(FORTUNE Magazine) – MANAGERS confronting the need to revolutionize their organizations commonly fear chaos, or unforeseen outcomes at the least. Even in the best executives, such fear can breed timidity -- the bane of corporate transformations. Says General Electric CEO Jack Welch: ''When you're running an institution, you're always scared at first. You're afraid you'll break it.'' Take heart. A few pioneers have cut paths through the wilds of radical change. Their experience demonstrates that the process of reinventing an organization is not only possible but also understandable, even predictable. While preparing the FORTUNE magazine video seminar ''Mastering Revolutionary Change'' with professor Noel M. Tichy of the University of Michigan business school (see ''Revolutionize Your Company''), FORTUNE's Stratford Sherman interviewed four CEOs who rank foremost among America's corporate revolutionaries: Welch, Lawrence Bossidy of AlliedSignal, William Weiss of Ameritech, and Tenneco's Michael Walsh. In extracts from those conversations, the four leaders share their insights about corporate change. Their companies fall into two broad groups. Tenneco and AlliedSignal had severe operating problems that created an atmosphere of urgency in which many employees welcomed change. At GE and Ameritech, by contrast, nothing seemed broken, and so the CEOs faced more opposition. At any business, the revolutionary process starts with an analysis of the business environment and the recognition that radical change is the organization's best response to the challenges it faces. That first stage is turbulent, marked by conflict, denial, and resistance. Next, leaders and employees begin to create a shared vision of what their company should become and turn their attention outward, to customers and competitors. In the final phase, the company creates systems for compensation and appraisal that enforce the new values and help reshape corporate culture. Ideally, the process never ends.

John F. Welch General Electric -- Welch, 58, a cheerfully combative Irish American, is widely acknowledged as the leading master of corporate change in our time. Since he became CEO in 1981, GE has shed over 200,000 employees while its net income nearly tripled and its market value increased by $67.6 billion. After waves of layoffs that pitted many GEers against Welch during the early years, the company now espouses a management style that depends on shared values and voluntary commitment. You've got to be on the cutting edge of change. You can't simply maintain the status quo, because somebody's always coming from another country with another product, or consumer tastes change, or the cost structure does, or there's a technology breakthrough. If you're not fast and adaptable, you're vulnerable. This is true for every segment of every business in every country in the world. People always ask, ''Is the change over? Can we stop now?'' You've got to tell them, ''No, it's just begun.'' They must come to understand that it is never ending. Leaders must create an atmosphere where people understand that change is a continuing process, not an event. The changes are always bigger than you initially sense. In the beginning of something like the defense industry downsizing, people are in denial -- they can't get themselves to believe how big the change will be. How do you bring people into the change process? Start with reality. Get all the facts out. Give people the rationale for change, laying it out in the clearest, most dramatic terms. When everybody gets the same facts, they'll generally come to the same conclusion. Only after everyone agrees on the reality and resistance is lowered can you begin to get buy-in to the needed change. We have a successful appliance business, but there's an appliance complex in Louisville that's not profitable. We've got to deal with that. So our leaders there say to everyone, ''We want you to share this problem with us.'' We lay out all the data. The head of the union and his stewards look at it. They then say, ''We can work on this. We can get you eight hours' work for eight hours' pay. We can get janitors to work twice as fast -- and we can get our people ! not to make so much work for them.'' We were going to leave Louisville, taking out 1,500 jobs. Now we're betting we can make it work, because everybody has the same objective. Another thing you can do is define values. When you make a value like teamwork important, you shape behavior. If you can't operate as a team player, no matter how valuable you've been, you really don't belong at GE. To embed our values, we give our people 360-degree evaluations, with input from superiors, peers, and subordinates. These are the roughest evaluations you can get, because people hear things about themselves they've never heard before. But they get the input they need, and then the chance to improve. If they don't improve, they have to go. What we value most is boundarylessness. It's the ability to work up and down the hierarchy, across functions and geographies, and with suppliers and customers. We have gotten rid of the Not Invented Here syndrome. We'll go anywhere for an idea. When there are no limits to whom you'll see, where you'll go, what you'll touch, the results are remarkable. Everywhere we go, someone is doing something better. Finding that better idea is rewarded at GE. My job is to listen to, search for, think of, and spread ideas, to expose people to good ideas and role models. I'm almost a maitre d', getting the crowd to come sit at this table: ''Enjoy the food here. Try it. See if it tastes good.'' And they do. When self-confident people see a good idea, they love it. Managing success is a tough job. There's a very fine line between self- confidence and arrogance. Success often breeds both, along with reluctance to change. The bureaucracy builds up. The people start to believe they're invulnerable. Before they know it, the world changes and they've got to react. When it's been so easy for so long, some people can never get around to facing reality. That's why you see so many businesses making incremental changes when they get in trouble: They can't believe that the situation is probably ten times worse than they've admitted to themselves. Managing in a difficult environment trains you a hell of a lot better than riding the wave of success. When the ship is going down, everyone knows to get out the lifeboats. My biggest mistake was agonizing too long over difficult decisions. I should have done it faster. But we're all human. We don't like to face up to some of these unpleasant things; removing somebody is the most unpleasant thing you * have to do in life. And I didn't want to break this company. In hindsight, I was generally erring on the side of being afraid of breaking it. GE would be better off if I had acted faster.

Lawrence Bossidy AlliedSignal -- Lawrence Bossidy, former vice chairman of GE under Welch, left in 1991 to run AlliedSignal, the $12-billion-a-year manufacturer of aerospace equipment, auto parts, and other products. A big man, blunt, good humored, and piercingly intelligent, Bossidy, 58, has a temperament that balances egalitarian instincts with the urge to push through obstacles. AlliedSignal was bleeding when he arrived. It has since boosted earnings per share by 74%, while its stock price, recently $73 a share, surged ahead 145%. This company was made of the old Allied Chemical Co., plus Bendix and the Signal Cos. It had poor margins, too much debt, and negative cash flow. With our balance sheet, we couldn't afford that, or we'd meet the Grim Reaper. The company also had a curious internal focus -- and no clarity about what it wanted to be. We set about putting in a mechanism to focus on what AlliedSignal should be. We tried to analyze the businesses and the people leading them. My philosophy is that if you get the right people leading a business, that business will improve. We have 128 key jobs in the company; we've changed the people in 69 of those jobs, some of them coming from outside AlliedSignal. We went into 1992 with three objectives: to make our numbers; to make Total Quality a reality, not just a slogan; and to make AlliedSignal a unified company. The transformation here has been easier than at GE because the people of AlliedSignal obviously were on a burning platform, and they knew from newspaper reports about the struggles of IBM, GM, and Sears. They knew something had to change. They knew AlliedSignal would have to be successful to provide them with job security and opportunities. To inaugurate large-scale change, you may have to create the burning platform. You have to give people a reason to do something differently. Examples from the real world can get them motivated. Chrysler is now bringing products to market in three to 3 1/2 years -- a major competitive advantage. So even if your company's financials are terrific, you might want to focus on the Chrysler case to build support for improving your own performance before you're attacked. Scaring people isn't the answer. You try to appeal to them. The more they understand why you want change, the easier it is to commit to it. And they must believe they can win. You have to define a goal line, so if they're successful, they have a chance to stop and say, ''Hey, this is a victory.'' Celebration is crucial. There is a nearly unanimous opinion forming that in the 1990s we'll be running businesses primarily by customer-oriented processes. We're breaking down the walls that separate finance and manufacturing and engineering and marketing, and putting all these functional disciplines into process organizations. We're all looking at how to overhaul those processes. We're starting almost from scratch in reshaping the way the whole enterprise runs. We're going to have to change all the measurement systems too. But you can see how it can be done. The competitive difference is not in deciding what to do, but in how to do it. Execution becomes paramount. If you don't have the right people, it can't happen. At the same time you have to have the right motivations and values. There will continue to be an emphasis on teamwork as opposed to individual contributions. Hierarchy and authoritarian structures don't involve as many people, so employees don't buy in. And therefore they tend to be less successful. It's not a platitude to say that you have to utilize people's brains and imagination and dedication. They know their jobs better than you do. The fellow running the lathe in the factory knows more about that part of the process than the bureaucrat in the office. When workers feel personally imperiled, you have to talk about it openly. You say, ''The size of our work force depends on success with our customers, and therefore we can't make any job-security promises. But change is something this company needs in order to survive.'' Candor is a way to treat people with dignity. You go out there and answer questions as directly as you can. Sometimes it's difficult, but it earns you credibility. As we add more and more initiatives, we have good, dedicated people complaining that they're working too hard, that they need a social life and more time with their families. My response is that it's an ideal time to stop and look at all the needless work we do. We can't have fewer initiatives, but we sure can be open-minded about eliminating what doesn't add value. Almost any process, if you look at it, is susceptible to improvement. And if the process has been around for long, the improvement is likely to be huge. It's just stunning what happens when you look at work in a disciplined way. If a team of people maps how you do your work, you may feel uncomfortable, but they'll show you how to do it a lot better and faster. You can apply these ideas on a broader scale than anyone ever thought. The CEO has to introduce the change process and be eternally vigilant in support of it, but ultimately change needs lots of practitioners. You're looking for recruits in every department or division. The broader the base, the faster you can change. And when people begin to observe the results, the process accelerates yet again. There's a kernel of hope here for all companies. I'm convinced the productivity of many American companies is now increasing faster than in the last 20 years, and that augurs well for the future of our nation.

William Weiss Ameritech -- Ameritech, an $11.2-billion-a-year Bell operating company, serves 12 million customers, mainly in five Midwestern states. Chief Executive Weiss, 64, is tall and courtly, given to subdued suits and quiet self-expression. In action, though, he is a firebrand who confronted a complacent monopoly supplier of phone services with a future defined by fierce competition. Like Welch, he faced the difficult task of forcing change on a healthy business. In 1992, a year of record earnings, Weiss announced a 7% cut in the company's management ranks. If I were to look in the mirror five years from now and feel that I hadn't given my best shot to get this business positioned for the future, I'd have a hell of a time with myself. Even before divestiture, it was pretty clear to me that we had to change. If our culture kept plugging along, competitors would just devour our markets. To give you a sense of what we were like: We wouldn't permit customers to put a plastic cover on a telephone directory once they had it in their own homes. Why? Because we tried to recover those directories, and it was inefficient for us to take those plastic covers off. We were the ones who made the rules, and we had rules about everything. Our culture had no instinct for competition. People believed that if you got a job here, it was a lifetime opportunity. We had an entitlement philosophy, believing that we were a monopoly because it was right to be a monopoly. Many people thought competitive entry was a bad thing. Their inclination was to hang on to the things that had kept us so secure in the past. / In the old culture, the management committee's meetings were the most civil, uninteresting, unconstructive kinds of meetings you could have. You did not get varying points of view. If you didn't like what the boss wanted to do, you sat on your hands. You didn't do things with your heart, so nothing ever got done very well. Our markets were moving too fast for incremental change to work. We had to get our people onboard. But we could not decide what our vision was. The reason we couldn't decide is that we couldn't agree, and the reason we couldn't agree is that we didn't want to. Each independent local phone company within Ameritech wanted its own vision, separate from the rest. Well, we're on our fourth or fifth generation of presidents of our Bell operating companies. The people I picked had seemed to be aggressive enough to drive this forward. But when they got into the more senior positions, all of a sudden they became traditionalists. They wouldn't make the hard decisions. They became risk averse, reluctant to get into conflict. So we had to turn over the leadership group several times before we found people capable of making a bold transformational change. Finally I decided to drop a bomb. I had to intervene on a massive basis. We had to get new, aggressive, gung-ho leaders who were willing to take fairly major risks to reshape this company. I picked four people -- three of them survivors from the Bell operating companies -- who seemed bright, knowledgeable, energetic, and courageous enough to get this thing going, and named them to head the change effort. They weren't the most senior people by a long shot. That was the first indication to our people that something was different. In the culture we are building today, people are willing to take each other on. If they disagree, they go at it. They're still a little reluctant to deal with me on those terms, but they're pushing me more than they ever did before. And I'm learning not to stake out a position so quickly that it preempts them. Now our people are asking, ''How can I respond to the customer?'' If you have a company that can do that, it's a good one, no matter how many levels you've got. Our organization used to be based on geography. Now we've reorganized into business units that focus on customer segments and customer needs. For some of our people, the new organization could mean a lesser job -- less power, less prestige, less status -- not because they're any less effective, but because + their jobs have changed. Few people will accept that voluntarily. The best way I know to get people to accept the need for change is to not give them a choice. The organization has to know that there's a leader at the top who has made up his mind, that he is surrounded by leaders who have made up their minds, and that they're going to drive forward no matter what. You can't keep people from feeling scared. I doubt the downsizing is over. But my view is that every aspect of life has its uncertainties. Everyone knows this business is going through a transformation. There's no way you can give people assurance other than what they can earn in the marketplace. And they're beginning to accept that uncertainty as the character of the future. Do they like it as well as the security we had in the past? I don't think so. Are they comfortable with it? Not yet. Will they ever be? I doubt it. But I think that will be the character of our business, as well as of many other businesses in this country. An old friend once said to me, when I was feeling down and he was trying to motivate me, ''Bill, this is like a race where you run the first four laps as fast as you can -- and then you gradually increase the speed.''

Michael Walsh Tenneco -- Tenneco's Mike Walsh, 51, was an outsider brought in to revive an ailing conglomerate in gas pipelines, tractors, and other businesses. Walsh's regime has been marked by rapid action and aggressive performance demands. Despite a diagnosis of brain cancer -- now in remission -- Walsh hasn't let up. Since 1991 the company's value has nearly doubled. I didn't do a very good job of due diligence when I decided to leave the Union Pacific railroad for Tenneco. My deal with the Tenneco board was that for my first six months I would just go around the company and meet people -- kind of marinate and start figuring things out. But when I got here in September 1991, we were on the edge of real crisis. Our Case agricultural- equipment subsidiary was about to report losses $300 million or $400 million larger than the board realized or Wall Street expected. From what I could see, management didn't grasp how desperate the situation was. People in the corporate office didn't talk openly with each other or with the divisions. There was a lot of politics. People reported not the facts, but what they thought their superiors wanted to hear. It was difficult to get people to talk about what had to be done. So we brought the key players into a room, closed the door, and said, ''Look, sports fans, we're facing a crisis. There's no way we're going to make that announcement without also announcing a serious action plan. We have 72 hours.'' When you come into a troubled company from the outside, it's a little like being a defenseman in a tough hockey game during a line shift. You're on the ice, the play doesn't slow, and before you know it, somebody has checked you into the boards. In our meeting we committed to announce the bad news the next day -- coupled with a $2 billion restructuring program that included asset sales, a dividend cut, an equity infusion, and a return to respectable profitability with a year. We had to downsize the corporate staff by one- third. Right in the middle of all this, the vice chairman -- my principal ally -- suddenly dropped dead of a heart attack. I was scared. For the first time in my life, I felt that everything I'd built was on the line -- and that the balance might tip against me and Tenneco. If it did, I knew my own career would be shot -- not to mention the impact on thousands of Tenneco employees.

The main requirements of leadership are guts and judgment. To win trust, you have to make yourself vulnerable. You've got to be out there dealing with real problems, on the front line where people can watch you and personally size you up. You've got to reconceptualize not just the business, but the mission of the enterprise. You have to reach out and energize the enormous latent talents of the organization. These jobs are backbreakers; they take enormous physical energy. A lot of people who call themselves leaders just slow things down. They're insecure, or don't believe in delegation, or aren't willing to deal with the arteriosclerosis that's weakening the organization. By the time they get to be CEOs, many leaders lose their appetite for dealing with all the garbage. You've got to be very good at picking people you can trust -- and getting them to share the load. I spend half my time on people and processes. Unless you get the people and the relationships between them straight, you aren't going anywhere. The engine of Tenneco's transformation consists of our six operating division presidents and a small but superior corporate staff. In the beginning, nobody believes you can do what you say you're going to do. They've heard it all before. You've got to find opportunities to make your points unambiguously and get people excited about your core values. The leaders have to celebrate progress so people realize that the things that they thought were impossible are not only possible but happening -- and being rewarded.

Every person in a key position has to see himself or herself as a mini-CEO. They have to conceptualize what has to be done, in the same way the CEO has. Then it cascades. Large organizations try to wear you down, or wait you out, or both. You have to give them a chance -- but then you must get tough. You tell everyone with significant responsibility to get with it or get out. The best workers are volunteers. You can't order people to perform at peak levels. They have to be motivated. A leader can create an encouraging environment, but there has to be something inside the people as well. You've got to pick those with a burning desire for change. They're often buried down in the organization. In January of this year I was diagnosed as having a malignant ''mid-grade but treatable'' brain tumor. Now I don't mean to minimize it, but I'm totally symptomless mentally. I have gone through accelerated radiation and chemotherapy, and I'm working in a relatively unimpaired way. That's what I've chosen to do. It wouldn't have been possible without the people and processes we had already put in place. Recently my doctors assured me the tumor has stopped growing and has begun to break up. Tenneco is making excellent progress. We've cut our debt-to-capital ratio by more than 20 points while producing a $1.1 billion swing in operating earnings. But in terms of channeling the energies of all our people and unleashing our potential productivity, we're halfway home at best. And that's not bad. I know a lot of companies in the United States that may think they've come more than halfway, but I don't know very many that actually have come even that far. In my opinion, there are two kinds of businesses in the United States: those that are heading for the cliff and know it, and those that are heading the same way but don't know it. Our advantage is, we know it.