Tuesday, January 01, 2008

Winning, by Jack Welch

I was aimlessly wandering around my local library recently and saw this book sticking out. As an employee of General Electric I thought I better give it a go. I’ve worked at GE for quite some time. Maybe this book would finally help me to understand my employer.

I’ve read one other book on GE, a critical investigation of GE’s corporate culture and business practices, as put in place by Jack Welch. (A review of it is linked on my articles page, but I can’t at the moment recall the title and author of the book. I bought a copy, lent it to a fellow employee, and was given $30 by this same employee and instructed to purchase another copy as they wanted to keep mine!)

Quite a bit of controversy surrounds Jack Welch’s tenure as CEO of GE (from 1981-2001, if memory serves me correctly.) He was nicknamed ‘neutron’ Jack, because after he was done with a business all the people had gone (sacked, or ‘let go’), and only the building remained.

In short, Welch’s business model was to cut loose any businesses that were not performing, and push the ones that were doing well to become super performers. When Welch got into the financial services caper, he was amazed at how easy it was to make money out of these businesses. (Hence today some 40% of GE’s businesses are in financial services.)

Being a bleeding heart lefty, I’m naturally at odds with Welch’s tooth-and-claw capitalism. Reading through Welch’s ‘Winning’, I kept thinking of Ayn Rand, and how she would approve of many of Jack’s Darwinian prescriptions. It’s perform or die in Jack Welch’s world. You’re also the type of person who will love the work you do, and love working long hours and ‘squeezing the lemon’, Welch’s term for running super efficient businesses.

I must admit, a lot of what he says is really simple common sense. His adherence to the importance of candour in business is totally spot on. In a work environment you need people to be able to voice their opinions honestly. There was one section in the book that really impressed me, where Welch said that people deserve to be heard out and to be respected. In this sort of environment you can tell your boss what you honestly think of how something is being done, and this won’t be taken personally.

Welch admits that speaking candidly can be difficult for people at times, both those giving and receiving candid opinions, but that it is essential.

So I agree with a lot of what Welch says on these subjects. He knows how a business should run as a machine. However, if you don’t fit into this machine, then you’re out the door. If you’re primary value is not in making a lot of money, consistently, and in impressive amounts, then you’re out the door.

This is where the controversy arises. Welch’s example is followed all across corporate America. Has this even more pronounced Darwinian approach been a bad thing? (Interestingly, in my experience, GE has a quite liberal, progressive social attitude. Some could even call it politically correct.)

What’s the take away from ‘Winning’? For uber-manager’s like Welch, the corporate world is a big chess board (hence his obsession with 'winning', one would presume.) This is the sort of capitalism where businesses are bought and sold, but not created. (Welch almost comes across as timid when discussing what he calls ‘organic growth’, or creating new businesses. Funny how he has to come up with this special expression to describe what most small business operators do.)

So people like Welch are not innovators. They don’t create new things. Frankly, they’re not interested in doing so, because that would involve too much risk. It would also demand creativity, vision and an ability to dream.

I wonder what the future holds for Jack Welch’s business model, with the advance of China, a communist country with a booming economy set to overtake the US economy in so many decades. Will people be quoting Jack Welch in 2050, and looking back to him for inspiration?

I wouldn’t have the foggiest. I merely ask the question because it seems interesting that he is such a feted business figure just when the heydays of American industry seem on the verge of being eclipsed. Welch made money by slashing and burning, but not by creating something entirely new, like Bill Gates or Henry Ford.

Welch is a successful game player, a super manager, but not an innovator or creator. He plays to win. But that's all.

PS: It should be noted that his third wife, Suzy, helped Welch with the text of this book.

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