Tearing up the Jack Welch playbook
Enough already. Corporate America needs a new playbook. The old rules of the Jack Welch era don't work any more. Today's volatile, brutally competitive business climate demands a new set of rules and whole new mindset.
What do you think? Is it still so critical to be Number One or Two? Is that the best way to think about your market? Is being biggest still best? Is Six Sigma all it was cracked up to be? What do you think it takes today to get ahead and stay ahead? What new rules would you add? -- Betsy Morris, Fortune senior writer
Qaulity, standardization, of products is alwalys an issue....but someone needs to be a visionary and risk taker within the organization and have the ability to sell the idea to share holder/stake holders/senior management.
One of the typical problems I have seen within organizations is that when there is an opportunity for growth they grow but, don 't control expenses and don't analyse why they are growing and their competitors are not.
The entire six sigma program that Jack Welch championed was about beating your suppliers into the ground. The result was great, short term, gain in efficiency. Now that GE has taken the profit margins from their suppliers, there is no more gains for GE to get. Where are GE's great earnings now?? They left with the short term mindset of Jack Welch.
The idea that the old rules don't apply is silly. The new rules are merely new spins on the old ones so that some business professor somewhere can get credit for something "new" even though all he did was spin it a different way. The rules will always apply, it's the application of them that changes. For example, shareholder value always matters. Managers fight day in and day out to keep their jobs and guess who decides that, the shareholders, or at least the key ones. The WAY to maximize is the please the customer. Six Sigma was and is all about the customer. By pleasing the customer, you increase earnings, your stock price rises. Not sure why people think that's the not the same. Agiles is best, big is no good? Big companies definitely have the ability to be agile. They have the resources to change what they need when they need to. GE is a huge conglomerate that is made of many much smaller operating units. When the market changes, the unit responsible for it does. At the same time, focusing on being number one or number two causes a company to think this way. To think about the changes needed quickly, to focus on the customer, to look outside the business. As far as passionate people, that is part of being the best. This thought doesn't differ from Welch's thoughts. Jeff Immelt once said that he has worked over 100 hours a week for many years. That's passion. Would any of you do the same? Yes, the world changes, and yes you need to be flexible, but these rules always work, it's how you apply them that may need changing.
'add rules?' please don't! There's too much of them already.
Focus on what we don't know or really need to know, instead of describing in too many ways what we in fact already do know about our company processes.
Ever seen the six sigma schemes? worked with them? wrong focus when China is beginning to accelerate....
Mr.Welch and his principles of managing a business has arguably worked well when he was at the helm of GE. But, I have always had my strong disaggrements to those principles and more importantly to the business schools preaching of these principles as a 'must-be applied' by all at all times. Mr.Welch's style and principles, such as you got to be a No 1 or 2 in the industry or the strong/weaker players dicotomy, forces one to see business competition as 'warfare' and thus leave out a whole series of other ways a business can be successful despite not being a No 1 or 2.
While now retired, I spent my business life (1962-2004) battling the stock-value syndrom. What makes a company great is the enthusiasm of its employees. And what makes an employee enthusiastic is his happiness at seeing a satisfied customer. After all, a customer sees the employee, not the CEO! Ergo, keeping the customer happy (within limits, of course) should be THE PRIMARY focus of any company. Take what you know or can invent, and make your customers successful by using it.
Hopefully business leaders are not only looking at Jack Welch's business practices but also his unethical personal life. Maybe we can learn from both.
When Jack split GE stock, 3 for 1 six years ago at approximately $180 a share, he was king of the business world, the dot-com bubble had not burst, and everyone in the market was making money hand or fist. Jack believed that 6-sigma was the save all for product quality and money for all GE products, and that people were just resources and should be used up, disposed of, and replaced as needed. He also believed that ranking people in the company 1 through 4 and rewarding them based on there ranking would drive his employees to perform at the highest levels.
What Jack did not understand was that no one thing, 6-sigma, will save all but instead end up costing the company millions in the long run, just ask Motorola who went bankrupt using 6-sigma. Product Quality and Reliability took a beating in many GE product lines because of 6-sigma, in turn customer satisfaction went down compared to the levels in the past. The stock prices fell sharply after the stock split in the sunset of Jack�s stay, it dipped as low as $24 a share and has only recovered to around $33 a share today. The worst part of it all was when Jack was paid around $100 million to stay on one more year and finish the Honeywell acquisition. He greatly underestimated the Europeans and the Honeywell deal was lost. Shortly after Jack handpicked Jeffery Emelt to take the rains and left GE with a $90 million bonus and a huge retirement package that paid him so much that when GE stockholders found out about it, because of his divorce, the board was forced to modify the package.
GE has a man that believes in �Jack� at the helm today. The stock is currently just over $33 a share. Was Jack really that great or did he just make a lot of money at a time he was able?
Hype Hype Hype.... That is what business is becoming. I am starting to think that companies are more akin to movie studios. I remember watching bloomberg quiet a bit several years back and they had the enron people on over and over on their leader spot light or something saying how wonderful the company is etc. LOL. Oh and my favorite book.... THINK AND GROW RICH.
When I first heard of Six Sigma and then worked in companies that followed it, I always got the sense that it was a Draconian way of managing large companies. Sort of like taking a red hot poker and randomly sticking it into a large mass in order to get it to dance the way you want it. In the 80's, perhaps that's the only thing that could be done with large companies in order to get them to change. Today we have the internet that allows small companies to act like big companies and deal with individuals halfway around the world. It makes sense that we need new ways of managing that are inline with how the global economy works.
Business has changed because people have changed. The blue suit, white shirt, and red tie have given over to a need for expression and sense of accomplishment. People are looking for opportunities to find meaning in their work. Talk to Senior Executives and you will find that they are far more interested in a balanced approach to life than chasing a paycheck. The boomers are aging and they are questioning (again) the "old rules".
Creating a great product, helping your customers achieve success, mentoring younger employees and watching them grow, WHILE making a great paycheck is what drives us. Doing these things well helps create and nuture passion which in turn helps make the business successful. If you don't....it will show in turnover stats that will eventually lead to the demise of the organization. What was ridiculed as "new age hocus pocus" is now a fact of life. This isn't your Father's company anymore!
The rules never change, just the ability to make more money selling a book, as Mr Welch did. It doesn't take a brain surgeon to recognize that every decade, some high-profile people in the business world will write a book that tries to push the idea that there is only one way to run a successful business, and that way is to write a book and make lots of money. Even Chainsaw Al Dunlop came out with a book highlighting his management style, which of course was to lie and cheat and steal. Personally I don't think is a big differnce between his style and Jack Welch's, other than Chainsaw got nailed before he could leave with a ridiculous retirement package.
Rules? There are no rules in business. Either you have what it takes to be successful or you don't. Don't kid yourself into believing there is some secret formula. Those that are successful adapt to thier enviroment, market, and have forward vision to see what is ahead. These skills can not be taught, you are born with them. If, as a kid, you had a lemon-aide stand or tried to sell those greeting cards from the Boys Magazine and failed, you should forget about managing a business.
Many of the new rules, opposed to Jack's old rules, just don't make sense!
1) You CAN be Agile and Big - Jack Welch taught nothing if he didn't teach and demonstrate this with GE.
2) Who cares if you create a new niche, something new, if nobody wants it! GE Leads the world in new innovations BECAUSE it wants to be (or remain) #1.
3) What - the customer is king so screw the shareholder? Give me a break!
4) Looking ONLY out and NEVER in is just craziness.
5) If all you did was hire passionate losers, your shareholders and customers alike would revolt!
6) The CEO should be charismatic AND courageous.
7) Admire my might? I never heard Jack Welch utter any such sentiment.
I bought a GE Microwave oven when I built my house. It's not worked for more than 3 months at any time. I bought a new GE Microwave to replace the old one thinking something better (under Welch) would have ensued.
The GE Microwave is sitting broke in my kitchen.
For all the GE BS I ain't buying anymore!!
I was really amazed with the comments made about Darwinism in business being questioned. We all know by now that Darwin�s theory was discredited by the top scientists throughout the world and is only used as reference and a simplifying tool due to a lock of a better one.
Leagues of grad students and scientists are chasing a True theory looking for fame.
You are debating that it is possible that the same is now occurring in business/ management model?
If such, I am wondering if anyone of you readers is participating to shy in this shifting paradigm. If the fittest does not lead who does? Is it like stock market � randomness, luckiness, following a rule of a butterfly, meaning someone names an individual �right�, presents it to someone with �some say� and that spreads or does not. Then people follow and masses of individuals decide this is The person (the stock) since all people say he/she is. That would take us back to a very old theory commonly referred to as �The Emperor has no cloths�.
The CEO's of the 90's destroyed American companies because they had no vision or passion about the business- their focus was on immediate profits to secure that BIG bonus. Exploitation in the pursuit of immediate money was the name of that game. Whatever it took to make immediate profits, even if it meant selling and sacrificing the capital and people was done in the pursuit of the immediate cash goal. That stupid, short-term tactic hurt many hard-working Americans, and it hurt our nations' overall competitiveness in many areas. And, incidentally, europeans, and the EU Trade Commission rejected this tactic mainly because it is not in keeping with the long-term, strategic business AND social goals of their community. Wow, now Americans are beginning to realize that there's more linkage between business and social goals that Jack Welch ignored at the detriment to America's long-term strength.
The question of our business leaders' capabilities should be 'Can they build a business empire like Henry Ford did, not how much money can they generate in two years?' That's the true test of a business leader!
Each of Jack Welch's rules still hold true - as these are basic fundamentals of any business game.What has changed in today's scenario is the pace of the game and the complexity. However the basic rules remain the same -
1. Big Dogs own the street - still holds true...they have the ability to make accquistions, take risky projects and marketing power to introduce new products. The have the capacity to mitigate country or product specific losses without having a huge impact on bottom line. Nimble is critical...what Jack Welsh said about being lean and mean can be interpreted as being having the might but also being nimble
2.Being No.1 or No.2 - Unless the thrust is to excel and rule the market, the company will only be a follower ...the drive to be No.1 or No.2 will make the company play offensive rather than a defensive game
3.Shareholder's value - All sucess needs to be translated into the bottom line. It is the final aim to give the maximum return to the shareholder's dollar invested. The customer being the king is only a means to develop better products as per customer requirements to finally increase profit and improve shareholder;s value. The logic is simple...no company with want to meet customer needs at the cost of reducing shareholder value.
4. Being lean and mean - Being nimble as reworded today, ability to move in and out of new products , markets, and adapt to changing scenarios is critical to survival....nobody did this better than GE when the started moving production and services, R&D to low cost countries before it came into fashion in the current decade
5. Rank your players go with the A's - To be No.1 or 2, to introduce the best products, to play offensive, one had to have the best guys on board...The poor performers would pull down productivity and morale ...so definitely a "must leave" category. This is even more important now when one has to be nimble and and increase customer value without increasing cost.
6. Hire a charismatic CEO - Well Jack Welsh was one of the most charismatic CEO's of his time who influenced a whole generation during his time...and his charisma was built on real performance and not on hollow quotes. Charisma is built on sucess, courage to tread the untrodden path and be path breaker not a follower and Jack Welsh did all that and more.
7. Well company's soul is as important as its might..a company's social concience plays a great role on consumer psyche and buying decisions
Fads come and go. Only Warren Buffett
has it correct: cash flow is king!!
Jack is still right, his playbook is sound.
It's sad to see so many workers and managers running after some mantra for business success. For the rank and file it can be downright deppressing to have the director of their division show up one day with six rules to total success. It is rare to meet or find a CEO or Chairman who is truly smart and innovative. Mostly, they get to their position by a combination of luck, great ambition, and business politics. The whole concept of the brilliant CEO seems like a carryover from US politics itself. The Congress is afraid to make decisions, so by letting the President make them, they can hope to get re-elected. Bad CEOs come and go, and if one gets lucky and has some success, they get overpaid, and write books for all the people who will never get to be a CEO.
Oh please. Jack Welch = CEO during end of Nationalist Syndicalist Socialist Era of US.
GE made most of its cash of the back of taxpayers.
Welch recipe for success = corruption, Big Government liberalism largess.
There's nothing but parroting morons in financial media, business media and business school academia who worship their sacred cows.
The new rules are dead on. The people in the trenches of large organizations have know it for years. Lets hope the disconnected leadership of today's corporations finally listen. Hard to believe listening to customers, motivating employess, and moving fast is ground breaking adivce - but for many large companies it certainly is.
I have told about everyone I know that the person who writes a book about how Jack Welch has impacted American companies would make a million. There are countless stories about how GE has pushed companies around, mostly the midsized and smaller companies. Basically sends manufacturing offshore - not good - Lous Dobbs would agree, I'm sure! The pressure on the GE personnel, daily, is, in my opinion, where a leader should be rewarded. I have never been a fan of Jack Welch's Six Sigma, other than in manufacturing processes, for efficiency. Taking it to the companies operations just reduces the quality - companies cannot manufacture quality goods at the absolute lowest of margins. Quality goods is what the U.S. is all about.
It is really good to see someone stepping up to address the "Jack Welch" impact on the U.S. Don't stop now.
Old American Saying: Don't confuse brains with a bull market. Jack Welch is the classic example of being put on a pedestal for riding the tide of a bull market. In the wake of his departue, accounting scandal and several years of sub-par performance have resulted while the mess he left behind is sorted through. Jack' results speak for themsleves, and the voice is pretty pathetic (not to mention the untold costs to the environment as a result of his "could care less" policies).
Jack Welch - corparate fraud; Jack Welch is the guy everyone thinks is so smart because he's run up the stock; however, in the 5 yrs since Welch retired, the stock went nowhere. Not because current management isn't as good, but because Welch stuck GE with the task of unwinding majore insurance overstatements of earning.
Article is good and right on. The representative on CNBC was poor on explaining the article.
"No one is out saying, "Let's screw this customer today, and if we do, our share price might go up 20 cents."
Its not said, but implied all the time by management's decisions. If a new product gets rushed to market to increase sales (ie. Christmas and the like), it usually means a sub-standard product. There is no benefit to the customer for this, only the shareholder.
So Sorry - Six Sigma Still Sucks!
In 1988 I escaped the telecom industry and joined Sun Microsystems. WOW! I could get more done in a day than in a month in my prior life. Commons sense, logic, creativity, and spirit were accepted tools for all aspects of work life and it was FUN! Customers loved it as much as the employees did and sales reflected this.
At some point Scott(McNealy) drank the Kool-Aid offered by Jack Welch and Sun started the downward trend.
The focus became meeting Six Sigma goals, even if reality didn't quite match the image. One of the biggest conflicts was "player ranking" - A manager could have the top ten people in the world working for him (in any discipline), but would be forced to "Rank" them and weed out by the numbers.
Thanks so much for this article. Your list of New Rules really make me miss Sun in the early 1990's.
Jack Welch executed his plans like no one else. He also could put together teams of people to administer the corporate edicts he put out, based on their particular skills and creativity. He was the lynch-pin.Many down stream from him within GE tried, but were pale imitations. Often scuttling good people & or divisions in the process.
I�ve worked at 3M (pre-Emelt), Honeywell (with and without 6-sigma) and GE (with 6-sigma). Employees gave a lot of lip-service to 6-sigma, it really helped very little, just ended up being this year�s program for the most part. The real danger to the organization I saw was what Welch�s employee philosophy did to team work. Team work basically disappeared as the employees developed an every man for him-self attitude. The better I look, the worse you�ll look and if one of us has to get whacked, I want it to be you. The other thing that Welch created was, if you�re over 50 years of age, you�re a low-performer. No one but the CEO gets to retire from GE, so the best employees leave. Creativity was stifled as people became risk-averse. Organic growth declined as a result. Cost reduction ruled, research and investment was avoided. Customers fled and stagnation set in. Jack Welch has been a drain on our competitiveness. He is not to be admired.
The Fortune reporter and most of the people commenting in this forum clearly don't understand Six Sigma.
The foundation and hence the name comes from "Statistical Quality Control" concepts similar to the well accepted ISO 9000 program initiated in Europe in the 1980-90's.
The GE program as well as many others went right down to the "individual contributor" employee. While being #1 or 2 has to do with not pouring precious capital and manpower into marginal businesses, it pales compared to the over-all impact of Six Sigma.
Fortune's authors and readers would be better served by more accurate and meaningful reporting
I was always impressed with Jack's success at GE and for the good things he accomplished I believe he has earned great praise. However, like all good CEO's and politicians he also also managed to avoid "paying the piper" for all the negatives "rules" he helped to popularize. More specifically:
1. Make sure to be the CEO during Bull market.
2. Blatantly use the innovations of others and when the rewards are more significant due to your size, aggressively claim the credit. This is best demonstrated by 6-Sigma. Mr. Welch is and, by rights, should be proud of its success. However, few realize that Motorola was the company that coined the term and in fact was just derivative of Deming and Duran's earlier work.
3. Everyone MUST collaborate and reach consensus except the CEO. As the ultimate agent for change, the CEO is above the need for consensus. Thus Jack was able to tell many senior executives "My Way or the Highway". Not a terrible failing really, but so ironic I had to include it.
4. As a CEO if you don't really understand your business (e.g., your background is in accounting but your the CEO of a automobile company), change your business to one you can comprehend. GE was the prime example of this as during Jack's tenure it went from a world class manufacturer to a world class finance company. This was particularly good for Jack as he continued to earned stock mulitples associated with manufacturing firms rather than those of banks.
5. Don't manage your business for the long term, managed your earnings for the benefit of the stock analysts. Jack was a master of putting excess into the stock plans and withdrawing the money because they are over funded when they were needed. Review the last few years of Jack's tenure and see how many times more money was withdrawn from the retirement plan than all of GE's remaining manufacturing units produced in profit for the same time period. I realize this was Jack just operating within the rules defined by our government. But the biggest sin here, was that because Jack was such a star, everyone had to do the same thing. Suggested replacement rule: If you hit your quarterly targets every quarter, your doing something wrong. No one is that good a forecaster, so games are afoot to move money from one pocket to the next. There should be variability sometimes over, sometimes under it's the trends that should be predictable and measured.
6. Wall Street and the Government don't properly measure or understand productivity, so don't waste time on improving processes and tools. Instead dramatic results can be achieved and stock increased by two simple expedients. Change the standard work week from 40hrs/week to 60hrs/week by reducing staff but insisting on greater output. (This is the real benefit of the firing the bottom 10% each year, as Jack learned fear is a wonderful motivator.) If you can't increase the hours worked then move your operations offshore while "encouraging/forcing" your suppliers to do the same. In both cases, costs go down. Of course if anyone actually measured productivity by looking at the total hours required to produce product across the supply chain and not just the cost of those hours we might find productivity actually droppped. But then, this was the genius of this rule, no actually measures it this way because the measure productivity using money spent rather than man-hours required.
7. Implement "Darwinian" performance reviews. As mentioned above they a highly effective way to improve productivity. The second and equally valuable benefit, is that age discrimination can be conducted on a yearly basis. As a result, wages can be kept down and medical insurance can be managed. The resulting loss in experience can be overcome by forcing those selected to train their replacements.
8. Insist that employees only travel coach, especially when going overseas. Without these savings, it's not possible to afford the corporate jets required for the CEO's extensive travel schedule.
There are more such rules, but I have already taken more space than I should have. Keep in mind, Jack has received a great deal of credit for the good things he implemented, all I ask is that he receive credit for all of the bad things he brought to US management too.
The Jack Welch playbook works great for building a Boys-from-Brazil society of unbridled capitalism, and apparently works best of all (materially) for the CEO. In the end, however, it lacks that key quality our democracy and its industries need most--virtue! Does one live to work or work to live?
Jack and his philosophies � here�s what you get with ranking people 1 � 4� One, it�s highly subjective, and being such, the rankings are essentially invalid (and given Jack�s penchant for six sigma, you think he would have realized that). Two � it can lead to a Machiavellian outlook � I wonder how much true teamwork happened at GE across all levels. Three � it typically has people focused either on trying to achieve #1 status, or building defensive posturing to validate #2 � 4 rankings. Given this, who is focusing on providing the customers what they want, and minding the shop? Regarding his use of Six Sigma, typically a truly well run six sigma program maximizes VOC quality at an optimized cost, not the lowest cost (I think there is still a difference, at least there used to be), and GE�s quality deliverables, which others have noted, weren�t the best then, and are not now (if only the Hudson river could talk). Jack, like so many others, just happened to be at the right place, at the right time, with the right spin, got out at the right time, and was able to engorge himself with enormous compensation from the shareholder coffers. Was he worth the premium? Nope. Would the company have performed approximately the same during Jack�s reign with a CEO making one tenth of what Jack extracted for himself � I�d take that bet� Do too many CEO�s follow his model? Yes, as illustrated by the declining global positioning of the US industry and service sector base over the past 10 years�
The book by Jim Collins "Good to Great" provides an excellent model for what kind of leaders that are able to sustain performance. Jack produced great results but what type of results are being produced by GE now? Has GE now gone from "Great to Good?" The research in "Good to Great" speaks for itself.
Besides firing people in the thousands, what kind of innovtions did the famous Jack do except pad his golden parachute and free use of the company jet?
To suggest the Jack Welch playbook should be torn up is ludicrous. The man obviously did something right. At worst he rode on the backs of the people he hired... at best he was the visionary who created the largest and one of the most successful companies in America. The principles he touts are fundamental tenets of good management that business should follow. Why would you tear up the playbook of the champion team?
Anyone who spent anytime near Jack and his boys knew all along he was a
B-minus executive with an A-plus publicity agent.
Well Well. It looks as if the Jack Welch boot did not work. Or did it?
Maybe it was necessary to six sigma the employees and support companies in order to get Mr. Welch such a large bonus! At any rate, in business it works best when you achieve collaboration.
Our Rules (and they work):
1 Smart dogs don't bother with the big dogs.
2 Sell what people are buying at a profit
3 Balance the needs of your customers, company & associates
4 Continuously improve and do the "right" thing
5 Hire people who care and DWTSTWD (does what they say they would do)
6 Hire a CEO who cares and DWHSHWD (does what he says he would do)
8 Admire our ability to get you what you need.
The need for a new playbook has much more to do with the attention span of most companies' leadership then the emergence of new set of rules for the game.
Organizations where Management:
1. Has the support and courage to understand and pay attention to good operating fundamentals (process discipline);
2. Aggressively seeks to understand and deliver superior value to the market (customer centric) and
3. Clearly communicates to employees that they are the most valuable asset the company has and motivates and rewards them for the right behaviors
have always and will always be at the top of their games.
These are not new ideas they just get lost in the heat of the battle over cross-purpose business goals. There is no substitute that will fix a short attention span and management that knows its days are numbered the moment they take on their leadership position.
It looks to me that the modern model for organizational sustainability is seriously flawed. And as long as organizations and their management are rewarded based on quarterly performance the search for the new silver bullet will continue.
While I can understand Fortune's desire to have such a title, in fact, the seven rules mentioned in the article are really spins on the rule they purportedly replace.
Being big is about being agile. Being 1 or 2 in your category is all about the BCG and the experience curve, the more often you do something the faster you do it, so the more scale you have the more agile you are and the lower costs you have.
Finding a niche, or inventing one like the iPod is a way of being 1 or 2 in that product category.
Six Sigma is a customer focused program. Customers pay your bills, but it only makes sense to invest shareholders' money in projects that involve paying customers.
Welch was always looking for acquisitions and new businesses he could dominate. But he asked for ruthless efficiency in pursuing those businesses.
A players are generally passionate people.
Finally, the "soul" and the corporate citizen is not only not new, it is a throwback to the sort of corporation that Welch had to fix. The kind that offers retirees benefits vastly more valuable than that which they created when they were working (like GM) which drives hte company out of business. In whose interest is it for GM not to build cars? Earning a good return on shareholder's money is still the top priority of any company.
I think the thing we got to look at now is EMPLOYEES. Companies today think to much about customers,share holder's & the companies it self. They have got away from the people that talk to the customer. If the EMPLOYEES that talk to your customers are not happy then how can a company grow.Yes Jack's old rules work only if you got EMPLOYEES that are happy with the conpany they work for.Take GE the EMPLOYEES believe in the copany and the company gave back to the employees wich made the employee want to work hard. People today do not care about there jobs becouse companies do not care about the people they have working. When a EMPLOYEE see a company make a profit and do not share that with the employee,the employee say why should I give my all and the company give 2% back. New CEO'S must unerstand customer only buy what the EMPLOYEE sale them. WE all must keep in mind the companies nore the share holder's hold power its the EMPLOYEE and the word of that EMPLOYEE that make a customer buy.
Here is the brake down
Here is what we see now days
So yes I think Jack's rule will work but only when the copanies get back to showing there employees some love with "MONEY" not just a thank you and some cheep pin that they paid $2 for :-) lol......
There are many aspects of making a successful business, and there is no one thing (or six or seven) that works for everybody. The problem with 6-sigma (or Jack's rules) is that they were taken literally, and to the extreme I might add, by others who thought just by applying what Jack did at GE they would also be successful as Jack. I still think his rules had many good and sound principles that are still true to today, but they are not the 'savior' as many think they are. What we need to do with any ideas is to learn and understand them, then make them your own, and finally, adopt them to your business.
Jack's rules will never die. All new rules will be spinoffs of his doctrine. Let us not forget that GE in 1981, when he took over, looked completely different than when he retired. The ideas around being agile, finding niches to grow, and looking out are what made Jack take GE into areas such as Consumer Finance, Information Technology, etc. The very areas he saw as growth markets are one's he attacked and dominated, but weren't originally GE's core.
If you're not trying to be #1 in your market then what are you in business to do? Dell is number one, for different reasons as GE, but are still number one. People's values on products and services they may buy change everyday, every year, every decade, but that's why businesses adapt (ethically)....to remain or strive to be #1. No one ever remembers a second place finisher.
People on average are normally passionate about what their good at. Were Michael Jordan, Joe Montana, Jerry Rice, Bill Gates, Sam Walton, and Oprah not passionate about what they did. Bottom line..... A players aren't A players without passion. When you're good you strive to be great. That's passion. Enough said.
Betsy Morris's article does a great job of illustrating a major problem in our society - Monday morning quarterbacks who have access to the media but not qualifications to offer a useful opinion. Jack Welch focused GE from top to bottom on what was then the key challenges facing GE. His WorkOut initiative reinforced the importance of leadership/sponsorship, discipline and change management while empowering employees to be actively engaged in improving their work. His emphasis on deliberately managing top, middle and bottom performers with purpose was a bedrock for GE's success and probably the reason it's produced more Fortune 500 CEO's than any five companies. His recipe for success in the 90's was Speed, Simplicity and Self Confidence - speed meant efficieny and responsiveness but Speed could only be derived from Simplicity - Simplicity in turn depended on Self Confidence - he rested the success of GE on the belief that Self Confidence of it's workforce (empowerment, risk taking, vision, candor) was the key ingredient to its' necessary transformation. Whether your objective is increasing efficiency, driving customer satisfaction, improving productivity, product innovation, etc - these are building blocks and always will be.
Thank you to the Fortune staff and Betsy Morris for illustrating why the quick-fixs, fads and consultants will always be around.
You can argue Welch being right or wrong, but the reality (for now) is most major companies are following his directions. Personally, I do not agree with Welch on many issues, but I can not deny that his methods are being implemented blindly. You can argue about it, but eventually it�s going to affect you � regardless if he�s right or not.
I would think most major corporations would have the ability and talent to come up with something better than just to follow the leader, but that is not the case. It�s even worse now, as many former GE HR Welchbots are infiltrating the ranks of other corporations and spreading the GE way.
Are we really this lost in corporate America that we latch on to something just because �that�s what worked for GE�?
Personalizing Welch�s effect, I worked for a major defense contractor (not GE) and was given a review rank of a �C� talent or non-participant or general looser slacker. I concluded, maybe Jack was right, C players are in the wrong job and need to go elsewhere. I quit that company and went to work for another defense contractor doing the same job for about 100K to 170K / year MORE than I was making. Yep, the old company did me a favor and essentially forced me to go look for another (better) job. Thanks Jack!
Even a busted clock is right twice a day.
You forgot that the old school CEO would cook the books for his/her bonus, whereas the new school CEO simply back dates the stock options.
Oh, please, enough already with Jack Welch. Anybody who listens to this jerk is wasting their time. I live in CT where GE is located and have never met a former GE employee that didn't say they hated the company nor a current GE employee who didn't love the company. This company recruits wet-behind the ears college kids and indoctrinates them with the idea of being worked to death is good. Whatever you think of the company it has a tremendous turnover.Of course, Jack Welch would say that is by design, getting rid of all but the A players. But the turnover costs the company, and affects the bottom line.
Like any rule book in business or in warfare, Jack's Rules needs to be updated as well. Nobody in Corporate America would ever deny that Jack Welch was a superb business manager and visionary, and he had the results for over two decades to validate his well-earned title as a true business icon.
But times have changed and everything around us, from technology to the environment to world politics, etc., that affect business have also changed, and so the rules have to change as well, otherwise, you risk fighting today's "battles" with yesterday's "weapons".
TQM, 6 Sigma, Reengineering, BPO. Management-By-Fad never works.
Ever heard of the 3-legged stool model? It is really simple. Imagine your organization is a 3 legged stool. One leg is your cutsomers, the next leg is your employees, and the thrid leg is shareholders-owners. We need to keep these things in perspective.
I just left a major banking corporation who abused the top 10% employee ranking rule. They kept ranking me in the bottom 10% although I was the only one out of a 1,000 people in our department who had the specific skill. I was told I was not a team player, although I had 6 bosses in less than 3 years who were all located out of state.
Now I'm in a new position with a $20,000 increase in pay, 25 minutes from my house, and loving every minute of it.
My former employer is now using 10 people from India to do my job.
Jack Welch's credibility as a manager was brought into question by his relationship with Suzy Wetlaufer. Their affair cost Jack $100+ million in a divirce settlement. Anyone who pays that much for "a good time" is suspect. Welch and Wetlaufer's subsequent marraige was likely an afterthought to prop up Welch's reputation.
Welch's divorce made his exorbitant retirement perks from GE public record. This irked many GE shareholders, but not as much as his angry defense of them. Finally, Welch relinquished the perks back to GE, but the damage was done, he had cemented a new reputation for himself.
Welch was driven by urges for power, money, and sex. That was Welch's real playbook. Those forces have driven men to greatness and ruin from the beginning of time, and will until time's end.
Firstly Darwin has not been displaced. Allowing companies the time to do research and develop new products is crucial to long term success. The short term'Value' by bleeding a company is so detrimental to the longterm for American Industry.
Six Sigma is still an excellent tool, no matter how large or how small the company, market, or issue it is being used to solve. The use of consistant methods to solve problems helps on several fronts. It helps employees in different locations communicate using a common language, and approach problems with similar set of tools. It helps document solutions to problems in a consistant manner, which can be learned from or used in solving future problems. And, it provides a databased approach to solving problems using fundamental statistics. I'd tend to agree that most of the "Old Rules" do not apply anymore, but I do think that Six Sigma is alive and well, and is a tool that will continue to be essential for years to come. I also think that Six Sigma will continue to be used by not just U.S. corporations, but by Global Corporations, where its use will grow.
These rules are not new. Sam Walton followed these "new rules" when he founded Wal-Mart. Moreover, Peter Drucker the Dean of management teaching proposed similar rules in his management book in 1974. Simply,we are relearning that leaders with listen skills always out perform leaders that do not in the long run. Yes! Steve Jobs is the roll model- he listens.
Parental Guidance and Back To Basics. Simplify Execution
V. S. Rotondi
We have long since passed the time when star CEOs and the coterie of consultants and publicists that insulate them should receive automatic obeisance.
Is being tough necessary? Sure, sometimes. Is striving for No. 1 status always bad? Hardly. Is being big automatically evil? Not at all.
But when the primary mechanism of achieving success is through instilling fear ... of being laid off, of risking an innovative out-of-the-box solution that could fail as easily as it could succeed, of spending something now to save even more later ... the pendulum has swung too far and needs to be moved back.
The Welch Way has destroyed the loyalty bond, such as it was, between senior managers and the rest of their organizations, resulted in large numbers of laid-off employees (but active consumers) who are disaffected with corporations, and caused innumerable decisions saving nickels and dimes that will cost quarters and dollars to recover from later.
The issue is balance. A competent CEO needs to know when to nurture as well as when to go neutron. As an HR consultant in China for a number of years, it's apparent to me that when the Asian tiger fully awakes and finds its strength, significant changes are going to be forced upon American business.
Remember: Confucian teaching, which affects hundreds of millions of employees and tens of thousands of organizations opening up to the world, puts a good boss in almost a parental, caring role. When bosses raised in that Asian tradition but educated in America's best business schools compete as equals with the Welch wannabes in the coming decades, we'll yet again see dinosaurs forced into extinction.
It's taken 20 years for American business to be driven into its current state. It will take at least 20 years to recover. In 20 years, Asia's new giants will be really be feeling their oats. If American business is to succeed in that competition, the time to change management models is now.
Good start, Fortune. We need more.
I believe that who ever wrote this article is looking to create controversy or has not read his book or heard Jack Welch speak live or
The way the new and old rules are being contrasted, is out of context and does not provide a fair representation of what JW stands for.
JW principles are not about being big and mighty... but slow. they are about having a clear vision, focus on your strengths (and big companies can use size as a strength) , surround yourself with the best people and aiming to be the best. Passion, vision, focus, diferentiation and talent. Who ever spends time with JW will realize that this is what he is about, you just need to be 5 min with him in a room.
Jack Welch's ideas work, ask any CEO and they will agree. He has a great avility to create new leaders who can execute and run companies, if you dont agree with this, name one single CEO who has produced more CEOs and senior managers than Jack - he produced 3 CEos in the Dow 30, GE, 3Com, Home Depot)
I recomend readers to read JW's book or to hear him live taking about his principles on business, you will get a very different impression on his principles.
World Business Forum
JW has spoken many times at the WBF and he has been rated as the most influential speaker at our conference. Voted by more than 4,000 senior executives!
I think his principles are very much alive!
The only constant is change. The only way to truly ensure that your organization will be successful is to recognize and understand the strategies that have worked in the past, why they worked, and most importantly, WHEN you need to rethink them in order to effectively evaluate and select which strategies will work in the future.
Jack Welch: Just another exhorbitantly paid CEO continuing to make money off of minimal skills.
Yes, you heard me. Minimal skills. I guarantee that for $100,000 a year, with no business school training, I could do at least as good a job (I'm convinced I could do better) as any of the multi-million dollar CEOs out there, in any industry. Looking good on the news or at the big corporate shareholder meeting is one thing, but let's face it, a CEO only needs to know a little about the business, and leave the details to a qualified staff. (picking the qualified staff is where the skill lies) You don't need to pay gazillions for someone to do that. Email me at email@example.com if you would like me to run your company for a year.
Six Sigma is a joke! GE makes products that are absolute crap. We bought a house five years ago with all "GE Profile" appliances. They have all broken several times since then. Where is the value that should be in the appliacnes - where's the Six Sigma? It seems like the Six Sigma was effective in introducing flaws rahter than removing defects.
This is a RIDICULOUS article. Saying that Jack's playbook doesn't work under today's economy is like saying that Babe Ruth wouldn't be able to succeed as a baseball player in today's playing conditions. The truth is that Jack Welch would not only adapt to today's market, but he would control it. Under his tenure GE's stock surged over 3000%. So if Jack was still in control, he would have his same play book plus a few tricks up his sleeve. Give the men some respect!
�Tearing up the Jack Welch playbook� is a timely suggestion since he represents the epitome of arrogant, high control CEO�s. However, your �new rules� are destined to join the list of disappointing management fads unless accompanied by an alternative for hierarchical control� the root cause of disempowered employees, organizational rigidity, poor learning, lack of creativity, and other seemingly intractable problems. Hierarchical control is also inherently incompatible with the expectation that employees think economically as they generate ideas for new products/services, better serving customers, and improving company results. Fulfilling this responsibility requires that employees have the knowledge and information to evaluate costs and benefits and the freedom to take risks, evaluate results, and learn from mistakes. And sharing in the financial and intrinsic rewards of business success will increase the probability that they work passionately.
Dave Packard, Herb Kelleher, Ken Iverson, and Max De Pree created such cultures by emphasizing freedom in the workplace while building Hewlett Packard, Southwest Airlines, Nucor Steel, and Herman Miller. Unfortunately freedom�s critical role in their successes has been consistently over-looked or ignored by other managers, experts, and business schools. Our new book, Freedom-based Management,� utilizes personal experiences and those of these companies to describe the principles of freedom-oriented management, the awesome business benefits freedom produces, and a minimal risk strategy for introducing freedom into organizations�everything needed to create an environment within which your new rules can flourish.
What a load of crap in "Welch fires back" comparing the perfection of the scorecard in Major League Baseball to performance evaluations in the coroporate world....there is no comparison.
In baseball you either get a hit or strike out, catch the ball or make an error, it's there for everyone to see, right up there on the Green Monster.
Things are not quite as clear in the corporate world where depending on how well you can manipulte and manage perceptions is key to sucess. Especially those corporations that use Jack's axe therory.
When people are treated as chattel, others take notice and take evasive action. Low or no risk decisions, restricted communication, isolationist behavior. In addition to this many of the people axed using this theory are only scapegoats or have been framed to cover someone elses failures...it's a slippery slope...and creates toxic cultures.
Thanks for your cover story in the July 24th issue of Fortune, �Sorry, Jack!� It will provide much fodder for discussion in my MBA classes, but I think the article got it wrong. I do not believe that the fundamental laws of economics and capitalism underlying many of Jack Welch�s rules have been repealed. Economies of scale, efficient production and deployment of capital still matter. Management techniques such as Six-sigma and differentiation of employee performance are not mutually exclusive with innovation, flexibility and customer service. The real problem is with managers blindly looking to mimic these techniques and achieve stellar results without considering specific cultural and situational aspects. When things don�t work out, they blame the technique and look for the latest management fad. It just doesn�t work that way. Jack Welch�s real key to success and his legacy at GE was creating a culture that learned how to apply the appropriate techniques and adapt to an ever changing world within a set of universal and timeless business principles.
Raymond P. Sarnacki
Adjunct Professor of Management
Erivan K. Haub School of Business
St. Joseph�s University
I think Jack Welch is missing something very critical that was pointed out in the article.
You can't have leaders without followers. If you get rid of all the followers, all you have left are leaders with no one to lead.
Jack Welch's policies have destroyed the leader / follower relationships.
Something else to consider. Not everyone wants to be a leader or has the ability to be a leader. That doesn't mean they can't be a loyal, hard-working contributor to the organization. These are the types that are being weeded out of GE.
Six Sigma is a very old concept. It is a methodology to reduce defects on the production line in manufacturing. Now banks are applying this concept. I'm thinking that this concept doesn't translate 100% into other types of organizations and unintended consequences are the result.
Jack is long gone....and GE no longer plays by those rules. Anybody can turn a profit by buying and bleeding and at the same time cheating on their spouse. It takes real leadership to drive growth by investing in technology, creating a world calss sales force and delvering on fullfillment....Immelt vs Welch, two different styles and I would take Immelt over Welch anyday.
Get real, Fortune. For such a great magazine with a distinguished legacy, your coverage on this topic is disappointing. You take Welch's rules out of context, boiling them down to soundbites, and then find a few CEO's who are looking to build their own legacies and have the audacity to fall into your trap of gross oversimplification. Remember what Jim Collins taught us: The Genius of And. Be big and nimble. Serve shareholders and customers. And so on.
"Tearing up Jack Welch's Playbook, Sorry Jack, the new business rules"...Boy!!!
The way Fortune has publicized and highlighted Jack Welch's successes only to tear them apart and show their new rules looks more like taking an approach to hilight your cause or agenda by utilizing the popularity of a great CEO. I guess just highlighting as "Fortune's new business rules" would not have worked Vs. tearing apart the successfull Jack Welch. What a way to discount a legendary CEO's rules to forward Fortune advertising.
Jack Welch's tenets of management are fundamentals, nothing more and nothing less. Any business that does not practice the fundamentals and seek to improve execution of the basics will fail or at best languish in mediocrity. Jack is a fierce competitor and master of leading through volatility. Following his lead should be embraced more than ever in today's environment. Betsy Morris should write fiction because her grasp of management and leadership shows incompetence nor does she have a track record on which to perch. Perhaps she could write about innovating a new wheel and how to be last to market.
Interesting that you would run an article trashing Jack's style, considering he has an exclusive deal with Newsweek, and won't give fortuen the time of day.
Welsh�s strategies don�t even achieve their own shareholder values anymore .Between 2001 and 2006 if you bought 100 shares each of the following large prestige leading companies: Coca-Cola, Citygroup, Dell, Exxon-Mobil, G.M., G.E., and I.BM. , Disney, 3M, Johnson & Johnson, Microsoft, Wal-Mart, Pfizer and Proctor & Gamble, you would have invested about $50,000 and lost about $5000... The conclusion is unmistakable: �Bigger is not better.�
What Welsh and others ignore is that the most limiting factor of bigness is its devastating impact on culture, structure, passion and creativity. The bigness of organizations causes defensiveness, uncertainty and structures that inhibit today�s necessary behaviors. The success of smaller more innovative companies leads to the conclusion that many organizations should simply get smaller in order to really deal with today�s environment. Splitting up organizations, spinning off or creating more independence among groups, are what is being necessary to maximize the potential of both individuals and corporations.
Enough already. Corporate America needs a new playbook. The old rules of the Jack Welch era don't work any more. Today's volatile, brutally competitive business climate demands a new set of rules and whole new mindset.
What do you think? Is it still so critical to be Number One or Two? Is that the best way to think about your market? Is being biggest still best? Is Six Sigma all it was cracked up to be? What do you think it takes today to get ahead and stay ahead? What new rules would you add? -- Betsy Morris, Fortune senior writer
I dont know very well Jack Welch and his management ideas. I dont read a lot of management books. They are boring. They miss few things that are important for a CEO.
1. It is true that it is more brutal competition in any market. But we forget to mention here why this? The answer is very simple: in this age with the computer power, conductivity and transmission of data, and connection, it is very easy and inexpensive to jump in any market and become a player.
2. To do that you have to be unbiased, "pure", not indoctrinated by academia, genuine thinker. An example: outsourcing. Good idea because of lower labor cost overseas? Wrong. It might not be bad but it is good and winning idea for sure. Toyota, 20 years ago opened its first plant in USA, in the country where the labor is among the most expensive in the world. Today Toyota is almost bankrupting the aotumotor giants like GM. this leads me to the next point: what did make Toyota so successful? The quality of products.
3. Quality management is the core of management in general. You improve the quality you are on your way to become a winner. How does quality get improved? By process reengineering. Americans are a little bit slow in getting it. Half a century ago, one of the fathers of quality improvement theory, Deming, had to go half away around the globe to implement his ideas, in Japan that was known at that time for the worst quality products in the world. Toyota today is proving that quality does matter. When they built the plan here the only thing that impresed the folks here was the fact that they did not have a parking space for cars that would need rework? Go figure.
4. and equally important if nt the most important assets for a manager is the vision.
If a company doesn't put the customer first, pretty soon there won't be any customers. They pay the bills!
The thing I find interesting is the notion that the "score" in business is the share price. This has only been true since the late 80's, before that, shares were literally shares in a profit-making enterprise and thus shares of the profit. So, in the first 300 years of capitalism, profit was the "score" in business as that was the purpose of a corporation, to invest together and create profit to pay dividends to the investors. Jack Welch's new rules were about this change from corporations as shared profit-making enterprises to corporations as entities to create speculative bubbles in mostly phony equity documents. he was acknowleging officially that American corporations were now all in the same business, the business of selling equity documents to investors. For example, bigger is better because your "brand name" for your stock is more visible, hence attracting more investors to your bubble in cumulative effect. Being "No 1 or 2" is good because it has media and press value, and will attract investors who hear your name as a positive, or winner. Etc. Jack Welch's rules are rules for the manipulation of investors. Investors haven't changed much, and the stock markets are still vastly inflated, so these rules still hold.
The change will come suddenly, it will be a general collapse of the speculative stock industry, probably right as the baby boomers retire. As their share prices collapse, as 100 million people all try to sell off their prized "investment" pieces of paper with very few buyers, dividends will be again the only reason people buy stock. Then the rules will shift to favor actual profits and a sound business strategy. But not until then.
Around 2015? Say 10 years from now?
Fortune hit the nail on the head with this one. Business' fundamental role in society is to make money. However, as society has changed and demands of stakeholders (those to whom the business' success is linked) are changing due to globalization and the information age. Companies can no longer hide behind off-shoring and shell corporations. They must 'stand and deliver' or face customer revolt, community opposition, regulatory constraints, and employee defections or reduced productivity.
The notion of the responsible corporate citizen in the US includes heatlh insurance and pensions. Around the world it is transforming to include responsible environmental stewardship, and respect for local cultures and ways of life, etc.
You can lead without dominating and the successful business strategy will always be the one that allows for maximum profit within the accepted norms. Jack Welch's profits at GE came at the expense of pollution in the Hudson River (for example) that was allowed in an era of laissez-faire regulation. The communities, employees and shareholders are still bearing the burden of that decision. Defining what is successful requires a long term view, not juding quarter by quarter balance sheets.
Betsy Morris is right on target with the new rules and pointing out the significant flaws that are becoming evident in the Jack Welch model. Agility, Innovation, "Outward" focus, and finding and developing "passionate" people are all powerful elements of a model that will win with "staying power" over the "Welch model".
I've watched, first hand, the GE/Welch model turn what was once a great company, into one with short-sighted vision, dimished employee and customer loyalty and now struggling to gain the market share they desire and could once command.
Thankfully, I chose to make a change to lead in a company that exhibits the "new model" and is now taking "high performing" people, customers and overall market share from my "GE/Welch" inspired former employer.
In baseball it's wins and losses. In business it's market share. Everything else is excuses, smoke and mirrors. The Japanese (Nissan) I worked for said "if you're third you're dead." They died. Look what Carlos is doing for them. Do you not think that more market share would help GM? It is all about product appeal!
I agree with the changes, as world is changing, technology is changing and preferences of each one us is changing every day. What Jack Welch wrote three years back was based on his understanding of the market; however it seems that he did not consider a rapid changes in the business environment / practices. Hence, it is important for all of us to understand, what are rules today may not remain tomorrow, and therefore, we all need to be on constant change; these rules may be old tomorrow and who knows Jack's rule will be applicable again!!!
Sustainable business depends upon doing the right thing for the right reasons. If you value proposition is a zero sum proposition, I win someone else must lose, is not sustainable. Let the buyer beware will not stand. Our value proposition is that we not only sell the customer what they ask for we sell them what will make them successful. That means we need to know their intentions and meet or exceed those expectations.
What I found most interesting is that the seven new rules identified as being keys to success for corporate America are essentially the attributes of an entrepreneur and his/her venture. As director of entrepreneurial studies at Bentley Collge (Waltham, MA) as well as a practicing entrepreneur, it really is no surprise that given the emphasis on innovation and growth, corporations need to embrace the entrepreneial mindset, skillset, and toolset to achieve success. It's really that simple and that complex.
Welsh's business practices were always flawed and will always be flawed. His business philosophies have lead to a soulless business environment that allows business to post profits right up to the day they have to file bankruptcy!
The simplistic interpretation of Jack Welch's rules and the proposal of an equally simplistic new set of rules serve to perpetuate the destructive cycles of management fads. Unfortunately, a company's successful use of a management technique is too often packaged, popularized, and then misapplied by consultants and educators who offer it as a panacea to management all too eager to find a panacea. The na�ve application of the fad techniques inevitably produces poor results. Thus the technique falls into disfavor. This is followed by the wise sages of the business press, management consulting, and education then denigrating the techniques they promoted 5-10 years earlier while promoting the next panacea.
The focus on the fad management techniques vs. the CEO lets the CEOs off way too easy. It is time we quit blaming management techniques and look in greater depth at what constitutes sound management. For example, I hope the CEOs who adopted six-sigma and failed to produce the expected results were held accountable for their lack of understanding of six-sigma and its application to their context. Tools work when properly applied.
The fact that "everything Welch said became gospel - often to the extreme" is not Welch's fault. It is the fault of the CEOs who did not do their homework to understand what the unique needs of their own businesses were and naively deployed Welch's methods. Also at fault are the consultants more than willing to sell these CEOs popular, vs. effective, solutions. This cycle of management technique popularization, misapplication, denigration, and new fad technique adoption does not bode well for truly advancing the art and science of management.
Welch was neither a god nor a demon as some portrait him, but he obviously achieved great things. Bull market or not, GE thrived from 1980 to 2000 while its comparable competitor, Westinghouse, did not. Many other established U.S. companies fell from grace during this time as well.
In regards to some of the old and new rules �
Agile is best; being big can bite you - Maybe this new rule vs. old rule should be the rule "good strategy and good management is best; not even size will save you from poor strategy and poor management." If you are agile you are better off whether big or small. GM has not fallen from grace because it is big, just as no one is recommending that Toyota downsize to be more agile and competitive. Certainly both physical and social technologies evolution continually change the winning business model solutions. If everyone runs from "scale" to "agility", in a few years the business articles will be bemoaning how those focused on "agility" are out of touch while some other neglected dimension of the business model rises up to gain attention and favor
Find a niche, create something new vs. Be No. 1 or No. 2 in your market � Part of the art of management is defining your market. If you create something new, you are by definition number one and have the freedom of the number one player in the market. If you are number three or four in head to head competition with the rest of the industry, the market is telling you your solution is less valuable than others. In that case, isn't it the CEOs' fiduciary responsibility to redeploy the assets to a better use that generates more value? Also, don't executives know that they must continually create something new and that every new investment made cannot be expected to move the needle in a large business? After all, in 1980, Wal-Mart was a small company and Dell did not exist yet, but they were new creations which came to dominate their markets.
Customer is king vs. Shareholders rule � Last I knew it was the customers who provide the revenue which drives the cash flow, earnings, and stockholder value. Any executive not focusing on the customer is shortchanging the shareholder. If the only reason for share price growth is due to earnings manipulation, share buybacks, and acquisitions which do not create value, it is time for the shareholder to bail out and the board to replace the CEO. It is also time for the board to take a hard look at incentives in the CEO's compensation package to see if they are aligned with producing value from the customer's perspective.
Hire a courageous CEO vs. Hire a charismatic CEO � Does this infer that Jack Welch or Lou Gerstner were not courageous? I don't buy it. But the focus of this juxtaposition seems to be on a longer term focus and organic growth vs. operational optimization and acquisition. The facts tell us that a longer term focus and organic growth is the path to creating the greatest value. It seems to me that is a lot of what Welch and Gerstner did in their respective companies by moving them into higher value offerings and out of commodities.
The Power of Positive Engagement, as defined in this article by Darcy Rezac, Author of Work the Pond! (Prentice Hall 2005) and Sauder School of Business Dean UBC, Daniel F. Muzyka. it is all about the need to creat social capital for benefit of all: customers, employees, communities & shareholders. The Johnson & Johnson credo--first published in 1942!
Jack was a leader who beleived in scaring his employees and overworking his employees to death. Most of the e band execeutives in GE are either single or divorced. Most of the folks who left GE are happy and doing well. Being a GE supplier is like a ride to hell and being a GE customer means that GE makes 21 ROI of you.
Enough, already. Jack was right and so is Betsy Morris.
Johnson & Johnson, way back in '42 in their famous 'Credo' identified 4 'Kings.' The customer, the employee who serves the customer, communities in which we operate...and fourthly, the shareholder.
I prefer to think of the customer as the 'king-maker' and the other three as kings.
Jack Welch's playbook is still very relevant. People get carried away with new ways of doing business - dot.com's for example. There is nothing wrong with adopting new thinking and better approaches. But you never ever discard the playbook that got you where you are if you've been a successful enterprise. You take what has worked best for you and you adapt it and integrate it with any new plays that you feel will help execute in whatever direction you want to take your enterprise. Jeff Immelt isn't going to discard the rules by which he's grown and achieved great personal success but he might change the focus of the organisation. The things that made GE successful will still work today; maybe without the same growth rate that they achieved over 20 years under Welch, which is what Immelt's challenge is and he's meeting that head on. You can bet your life that GE is still going to succeed and grow using much of the old plays combined with some new ones.
I sent the "Sorry, Jack!" article to a friend of mine who still works at the large company where I used to work (I was ranked and yanked 1 1/2 years ago). Below is his response...so sad. Open your eyes corporate leaders of America!
"Still here. Got ranked as a two again, but was given a warning and a lot of BS. I was actually told that what I do, day in and day out of resolving issues and problems really was not as important as getting upper management to notice me, doing charts and graphs to show what I have done and saved the company, doing CPMS on time etc. But yet, they keep me covered up with issues to resolve. This next ranking results may be somewhat different for me. It really makes you want to dig deep and work real hard. Yea Right!!"
HThe problem with articles like this is they are "either - or";
there are different rules at different stages of the game, and for different companies.
The other problem with the article is it perpetuates the fawning over Jack
Welch, who is not the best CEO GE ever had. He was a good CEO, but I don't think a great one.
I like the article though - provokes a few brain cells.
The difference between GE and Toyota (who gains share every year), is your "new rule" number 3 (customers) is rule number 1 for Toyota. Jack's "cost out" mentality made GE an internally focused organization. Ask any GE vendor who is running GE and they will tell you the truth, the finance folks, risk, purchasing, contracts, cost out, no time to think or plan, do more for less, confuse activity for progress, no time for tomorrow, today is the only thing that matters. Jack made shareholders "king" and todays shareholders are paying the price. Jeff Immelt has the hardest job anywhere, trying to get GE to change from cost-out to customer is going to be interesting to watch.
One of the stakeholders that gets squeezed more and more, are the employees. Top managers are getting ever more exagerated salaries and bonuses and shares, whereas the ones who deliver the goods, the amployees, are asked to agree to lower salries, less reitrement behefits, less health benefits etc.
Only satisfied employees yield satisfied (and profitable) customers.
America has given-up its best industrial and scientific technology to China in recent years. The most-skilled engineers have been off-loaded to satisfy the cult of offshoring (predominantly to China & India)and now, just when shareholders and CEO's should be able to sit back and comfortably observe the wasteland they have created, folk start questioning the viability of the King of Short-Termism; Jack Welch.
Yet in his heyday, the likes of Fortune magazine were quite willing to trumpet GE and Welch as "a good thing".
Now the US is being sand-bagged by China and India (a country GE has helped to prosper considerably) and the recriminations are beginning.
Welch did what he did to satisfy both Wall Street and the cult of short-termism that has engulfed US firms for the last decade. Until shareholders demand that CEO's are able to make long-term strategic decisions (and don't get fired for a bad quarter, or rendered rich beyond their dreams for a good one) then the situation will persist. US firms have given-up all of the family silver (the secrets and the best staff) only the drapes are left.
There is no zero sum game, you can be innovative and do lean six sigma. There are consulting companies out there now who consider them complementary and have highly developed practices for each. It is all about continuous improvement, by the most appropriate means.
If you think about Six Sigma, it is all about doing stuff you should be doing anyway. We should manage with data, we should involve our customers and we should work as teams. What is undesirable about that? Where things tend to break down is that Six Sigma is prescriptive and it requires a lot of effort. Most CEO's don't have the energy to start six sigma, have it show them that they have no effective method of operationalizing their strategy, don't have any data collection systems worth a darn, etc. and then take all those things on in turn. LSS isn't designed to fix those things, but will make them obvious.
The rules of business probably don't change much, trends do. The CEO who makes the news does so because he/she is successful at the moment and is not publicity adverse. Their personality tends to make them lead in a certain way, so everyone thinks that is the way to go. In other words it is the times who make the man.
I will never forgive Walmart for what they did to the workers at the Jonquiere store in Quebec. They closed the store because they exercised their legal right in Canada to form a union.
They can go green till their store front ends looks like a golf tee off.
I will never shop one of their stores again.
I must say that I found the article "Sorry, Jack!" to be very interesting. I believe that Warren Buffett would agree with the new rule: hire a courageous CEO. I also found it quite humorous that the article de-emphasized the importance of size and being the "big-dog", yet was immediately followed by the Fortune Global 500 article chronicling the largest global companies. Thank you for the fine article and the humorous placement (seriously).
Jack Welch is the worst enemy of the the American Middle-Class working person....and therefore, America. He has killed more American cities and ruined more Americans lives than terrorists ever will. Jack Welch is the reason our founding fathers did not grant rights to or even allow the forming of corporations except in very specific and limited cirmunstances.
Jack Welch's management syle was great. he did to GE what needed to be done, like move it from the hierarchial structure and "big companies rule" of the mid 1900's. he changed and made GE successful, now jeff immelt is changing what he feels will help GE be successful in the future. 6 sigma or nothing, these are just management process. when the customer changes, you do too.
The old rule propounded by jack welch some years ago could be accepted during the analogue period,however the digital era drives the new rules in managing Mega corporations.change as a management tool determines whatever rules that is in vogue.In other words I will term it as :Time Value of management concepts
The Rules of Business have changed significantly with the changes in society. Globalization means the world is interconnected, the key is to utilize that. To be a success you need to network and understand cultures of the world.
To truly be a succesful manager/ceo in business one needs to connect and understand cultures not like our own.
Jack Welch and General Motors havent really done that. An example of cross cultural understanding could be found with someone like 'Coca Cola'
Jack Welch's rules in their current state can not survive in today's information world.They were good back then and still some are applicable with a little tweaking.Some of the rules create fear and stifle creativity.Business is still about people,and people skills are still relevant today more than ever.
Business Environment is always in constant state of flux. Every decade witnesses a shift in principles and priorities. What we think is the ultimate rule just becomes a fad in the upcoming decade.
Take the case of what Einstein's model did to the Newton model.
On Jack - Hopefully, MIT will get smart and fire the TURKEY when it realizes that he is just selling his WARPED CEO opinions. Wonder how he grades the kids papers. Hope they don't take hime too seriously!
My graduate management professor sent me this article on Jack Welch. Welch largely built GE profits from GE Capital. We have a done a good job on building a consumer economy based on readily available credit, hence the success of the finance sector. The only question is how are consumers going to be able to continue to spend once the bill for all the credit comes due. You can create great products or great services - but you still need consumers. Right now China is willing to finance our consumption binge. What happens when they are no longer willing to do this? Economics teaches us that that there are two things we can do with income - save or consume. At the moment we are consuming. If we consume and do not invest, then in the long run we will be less economically productive. This is one challenge no leader, business or political, seems to be willing to tackle.
I know Jack, and I know GE. Obviously a great man of his time, but times change and a great man, a great company, changes with it.
The key to being a successful company is not striving to be No 1 or No 2 or increasing shareholder value -- they are consequences. I agree that the key is creating a product or service that the customer wants and with which they are satisfied. Better yet, exceeding that level of satisfaction is the goal.
To get to that goal of customer satisfaction, the employees have to buy-in to it. They are the ones who imagine the product. They are the ones who design, build, test, and market that product. To keep them producing, they must be treated with respect and admiration, much like their boss. They should be valued and rewarded. They should be treated like they matter.
Rank and yank is a siege mentality. After the siege is over, rank and yank can not continue without the company creating self-inflicting wounds. Hire the best. Treat them with respect. Reward them when the company does well.
To get to that goal of creating a product that the customer wants, a company must treat its employees with respect and integrity along the way, rewarding them in the same manner (not necessarily the same degree) as they do their most prized executives. If the boss gets a competitive salary, the chief bottle washer gets a competitive wage. If the boss gets a bonus, the chief bottle washer should get a bonus.
At the risk of adding to your rule book, here are the basic rules from which all others evolve (ps, Darwin was never discredited!):
1. Customer happiness is the goal. The product is the means. Shareholder value is the consequence.
2. Keep your employees happy. They will make your customers happy.
Previous comment -- forgot "State"!
As a new GE employee having worked for numerous large and small companies as a reference, I can honestly say that the culture is good (upbeat and positive), but the innovation and everything else is lacking.
The major issue is the behemoth that is so slow and full of itself, it can't get anything done. Nimble is the opposite of GE today. It is full of too many managers who don't know what is going on and do not know how to get things done, other than to call someone else to do it. Partly due to the wide movement qorund the company, depending on good management, rather than knowledge and experiance.
Numerous layers of bureaucracy, full of all sorts of C players (or worse) from numerous countries (to tear down American salaries)that can't even converse in English. The reason there are so many C players is that no one person can get the job done. They don't have the tools, knowledge or both.
Just think, how long it takes to call others to get your job done and wait for them to complete a complex chain of events. What takes hours or days at other companies, requires weeks or months at GE.
GE's innovation is shut down by its own EHS system. They are so safe, it is a wonder that they are still allowed to use computers and drive cars.
Finally, too many groups doing the same thing without any contact between them. Several wheels are re-invented and the customers are completely perplexed.
Now they claim that they are practicing LEAN. As mentioned before, they ship it offshore and increase their WIP by 10-20X, the exact opposite of a LEAN supply chain. Then they say that they don't pay until they take possession. Again, the opposite of LEAN as they have thousands of WIP product lines with possible scrap in the pipeline and increasing lead time by weeks and months. If your supply chain isn't lean, then everything else isnt lean either, never will be.
Eventually, GE will not manufacture anything as they continue to lose their key employees and continue to sell off businesses. Then when the financial industry crashes, they will cease to exist like so many others. The house of cards that Jack built, destined to fail.
Management itself is the problem. Compare the way "managed economies" operate to the way managed companies operate and see if you notice any significant differences. Now look at the well-being of managed countries compared to that of countries with relatively free economies. Imagine the improvement we'd see if we could replace "management" with something akin to "freedom." If you're interested in finding out more, see http://tinyurl.com/yanqmm.
i honestly think no one gets it. why the obsession (fortune is a big culprit here) with rules. you win by doing whatever it takes (legally and ethically) to win.
i think the value is in learning from what jack did versus whose rules are correct. he understood the game, figured out how to win and then did it.
you want to win - find out what winning means, what it takes to win, organize your resources and then go win. everyone knows this and nonsensical obsession about rules isnt going to do anything for you.
It took Michelangelo about 6 years to paint the Sistine Chapel Ceiling giving the world a work of art that has enthralled mankind for 500 years. If he had done it using Six Sigma techniques, he would have outsourced the work to 24 Indian house painters who would have painted it in 6 weeks with rollers and ended up with a beige warehouse.
Look at GE's record, starting April Fool's Day 1981 when Welch took over. The next five years -- PROFITS went UP, while SALES went DOWN. Reason: Welch got rid of 150,000 hard-working GE employees.
ANY IDIOT can make a company look good by laying people off. It takes a REAL LEADER to make one go in tough times. Welch's rules for shareholder focus were instituted for one reason: because Welch wanted to be CHIEF SHAREHOLDER. America needs to institute some new rules, to force primadonnas like Welch to keep from ruining American jobs, while they pave their driveways with gold.
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