Jack Welch’s take-no-prisoner, suffer-no fools approach to managing is the stuff of business legend, and if that approach seems uncannily like that of a coach in sports, say someone like the unrelenting and not always forgiving taskmaster, Vince Lombardi, well then, that’s was just Welch’s style. Deified, lionized and, in some quarters, vilified, Welch made General Electric one of the world’s biggest and most profitable corporations, and the model of managerial effectiveness and success. Now, Mr. Welch has recounted how he did it i Jack: Straight From the Gut (with John A. Byrne, Warner Books, September 2001). The book, and Jack Welch, are reviewed by someone whose own management expertise is well recognized, and who actually jousted with him, if only verbally, former Bombardier Inc. Executive Vice President Yvan Alliare.
In February 2000, Jack Welch was a guest speaker at Bombardier’s annual senior management conference. In person, he looked more frail and wan than I had expected; but as he began to talk and field questions from the 140 or so senior managers, he radiated energy, decisiveness and passion for the game of business. After his talk, he turned to me with the look of a boxer about to deliver a left jab and said, “So, what do you disagree on with me?”
That craving for competition, debate and new challenges comes through in Welch’s just-published book, Jack: Straight from the Gut (with John A. Byrne, Warner Books, September 2001). The best way to describe Welch is to say that he is a business jock. “Business is a game,” he writes on page 267, and in that game, profit is the score. He wants his team to be the best, No.1, the “Olympians of the business world.” And he is at once the star player, coach, trainer and cheerleader. He brings to the game of business the ruthlessness, fierce desire to win and intolerance for weak players that make up great sports teams. His book is full of sports metaphors, as befits a baseball nut, a golf fanatic and a former hockey player.
The first line of the first chapter sounds the theme: “It was the final hockey game of a lousy season.” The first lines of his concluding chapter harp back to the same theme: “Big decisions in the real game. Crises and pressure. Lots of swings. A few home runs. The thrill of winning. The pain of losing.”
For those who have followed and monitored GE over the years and who have read some or all of the numerous books about GE and Welch, the basic outline of the story is familiar. Welch does not deviate from that storyline; but he does add colour and a few zingers along the way.
- “There are more mediocre people making more money on Wall Street than any other place on earth.”
- “When all is said and done, teaching is what I do for a living.”
- “I had a strong prejudice against most of the headquarters staff. I felt they practised what could be called ‘superficial congeniality’—pleasant on the surface, with distrust and savagery roiling beneath it.”
THE INNER MAN
Welch also provides a glimpse of the persona behind the business leader. We learn that he is a hypochondriac, travelling with a pharmacy of pills, pestering the company physician with real or imagined ailments. He is superstitious—he has carried the same leather briefcase for the last 24 years, and has named it “Mr. Lucky.” We learn of his failed first marriage, although that episode comes through as a mild inconvenience, quickly superseded by what is described as a successful second marriage. His children make cameo appearances and, judging from their pictures and curriculum vitae, are healthy, successful young adults.
Perhaps he is more revealing of his inner self, of the sources of his extraordinary drive, when he describes his relationship with his mother. She was for her only child a disciplinarian and a cheerleader, a motivator and a guide; to this day, he quotes as mantras her words of counsel. Without indulging in psychobabble, one can still feel the simmering desire of a son who wants to make his mother proud. Introduced to Queen Elizabeth at a state dinner at the White House in 1990, he reflects: “I always regret my parents missed these amazing moments.”
In an oblique way, Welch is also revealing about himself when he admits that after having done well in sports early on, he turned out to be too small and too slow to really excel in hockey, baseball or football, the all-American team sports. He took up varsity golf in college (having been a caddy in his youth) as a consolation sport; it is decidedly not a team sport, but a jock sport.
I wonder how often this thwarted desire to excel in team sports in America has fuelled a burning desire to excel in some surrogate team sport, such as politics or business. Richard Nixon comes to mind here as a decidedly ungifted but insistent football player in high school.
What are Jack Welch’s motivations for writing this book:
1. Cashing in (for the benefits of his favourite charities, as we are told right at the outset) on his towering popularity (“The Tiger Woods of management,” says Warren Buffett in the book’s blurb);
2. Imparting some of his hard-earned wisdom to his fans (about which more later on);
3. Trying to set the record straight about several allegations made in Thomas F. O’Boyle’s curmudgeonly book At Any Cost: Jack Welch, General Electric and the Pursuit of Profit (Knopf, 1998; Vintage, 1999).
AT ANY COST?
Although O’Boyle is never mentioned in Welch’s book, he clearly rattled Welch. All the cases in point, all the “causes célèbres” in O’Boyle’s book get some coverage in Welch’s book, usually in a brief and dismissive way. In a few cases, there’s a clear admission of grievous mistakes on Welch’s part.
- The Russell affair (allegation of price-fixing for industrial diamonds between GE and DeBeer; just a fired executive being nasty, egged on by ambitious Justice Department lawyers);
- The Rotan affair (corruption in Israeli defence contract; yes, but only one GE employee involved—that can’t be totally prevented in a large corporation);
- The Monster Chart (allegation of a bogus analysis used to mercilessly pressure suppliers; just good analysis to drive action on procurement);
- The “managed earnings” issue; (“we managed businesses, not earnings”; GE fixes a business (and takes the charge) when it has cash (often from selling another business);
- The PCB pollution of the Hudson River (here Welch makes his case at length and very persuasively; in summary, the EPA is guilty of bad science, bad judgment and bad faith);
- The Kidder-Peabody scandals (insider fraud and a rogue trader; the first happened before GE bought Kidder, and the second, well, “we obviously didn’t know enough about the business”).
Welch wanted to testify in his defence, to give the lie to O’Boyle’s sombre assessment.
- “The fact that he [Welch] was lionized in his time will matter little to future generations and likely will be seen as indicative of how cutthroat and vicious an era it was, a time when there was virtually no vision in the mainstream of American business. Money is always what matters most to Welch, that and running the most profitable corporation on the planet. History, I believe, will judge him harshly for that.”
I don’t know about history’s judgment but I believe O’Boyle’s got it wrong. Welch’s motives are not money or bigger profits. These are the scores of the game, the measure of your ranking in the league, your claim to a shot at the SuperBowl, the World Series, the Stanley Cup. But the game itself is all about people, passion and plays. Welch believes there is no greater sense of pride and achievement than to be part of a winning team, no greater thrill in life than to rev up the competitive spirit, engage tough opponents and win.
Welch may be wrong in thinking that his recipe for happiness is universal; the relentless pressure to perform may not be everyone’s cup of tea, but not everyone is forced to work for GE or for its imitators. Welch’s book is an unrepentant argument for his brand of leadership. Indeed, in a chapter titled “What this CEO thing is all about,” Welch offers 31 caplets of wisdom which, although instructive, do not quite add up to a prescription for success as a CEO.
A close reading of his book, however, does reveal some patterns, a sketch of a leadership model in a large, modern corporation.
1. Although a product of GE, Welch managed to retain some freedom of mind, some ability to view the company critically “from a distance”; he was, early on in his career, a maverick with a cause and with some powerful mentors who liked his naughty-boy act. That combination of legitimacy as an insider and capacity for critical evaluation would make Welch the CEO a very effective change master.
2. Welch lived the examined life when it came to his business experience; he has thought through what worked and did not work at every stage of his career; his experience in plastics was highly formative. It shaped his lifelong belief that large companies must operate as a collection of small entrepreneurial businesses. “I discovered that the only business I would ever know in my blood was plastics.”
3. When appointed Group President in 1973, Welch learns the rudiments of leading businesses he does not know “in his blood.” “I could no longer have fingertip control of all the details. That made my obsession about people even more intense.” This is the genesis of what GE and Welch would come to call their “operating system,” a highly successful way of providing effective leadership to a large set of unrelated businesses.
That “operating system” (it’s called “strategic governance” at Bombardier) calls for getting, growing and grooming lots of capable business leaders who can deliver results, and make strategy happen. It calls for thorough strategic planning and budget processes, relies on high quality, timely and relevant information, and is wrapped in incentive schemes (e.g., stock options) which align management’s interests with those of shareholders. Welch was just superb at making GE the best on these four dimensions of strategic governance.
4. All large (and not so large) companies carry on with strategic plans, budget and operations reviews, and too often with no clear evidence of benefiting from such exertions. Here, Welch is instructive and deserves careful reading. It is the climate, the social dynamics of these meetings, which makes them invaluable. He does not want “dead books” which are passively reviewed and approved by HQ.
“All my career, I never wanted to see a planning book before the person presented it. To me, the value of these sessions wasn’t in the books. It was in the heads and hearts of the people who were coming into Fairfield. I wanted to drill down, to go beyond the binders and into the thinking that went into them. I needed to see the business leaders’ body language and the passion they poured into their arguments.”
These sessions are “built around informality, trust, emotion and humour.” “These meetings have got to be spontaneous. I want to see their stuff for the first time and react to it. The planning books get the conversation going.” But this type of climate can be achieved only with a leader who is self-confident and knowledgeable enough to engage in informative “conversation” with the heads of vastly different operating businesses.
5. Welch focuses his attention and energy on what he believes is really important for the company to do well. That of course means he spent an enormous amount of time on driving his “operating system,” in people reviews and in Crotonville, the GE’s training centre. He estimates that as CEO, he participated in the training of some 18,000 GE managers at Crotonville.
But he also got involved in areas that are often neglected by CEOs. For instance:
- “I never allowed one advertisement on the air that I didn’t like…Image mattered. I was convinced it was my job.”
- “For every analyst meeting, I’d sit for hours with my finance and investor relations teams, sketching out and tearing up chart after chart.”
He devotes a whole chapter to “deep dives,” that is getting involved in a challenge “where you think you can make a difference and then throwing the weight of your position behind it,” irrespective of hierarchy or reporting relationships.
In the same vein, he recommends “wallowing…getting people together, often spontaneously, to wrestle through a complex issue…. It was all about breaking down the concept of hierarchy.”
6. Welch’s actions make up a simple model of change leadership in a very large corporation:
- Choose very carefully and selectively the corporate initiatives you want to push through. At GE, there were but a handful during Welch’s tenure as CEO: boundaryless behaviour, globalization, Six Sigma, services, digitization (GE’s forte is clearly not in finding poetic, memorable labels for its initiatives).
- Pitch the change at a decibel level and with a frequency that will make it unavoidable. Don’t underestimate what that means: The white noise of organizational life is deafening. Welch believes that to get the whole corporation to buy into a new initiative, he had to be “over the top,” to endorse it and promote it with “a mania, a passion, that veered towards the lunatic fringe.”
- Connect the change directly to performance evaluation and financial rewards.
That is not a bad model of leadership, but it is one that requires immense energy and a lot of smarts.
To Welch’s sparring question at Bombardier’s conference, I replied that I thought GE’s Vitality Chart was a questionable practice, likely to trigger counterproductive behaviours. (Every group of managers must be rated on the chart so that 20 percent are “A,” 70 percent are “B” and 10 percent “C,” the latter to be dismissed in short order). No sports team would survive if that type of rating were applied year after year. Welch said that he agreed with me and that GE was moving away from that system. In his book, however, he defends his Vitality Chart with all his energy. I guess he did not really want a fight on that February day.