The GE approach to General Management
Last week saw the passing of business legend, Jack Welch, under whose tenure at the top, General Electric, or GE as it’s more often known, grew its market capitalisation from $12bn in 1981, to over $400bn when he finally stepped down twenty years later.
His leadership exemplified a ruthless focus on performance, where every business unit in the group was tasked with becoming number one or two in its industry, or it would be dismantled and sold off.
His reputation, particularly in his early years in charge, for closing plants, streamlining businesses and radically downsizing departments, earned him the nickname Neutron Jack. But he also laid down a template that Steve Jobs would follow over a decade later: one of the first things Jobs did upon re-joining Apple in 1997, was to slash 80% of the product inventory and cut 70% of the innovation projects from the product roadmap. Both interventions secured the futures of their companies.
Like Jobs, Welch had his own flaws, and this is not an article saying: “We all need to be more like Jack”, any more than one on Apple’s strategic focus would be an exhortation to be more like Steve. This is an article about learning from Welch’s strengths, which were overwhelmingly in the disciplines of management.
GE’s strategy was entirely agnostic about products and markets, it was simply to be number one or number two anywhere it played. But at the core of that strategy was a clear sense that GE would win through having the best General Management across all its divisions. This was the real source of advantage that Welch decided to build.
Management was the area in which he personally excelled, and his philosophy was so clear, so simple and eminently usable by anyone in a leadership role, that it requires no explanation. Rather, I’ll simply let him speak for himself, in his own words garnered from his various writings:
“Willingness to change is a strength. An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. I've learned that mistakes can often be as good a teacher as success.
“Culture drives great results. Public hangings are teaching moments. Every company has to do it. A teaching moment is worth a thousand CEO speeches. CEOs can talk and blab each day about culture, but the employees all know who the jerks are. They could name the jerks for you. If you don't have public hangings for bad culture in a company, it's crazy.
“Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others. My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.
“You measure your people and you take action on those that don't measure up. You got to be rigorous in your appraisal system. Be candid with everyone. The biggest cowards are managers who don't let people know where they stand.
“The team with the best players wins. If you're a leader and you're the smartest guy in the room, you've got real problems. From the first person I hired, I was never the smartest guy in the room.
“If you pick the right people and give them the opportunity to spread their wings, you almost don't have to manage them. Giving people self-confidence is by far the most important thing that I can do. Because then they will act.”
Reviewing those quotes, I’m mindful that in the last five years, I’ve written articles on each one of those themes, without realising that thirty years ago, Welch was writing about all of them. Like many lauded leaders, he was a polarising figure, but his record speaks for itself. Where he was good, he was very, very good, and his quotes on general management will continue to offer valuable lessons for years to come.