John Francis “Jack” Welch (born in 1935) became General Electric’s youngest ever CEO at the age of 45 in 1981. During his 20 years at the helm, he really took the company forward by introducing many management innovations. His management skills earned him legendary status. Indeed, in 1999 Fortune magazine named him “Manager of the Century,” and the Financial Times recently listed him as one of the three most widely admired company CEOs today.
Welch had little time for bureaucracy and outmoded forms of company leadership and management. His radical questioning and drastic realignment of existing structures and practices often won him no friends, but the results (almost) always proved he had been right.
Continuing a tradition established by his seven predecessors, Welch made solid management training a trademark of the company. As CEO, he personally invested a massive amount of time and energy on training up-and-coming managers, among other things by being a frequent speaker at the training center in Crotonville, New York, and attending numerous other events worldwide. To this day, the quality of GE’s managers and their training are largely characterized by Welch’s influence, which constitutes a benchmark of professionalism and effectiveness in the best tradition of good management.
One of Welch’s great strengths was to surround himself with really good people. Personnel decisions are crucial for guiding a company’s development because it is the human beings working for an organization who determine its overall performance. The quality of its employees determines the quality of the performance for customers, as well as determining how efficiently and effectively things are done within the organization. In addition, it is the people in the organization who live out its values, visibly reflecting the integrity and trust that characterize its corporate culture.
In a knowledge society, the most important resource—knowledge—is brought into an organization by its staff and is then deployed for the benefit of customers. Organizations that fail to implement the values set out in any mission statement will lose those employees who can freely choose where they work. The problem with this is that the people who have such a choice are always the good ones. And organizations cannot afford to lose them.
The extent of staff turnover is less important than the question of who leaves the organization. If large numbers of good people leave, this is an alarm signal that the organization’s top management needs to take very seriously. I expect good people in particular to start valuing a healthy corporate culture even more in the future, as the perceived importance of experiencing a culture of trust, of integrity, and openness, performance orientation, professionalism, effectiveness, and responsibility increases, along with a sense of community of purpose. After all, why should good people who can choose where they want to earn their money make do with an unsatisfactory corporate culture if they are unable to change it?
Jack Welch always set great store by a healthy corporate culture, and during his 20 years as CEO of General Electric, he made a tremendous effort to ensure that such a culture actually thrived. He knew that he could fulfill his ambitious plans for the company only if he had really good people to help him. The prerequisite for realizing such a corporate culture, which also boosts the organization’s capacity to perform, is a consistent policy of recruiting, developing, and promoting the best people.
Every people decision must follow a set procedure. Rather than focusing on “insights into human nature,” the emphasis should be on a sober, conscientious procedure that is allowed the necessary time and carried out with due care. Below we examine the basic premises underlying this approach.
Start out from the basic premise that people are not good in a general sense. The question must not be: “Is this a good staff member?” but rather, “What is this staff member good at?” Effective managers are characterized by an ability to productively harness people’s strengths. Accordingly, when hiring or promoting staff, they always aim to make use of individuals’ strengths while rendering their weaknesses irrelevant. Since people always have very few strengths, they must first be identified so that the individual in question can subsequently be deployed precisely where these strengths are needed. Find out the one area where each person performs remarkably well; do not look for people whose performance in many areas is only passable. Once you know for certain where their greatest strength lies, set them to work in that domain and insist that they do best what they are most capable of.
When filling a post, the question to ask is not what work it generally entails, but rather which specific key task or assignment is to be fulfilled there. Very different strengths may be required, depending on how that specific assignment is defined for the next 15 to 24 months or so. People and assignments must match—this is one of the key “secrets” to effective people decisions. (This is explored in greater detail in Chapter 37 on General George Patton.)
When you’re hiring staff, always—I repeat, always—give serious consideration to several candidates. If you cannot find at least between three and five candidates for a post that needs to be filled, make no decision. You would simply be confirming the appointment of someone you had not actually selected. Jack Welch personally experienced the toughness and pressure associated with such a selection process for senior positions. His predecessor, Reg Jones, who was chairman and CEO of GE for nine years, left the decision about who should succeed him open for a long time. Welch ultimately won the tough, but fair, battle against two other candidates who had also stayed the course. And when the time came for him to decide who should step into his shoes, he made sure there were also several top candidates in the running (that particular race was won by Jeff Immelt, who became the company’s chairman and CEO).
It should be obvious that making such decisions is often difficult; for Welch the choice of his successor was one of the most difficult decisions he ever had to make, not because of the person he had favored, for good reason, but among other things because he had to reject two esteemed top-quality candidates, people who had worked alongside him for a long time.
People decisions should either be thoroughly and painstakingly thought through or not made at all. Alfred Sloan, Jr., for many years the CEO of General Motors, was once asked by Peter F. Drucker how he could afford to spend four hours deciding how to fill a somewhat low-level management post. Sloan replied: “This corporation pays me a pretty good salary for making the important decisions and making them right . . .. If we didn’t spend four hours on placing a man and placing him right, we’d spend four hundred hours on cleaning up after our mistake—and that time I wouldn’t have.” Sloan then concluded by saying: “The decision about people is the only truly crucial one. You think and everybody thinks that a company can have ‘better’ people; that’s horse apples. All it can do is place people right—and then it’ll have performance.”1
For Jack Welch it was a sign of exceptional competence if managers surrounded themselves with people who were better and brighter than they were. Whenever GE found itself in a tight spot, he resorted to a special method: “Every time we had a crisis at GE, I would quickly assemble a group of the smartest, gutsiest people I could find at any level from within the company and sometimes from without, and lean on them heavily for their knowledge and advice. I would make sure everyone in the room came at the problem from a different angle, and then I would have us all wallow in the information as we worked to solve the crisis.”2
As a rule, those discussions proved extremely lively. The questions raised and differences of opinion expressed not only identified the really important issues, they also prompted reconsideration of the assumptions underlying them. As Jack Welch blithely put it, “A good leader has the courage to put together a team of people who sometimes make him look like the dumbest person in the room!”3 The key point here is that the aim was to determine what—not who—was right.
Effective managers surround themselves with strong people because opposition is essential for good decisions. There are countless examples of this in books and biographies by top managers. Bill Gates had Microsoft staff totally question his Internet strategy; Alfred Sloan, Jr. discontinued meetings at GM if there was no disagreement about key decisions; and at Nestlés Helmut Maucher always stressed the importance of involving his staff in decisions. This list could be extended almost indefinitely. Seeking differences of opinion with a view to making better decisions is an essential part of competent management. Managers who surround themselves with yes men are not competent. And remember, good people will leave organizations that favor toadying.
Whenever Jack Welch found good people, he gave them a lot of space to run the divisions for which they were responsible in the way they wanted. The condition always attached to this leeway was that the managers in question fulfill the “GE Culture,” a familiar concept within the company, and above all that they comply with the GE principle of constantly seeking change and improvement.
Integrity alone is not enough to achieve anything. Yet if it is lacking, nothing can compensate. For Jack Welch the question about someone’s integrity was always the first he asked himself when making people decisions.
Once you have found really good people, you may occasionally end up in a similar position to the one in which Sergey Rachmaninov found himself when he heard the young pianist Vladimir Horowitz play the Piano Concerto No. 3 that Rachmaninov had composed. At the time, a totally content and relieved Rachmaninov said: “Now I don’t have to play any more.”4
These days, Jack Welch and his wife Suzy are devoting their time to sharing profound insights into effective management. His books and talks on this subject are a success worldwide.
Are the seven basic premises listed above practiced in your organization? If not, what exactly can you do to change this?
What do you need to do to attract really good people to your organization and keep them there? What is the first measure you will implement to achieve this?
Campaign to ensure that your organization draws up management principles and behavioral standards that have to be followed by its staff. If such principles and standards exist, but are not being heeded, launch a discussion to find out what you and your colleagues can do together to ensure that a healthy corporate culture ensues.