
       they made good decisions”.
      GE cut the number of layers of management from 29 to 6
      Speed: Traditional large companies were slow, but by eliminating the layers of
       bureaucracy, GE shaped itself to move quickly and make decisions speedily
      Informality: Pointless formality makes people uncomfortable and gets in the
       way of real work
      Ideas, not management layers: Businesses are driven forwards by ideas, not by
       layers of supervision
      Sharing information: in the old system if you had an idea you wouldn‟t share it
       because the system worked in such a way that someone else would end up
       getting the credit. In the new system there is an environment of “information
       shared is information multiplied”.

Chapter 9: Stick around
    “…the average young man cherishes the idea that his relationship with the
       organization is to be for keeps” – that was the old world where loyalty and
       solid performance brought good job security
    The companies were prepared to employ these people for life, but in many
       cases the companies themselves did not last (12.5 years for businesses and 40-
       50 years for multinational corporations
   The “psychological contract” was a product of the „job for life‟ attitude of the
    workforce. A number of issues are raised:
         o Loyalty to what? What if the company‟s corporate strategy was wrong
             or if they were involved in unlawful or immoral acts?
         o Employees had a career all mapped out at the same company and did
             not accept a world view outside the company and the corporations
             became self-contained and self-perpetuating
         o The foot soldiers, the steady dependable performers were rewarded and
             this did not encourage risk taking or branching out into new areas
         o Loyalty was of far more value than ability “there was a must corner
             where mediocrity could reside”
   The new psychological contract puts more emphasis on building skills than on
    blind loyalty (this also leads to your employees become more employable by
    other companies)
   There will always be a psychological contract because both employer and
    employee have expectations and aspirations of the other side.
   The perception today is that being a “corporate man” is a bad thing (“What
    would have happened if that person had looked outside the company? What
    heights could he have climbed? What achievements could he have achieved
    that he could not embark upon in the current company?”)
   Jack Welch is a on-company man, but he remains questioning and does not sit
    still long enough to get comfortable
   The corporate person lives on, but only by learning and nurturing
   Welch says that CEOs should stick around for a minimum of ten years,
    otherwise they do not implement long term goals and they try to make their
    mark on the company as quickly as possible, rather than over a period of time
   Imperfection means that you can do better next time
   Two groups of managers have emerged in companies:
         o “High-Potential” managers who are given the most developmental
         o “Solid Citizens”
   You need to give the managers on-the-job training to managers by assigning
    job assignments strategically to assist in their development – being on a
    special team or task force, managing a particular product, launching a new
    business etc
   Different assignments serve different purposes
   Experience is the best teacher of leadership
   Organizations have to provide support for development via coaching,
    counseling and mentoring.
   Here are some warnings regarding using assignment for developmental
         o Those chosen for developmental assignments should be told why they
             have been given that assignment and support systems should be put in
         o Developmental moves won‟t fix every weakness
         o Most organizations don‟t have enough big assignments to develop all
             the leaders that they will need
   Every assignment is potentially developmental
      All jobs need new skills all the time
      Learn from experience: sticking around in one company helps you to gain
       experience in how the company operates and then you get to the stage where
       you are in a position to fix all those things that you have learned are wrong
       with the business
      Give people time to make mistakes, learn from them and put them right.
      Developing people is the new focus of business

Chapter 10: Manage the corner store
    GE: Just your average everyday $60 billion family grocery store
    Jack Welch “…is incredibly smart. He can think strategically, but he is also
       good with people, with deals, with organization, with politics…”
    Jack Welch is simply doing his job the best he can
    Jack Welch‟s philosophy is that you manage a global organization like a
       corner store: if the customers aren‟t satisfied or if the stock isn‟t moving, you
       have to fix it – just like a corner store.
    The three most important things that you need to measure in business is
       customer satisfaction, employee satisfaction and cash flow
    Cash flow is the vital sign of the business
    Cash is a fact, profit is an opinion
    Welch is concerned with the nitty-gritty: cash flow, goods in, goods out
    The rewards of liberating capital can be considerable
    Watch the cash: the concept of cash flow is widely understood and is thus a
       good measure of managing a company‟s finances
    Keep the parameters of performance simple: Welch‟s parameters of success
       are cash, service and business basics like inventory
    Management is management: the basics of running a small shop as compared
       to running an international organization are comparable.

Epilogue: How long can Jack Welch be effective?
    Skills that make leaders successful often outlive their usefulness
    Charismatic leaders are often blinkered by an illusion of their own infallibility
       and are thus inflexible
    You must watch for signs of egotism and lack of willingness to acknowledge
    The GE culture is too robust and carefully constructed to fall to the ambition
       or ego of one person – Jack Welch helped to reinforce this quality
    The great lesson of Jack Welch‟s career should not be forgotten, “Change
       when the going is good. Change now to get ahead of the competition. If you
       delay you will be forced to change.

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