Jack Welch, regarded by many to be “the world’s most revered captain of industry” and perhaps even more reverentially as “Manager of the Century”, is celebrated for many well-known reasons. I (Tsun-yan) want to highlight 2 lesser known aspects of his leadership that many could learn from, namely, how he changed his leadership focus and approach during his tenure, and how he went from an underdog candidate to the most successful GE CEO in history. This post focuses on his different leadership approaches for different eras. Next week we will talk about his journey to CEO-ship.
Before talking about changes, let’s be sure to start with the constants. Up close, Jack had always been over-the-top, no-nonsense tough love kind of leader. He focused relentless on productivity, results and talent. That never changed. However, his ability to evolve his leadership to capture changing market opportunities and develop different muscles of the organization was central to the 20x increase in GE’s market cap over the course of his CEO-ship: from $12 billion in 1981 to $410 million in 2001. 19 years forward, this is still a towering achievement. Of course, market cap wasn’t the only thing he “grew”. GE Alumni who remember fondly the GE culture and its profound impact on their own development as leaders abound across the world.
Some defining and vastly different eras of Jack Welch’s CEO ship are:
Early 1980s Neutron Jack: He used direct levers which are blunt. In a five year span, he divested over ~200 companies and cut down staff from ~400,000 to ~300,000 while closing down factories and reducing bureaucracy. He got his nick-name “Neutron Jack” form this era. The company towns he breezed through like Schenectady were hit by factory closures, office employees let go completely, nothing left standing, if they don’t fit the test of being #1 or 2 in the market. Forced ranking and exiting the bottom 10% became standard. While painful, this rapid “slimming down” laid the foundation for deeper cultural change, and greater competitiveness in the market.
Late 1980 Thematic leadership – Speed, Simplicity, self-confidence: Jack’s leadership approach became much more holistic – direct, indirect, and contextual. Direct levers included acquisitions. Indirect efforts included introduction of signature processes such as Work Out, Six Sigma, and Section C discussions about talent, which went far beyond the GE shores and were adopted by many companies. The deepest lever was also the subtlest, his contextual leadership. He attempted a “transformation of attitudes, struggling, in his words, to release “emotional energy” at all levels of the organization (source: HBR). He reduced the number of business leaders involved in major decisions and forced them to be radically transparent with each other in order to make the best decisions, quickly. This interview in 1989 is a masterful articulation of the spirit that he tried to infuse.
Early 1990s Shift emphasis to services, particularly Growth into Financial Services: After a decade in the job, Jack extended his more holistic leadership into new domains. One such domain is financial services. Financial services accounted for ~40% of GE’s $594 billion peak valuation, only to run into troubles due to the 2008 financial crisis. While frothy nature and challenges of the industry eventually invaded GE just as much as other banks, diversification beyond manufacturing into a vastly different industry like financial services shows Jack Welch’s massive leadership. While a lot of the shift was propelled by massive acquisitions, e.g., the leasing businesses of European banks, the corporate approach had evolved to adapt to managing a much higher service vs. manufacturing mix. This also enabled GE’s push into the healthcare and other technology sectors later in the decade.
What can we learn from Jack Welch’s adaptability in leadership focus and approach?
Consciousness and choice are the key to becoming more adaptable wizard of leadership focus and approaches.
Most CEOs and senior leaders, including entrepreneurs and founders, stick to what got them to initial success. Often they unconsciously outgrow that mode(s) because a different market, a different business, a different strategy all call for a different approach. Consciously or unconsciously, however, they stayed in the safe zone of what has worked before.
Jack Welch showed us a different way. He was keenly attuned to changes, and wasn’t tied to what worked before. Instead, he was consciously sensing what is needed in the future, and uncovering that in himself. In each shift, there was cleaning up the portfolio of businesses, divesting as much as acquiring, for example, and he held the people’s feet to the fire in terms of adapting their leadership. Logically this doesn’t sound so difficult. However, many CEOs and senior leaders don’t go into transformation because of fear and other emotions. Jack Welch, however, had an unrelenting and intense focus on results, the fact base, and the future, and making decisions based on those three factors.
Implications for Senior Leaders
When change is the only constant, what has worked before is the riskiest place to be.
Whenever there is a fundamental shift (e.g., in industry, corporate structure, competitive dynamics, regulation, change in geography, etc.), it is high time for you to do a fundamental examination of your leadership approach. Ignore this to your own peril.