Considered by many of his peers and colleagues as one of the greatest chief executive officers (CEO) of all time, Jack Welch has attained legendary status in the business world. (Think you have what it takes to be chief executive? Find out what those at the top have in common. Check out Becoming A CEO.)
During his more than 20 years of managing the company, as CEO and later as chairman of General Electric, Welch's most notable achievement was increasing the market value of the firm. Welch increased it from approximately $12 billion when he took over, to a colossal $505 at the time of his retirement announcement, making GE the world's second largest company with a market capitalization that was only exceeded by Microsoft.
Along with Welch's unique, effective and sometimes brutal management style, a number of profitable strategic acquisitions under his leadership helped GE climb to the summit of the business world, with 10% or more earnings growth for many consecutive quarters. The most lucrative of Welch's acquisitions was the $6.4 billion paid for Radio Corporation of America (RCA), which owned NBC television.
Manage Like Jack
The success story of GE under the energetic and visionary leadership of Jack Welch, however, is a complex narrative of managerial innovation and prescient strategic moves, which not only included the acquisition of companies, but also the selling of troubled firms owned by the enormous conglomerate, and the ruthless termination of managers who did not produce.
In business as in life, there are no guarantees. But for any business - gigantic, medium-sized, modest, or small – the management philosophy of Jack Welch may be applied equally, and the results will be positive.
The following analysis will describe the basic principles of the Welch management system. Within each principle are specifics, subtleties and case histories to which entire books have been devoted. So these five points will address the larger picture and leave a more detailed study of the Welch management approach to those parties interested in acquiring that valuable additional knowledge.
- Change is good; don't be afraid of it.
Welch insists that his managers, from senior level on down, "embrace change." Everything is constantly changing, says Welch – market conditions, the business environment, consumer spending habits, advances in technology, new products, competitors who may be gaining on you.
CEOs, the senior management team, middle and junior managers and individual employees must be open to reinventing themselves, and everything they do. This is the only way to keep up with all of the many factors constantly in flux which impact a business, the way it operates and its bottom line.
- Lead a company, don't over-manage it.
At one time, most senior managers performed only limited, although all-important, functions – they watched, supervised and dictated orders to their underlings. Isolated from their subordinates and employees, these top managers could neither inspire them nor grant them permission to take initiatives not mandated from the top down.
Welch abhors this approach. He has often said that he wants his top people to lead not manage. Managers control, they don't facilitate, says Welch. Managers complicate things, they don't simplify them. Managers keep their feet on the brakes, in a manner of speaking, rather than on the gas, Welch has implied. Successful managers can only understand the entire work process if they integrate their duties to comprehend the multiple aspects of their business.
- Hire and develop managers who can energize, excite and control.
The ideal manager, according to Welch, is one who shares his vision, has boundless energy, and possesses the ability to radiate enthusiasm and ignite that flame in other employees. Along with those highly desirable skills, the best managers also have the indispensable gift of creating, developing and refining a vision and putting it to work in a practical way.
To inspire enthusiasm and excitement in employees, no matter at what level in the corporate hierarchy, is to assign them more responsibility and grant them the permission, liberty and encouragement to act on their own initiative. (Make smart investments by spotting up-and-coming success stories early. For more information, read 3 Secrets Of Successful Companies.)
- Acknowledge the facts and proceed to exploit them for advantage or eliminate their negative impact.
CEOs and all managers who deliberately ignore the facts of their business, the business environment, and general market and economic conditions are doomed to fail, according to Welch.
Changing market conditions and evolving strengths in technology and financial resources in GE under Welch's leadership, prompted the CEO to sell off certain assets, despite their profitability. Understanding the macroeconomic factors affecting your business ensures long term prosperity in a dynamic corporate environment. Assets that generate income today, can often not conform to the ongoing company business model for the future.
In 1986, as market facts indicated the potential for increased profitability in mass media, GE acquired RCA, which owned NBC television, a move which eventually provided huge and consistent revenues for GE. (To learn how you can benefit from a takeover announcement, read Analyzing An Acquisition Announcement.)
- Be focused, be consistent and follow up on every detail.
Focus, consistency and follow-up may be described as Jack Welch's mantra. His invariable focus on changing when necessary, openness to new ideas, customer service, quality, simplicity, the empowerment of managers and employees, and the quest for competitive advantage are the hallmarks of Welch's great leadership. Following up to make sure these values are pursued at every level all but assure in a very unpredictable world, that a company has at least the potential to succeed.
The management principles described above are only a small sampling of Welch's comprehensive managerial style. Managers across the spectrum, from CEOs of large firms, to owner-operators of small businesses may profit from implementing these ideas, all of which helped build GE into the giant it is today, and elevated Jack Welch who led the way to the Olympian heights among the most successful chief executive officers of all time.
Welch's techniques for managing strategic and tactical moves, recruitment, compensation issues, research and development, financing, accounting, marketing and advertising, legal issues, employee relations and other human resources issues, among numerous other aspects of running of a business are beyond the scope of this article. (Give your business what it needs to thrive and it will reward you for years to come. For more information, see 9 Tips For Growing A Successful Business.)
For further reading about Jack Welch's management processes, the following books are recommended: Winning, by Jack and Suzy Welch; "Winning: The Answers," by Jack and Suzy Welch; "Jack: Straight From the Gut," by Jack Welch with John A. Byrne; "Jack Welch Speaks, Wisdom from the World's Greatest Business Leader," by Janet Lowe.
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