Sunday, March 29, 2009

Jack Welch- The Legendary CEO!

Finished Reading the book. "Jack Welch and the GE "...

Jack Welch and the GE way is a book written on the management decisions made by Jack Welch as the CEO of the GE. Jack Welch is considered to be the most respected CEO and is often used as a yardstick to compare other CEO’s across the globe. When Jack took over as CEO in 1981, he saw a company in trouble, unlike most of his peers. His decisions, at first sounded crazy to many others, but time has proved them wrong. Let me share with you some points which attracted me greatly.

Jack always appreciated the difference between leading and managing. He wanted his ‘leaders’ to embrace change, not fear them. He urged them to face reality and act decisively. When people saw a company in its comfort zone, jack realized that the world is becoming more and more competitive and foreign powers like Japan is eating away America’s market share.

Jack wanted to build a market leading company. His principle was ‘be at no: 1 or no: 2... Or quit! ‘ . He shut down some traditional businesses of GE which create some rage among his own colleagues. (GE utensils, consumer electronics was sold off) But in fact what he did was following a simple principle of economics. What business a company should do is not based on the absolute advantage it has on it, but based on the comparative advantage it has! Manufacturing Jet Engines, Electric bulbs obviously had comparative advantage over utensils, etc. In making a market leading company, he was following the approach of fix-close or sell. Jack implemented the idea of restructuring the company, which included inevitable lay-offs. During Jacks tenure his company’s employee strength got reduced by 1/3rd.! People often described jack as ‘neutron bomb’ which kills people leaving the buildings intact!

Another major culture jack successfully cultivated in GE was ‘learning from others’. Jack considered borrowing ideas from others as a legitimate act of plagiarism. Jack Welch successfully got rid of the bureaucracy that was prevailing in GE and other American business. He was always unhappy to see 6-7 signatures on business documents. He wanted GE to be lean and agile like a small company, tearing down the boundary between management and workers.

Jack always insisted on creating a work atmosphere where workers feel free to speak out. He took the ‘boss’ element out of the company. He believed that the person who is out there in the grounds, doing the actually work might know more than the person sitting in AC room issuing orders. Jack created something called ‘work-out’ in GE, which are sessions in which the boss was to answer suggestion/question from his employee face to face. He was so particular in making these work-out sessions as informal as possible. These sessions have become an integral part of GE then.

Jack’s thought on stretch.

“Stretch is a concept that would have produced smirks, if not laughter, in the GE of 3 or 4 years ago; because it essentially means using dreams to set business targets – with no real idea of how to get there. If you do know how to get there- it’s not a stretch target. We certainly didn’t have a clue how we were going to get to 10 inventory turns when we set that target. But we’re getting there, and as soon as we become sure we can do it, its time for another stretch”

On another occasion, Welch said “We have found that by reaching for what appears to be impossible, we often actually do the impossible, and even when we don’t quite make it, we inevitably win up doing much better than we would have done. “

It was during the reign of Jack, that GE acquired NBC, the leading media firm. People always doubted this bold decision of Jack, commenting ‘what business does the bulb maker has in a media company!’ But time has proved that Jack was not irrational. Jack Welch had a special favor to GE Capital, the financial services arm of GE. The rule’ no1 or no2 or quit’ didn’t quite apply to GE capital. The decision proved quite right, until recently. (Hope all knows why!!(Hint: US financial crisis))

Making quick decisions was another big quality we can see in Jack. I don’t remember the exact scenario, but it something like… when other media companies were still thinking; jack had already made a deal with international Olympic committee for exclusive rights for the next 2 Olympics…..(not sure about this)


When Jack Welch embraces any idea, he does so with his own brand of fiery commitment, and his customary all-consuming passion. Injecting Quality into GE was no exception. Though he welcomed ideas of Motorola, he had his own way of implementing it. “Make quality the job of everyone” was his idea.

On Ethics and Integrity

“I can’t guarantee anyone in this room that you’re not a thief. That you haven’t stolen something; or robbed somebody this morning. All I know is that if I knew that, you wouldn’t be on the payroll.”

“My whole job is people, I can’t design an engine. I have to bet on people. I’m not like Andy Grove at Intel. He know how to make a chip”

“Numbers aren’t the vision; numbers are the product. We always say that if you had 3 measurements to live by, they’d be employee satisfaction, customer satisfaction and cash flow……If you’ve got high customer satisfaction; you’re going to get a share. If you’ve got employee satisfaction, you’ve got productivity. And if you’ve got cash, you know its all working.”

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