Leadership of Jack Welch

Jack Welch

In his book, “Jack: Straight From the Gut,” Jack Welch, former Chairman/CEO of General Electric, one of the world’s largest and successful corporations, reveals his philosophy and management style:                                

• When people make mistakes, the last thing they need is discipline. It’s time for encouragement and confidence building. The job at this point is to restore self-confidence. Of course, arrogant people who refuse to learn from their mistakes have to go. If we’re managing good people who are clearly eating themselves up over an error, our job is to help them through it. We build great people, who then build great products and services.

• “Superficial congeniality” – pleasant on the surface, with distrust and savagery rolling beneath it. The phrase seems to sum up how bureaucrats typically behave, smiling in front of you but always looking for a “gotcha” behind your back.

• We managed businesses – not earnings. When we sold a business like air-conditioning and realized an accounting gain as well as cash, this gave us the flexibility to reinvest in or fix up another business. That’s what shareowners expected from us and paid us to do.

• Any organization that thinks it can guarantee job security is going down a dead end. Only satisfied customers can give people job security. Not companies.

• The As are people who are filled with passion, committed to making things happen, open to ideas from anywhere, and blessed with lots of runway ahead of them. They have the ability to energize not only themselves, but everyone who comes in contact with them. They make business productive and fun at the same time. They have what we call “the four Es of GE leadership”: very high energy levels, the ability to energize other around common goals, the edge to make tough yes-and-no decisions, and finally, the ability to consistently execute and deliver on their promises. The four Es are connected by one P – passion. The Bs are the heart of the company and are critical to its operational success. We devote lots of energy toward improving Bs. The C player is someone who can’t get the job done. Cs are likely to enervate rather than energize. They procrastinate rather than deliver.

• The vitality curve is the dynamic way we sort out As, Bs and Cs. Ranking employees on a top 20-vital 70-bottom 10 grid forces managers to make tough decisions. The vitality curve must be supported by the reward system: salary increases, stock options, and promotions.

• I called boundaryless the idea that “will make the difference between GE and the rest of the world business in the 1990s. The boundaryless company I saw would remove all barriers among the functions: engineering, manufacturing, marketing, and the rest. It would recognize no distinctions between “domestic” and “foreign” operations. It meant we’d be as comfortable doing business in Budapest and Seoul as we were in Louisville and Schenectady. A boundaryless company would knock down external walls, making suppliers and customers part of a single process. It would eliminate the less visible walls of race and gender. It would put the team ahead of individuals ego.

• Nothing is more important than a company’s integrity. It is the first and most important value in any organization. It not only means that people must abide by the letter and spirit of the law, it also means doing the right thing and fighting for what you believe is right.

• In the 1990, GE pursued four major initiatives: Globalization, Services, Six Sigma, and E-Business. In globalization, we focused most of our attention on areas of the world that were either in transition or out of favor. We thought the best risk-reward activities were there. When Europe was slumping, we saw many opportunities, particularly for financial services. When Mexico devalued the peso and the economy was in turmoil, we made over 20 acquisitions and joint venture and significantly increased our production base. In services, the service upgrades that we provide today allow our customers to get increased productivity and longer lives for their installed equipment.

• The big myth is that Six Sigma is about quality control and statistics. It is that – but it’s a lot more. At Six Sigma’s core is an idea that can turn a company inside out, focusing the organization outward on the customer. Quality can truly change GE from one of the great companies to absolutely the greatest company on world business. We used Six Sigma all over the company to attack costs, improve productivity, and fix broken processes. Plant managers can use Six Sigma to reduce waste, improve product consistency, solve equipment problems, or create capacity. Human resource managers need it to reduce the cycle time for hiring employees. Regional sales managers can use it to improve forecast reliability, pricing strategies, or pricing variation.

• Some ideas that worked for CEO Welch, namely: Integrity. By maintaining integrity, establishing it and never wavering from it supported everything I did through good and bad times. People may not have agreed with me on every issue, but they always knew they were getting it straight and honest. It helped to build better relationship with customers, suppliers, analysts, competitors, and government. It set the tone in the organization. Maximizing an organization’s intellect. Taking everyone’s best ideas and transferring them to others is the secret. The first step is being open to the best of what everyone, everywhere, has to offer. The second is transferring that learning across the organization. People first, strategy second. Getting the right people in the right job is a lot more important than developing a strategy. Self-confidence. The true test of self-confidence is the courage to be open – to welcome change and new ideas regardless of their source. Employee surveys. Knowing and confronting what was on the minds of our employees was a key part of our success. And wallowing. It meant getting people together, often spontaneously, to wrestle through a complex issue. It was all about breaking down the concept of hierarchy. Everyone knew they were equal partners at the table, where their ideas could be thrown out with informality and candor.

• Great people, not great strategies, are what made it all work. We spent extraordinary time recruiting, training, developing, and rewarding the best. Our reach and our success would have been limited without the best people stretching to become better. While information will be available on a computer screen as never before, it will always be human judgment that will make the organization go.

• Before you become a leader, success is all about growing yourself. When u become a leader, success is all about growing others.

8 Rules of Leadership by Welch:

• As leader, you have to invest your time and energy in three activities: (1) to evaluate – making sure the right people are in the right jobs, (2) to coach – guiding, critiquing and helping people to improve their performance, and (3) to build self-confidence – pouring out encouragement, caring and recognition.

• Leaders make sure people not only see the vision, they live and breather it.

• Leaders get into everyone’s skin, exuding positive energy and optimism.

• Leaders establish trust with candor, transparency and credit. Establish trust by giving credit where credit is due. In bad times, leaders take responsibility for what’s gone wrong. In good times, they generously pass around to praise.

• Leaders have the courage to make unpopular decisions and gut calls. Your job is to listen and explain yourself clearly but move forward. You are not a leader to win a popularity contest – you are a leader to lead.

• Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with actions.

• Leaders inspire risk taking and learning by setting the example. Celebrating creates an atmosphere of recognition and positive energy.

• Leaders celebrate.

• Before you even think about assessing people for a job, they have to pass through there screens: (1) integrity – people with integrity tell the truth (2) intelligence (3) maturity.