Jack Welch On Winning
I got a ticket to hear Jack Welch speak about his new book and his ideas at Central Hall. I had never seen him “live” before, so I was intrigued to see how this super-CEO would come across.
I have always thought of Jack Welch from his books and interviews as a ruthless advocate of corporate Darwinism. So he is, but I hadn’t realized that he does it with a lot of humour, Irish charm and warmth. He comes across as a very tough man but also as someone you instinctively like. I must say that I was captivated, and so was everyone else.
The key moment for me was when he took a question from a woman who said she worked in government and asked how his management principles could be applied in the public service, He frowned, put his finger to the bridge of his nose, and thought hard for 15 seconds. Then he said: ‘Most of my stuff does not work in public service.’ Then he thought some more and said: ‘I’m sorry, but frankly, I can’t help you. Next question.’
His management style, which is well-known, is to emulate a sports team – where everyone knows how good everyone else is, and the least-good get dumped. Hence the famous GE system of 10/70/20, whereby the bottom 20 per cent are disposed of every year. In the talk, he said that this system is variable – the disposables could be 20, 15 or 5 per cent – but they have to go. The mere fact that a group of less-able are disposed of tells the better people that they are in the right place to get rewarded.
He said that the worst possible kind of management is management that tries to be kind. This leads to retention of poor performers. The top players will see this as not the kind of place they want to be and quit, leading to a downward spiral. If, on the other hand, you make it clear that only the best are wanted in your company – and you prove it by dumping the worst – you will get an upward spiral. ‘You just have to be honest with your appraisals.’
He said that once you have this ‘honest’ system in place you never have to fire the weak performers – they leave of their own accord. It’s a version of the McKinsey ‘up-or-out’ principle.
About management consultants…. he hates them. He finds it offensive that an outsider could possibly know more about a company’s business than its own managers…. He tried several times to ban them at GE but ‘they just snuck in’.
He thinks that salespeople are the heroes of any firm. He said he spends 75 per cent of his time on HR and the rest on trying to sell things…. also, in answer to a question, that great salespeople have the power to get their company to make what the customers will need next, leading to repeat sales and a dependent relationship,. Obvious, really, but rarely done.
About HR – this was really interesting – he said that it is the one subject business schools ignore (except Taft), but it is actually what anyone going into a business career will spend most of their time on. As Jack Welch says it, management is all about evaluating people and deciding who is worth keeping and who is not. And about telling people to their face whether or not they measure up.
His template is four E’s and one P: energy (does the person radiate personal energy); energizing (does the person have the power to inspire others with energy); edge (are they sharp/canny in business negotiations); execution (can they make their ideas happen); and passion (do they really care about their customers and employees).
He also said:
‘Building great teams is all about telling everyone where they stand. You have to weed out the weakest.’
‘You have to make your company a learning organization, where everyone learns from everyone else, and wants to.’
‘The media are a wonderful source of learning. I can’t understand people in business who don’t read the business media every chance they get. They should all be insatiable readers of the press.’
About HR: ‘The person in charge of HR should be a very successful manager from the field who you put in charge of HR. Then people will realize that you really think HR is important.’
Big versus small:’ You have to combat bureaucracy by continually breaking things down into smaller units. We had a principle at GE: we hate bureaucracy and the people who practise it – it was written on a card everyone carried in their pocket. But the layers kept on forming themselves all through my 21 years in charge of GE, and my successor looked at the organization chart and said: ‘What are these people all doing?’ It’s a constant battle.
He was asked who he thought today’s best firms were. First was P&G – a company, under Laffley, which has thrown everything up into the air and has re-invented itself. Next, Home Depot. In the UK - perhaps - Virgin. Which business leaders did he admire? Hundreds – the quality of CEO’s today is many times higher than it was in the 80s (when he took control of GE). Ballmer – Laffley – Branson.
What mistakes had he made? Answer: in acquisitions, looking at the numbers – it was always 20 per cent! – and failing to think about the cultural factors enough. Cultural fit made acquisitions succeed or fail.
What gave him the most satisfaction? His answer rang true: he said he always got a Friday report on whose share options had vested, and he used to look at – for instance – an engineer on $80,000 a year who had just got $400,000, and think to himself how he and his family would be feeling that weekend. In other words, Welch got his kicks by making people rich – hundreds became millionaires during his tenure and thousands became wealthy.
Nice line about HR: ‘They always used to be the picnics and newsletters department’. He puts HR on a level with the CFO, if not higher.
Simple way to succeed: make the company exciting…. celebrate success…. theatre tickets, foreign trips – whatever is appropriate – give the winners rewards and get rid of the losers. ‘Of course, I realise that’s not so easy in Europe…. ‘.
‘In companies, people know damn well who the best people are and who aren’t. Any management initiative that you want to be a success must be led by the best people, or no-one will believe you really mean it. For instance, when I brought in Six-Sigma I made GE’s top people personally responsible for it. Everyone knew we really meant it.’
About work-life balance: ‘Everyone makes their own accommodation with this. But I will tell you, business is about results. If someone produces wonderful results, they can have whatever work-life balance they want. They are indispensable. But if someone goes to their boss on a Friday night and says: ‘ I would really like to help you prepare that sales pitch you are working on, but I have to get home’ – well, that person is going nowhere.’
He summed up his management ideas by saying: “Reward those who change things. Punish those who don’t. And shoot the resisters!’