Vol. 21, No. 1 (3 parts) Part 1, January 1999 © 1999 Soundview Executive Book Summaries* Order # 21-01 FILE: MANAGEMENT STRATEGIC ® Key Management Techniques of General Electric’s CEO JACK WELCH AND THE GE WAY By Robert Slater THE SUMMARY IN BRIEF Jack Welch had his eye on the horizon when he took over GE in 1981. What he saw there concerned him. The previous decade’s high inflation rate and encroaching competition from Japan were changing the rules of the game. Welch knew that while GE looked healthy enough to outsiders, it had to “get a lot better, faster.” That meant change — a lot of change. Welch slashed the size of the work force, delayered management, and reduced the number of business units. For this, he earned the name Neutron Jack. Welch also tore down internal boundaries, improving communication and speeding up operations. He implemented programs that cultivated ideas and rewarded quality. He expanded the corporation’s global reach. For this, Fortune magazine voted GE the most admired company in America in 1998 and credited Welch for having “rewritten the book on management while keeping GE huge, nimble, and immensely profitable.” Management guru Warren Bennis added that Welch raised GE from “big and good” to “big and great.” INSIDE . Welch molded GE into the powerhouse it is today, raising its revenues Understand Your Role to record levels by the late 1990s. And he did it his way. As Leader 2 By understanding his role as a leader. By unloading the bureaucracy that weighed it down. Decide What You Do Best By looking for new ideas inside and outside GE. And Do It Better 3 By driving quality throughout the organization. Get Rid of Boundaries 4 The style may be quintessential Welch, but your company can follow his example. You can — and should — speed up your business processes, Assemble Type “A” Workers 5 constantly focus on innovation, and make sure you put only your best Find and Grow Ideas players on the field. Above all, says Welch, you should never forget that In a Learning Culture 6 business isn’t rocket science; it’s simple. Make Quality a Priority 7 Want to know more? Read on. Focus on Services 8 Published by Soundview Executive Book Summaries, 23 Pond Lane, Middlebury, VT 05753 USA *All rights reserved. Reproduction in whole or part is prohibited. LEAD Understand Your Role as a Leader Promote Your Values “I don’t run GE,” says Jack same message.“I don’t say one thing Values are such an integral part Welch. “I lead GE.” to outsiders and another to insiders,” of GE’s culture that Jack Welch Leaders inspire employees by cre- he notes. had them inscribed on wallet-size ating a vision of how things can be The CEO expects GE employees cards and gave every worker one done better. They get people to per- at every level to be able to identify, of these “Values Guides.” form at levels they didn’t think as well as to commit to, the compa- The cards say that GE leaders, possible. ny’s values, for example. always with unyielding integrity, Then they get out of the way. have a passion for excel- Get Real lence and hate bureaucracy, Simplify Welch believes leaders must face are open to ideas from any- When it comes to visions, Welch reality about situations, products, where and committed to Work- keeps them simple. He advocates and people, then act quickly and de- Out (see page 5), having what he calls an overarching cisively on that reality. live quality and drive cost message: “something big but simple Facing reality means acting on the and speed for competitive and understandable. knowledge that the world is becom- advantage, “Every idea you present must be ing increasingly competitive. It have the self-confidence to something you could get across easi- means understanding that no job is involve everyone and behave in a ly at a cocktail party with strangers,” guaranteed for life. It means reject- boundaryless fashion, he says. “If only aficionados of your ing the bureaucratic approach to create a clear, simple, reali- industry can understand what you’re management. And it means acknowl- ty-based vision and communicate saying, you’ve blown it.” edging that business is simple. it to all constituencies, One of Welch’s visions, for exam- Facing reality means making some have enormous energy and ple, was to have every GE business hard decisions sometimes. But Welch the ability to energize others, be number one or two in its market. is convinced that most mistakes come stretch, set aggressive goals, Clear and simple. from not facing reality and then act- reward progress, yet understand ing on it. He says his biggest mistake accountability and commitment, Spread the Word was not acting fast enough to imple- see change as opportunity, Welch takes advantage of every ment some major changes at General not threat, opportunity to promote his vision. Electric, for instance. have global brains and build He drives home his message in his More specifically, he regrets not diverse and global teams. annual Letter to Share Owners, in buying a food company early in his his speeches to the GE board, and in tenure as CEO — an investment he When you make a mistake, admit talks with financial analysts. believes would have paid off. But he it, advises Welch. Better yet, learn He makes sure everyone gets the was too slow to make a decision. from it.✰ Jack Welch and the GE Way by Robert Slater Selected by Soundview as an Outstanding Book for Business People The author: Robert Slater has over twenty-five years’ experi- To subscribe: Send your name and address to the address listed ence with Time, Newsweek, and UPI. He has written several business below or call us. Prices also listed below. books, including two others about Jack Welch. To buy multiple copies of this summary: Soundview offers Copyright © 1999 by The McGraw-Hill Companies, Inc. Sum- substantial discounts for quantity purchases of its summaries. Please marized by permission of the publisher, McGraw-Hill, Inc., 11 West 19th call or write for details. Street, New York, NY 10011. 328 pages. $24.95. ISBN 0-07-058104-5. To pay for books or Soundview publications: If paying by To buy the book: Call Soundview, 1-800-521-1227 (outside the check, use U.S. funds drawn on a U.S. bank. We also accept USA and Canada, 1-802-388-8910) or fax 1-800-453-5062 (outside American Express, MasterCard, Visa, Diners Club, and Discover. the USA and Canada, 1-802-388-8939) and charge to your credit Published by Soundview Executive Book Summaries (ISSN card. E-mail: [email protected]. Internet: 0747-2196), 23 Pond Lane, Middlebury, VT 05753-1164 USA, a di- http://www.summary.com. Send mail orders to Soundview, 23 Pond vision of Concentrated Knowledge Corporation. Publisher, Cynthia Lane, Middlebury, VT 05753-1164 USA. Please include the book Langley Folino. Editor, Roger Griffith. Published monthly. Subscrip- price plus $4.00 shipping and handling for the first book and $1.50 tion, $89.50 per year in the United States and Canada; and, by airmail, for each additional book; in Canada, $5.00 for the first book and $95 in Mexico, $139 to all other countries. Periodicals postage paid at $3.00 for each additional book, and add GST/HST (12521 8826 RT); Middlebury, VT and additional offices. POSTMASTER: Send address in Mexico, $5.00 for each book; all other countries, $11.00 for each changes to Soundview, 23 Pond Lane, Middlebury, VT 05753-1164. book, shipped airmail. Copyright © 1999 by Soundview Executive Book Summaries. 2 RESTRUCTURE The company also bought assets Decide What You Do Best and Do It Better worth $16 billion. These new acqui- Jack Welch believes only the sharpen GE’s purpose and focus. He sitions did fit the three categories. strongest survive. Weak businesses chose to keep and nourish business- For example, the purchase of RCA, don’t have the resources, muscle, es that concentrated on at least one which owned NBC, and investment and power to compete globally. of the following three functions: bank Kidder Peabody enhanced Early in his tenure as CEO, he core functions such as light- GE’s services function. made it his mission to strengthen GE ing, major appliances, motors, trans- Broader Markets by weeding out its weak businesses. portation, turbines, and contractor By the late 1980s, Welch had Number One, Number Two equipment high-technology, including achieved strategic dominance at In the early 1980s, GE boasted industrial electronics, medical sys- home and turned his attention to the 350 GE businesses in forty-three tems, materials, aerospace, and air- global arena. strategic business units. Only three craft engines He told business unit managers to GE products — plastics, gas tur- services like GE Capital as redefine or broaden their target mar- bines, and aircraft engines — had a well as information, construction and kets. This set the bar a little higher, respectable share of the export mar- engineering, and nuclear services forcing unit leaders to reevaluate the ket. And just one of these, gas tur- One hundred seventeen business- business of their businesses. bines, was a market leader abroad. es and product sectors that did not The result: By fall 1997, many Welch believed GE could, and GE businesses attained first or sec- fit these categories — from toasters should, do better. ond status in their markets world- to coal mines — were either sold or He developed a “number one, wide.✰ number two” plan to boost GE’s shut down.