Jack Welch on Winning

The Corporate Titan

To baby boomers and Generation X, Jack Welch is a corporate titan whose name you remember. He led a renaissance at General Electric (GE), driving its market capitalization from $14 billion to over $400 billion in twenty years. He famously whittled down GE's portfolio to be number one or number two in any industry the company competed in. He smartly used the GE Financing arm as a quasi-bank, giving the conglomerate a sterling AAA credit rating for many years. 1

Welch was continually on the cover of Fortune, BusinessWeek, and Forbes magazines. His book Winning, published in 2005, distills thousands of questions he received into practical principles. Some of these are truisms, some come across as cold and calculated, and some you might disagree with. Still, there is a lot of good material here.

Mission, Values, and Candor

An effective mission statement basically answers one question: how do we intend to win in this business? Setting the mission is top management's responsibility. The mission must guide daily decisions and connect to the values that shape behavior across the organization.

Welch emphasized never letting profit center conflicts get in the way of doing what is right for the customer. Give customers a good, fair deal because great customer relationships take time. Always look for ways to make it easier to do business with you. Communicate daily with your customer, because if they are talking to you, they cannot be talking to your competitor.

Lack of candor basically blocks smart ideas, fast action, and good people from contributing all they have. Welch called it a killer. To get candor, you reward it, praise it, and talk about it. Most of all, you demonstrate it in an exuberant and even exaggerated way. Candor is the bedrock of trust and effective execution. 2

Differentiation: Fair and Effective

A company only has so much money and managerial time. Winning leaders invest where the payback is the highest and cut their losses everywhere else. Differentiation holds that a company has two parts: software and hardware. Software is your people. Hardware is the different businesses of your portfolio or your product lines.

Every company has strong businesses or product lines and weak ones and some in between. Differentiation requires managers to know which is which and invest accordingly. To do that, you need a clear-cut definition of what constitutes strong. When differentiation is working, people know where they stand.

Welch challenged the notion that grading should stop at age 21. Protecting underperformers always backfires. The system ranks employees into the top 20 percent, the vital middle 70 percent, and the bottom 10 percent. The top 20 percent receive rewards and opportunities. The middle 70 percent are the heart and soul of the company, and managers cannot allow them to toil in obscurity. The bottom 10 percent are moved out with honesty and respect.

Leadership Principles

Leaders relentlessly upgrade their teams, using every encounter as an opportunity to evaluate, coach, and build self-confidence. Take every opportunity to inject self-confidence in those who have earned it, using ample praise that is as specific as possible. Leaders get into everyone's skin, exuding positive energy and optimism.

Leaders establish trust with candor, transparency, and credit. They have the courage to make unpopular decisions and gut calls. You are not the leader to win a popularity contest. Just because you are the boss does not mean you are the source of all knowledge. Leaders celebrate, because work is too much a part of life not to recognize moments of achievement.

Effective people know when to stop assessing and make a tough call, even without total information. Little is worse than a manager who cannot cut bait. Over time, many develop an instinct for integrity, and they should not be afraid to use it. The best leaders in brutally competitive environments have a sixth sense for market changes and can imagine the unimaginable.

Hiring and People Management

A good leader has the courage to put together a team of people who sometimes make the leader look like the dumbest person in the room. Do not hire someone into the last job of their career unless it is to head a function or be the chief executive officer. Do not beat yourself up if you get hiring wrong some of the time, but remember the mistake is yours to fix.

Elevate Human Resources (HR) to a position of power and primacy in the organization. The best HR people are a hybrid: one-part pastor who hears all the sins and complaints without recrimination, and one-part parent who loves and nurtures but gives it fast and straight when you are off track. Very few companies have meaningful evaluation systems in place, yet people evaluation is too often just paper pushing.

Create effective mechanisms of money, recognition, and training to motivate and retain. Plaques and public fanfare have their place, but without money, rewards lose a lot of their impact. A winning company does not let good people walk out the door for lack of recognition. Companies cannot promise lifetime employment, but they can promise employability through skills that make people more attractive.

The middle 70 percent matters a lot. It is the heart and soul, the central core of any company. Make your company flatter, with managers having at least 10 direct reports and 30 to 50 percent more if they are experienced. Every employee, not just senior people, should know how the company is doing. The three ways managers get firing wrong are moving too fast, not using enough candor, and taking too long. Every person who leaves goes on to represent your company, for better or worse.

Change, Strategy, and Budgeting

Attach every change initiative to a clear purpose or goal. Change for change's sake is stupid. If a company has been through enough change programs, employees consider you like a gas pain that will go away if they wait long enough. Real change agents comprise less than 10 percent of all business people, and the rest are resistors.

When it comes to strategy, ponder less and do more. First, come up with a big insight for your business, a smart and realistic way to gain competitive advantage. Second, put the right people in the right jobs to drive it forward. Third, relentlessly seek out best practices to achieve it, whether inside or outside, adapt them, and continually improve them. Strategy means making clear-cut choices about how to compete, because you cannot be everything to everybody.

The budgeting process at most companies is the most ineffective practice in management. It sucks the energy, time, fun, and big dreams out of an organization. People in the field operate with one unstated goal: to minimize their risk and maximize their bonus. What good is beating targets you set in a windowless room?

The Complicated Legacy

Jack Welch earned the nickname Neutron Jack because of his willingness to make difficult decisions in his first years in office. He laid off 100,000 people and closed multiple factories. He canonized the HR practice of ranking and rating employees, where the bottom 10 percent were let go annually. 3

A newer book takes a negative view of Welch's legacy, arguing that the emphasis on financial engineering and shareholder value above all else hollowed out American manufacturing. The debate about his methods continues. The principles of candor, differentiation, and people development remain influential in boardrooms and MBA programs worldwide, even as the human costs of his approach receive renewed scrutiny.

• 1Jack Welch, Influential Manager Who Re-engineered GE, Al Jazeera
• 2Winning by Jack Welch, Summary
• 3Jack Welch's Legacy Looks Different, The Week