Copyright Aspen Publishers, Inc. Sep/Oct 2005

 Jack Welch's "Road Map" to Winning

"Leaders celebrate," writes the retired chief of GE.

On the very striking dust jacket of Jack Welch's WINNING, filled with the retired General Electric executive's reflections on managing both corporate organizations and personal careers, Welch's smiling face and penetrating eyes stare directly at the reader. In the lower-right-hand corner can be found a quote from Warren Buffet, "No other management book will ever be needed."

All too often, these prepublication endorsements prove disappointing. Not this time. Buffet is right on target.

In early April 2005, the same week that WINNING first appeared in bookstores, Jack Welch came to Jacksonville, Florida , to speak at an annual fundraising program for the local children's hospital. My wife accompanied me with some reservation, as she feared that he, like many business speakers, would be dreadfully dull. Quite the contrary, as she sat enthralled by Welch's thought-provoking comments and good-natured responses to questions from the audience. He covered a wide spectrum of topics from open communications so that employees know exactly how their job performance is rated to the challenges involved with balancing work and family life obligations. On our way out of the auditorium, she encouraged me to purchase a copy of WINNING. It was the best $30 I've spent in some time. Within two weeks, I had read the book (and reread some chapters), recommended it to numerous friends and to colleagues at the bank where I do consulting work and suggested that my son-in-law read the chapter on finding the right job.

Welch is certainly no stranger, as his highly successful 20-year tenure as GE's CEO has been well chronicled. After his retirement, Welch wrote (with John A. Byrne) JACK: STRAIGHT FROM THE GUT. The idea for a follow-up book arose during the promotional tour for this autobiography, as Welch found himself inundated with questions on a myriad of topics concerning management, leadership and how to best achieve individual career goals. WINNING is an attempt to answer those questions. The title comes from Welch's assessment that most of those asking questions wanted to know simply, "What does it take to win?" To Welch, winning is not only great (his italics), but fun. "Winning lifts everyone it touches-it just makes the world a better place." Thus, his intent is to provide a "road map" for winning, with advice applicable not just for corporate executives and CEOs but for small business owners and middle managers, for workers considering new careers and for college graduates looking for that first job-in short, guidelines for making everyone a winner. Welch cautions that there are "no easy formulas," but he promises "guidelines to follow, rules to consider, assumptions to adopt, and mistakes to avoid."

Some of Welch's observations, peppered with reallife examples from his GE days, may not seem new to those who have read GET BETTER OR GET BEATEN!: 31 LEADERSHIP SECRETS FROM GE's JACK WELCH (reduced to 29 leadership secrets for the second edition) or one of Robert Slater's other Jack Welch/GE books. Nevertheless, WINNING sums up Welch's management philosophy extremely well. Each of the 20 chapters is organized around a different theme, most of which focus on management issues such as corporate mission and values, hiring, crisis management, budgeting, mergers and acquisitions and Six Sigma. There are four chapters about managing your own career and then a quirky catch-all chapter at the end for questions that did not fit anywhere else, such as, "How's your golf game?" and "Do you think you will go to heaven?" Each of the chapters can be read separately, even though there are some key themes-integrity, candor, differentiation, necessity of change-that run throughout the entire book. Not only are Welch's guidelines thought-provoking, but also the narrative is gracefully written in a straightforward, conversational tone. No doubt Welch's writing benefited from the collaboration of his new wife, Suzy, former editor of the HARVARD BUSINESS REVIEW.

It would be impossible to mention, let alone provide a thoughtful analysis, of all the important management issues that Welch raises. Let me confine my comments to four that might generate some strong reactions among executives who are seeking new approaches to better manage their companies, that is, differentiation, personnel management, work-life balance and leadership.

Differentiation

Nothing seems to be closer to Welch's heart than the concept of differentiation, which he describes as the process whereby "managers make a clear and meaningful distinction between top- and bottom-performing businesses and people, when they cultivate the strong and cull the weak." The latter sounds harsh, and Welch has been criticized over the years as his radical restructuring of GE involved the divestiture of numerous noncore businesses and the layoffs of thousands of excess or underperforming employees. Such nonsentimental, results-oriented actions earned Welch the nickname "Neutron Jack," after the bomb that leaves buildings standing but kills all the people. While obviously sensitive to these charges, Welch launches a spirited and, in my opinion, convincing case that differentiation is both fair and effective.

Welch points out that there are two separate parts to differentiation. One is the "hardware" of the business, defined as the corporation's portfolio of business units or, in the case of smaller companies, its product lines. At GE, Welch established an objective that all business lines would be first or second in their markets. If not, "the managers had to fix it, sell it, or as a last resort, close it." Other companies might have different frameworks for measuring the strengths of their different business units, but, whatever the criteria selected, the concept is quite straightforward: Those units that provide the greatest return on investment get the money and resources to grow and expand; those that are marginal or worse do not. That seems quite obvious, but sentimental attachments to old legacy businesses or personal loyalties to managers of underperforming units or lots of other excuses often intervene to negate some of the tough decisions that need to be made.

The "hardware" part of differentiation is not nearly as controversial as the "software," or people, part of the equation. Here, Welch divides employees into three categories: the top 20 percent, the middle 70 percent and the bottom 10 percent. The top 20, or the stars, get recognition, big bonuses and lots of other perks. The middle 70, an "enormously valuable" group that keeps the company functioning, receive "training, positive feedback, and thoughtful goal setting," together with the opportunity for some to move up to the higher level. For the bottom 10, "there is no sugar-coating this-they have to go." Welch makes it clear that, despite his image as a tough, uncaring boss, he takes no pleasure in firing people, an event he calls "awful, both for the person doing the casting out and, obviously, for the person being asked to leave." Nevertheless, firings are necessary, and he devotes an entire chapter to the subject. He makes a good case that trying to be nice and protecting underperformers is doing neither the company nor the employees any favors. He blames this problem, which he considers widespread in the corporate world, to a lack of candor in company performance appraisal programs, where it is easier to avoid bad news and confrontation by simply giving above-average reviews whether deserved or not. When times get tough and companies need to downsize, then these same employees-having received consistently satisfactory or better evaluations-are blindsided when laid off, often at the very time when their age or the job market makes it most difficult for them to find comparable jobs. Does that sound familiar? Is that fair?

For Welch's ideas about differentiation to work, individual performance must be measured through "a rigorous, nonbureaucratic evaluation system," and this system, in turn, must be part of a larger management commitment to the alignment of outstanding performance with appropriate rewards, both in terms of recognition and money. Success depends upon a personnel management system "loaded with integrity." In fact, Welch frequently uses the word integrity, by which he means "a culture of honesty, transparency, fairness, and strict adherence to rules and regulations." To those found lacking in integrity, "They are hanged-publicly-and the reasons are made painfully clear to everyone."

Personnel Management

Differentiation, candid performance appraisals, a culture of integrity-these and other key elements of Welch's management philosophy are intertwined. Furthermore, they all are tied to the necessity for effective human resources (HR) management. Looking back on his career, Welch concludes that "managing people was really what I did." He explains, "I didn't have the expertise to design jet engines, build CT scanners, or create a comedy program for NBC. Obviously, as CEO, I got involved in everything: strategy, new products, sales, M&A, and the like. But in that job, I always believed the people part was how I could help GE the most." If you can solve the people management issues-hire the right people, place them in the right jobs, evaluate their performance and provide the rewards to motivate and retain them-success will follow. In Welch's list of the six best practices to managing people, his first is: "Elevate HR to a position of power and primacy in the organization, and make sure HR people have the special qualities to help managers build leaders and careers." He goes on to recommend that "the head of HR should be the second most important person in any organization" and be at least on an equal level with the company's CFO.

Welch recognizes that not many companies have HR directors with that kind of organizational clout. He finds that curious, although he acknowledges that HR results are often difficult to quantify and that all too often HR gets relegated to administering the company benefits plan and other routine tasks that he terms "health and happiness activities." To Welch, however, businesses are not machines or buildings, but people. A strong HR executive is key to issues such as matching the right people with the right jobs, developing management succession planning, dealing with difficult relationships (whether with unions or disgruntled employees) and more. Welch uses a baseball analogy (as he does often-see box), asking, "If you managed a baseball team, would you listen more closely to the team accountant or the director of player personnel? The input of the team accountant matters-he sure knows how much they can pay a player. But his input certainly doesn't count more than input from the director of player personnel, who knows just how good each player is. Both belong, alongside the CEO, at the table where decisions are made." Now here is a recommendation-the HR director should have equal, if not greater, organizational authority and stature than the CFO-certain to generate controversy among company executive management teams. Perhaps a healthy discourse on this idea might be beneficial, especially if participants evaluate the idea from an organizational perspective, not from the standpoint of the individual incumbents in those positions. In any case, Welch's explanations for placing such a high value on HR make a lot of sense.

Work-Life Balance

One HR issue that is becoming increasingly important in corporate America is work-life balance, or making the trade-offs necessary to be productive at work and involved at home. This issue is addressed in the Your Career section of the book, but it is clear that this issue not only affects personal career aspirations but also people management at the company. Welch good-naturedly pokes fun at himself. "No one-myself included-would ever call me an authority on work-life balance." When he started at GE in the early 1960s, no such concerns existed. Managers were all men and they worked long hours. They put their careers first. Family life came second. Not until the 1980s, when women started to move into the managerial ranks, did anyone question these priorities. Welch makes no excuses. He chose to put work first, and one suspects that if he had to live his career over again he would make the same choice, despite his two divorces and his admission that he played virtually no role in raising his four children. But in today's work environment, no company can avoid addressing flextime, off-site work arrangements and related issues.

Unlike other chapters, where Welch has lots of ideas about how things should be run, this is one area where he seems out of his element. Nevertheless, he is not shy about stating his opinions. While recognizing the changed dynamics in how companies must operate, he doesn't pull his punches: "There's lip service about work-life balance, and then there's reality." He then recounts his five reality statements from a "boss's point of view." Among his observations: A manager's "top priority is competitiveness" and helping the company to win means that every employee is expected to give 150 percent to the job; formal work-life policies sound great in company brochures, but their principal use is for recruiting purposes; and work-life accommodations are negotiated individually and work like "an old-fashioned chit system," available to great performers who accumulate chits to be traded for flexible work arrangements. To return to Welch's ideas about differentiation, he does not think that people in a company's top 20 percent will ever complain about the issue, as they are as "smart, organized, and competent" at home as they are at work and thus have "figured out and implemented sustainable solutions." These statements-and more-are not politically correct, and it is unlikely that Welch, despite his outspoken nature, would have admitted as much if still GE's CEO. Nevertheless, his comments do shed light on a high-profile issue. Welch may not have the answers, but he clearly outlines the framework for the questions that need to be resolved.

Leadership

It would be difficult to discuss Welch's management philosophy without commenting upon leadership. Above all else, Jack Welch was, and is, a leader. He devotes an entire chapter to ideas about what makes a strong leader. He acknowledges that leaders as varied as Winston Churchill and Mohandas Gandhi would recommend different approaches to leadership, which only illustrates that "there are lots of ways to be a leader." From his experience, Welch lists eight "rules" of leadership, although he cautions that "life would be easier if leadership was just a list of simple rules, but paradoxes are inherent to the trade." With that caveat, Welch proceeds with his list, starting with Rule 1: "Leaders relentlessly upgrade their team, using every encounter as an opportunity to evaluate, coach, and build self-confidence." Again, it is all about managing people. A leader must invest time and energy to make certain that employees are in the right jobs, that they are being guided and critiqued to help them succeed, and that they are being encouraged and energized to help make the company a winning team. A leader must take advantage of every opportunity, whether during a plant visitation or simply talking with employees during their coffee break, to be a coach. "People development," Welch emphasizes, "should be a daily event, integrated into every aspect of your regular goings-on." Abandoning his penchant for baseball analogies, he compares this aspect of leadership to gardening, and "every day is about growing people. In fact, think of yourself as a gardener, with a watering can in one hand and a can of fertilizer in the other. Occasionally you have to pull some weeds, but most of the time, you just nurture and tend." By the time you get to Rule 8, "Leaders celebrate," the basic principles of strong leadership are in place.

WINNING has much to offer to almost anyone in the business world and, I would contend, to those outside of business as well, as Welch's ideas about management and leadership have a broader application to life in general. I certainly would recommend this book to college students interested in business careers, business entrepreneurs, middle managers determined to move up the organizational ladder and ... well, just about everyone. Nevertheless, my concluding comment is directed toward CEOs and executive managers. While recognizing not all of Welch's ideas about leadership and management are going to be right for every company, every company would benefit by having a thorough exploration of his management philosophy and a spirited debate about his ideas, but only if those discussions-to use one of Welch's favorite terms-are filled with "candor." My recommendation is to buy a copy of the book for every member of your management team, give them a week or two to read it, and then go at it. It can only help you to become better at winning.