Jack Welch and His Vision of Business Transformation
This article is based on an HBR interview of Jack Welch by Noel Tichy and Ram Charan in 1989.
Jack Welch is known for his vision through which he brought about a major transformation at General Electric. The article published in Harvard Business Review in 1989 shows how the visionary leader helped the company he had inherited, move in a new direction. GE operated across 14 distinct business sectors and acquired a leadership status in all those areas. Soon after Welch became the company CEO, he changed the its strategic direction taking it to new heights. By 1986, he had rebuilt the organisation and its transformation was complete. The visionary leader achieved this target by eliminating unproductive work. Unproductive work can be a hindrance. It never helps you bring real results or create any real value. A company’s transformation is not complete without transforming its people. Creating a feeling of ownership for work and encouraging creativity to improve self worth; all these things were required to give the company a new direction. The final goal Welch wanted to achieve was to create an organisation which could tap the best opportunities globally by getting rid of internal hurdles. However, you need to transform the structure of your organisation and your people and offer them new strategic objectives. Noel Tichy and Ram Charan conducted an interview to find out Jack’s strategic focus that let him transform GE’s Fortune.
Good businesses depend on good managers. Good managers are oxygen for business. When asked about who is a good manager, Jack says he prefers the term business leaders in place of managers. Such business leaders are one with their vision. They have a vision which they own and articulate. They have the passion and the drive to take the vision to its completion. They remain open to people at every level and not just above and below. They go all around to make their vision a reality and to persuade people. Instead of using established channels, they create new channels and remain accessible to their people. Such people do not get bored of telling their story because they have the energy to follow their dream and their vision. To start real communication inside your organisation, you must talk to your people for hours. It requires you to do the listening more than talking. Instead of video communication or plain emails, good business leaders aim at constant interaction and bring consensus. They take challenges and stay open to reality.
Good managers see opportunities in challenges. They do not just make optimistic forecasts. Managers do not fear change. It is just an opportunity to see the game from a new angle and open a new chapter in your business. Downturns and tough situations are common in the market and weaknesses or fragility is not something business managers fear. Truth must not scare good managers because they do not hide facts. They know people are familiar with facts. Many times businesses hire managers that do not want to change and will stay stuck. They cannot move away from their positions. They like to be left in the manger even if it is unprofitable for their business. Truth and honesty are important values for managers. Those who try to run from them cannot face the reality. GE too had such managers, unready to face the reality or being candid with themselves or others.
Jack says that large organisations are simple organisations with simple structures. Its people believe in themselves. They have the necessary intellect. Bad managers are frightened and nervous and give rise to insecurity and complexity. They create clutter. Good managers do not. Every manager cannot be clear or precise. Good managers ensure that everyone from the top to the bottom knows what their business is trying to achieve. Jack ‘s focus was simplification of structure. Simplicity helps handle problems in advance. It helps improve operational flow. When work flows faster, results are better. Simplicity brings clarity and keeps people focussed. In this way, you can remove clutter and speed things up in your company. However, it’s a challenging pursuit and many managers may lose the track in the long run. Moreover, complex organisations can grow paralysed in tough and challenging times. Jack brought several changes in his organisation for simplicity and alignment. Thus he implemented his vision. Good managers do not wait. Soon after joining GE, Jack articulated his vision of taking the company to number one two position in the world. His first strategic focus was Japan. His organisation understood the market situation had grown tougher and Japan stood at the sharper edge of this changed situation. To win this market, you need a multi pronged strategy. You should combine your several strengths together – financial strength, market position, technology leadership – and focus on speed and agility as well as simplicity. This is how you develop a sharp-edge weapon to win new markets.
To implement his commitment to simplicity, Jack brought some important changes throughout the company. First thing he did was eliminate weaknesses by eliminating layers. Layers of management can hide weaknesses and ruin quality. Welch focused on hard work and engagement. Such executives are the best for they do not waste time on small things. They remove clutter to gain space and Jack reduced corporate staff to achieve this. The worst thing that happens from too many layers is ruined communication. Many layers jam communication and clog the pipeline from where ideas come. For a long time, the focus of executives has remained on control instead of value addition. People who clog the pipe must be eliminated as they can jam the emotional energy which should move freely inside the organisation. Jack sees the role of the middle managers as important. They can act as pillars for the organisation. However, their roles must be seen from a new angle since they need to be teachers, cheerleaders, controllers and liberators at the same time. Communication is a key component of organisational productivity and Jack has highlighted it in the interview. It can add confidence and can improve your staff’s productivity. Removing additional layers of management helps remove the clog that can become a hindrance to free communication. Too many groups and sectors can give rise to complexity. Jack reduce them to remove communication filters that delayed the decision making process. This improved the communication between CEO and the business leaders of the 14 businesses. Decision making cycles are now smaller and save the organisation a lot of precious time. Investment decisions are made faster that otherwise could take longer than an year.
Jack’s focus was simplicity which many businesses have ignored. He believed in keeping things simple because complex businesses are unproductive. According to Jack business management is not rocket science. It is the simplest function that people make complex by their attitude. Rather than choosing among several options, you make some simple decisions and take smart steps. You do not need complicated review systems or complicated organisational structures but a simplified system and structure. Every business has only few critical competitors to focus upon. In 1986 at GE, Jack advised his executives to focus upon few key competitors and their direction. He asked them to review their strengths and if they took actions that could affect GE’s business in near future. Business is a simple game and you cannot be adept at everything. Important thing is that business leaders play by the same rule. Jack updated this system inside his organisation where everyone at the top understood the game and played by the same rule. He focused at creating a positive attitude inside GE. This geared all executives towards fast and positive action. This alignment helped take fast action and create higher impact by making profitable decisions. Direct communication helps at smarter and faster action which means double productivity and double competitiveness.
Another important task Jack assigned his subordinates was to speed up work by spreading best practices throughout the organisation. Business leaders were given enough freedom so the business leaders can take ownership and prepare their growth plan. Jack explains the concept of ownership and how business leaders must take ownership of their businesses. In all the fourteen operational segments, the business leaders own the businesses. When Jack joined, he faced some difficulty selling his idea of ownership. However, attitude has changed over years and now focus is upon spreading the idea from top to the bottom. Now, these business leaders are committed to relentless personal interaction and information sharing. GE has a CEC (Corporate Executive Committee) where business leaders meet regularly and discuss ideas and share information.
Overall, one thing becomes clear from Jack’s thoughts. Simplicity and rapport among functions is essential apart from a high level of collaboration. His focus on simplicity is worth appreciation and helps understand how businesses can manage better work flow help staff be productive. Jack took charge at a very critical point when he needed to reshuffle the deck and clear things before GE could get into motion. To be the kind of company you want to be, you should note how to bring people together and make energy flow. Managers fail to do this which leads to complications because when energy cannot flow, staff feels frustrated. To be a good manager you must simplify things and create unison inside the organisation. Farsightedness is good for managers. However, they also need to remain ready for change and keep things simple to create the right environment and energy that will align the business vision and staff performance with objectives.