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LEADERSHIP SECRET 1: HARNESS THE POWER OF CHANGE
From the Files of Jack Welch
The mind-set of yesterday's manager was to accept compromise and keep things neat, which tended to breed complacency. Tomorrow's leaders, on the other hand, raise issues, debate them, resolve them. They aren't afraid to go against today's current because they know their constituency is tomorrow. They rally around a vision of what a business can become.
Is there a secret formula for succeeding in business?
There is certainly plenty of advice being dished out. But realistically, it's hard to know which advice to follow and which to avoid.
We recommend that managers study the master, to examine the actions of the man widely regarded as the supreme chief executive of the modern era.
Welch's business record is the envy of every business leader in America, and indeed around the world. He is the man Fortune magazine called in its May 1, 2000, edition: �Perhaps the most admired CEO of his generation.�
BRINGING IN BIG NUMBERS
When he became Chairman and CEO of General Electric in 1981, the company had sales of �only� $25 billion. In 1999, GE's sales reached nearly $112 billion.
Its profits in 1981 were only $1.5 billion; Welch grew the bottom line to nearly $11 billion in 1999.
To appreciate the significance of these financial gains, we should note that every accolade that can be
bestowed on a company has been given to Jack Welch's General Electric.
He is clearly doing not just something right�he is doing many things right.
And therefore we have only to gain from focusing on the business wisdom of GE's Jack Welch.
In the balance of this book, we spell out those ideas in great detail. And even though Welch has presided over a superbusiness (he hates the word �conglomerate,� so we won't use it here), leading 12 separate business entities, in charge of a total of 340,000 employees, his business ideas can easily be put to work in any size organization.
Of all of Jack Welch's ideas, none carries more weight than this simple decree: Change, before it's too late!
What does Jack Welch mean by this?
No one likes change. They all start off with, �I like the way things are.� That's why I�m here. If I didn't like the way it is, I'd be somewhere else.
It seems easy enough to do.
The boss makes a decision and employees automatically follow suit, altering their behavior. They discard an old way, adopt a new one.
Sounds easy, doesn't it?
It could in fact be the most difficult thing for anyone in business to do. And Jack Welch knows this all too well. Still, he has been pushing change as a business imperative from the time he took the CEO reins in the spring of 1981.
CHANGE WAS EVERYWHERE
Change was rampant in the 1980s: High-tech industries and global competitors were entering the fore; higher-quality products and new standards of productivity were surfacing. And all of these changes were occurring at rates that were far more rapid than ever before.
Welch understood what eluded other business leaders: that these changes were inevitable and powerful enough to rock the very foundations of their business. Other CEOs didn't seem to get it. After all, most business leaders hated change. They loved the status quo. It was safe. It was comfortable. It was where these leaders had come from after years of success. To them, change was the enemy.
But not to Jack Welch.
Explaining the situation in the spring of 1981, Welch pointed to two dominant trends affecting the business environment: the excessive inflation of the late 1970s, and the new Asian competitive threat.
It was a reminder that we'd better get a lot better, faster. So I guess my message in our company was, �The game is going to change, and change drastically.� And we had to get a plan, a program together, to deal with a decade that was totally different.
Unlike other business leaders, Welch loved change. He found it exciting, bold, even freeing.
There was a new and different business environment every day.
The only question facing the business leader was: What are you going to do in response to that changing environment?
In setting forth the qualities of a great business leader, Welch insists that he or she create a clearly focused vision. One vital part of that vision is to make sure that every employee values change.
MAKE EACH DAY YOUR FIRST DAY ON THE JOB
One favorite Welch exhortation is for GE executives to start their day as if it were their first day on the job.
In other words, always think fresh thoughts.
Make it a habit to think about your business.
Don't rest on your laurels. Don't assume that the business will run itself�or that those good numbers from the last quarter will automatically mean better ones the next quarter.
Make whatever changes are necessary to improve things. Reexamine your agenda over and over again.
Rewrite it, if you think it should be rewritten. Facing up to change will keep you from falling back on any old habits.
He could have left well enough alone. After all, GE was a model corporation.
But Welch knew better.
Critics inside and outside GE scoffed at Welch.
GE employees themselves greeted him with disdain�and outright fear.
Who was he to play with fire?
Yet Welch followed his gut instinct:
I could see a lot of [GE] businesses becoming .�.�. lethargic. American business was inwardly focused on the bureaucracy. [That bureaucracy] was right for its time, but the times were changing rapidly. Change was occurring at a much faster pace than business was reacting to it.
Welch responded to the changes occurring in the business environment of the late 1970s and early 1980s by coming up with a new strategy for GE's businesses.
From now on, those businesses would have to be number one or number two in their market. If General
Electric could not bring flagging businesses up to speed, it would close or sell them.
THE GENESIS OF �NUMBER ONE, NUMBER TWO�
It was a big, bold policy, and it carried many risks.
For Jack Welch was not just insisting that GE make adjustments in line with the new business environment. He was not just insisting that GE figure out how to survive the economic turmoil of the times.
He was demanding that any business that carried the GE banner had to be the best�or nearly the best�in its field.
It was the earliest articulation of another Jack Welch business strategy��Stretch.� (There will be more on �Stretch� in Chapter 21.)
However large the risks, Welch knew that if he succeeded in the �number one, number two� policy, he would be positioning GE for double-digit growth in the years ahead.
Welch's changes at the outset of his tenure as Chairman and CEO, while massive, were only a sign of things to come. Throughout his two decades in the job, he would continue to embrace change as a fruitful, necessary business strategy.
For instance, on December 12, 1985, GE and RCA agreed that GE would purchase the communications giant, which included the jewel in the crown, the NBC Television Network, for $6.28 billion.
It was the largest non-oil merger ever. General Electric was then ranked ninth on the list of America's largest industrial firms. RCA was second among the nation's service firms.
Together they formed a new corporate power with sales of $40 billion, placing it seventh on the Fortune 500.
The purchase represented a huge sea change for GE.
Throughout much of its history, General Electric had grown from within. Its business ethos had always been that purchasing an outside business, rather than nurturing its own businesses, was not wise.
He was not afraid to tinker with GE tradition.
He wanted to �grow� General Electric's highest-growth businesses, and he intended to do whatever it took to win.
EMPLOYEES HAVE GOOD IDEAS TOO
But by 1989, Welch began to appreciate that GE's employees possessed many good ideas about how to
improve the business.
It was time, Welch thought, to begin listening to what employees had to say. Allowing them to have input into the day-to-day operations of the company, he felt, could maximize productivity. It could also make these workers feel more satisfied in their jobs.
Using the brains of employees was a major change for Jack Welch and General Electric.
In effect, he was saying: If you�re confident that you have right on your side, don't be afraid; if you think there should be a change, shout it from the rooftops, and make sure your boss hears you.
Welch launched an initiative that he called Work-Out, which was an ambitious 10-year program to use the brains of his employees.
Work-Out was designed to get employees to share knowledge within the company.
GE was the first company to use the high-involvement ideas that went into Work-Out on such a large scale.
In Welch's words, Work-Out, was intended to help people stop:
.�.�. wresting with the boundaries, the absurdities, that grow in large organizations. We�re all familiar with those absurdities: too many approvals, duplication, pomposity, waste.
Welch knew that it worked because GE's numbers were constantly improving.
He knew that it worked because by the 1990s GE had emerged as the strongest company in America. Yet, even that record of achievement did not keep Welch from exploring the next wave of change.
In 1995 he took a big new step, launching a company-wide initiative to improve the quality of General Electric's products and processes.
He felt that he had to.
It had taken him some time, but he'd grown convinced that GE had a good way to go before it could boast that its quality was high.
Welch could have resisted changing. After all, as he likes to say, �GE today is a quality company. It has always been a quality company.� So why not stand pat? His answer was:
We want to be more than that. We want to change the competitive landscape by being not just better than our competitors, but by taking quality to a whole new level. We want to make our quality so special, so valuable to our customers, so important to their success, that our products become their only real value choice.
On April 26, 2000, Welch spoke to GE's Annual Meeting in Richmond, Virginia, devoting a segment to the business strategy of �Change, Before It's Too Late!� He wanted to make the point that it was more difficult to respond to change in the business environment than ever:
Another management concept that served us very well over two decades was the belief that an organization that was not only comfortable with change but relished it�saw it always as opportunity, not as a threat�had a distinct advantage in a world where the pace of change was always accelerating.
* In the late �70s and early �80s we experienced the Japanese inroads on many of our traditional businesses, realized that our future was no longer in many of them, and moved into businesses that were immune to this assault while we restructured the company. We did this, but we had almost a decade to get it done.
* When Europe experienced doldrums and dislocations in the early �90s, we moved quickly to partner with European firms whose future we believed in. The best opportunities this time were around for only two or three years.
* Then Asia in the late �90s�again economic dislocation and again sudden opportunities to partner with great companies with great futures from Japan to Thailand. The very best of these opportunities were gone in a year.
You see the pattern.
Today, in the midst of this Internet revolution, the opportunities presented by change open and close on a weekly, even daily, basis .�.�.
An openness to change.
That is the anchor of Jack Welch's key business strategy: Change, before it's too late!
Heed Jack Welch's advice. Study your business environment. Watch the way it is changing. Determine how you can alter what you are doing to become as competitive as possible.
Be open to change. Jack Welch is convinced that business leaders who treat change like the enemy are apt to fail at their jobs. Change, after all, is the norm, and successful business leaders must be able to read the ever-changing business environment.
Remember that resisting change is easy. The comfortable stance for most business leaders is to do the easy thing, to resist change, to assume that the status quo is fine. Welch differs. The status quo can always be improved.
Make sure that employees embrace change. Tell colleagues to treat change as an opportunity. Look at change as a challenge that can be met with hard work and cleverness.