Lessons on Winning and Profitability from Jack Welch
[Warm up ]
Jack Welch is one of the most prominent CEOs of the last century. He has earned name recognition from people around the world.
For the uninitiated, Jack Welch is the former CEO of General Electric. He assumed the role in 1981 and remained in the position until his retirement in 2001. Welch is candid and shoots straight from the hip. He pulls no punches and encourages entire companies to do the same.
And if there’s anything to know about Jack Welch, it’s this – he’s all about winning. If a company or division at GE was not first or second in its industry, it would be sold or closed. The ultra-competitive Welch wants to win. And he did a lot of that as CEO of General Electric:
Welch believes that winning and being profitable is a company’s number one social responsibility. He believes that winning companies are able to give the most back to society and have the happiest employees. So, given his obsession with winning, it should come as no surprise that one of Welch’s books is entitled Winning.
Welch has been a ruthless cost cutter. At the beginning of his CEO tenure, Welch laid off thousands of employees, which earned him the nickname Neutron Jack.
You can argue with his tactics, but you cannot argue with the success he brought GE. Welch earned many awards for his work as CEO, including Fortune declaring him “manager of the century.” The Financial Times calls General Electric the most admired company, and Fortune ranked GE the most admired company in 1996 and 1997.
Let’s dive into some business lessons from one of the world’s best CEOs.
[291 words]
[ Time 2 ]
Ideas:
“You want people that grab ideas, that share them, that grow with them, that’s what you want. You want culture that just thirsts for them and doesn’t care where they come from. The stripes on the shoulder don’t determine the quality of the idea – the idea does. And the people that grab them are the heroes. The people who take ideas from innovators…and take them to new levels are the people you want to have around you.”
He expands on this in another interview:
“Simply put, boundary less thinking meant we were open to the best ideas and practices from anywhere – another colleague, another department, another country or even another company. It changed our thinking and broadened our awareness. Boundaryless behavior increased the organization’s intellect and, thus, its effectiveness.”
On not being punished for taking risks:
To be an innovative company, you can’t punish every risk. Welch says:
“If you’re leading a group and you got somebody taking a swing, you’ve got to make examples out of them. Make them heroes for taking the swing.”
Welch brings up an example where GE sold an energy efficient light bulb in the early 80s for $10.99. Unsurprisingly, it wasn’t a big seller. Welch says the product was before it’s time. It took ten years for the costs to come down and the product to become a success. But GE rewarded the entire team (120-160 people) with new television sets, a trip to Disney World for a week, and public congratulations. The company wanted to show that it rewards risk taking and innovation.
“When should a boss take responsibility for failure of an employee? The answer is every day. Every single day. Unless the employee violates a policy, steals something, or does something else. [Otherwise] you’re in it with them. So every time you hear people out there trying things, you were there. You can’t walk away from it….to get a culture of risk taking, you need to reward risk taking. You get the behavior you reward…everything you measure and reward – you’ll get that behavior. If you ignore it, you won’t get it. If you want risk taking, reward it.”
[401 words]
[ Time 3 ]
The 20/70/10 Differentiation
Welch believes that in an organization, employees can be broken down into a performance differentiation. He believes 20% are all-stars and A players, 70% are average (and need to work to get into the top 20%), and 10% need to be gracefully released from the company. Let’s get into what he says:
“You embrace the top 20, deal with the middle 70, and you face into the bottom 10, and you do what’s right for them and for you.”
Welch believes that you need to treat the top 20% of people likes stars. “Make them feel loved, hug them, give them cash, give them rewards in the soul and wallet. Do everything for them. For the middle 70%, show them what they need to do to get in the top 20%. For the bottom 10%, tell them why they should move on. Do it over a year or so. Tell them what their shortfalls are, tell them they’re in the bottom 10%, don’t give them a raise, and ask them to leave. Tell them ‘Over the next several months, [we'll] work together to get you in the right place.’”
Welch says this method is much better than false kindness, where employees aren’t told they aren’t good, and then they take a termination or layoff as a surprise. Welch advises that you should not create false kindness, but rather create candor.
On methods for treating the 20%:
“Your job is take the A’s (20%) at any moment in time [and] reward them in the pocketbook with lots of money, with promotions, with opportunities, with a vision of where they can go. You never want your A’s to think ‘Oh geeze I’ve done all this, but I’m getting the same as this person over here – it’s terrible.’ You want them saying ‘I got recognized, the company is taking care of me, they’re pushing me up.’”
[350 words]
[ Time 4 ]
For the 70%:
“You want to send them to training, you want to give them stock options or ways to grow, you want to give them all that. But you [also] want to give them a path to becoming A’s.”
On treating the 10%:
“You want to tell them ‘This is not the place for you. This is the time for you to go over and work [for another company]. Take some time, take several months, we’re not firing you today, we’re not stamping you out. We’re telling you you’re not going to get a raise, you’re not going to get a promotion, your days here are numbered, move on.’ And do it before they’re 30 years old. That’s what we like to do….
“You want to keep building winning teams. And you don’t want to do it unfairly, you don’t want to do it cruelly, you don’t want to do it in one day. You want to coach them out. And then when you let them go, you don’t let them sit over here in limbo, you take them to lunch, you see how their job search is going. The exit is very important. You have to coach them out. And be sure they’re not getting bitter and angry and all the other stuff.”
Welch says as soon as you spot a 20 percenter, you let them know how good they are. Treat them like an A player. Don’t wait.
“In general you want people stretching always a little more than they are capable of. So they’re reaching for the moon all the time. And they’re never bored. You never want those A players bored.”
[319 words]
[ rest ]
How Welch describes Six Sigma:
“Six sigma is a process [you can] put in place to reduce variation in your company. The idea is customers get what they want, when they want it, and it’s right the first time. So, Six Sigma is a technique which you can train your people in to reduce variation. Variation is evil. And once you reduce variation, your costs are improved dramatically and your market share gains are enormous because people get what they want when they want it.”
Before Six Sigma was implemented in 1996, GEs estimated waste was around $8-$12 billion annually, and GE had an error rate 10,000 times the Six Sigma quality level of 3.4 defects per million operations. A few years after implementation, they saved a lot of money when compared to the cost:
We won’t dive into Six Sigma too much, so just keep in mind that it reduces variations and errors, and GE saved lots of money when they implemented it. If you want to learn more, there are many books on the topic.
Source: Kissmetrics Blog
http://blog.kissmetrics.com/winning-and-profitability/
Article 3
Did Jack Welch's Best Advice Go To His Lawn Boy?
[Time 5 ]
In 1969, Terry Holland was mowing several lawns on his street when he knocked on Jack Welch’s door, hoping to add another client to his list. At the tender age of 13, Terry was excited to get the job. But he didn’t expect what was coming.
A middle manager at the time, Jack Welch would later gain celebrity status as General Electric’s CEO for taking the organization from a market value of $14 billion to more than $410 billion. Years later he has become the most studied, most talked about, and most emulated senior executive of his generation.
What did the greatest manager of the 20th Century say to inspire greatness in a teenage lawn boy?
One condition
In an interview with Terry he took me through his first encounter, “First off, Jack asked me, ‘how much money do you want to mow my lawn?’ I told him, ‘I really don’t give a price, I let people pay me whatever they think is fair.’ So Jack started pointing around the neighborhood. He asked, ‘How much do you get for mowing that guy’s lawn?’ I told him three bucks. He pointed to another house. ‘How much do you get paid for his?’ ‘Three and a quarter.’ ‘I’ll tell you what,’ Jack said, ‘I’ll give you four dollars to mow my lawn on one condition… I want my lawn to look better than any of theirs.’”
Years later, Terry reflected on how that invitation to do great work made all the difference. “A light went on and I said, ‘Oh, here’s a guy that’s not just hiring me to mow his lawn. He wants his lawn to look better than all the other lawns on the street. And he’s looking to me to do it.’ As a kid mowing a lawn, you’re always trying to do a good job, just so you don’t get in trouble. But now here’s this guy who wants it to look really, really good. It’s a whole different game. It changes your focus to know excellence is rewarded.”
[390 words]
[Time 6 ]
Accepting the challenge
Terry did a good job on all his customers’ lawns. But Jack’s house was different. Jack’s higher expectation brought with it a greater opportunity. Terry was on the constant lookout for ways to make Jack love the way his lawn looked. He experimented with new ways of cutting, trimming, and sweeping.
“I guess maybe it’s a competitive thing that I have in me,” says Terry, “I enjoy doing stuff that there’s a reason to do. The time I spent cutting Jack’s lawn passed quicker for me than all the others. It gave me a chance to prove something to myself. There wasn’t the same drudgery that usually comes from mowing a lawn. It wasn’t mindless work. It was fun.”
After a few years, the Welch’s moved away. But when it came time for Terry to get a job referral, he called Jack. Jack recommended him for a position at GE immediately, no questions asked.
An invitation to make a difference
The way Jack Welch communicated vision to his lawn boy was simple and ingenious. It not only got Jack the best looking lawn in the neighborhood, it called a young teenage boy to greatness. It helped his lawn boy transcend good work, and discover the incredible experience of doing great work.
When was the last time you invited someone to do something great? Do we worry so much about people just getting the job done right that we’re afraid to invite them to take it to the next level? Is the reason your team isn’t exceeding expectations because you are getting exactly what you asked for?
Next time you ask someone to get a job done for you, pause, and do what Jack did. Call them to greatness and be prepared to see some of the results that Jack saw.
[328 words]
Source: Forbes
http://www.forbes.com/sites/davidsturt/2013/11/26/did-jack-welchs-best-advice-go-to-his-lawn-boy/
|