TIPS FROM THE VERY TOP: 10 leadership insights from legendary GE CEO Jack Welch

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Jack Welch. Photo: Joe Raedle / Getty Images

Jack Welch was head of General Electric over two decades before he retired in 2001. He is widely regarded as one of the most successful industrial leaders of the modern age, having increased the value of GE by some 4000% to several hundred billion during his tenure. He famously restructured GE with the goal of having each division No.1 or No.2 in the world in its category.

Since retiring, Welch has also become a bestselling author with his management book, Winning, and his more biographical Jack: Straight from the Gut. His reminiscences on his time at GE are valuable for any business leader or founder not just just because of his track record, but because many of his philosophies of business, leadership, and management could apply to companies of any size.

Here are some of his most instructive insights.

On the difference between managers and leaders

In an interview with the Harvard Business Review way back in 1999, Welch was asked what he believed made a good manager. He summed up his view of what he believes good senior people should be doing through an organisation in order to be effective.

I prefer the term “business leader.” Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion. Above all else, though, good leaders are open. They go up, down, and around their organization to reach people. They don’t stick to the established channels. They’re informal. They’re straight with people. They make a religion out of being accessible. They never get bored telling their story.

Real communication takes countless hours of eyeball to eyeball, back and forth… It is human beings coming to see and accept things through a constant interactive process aimed at consensus. And it must be absolutely relentless.

The full interview is here.

On taking what you learned in an education, and turning it to management

One of the classic challenges for people leading businesses as their career evolves is dealing with the different scenarios that the business cycle will throw at them over time, some that no amount of training can prepare you for. If you’ve started out with a degree in computer science or philosophy or finance, how can you be prepared for the all the challenges of running a company? And yet some people manage to do it.

Welch was a chemical engineer by training but he was able to lean on some of the critical thinking skills that he learned in university to interrogate business problems effectively. Here he is in his book Jack:

I have always felt that chemical engineering was one of the best backgrounds for a business career, because both the classwork and required thesis teach you one very important lesson: There are no finite answers to many questions. What really counted was your thought process. A typical exam question went something like this: An ice-skater weighs 150 pounds and is doing figure-eights on ice an inch thick. The temperature is rising a degree every ten minutes to 40 degrees, and the wind is blowing 20 miles an hour. When will the skater fall through the ice?

There was no formulaic answer to that question.

The same is true for most business problems. The process helps you get closer to the darker shade of gray. There are rarely black-or-white answers. More often than not, business is smell, feel, and touch as much as or more than numbers. If we wait for the perfect answer, the world will pass us by.

On being prepared to treat people differently

Many organisations or leaders strive to treat people equally across the business. Welch believes this can hold a company back.

Again, from Jack:

But differentiation is all about being extreme, rewarding the best and weeding out the ineffective. Rigorous differentiation delivers real stars – and stars build great businesses.

Some contend that differentiation is nuts – bad for morale.

They say that differential treatment erodes the very idea of teamwork. Not in my world. You build strong teams by treating individuals differently… Everybody’s got to feel they have a stake in the game. But that doesn’t mean everyone on the team has to be treated the same way.

At the same time, Welch’s philosophy is entirely founded on treating people well because he believes this surfaces the best ideas across any company.

On the “4Es” of successful people

For personnel Welch famously used a framework of “4Es” for assessing people: Energy, Energising, Edge, Execution.

Here he is explaining the concept (very concisely):

The 4Es are also referred to as the “4Es & P”, with the P standing for passion.

On being wary of the limits of resumes

Welch says he realised early in his career “how much my success would depend on the people I hired… It was clear that when I found someone great, it made all the difference in the world”.

When recruiting, Welch is wary about the limits of what a resume can tell you about a candidate for a job. He says:

In the early days, I fell in love with great resumes filled with degrees in different disciplines. They could be bright and intellectually curious, but they often turned out to be unfocused dabblers, unwilling to commit, lacking intensity and passion for any one thing.

In the hands of the inexperienced, resumes are dangerous weapons.

Eventually, I learned that I was really looking for people who were filled with passion and a desire to get things done. A resume didn’t tell me much about that inner hunger.

On dealing with setbacks

Welch is a huge believer in the importance of energising people around you. In Winning, he dispenses some general career advice, including do’s and don’ts for success and getting ahead in the workplace that are intended to apply to ambitious people at any level of an organisation.

When setbacks arise – and they inevitably will, Welch says: “You will feel terrible, maybe even bitter and angry. But work like hell to let those feelings go.” He adds:

… do not turn your career setback into the office cause celebre. What a way to alienate everyone…. If you want to complain about your career, do it at home, at a bar across town, or wherever you go to worship. The people at work, while they know a lot about your case, should not be drawn into your emotional experience.

On how to treat people when they fail

Welch is a straight shooter, but he believes in the power of positivity and its importance in building momentum. He is at pains to point out the importance of managing people’s failures carefully, especially when it comes to star performers, as their performance can evaporate if the environment lets it. From Jack:

When people make mistakes, the last thing they need is discipline. It’s time for encouragement and confidence building. The job at this point is to restore self-confidence. I think “piling on” when someone is down is one of the worst things that any of us can do…

Piling on during a weak moment can force people into what I call the “GE Vortex”. It can happen anywhere. You see the “Vortex” when leaders lose their confidence, begin to panic, and spiral downward into a hole of self-doubt.

On the benefits of straight talk

Welch hates what he refers to a “lack of candour”, or an inability for people to be straight with each other about what’s happening in the business. Here he is Winning: “Lack of candour basically blocks smart ideas, fast action, and good people contributing all the stuff they’ve got. It’s a killer,” he writes. The type of behaviour he’s talking about is when people “just don’t open up. Instead they withhold comments or criticism. They keep their mouths shut in order to make people feel better or to avoid conflict, and they sugarcoat bad news in order to maintain appearances. They keep things to themselves, hoarding information.”

He adds: “Forget outside competition when your own worst enemy is the way you communicate with one another internally!”

On dilemmas and keeping your promises

Sometimes in business, leaders make promises which will, from time to time, involve keeping some information confidential – even from your own team. Welch tells the story of when GE was trying to secure a deal to supply engines to Boeing for the new 777 generation of aircraft. Welch had lunch with Boeing chairman Phil Condit to try and convince him GE was the right partner.

Phil was well briefed on the subject… [he] listened carefully, asked a few questions, and ended the conversation with some great news.

“Let’s leave this luncheon by saying you’ve got the deal,” he said. “But you’ve got to make a promise to me. You won’t tell your people they’ve got it. They will have to continue to negotiate in good faith.”

I agreed. Over the next 60 to 90 days, those negotiating the deal were calling me up, saying we had to give Boeing more price concessions and more help with the development. I was dying each time my guys called to tell me about their latest concessions. Yet there was no way I could let them know of my conversation with Phil… Finally it came down to the last day, and we were getting one more squeeze from Boeing. I couldn’t take it anymore. I picked up the phone and called Phil.

“Phil, I’m choking. I can’t sit here any longer. I’ve got to break this commitment.”

“You’ve gone far enough,” he replied. “Tell your team to say no. They’ve got the deal.”

Welch was prepared to renege on his promise – his “candour” paid off.

On strategy, and what it really means

Strategy can be an intimidating area for a growing business but Welch believes it has been over-complicated in the modern business era. “If you want to win, when it comes to strategy, ponder less and do more,” Welch writes in Winning. He believes the key to successful strategy is starting with a core insight – what he calls an “aha” – and then throwing the right people at the task of executing on the challenge. “Strategy… is simply finding the big aha and setting a broad direction, putting the right people behind it, and then executing with an unyielding emphasis on continual improvement,” Welch says. “I couldn’t make it more complicated than that if I tried.”

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