“We build great people, who then build great products and services.”
So said Jack Welch, the iconic leader of GE, who created a firm six times larger than the one he inherited, but with fewer managers overall and only 25 vice-presidents.
Welch was appointed CEO in April 1981 and admits he did not have detailed plans for where he wanted the company to go, only that he knew how he wanted it to feel.
Creating a new culture among 400,000 employees and 25,000 managers with layers of bureaucracy was always going to be a hard task, but for Welch, it was all about people. Of course, he did earn himself the nickname “Neutron Jack” because by around the mid-1980’s he had reduced the workforce by about 25%. But at the same time he did a major upgrade of the firm’s management development centre. He said that if GE was going to move ahead it had to spend more money on fewer people.
Welch believed that by hiring the best you got the best ideas, and if those ideas could circulate in a bureaucracy free environment, he said it would be one of the best places in the world to work.
He spent a great deal of time in his first few years in staff reviews, cutting out the dead wood and identifying the stars.
He pioneered the system of managers having to remove 10% of their staff every year. While this was obviously very difficult and painful for many, he said it allowed people to know where they stood.
He said that the “false kindness” of past personnel reviews betrayed both the person involved and GE.
GE employee surveys actually showed that most employees wanted the system to become, not less, performance driven.
Many surveys have shown that people work better to targets and goals, and even better to big goals that may only be just attainable.
He applied the baseball rewards system to employees of GE, saying that if players in baseball teams can get wildly different pay packages, yet still play well as a team, why can’t this apply to the workforce?
“Rigorous differentiation” he says “delivers real stars – and starts to build great businesses”.
‘Jack: Straight from the Gut’ is a super account of what it’s like to be a CEO of one of the world’s biggest firms.
The ‘People Factory’ chapter is a great insight to the rigor of the staff reviews instituted by Welch at GE. Overall, there are many lessons from ‘Jack’ which all leaders would be wise to consider.