Jack Welch - A Simple Leader of Genius - Essay Example

Jack Welch - A Simple Leader of Genius The task of this work is to analyze the leadership traits of Jack Welch, the ex-CEO of the General Electric Corporation, who made it the most valuable and expensive global company in the world. Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital - the world's best talents and greatest idea. (Jack Welch) So, from the time Jack Welch has become the Chief Executive Officer (CEO) of the General Electric Corporation in 1980, the company witnessed the most far-reaching and drastic change in its management policy and global reputation. Under Welch's leading the company became the No.1 among the most valuable companies in the world. What were the main principles that allowed Welch to perform such a revolution inside the company and in the leadership theory itself First of all, it is necessary to say that there used to be a great number of different leadership theories. Autocrative theory of organizational behavior is based, or, better, oriented, at managerial authority. Thus, the employees must obey and depend on the boss, and those who follow this concept, rarely receive high results. The custodial concept shows employees' orientation on money. It is known that one of the manager's needs is security, which is provided by using this concept, the result of which is simple passive cooperation. The supportive and collegial theories also take their place, main principles of them being orientation on support and self-discipline respectively. But getting to know Jack Welch closer one becomes sure that this person used none of these theories, having created his own one, which turned the top managers of the global companies into talented and oriented leaders. Jack F. Welch became a CEO in General Electric when he was 45, thus being the youngest manager of such level at the time. He spent his entire career with G.E., and with this company he has developed his concept of ever-continuous development of the company. In the late 1970's it was already becoming apparent, that the G.E. Corporation was facing a state of being a victim of the global economy. National companies were losing their consumers, because foreign companies produced better goods for lower prices, and this was accepted by Welch as a very important sign. In his work he used the idea of all businesses being No.1 or No. 2 in their area, otherwise they were to be "fixed, closed or sold" (Tichy and Sherman, 16). He sold $12 billion of low profit businesses and bought $26 billion of highly profitable ones, thus allowing the profits and sales to increase from $1.5 billion in 1980 to $5.2 billion in 1993. Welch has created a whole leadership philosophy, due to which G.E. has acquired the strongest balance sheet. Jack Welch was not simply a successful CEO - he was and is an undisputed all-time champion of the corporate leadership. When Welch became a CEO, G.E. had a great number of problems, which were long-lasting and could become invisible for most of the top managers. First of all, the earnings of the company grew too slowly, capital expenditures were too high, thus making the capital flow slow as well, productivity growth was no more than 1-2% per year. He also noted that management was taking decisions too slowly, the company was overfilled with bureaucracy and he felt that in order to keep the company flowing, he must bring it through the most radical changes that have ever been accomplished in it. He has formulated the six rules of management, which are so unique and universal at the same time that could be used not only in managing a company, but almost in every sphere of human life. 1. Control your destiny, or someone else will. According to this principle the employees must control their destiny themselves, that is, Welch gave them some kind of freedom in taking decisions. He strongly believed that this would make companies successful, opening talents and capabilities of workers. Now we are constantly amazed by how much people will do when they are not told what to do by management (Slater 117). But at the same time, this freedom is saved for those who act successfully, and if someone is underperforming, the leash becomes too tight. 2. Face reality as it is, not as it was, or as you wish it were. Welch understood that G.E. was facing a problem - its core electric business was growing too slowly and he had to reorient the company at other more profitable branches, and he succeeded in this. 3. Be candid with everyone. Jack Welch wanted to create atmosphere of sincerity among workers and bosses, thus each employee could boldly speak to someone in authority about bad or good situation inside the company. 4. Don't manage, lead. Welch didn't accept the role of management as controlling someone (remember the already mentioned authoritative organizational theory). He supposed that managers must empower their workers, and this principle was the guiding one in changing the G.E. inner organization. You've got to balance freedom with some control, but you've got to have more freedom than you ever dreamed of. (Tichy and Sherman). 5. Change before you have to. A noted leadership expert Warren Bennis argues that nothing serves an organization better - especially during these times of agonizing doubts and paralyzing ambiguities - than leadership that knows what it wants, communicates those intentions accurately, empowers others and knows how to stay the course and when to change (Bennis 378). So, it is of course much better to change the company's strategy when it is necessary and when it must be done, not waiting until the company appears in such circumstances, when there would be no other way than to change, through loosing time, customers, and profits. 6. If you don't have competitive advantage, don't compete. Welch was sure that the company had to be Number one or Number two in its branch, because business would push average companies out. That's why as it is underlined above, he sold businesses which were not profitable anymore, and bought those which had brilliant perspectives. Not many people might know that Jack Welch was a son of an Irish woman with strong principles, who also viewed her son becoming a priest, thus he had to attend church, and follow Catholic commandments. His mother gave him such traits as self-confidence, toughness, aggressiveness, realism, perseverance, and a very strong work ethic. After his mother died, he changed his intention to become a priest. But all these features were with him in his life, and self-confidence became the most important characteristics of his era in G.E.. If leadership is art, than Welch proved himself to be a talented artist. His company became a model of extraordinary growth, increasing its market value from $12 billion in 1981 up to $280 billion today. Welch's premium on people knows no limits. Once, the G.E. transportation business started to hire younger military officers. They were so successful, that other G.E. units did the same. After some time Welch gathered all the officers and spent one day with them. He was impressed by their capabilities, and offered that G.E. units hire 200 officers a year. By the time he left the company, there were already 711 officers, many of which already had very serious promotions. This idea could be considered of genius, but look how simple it is! Welch didn't create something extraordinary. He simply devoted one entire day to his employees to see how they would show. Jack Welch believed that in order to become a successful leader, one must have a lot of energy and know how to use this energy to energize others. By giving some freedom to his employees he found out great ideas and put those ideas into practice. He believed that if he picked up the right people and gave them an opportunity to spread their wings and gave them compensation - their career - he wouldn't have to manage them. He considered business to be simple and never made it too complicated neither for himself, nor for his workers. He was brave enough to face the reality and the problems and was never afraid of changes. But nevertheless, it is worth saying, that G.E. was not only the house built by Welch, but Welch was the leader built by G.E. It is clear that he found a possibility to display his talents through making this company successful, and it can be said that they have created each other. The General Electric Corporation has always been faster than time - even early in the twentieth century it used such advantages as paid vacations for most workers, and a slow move towards home appliances. But under Welch the strategy of relations between workers was absolutely changed. What concerns economic indicators, one can take the ROE (Return on Equity) - which was equal to 25.8 percent, while among other highly successful companies this index was not more than 14.6. While cutting other expenditures throughout the company, Welch continued to finance the company management school or, better, center, in Croton Ville. He was absolutely sure that training of managers was extremely important for the company. As Welch says, companies can't promise lifetime employment, but by constant training and education we may be able to guarantee lifetime employability. (Tichy and Sherman). Though some people criticized what Welch did during him being the G.E.'s CEO, his success speaks for himself. By this success he proved that he did the right things in the right time. What can display success better than a poll, made by Forbes, according to which G.E. was chosen the most admired American company (Stewart, 73). General Electric is a brilliant example of how the company should be changed and how the leadership should be performed. Jack Welch became the person under which all the business and managerial relations have changed. Under his leadership the company was predictably and steadily growing, quarter by quarter. Predictability was the very feature that was needed by Wall Street. And this was something achieved by Welch. And now the market strongly believes in the G.E. potential, much more than it was in 1981. We took a bureaucracy and we shook it. We created a world-class organization, whose excellence is accepted on every continent. I believe the G.E. I'm leaving is a true meritocracy, a place filled with involved and excited people, with good values and high integrity. (Welch, 430). He also created two absolutely new concepts - of boundarylessness and work-out. These two concepts became revolutionary in creating new atmosphere in the G.E. Corporation. He was striving to eliminate so-called walls between workers and between different parts of the whole production. At the same time he pointed out, that nevertheless different parts of the company can't be governed as a one single institution. His wisdom and intuition were displayed here. He felt that there were too many levels of management; some of these were to be destroyed. He also wanted to cancel the boundaries between G.E. suppliers and customers, and the company itself. He has achieved his aim - to create mutual trust between the G.E. workers and its suppliers and customers. After assuming control at G.E., he announced that his prime directive was to make the company the most competitive enterprise on earth in brutally competitive times. (Ibid., xv; Lowe, Jack Welch Speaks, 39). Jack Welch was a good Catholic and one of his main features which helped him to become so successful, was his inner integrity. From time to time one can hear the question of how a good Catholic can be a good businessman. The answer may lie in a person being integral, honest and following the leadership ethic. But at the same time a person must have a small part of egoism if he wants to reach something in life. So, let's summarize everything and make some conclusions. Jack Welch is the most outstanding American manager. He is the author of absolutely new leadership theory, which proved itself to be successful. The success lies in the unusual attitude towards business and employees, too simple at first sight, but deep and substantial when studied. Welch liked to compare his enterprise with a grocery store, and his workers - with customers, whom he was going to know well. His relations with workers were direct and candid. He was never afraid to face the reality and to hear bad and good things from people with whom he worked. He made his company informal - that is his workers seemed to be working not in a big company, but for some entrepreneur who knew all his employees. He possessed what people call "charisma", and his frequent meetings with co-workers he used to the maximum level, taking out all the information necessary for him. Welch, better than anyone else, understood the value of surprise, unexpectedly attending different plants and offices of G.E., having luncheons with the staff and sending handwritten notes to his people, which helped them to find a clear way out of some problem. He has never written any formed letter to anyone in the company. The main reason of Welch's success is his belief in people and in what they are able to do. He never wrote form letters to workers, and each salary change, bonus or stock option he handed directly to an employee, letting him know what he wanted from him in the nearest future. At the same time he made rewards and bonuses highly differentiated, thus every worker in G.E. had the possibility to show himself and to get more than one could expect. So, by the time Welch had to quit, there were already seven or eight ready managers, taught by him, who could easily take his place and run the company not worse than he had done. But no one counts that this company will be run with such power and influence as it has been under Welch. Known to most as Jack, he was able to make his management philosophy public, recognized and widely used. He turned the leadership concepts upside down due to self-confidence and power united in him. If one meets or sees Welch on the book or magazine cover, he will think that he hardly looks like a successful leader or professor. But getting to know him closer one will understand that he is one of the few who personalized leadership so vividly. During the 17 years in G.E., Welch was able to lead the company to sales and revenues records. Sometimes he is compared to Alfred Sloan of General Motors, but Welch is still considered to be the best, having implemented the drastically new paradigm of human relations which became a model for all companies. He was the head of the talented management bench in the company. He was able to transform the industrial giant into the modern steadily growing enterprise. He had enough power and influence to change the most complex industry in the United States. He coupled his inner force with passion for winning and a keen look at what other managers could simply overlook. Jack Welch will always stay a well-known designer of human relations inside companies, being the person who has initiated organizational reforms in all global enterprises of the world. Works Cited Bennis, Warren. "The Artform of Leadership." The Leader's Companion: Insights on Leadership Through the Ages. Ed. J. Thomas Wren. New York: The Free Press, 1995. 377-78. Bennis, Warren. Why Leaders Can't Lead: The Unconscious Conspiracy Continues. San Francisco: Jossey-Bass, 1997. Ibid., xv; Lowe, Jack Welch Speaks, 39 Slater, Robert. Get Better or Get Beaten: 31 Leadership Secrets from GE's Jack Welch. New York: Irwin, 1994 Stewart, Thomas A. America's Most Admired Companies: Why Leadership Matters. Fortune 2. March 1998: 70-82. Tichy, Noel M., and Stratford Sherman. Control Your Destiny or Someone Else Will: Lessons in Mastering Change-The Principles Jack Welch is Using to Revolutionize General Electric. New York: Harper Business, 1994. Welch, Jack, and Byrne, A. John. Jack Straight from the Gut. New York: Warner Books, 1989, 430. Read More