FORTUNE: Talkback

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    03-Sep-2014

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Sorry, Jack!Tearing up the Jack Welch playbookEnough already. Corporate America needs a new playbook...

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<ul><li> FORTUNE: Talkback Sorry, Jack! Tearing up the Jack Welch playbook Enough already. Corporate America needs a new playbook. The old rules of the Jack Welch era don't work any more. Today's volatile, brutally competitive business climate demands a new set of rules and whole new mindset. What do you think? Is it still so critical to be Number One or Two? Is that the best way to think about your market? Is being biggest still best? Is Six Sigma all it was cracked up to be? What do you think it takes today to get ahead and stay ahead? What new rules would you add? -- Betsy Morris, Fortune senior writer Qaulity, standardization, of products is alwalys an issue....but someone needs to be a visionary and risk taker within the organization and have the ability to sell the idea to share holder/stake holders/senior management. One of the typical problems I have seen within organizations is that when there is an opportunity for growth they grow but, don 't control expenses and don't analyse why they are growing and their competitors are not. The entire six sigma program that Jack Welch championed was about beating your suppliers into the ground. The result was great, short term, gain in efficiency. Now that GE has taken the profit margins from their suppliers, there is no more gains for GE to get. Where are GE's great earnings now?? They left with the short term mindset of Jack Welch. The idea that the old rules don't apply is silly. The new rules are merely new spins on the old ones so that some business professor somewhere can get credit for something "new" even though all he did was spin it a different way. The rules will always apply, it's the application of them that changes. For example, shareholder value always matters. Managers fight day in and day out to keep their jobs and guess who decides that, the shareholders, or at least the key ones. The WAY to maximize is the please the customer. Six Sigma was and is all about the customer. By pleasing the customer, you increase earnings, your stock price rises. Not sure why people think that's the not the same. Agiles is best, big is no good? Big companies definitely have the ability to be agile. They have the resources </li> <li> to change what they need when they need to. GE is a huge conglomerate that is made of many much smaller operating units. When the market changes, the unit responsible for it does. At the same time, focusing on being number one or number two causes a company to think this way. To think about the changes needed quickly, to focus on the customer, to look outside the business. As far as passionate people, that is part of being the best. This thought doesn't differ from Welch's thoughts. Jeff Immelt once said that he has worked over 100 hours a week for many years. That's passion. Would any of you do the same? Yes, the world changes, and yes you need to be flexible, but these rules always work, it's how you apply them that may need changing. 'add rules?' please don't! There's too much of them already. Focus on what we don't know or really need to know, instead of describing in too many ways what we in fact already do know about our company processes. Ever seen the six sigma schemes? worked with them? wrong focus when China is beginning to accelerate.... Mr.Welch and his principles of managing a business has arguably worked well when he was at the helm of GE. But, I have always had my strong disaggrements to those principles and more importantly to the business schools preaching of these principles as a 'must-be applied' by all at all times. Mr.Welch's style and principles, such as you got to be a No 1 or 2 in the industry or the strong/weaker players dicotomy, forces one to see business competition as 'warfare' and thus leave out a whole series of other ways a business can be successful despite not being a No 1 or 2. While now retired, I spent my business life (1962-2004) battling the stock-value syndrom. What makes a company great is the enthusiasm of its employees. And what makes an employee enthusiastic is his happiness at seeing a satisfied customer. After all, a customer sees the employee, not the CEO! Ergo, keeping the customer happy (within limits, of course) should be THE PRIMARY focus of any company. Take what you know or can invent, and make your customers successful by using it. Hopefully business leaders are not only looking at Jack Welch's business practices but also his unethical personal life. Maybe we can learn from both. When Jack split GE stock, 3 for 1 six years ago at approximately $180 a share, he was king of the business world, the dot-com bubble had not burst, and everyone in the market was making money hand or fist. Jack believed that 6-sigma was the save all for product quality and money for all GE products, and that people were just resources and should be used up, disposed of, and replaced as needed. He also believed that ranking people in the company 1 through 4 and rewarding them based on there ranking would drive his employees to perform at the highest levels. What Jack did not understand was that no one thing, 6-sigma, will save all but instead end up costing the company millions in the long run, just ask Motorola who went bankrupt using 6-sigma. Product Quality and Reliability took a beating in many GE product lines because of 6-sigma, in turn customer satisfaction went down compared to the levels in the past. The stock prices fell sharply after the stock split in the sunset of Jack?s stay, it dipped as low as $24 a share and has only recovered to around $33 a share today. The worst part of it all was when Jack was paid around $100 million to stay on one more year and finish the Honeywell acquisition. He greatly underestimated the Europeans and the Honeywell deal was lost. Shortly after Jack handpicked Jeffery Emelt to take the rains and left GE with a $90 million bonus and a huge retirement package that paid him so much that when GE stockholders found out about it, because of his divorce, the board was forced to </li> <li> modify the package. GE has a man that believes in ?Jack? at the helm today. The stock is currently just over $33 a share. Was Jack really that great or did he just make a lot of money at a time he was able? Hype Hype Hype.... That is what business is becoming. I am starting to think that companies are more akin to movie studios. I remember watching bloomberg quiet a bit several years back and they had the enron people on over and over on their leader spot light or something saying how wonderful the company is etc. LOL. Oh and my favorite book.... THINK AND GROW RICH. When I first heard of Six Sigma and then worked in companies that followed it, I always got the sense that it was a Draconian way of managing large companies. Sort of like taking a red hot poker and randomly sticking it into a large mass in order to get it to dance the way you want it. In the 80's, perhaps that's the only thing that could be done with large companies in order to get them to change. Today we have the internet that allows small companies to act like big companies and deal with individuals halfway around the world. It makes sense that we need new ways of managing that are inline with how the global economy works. Business has changed because people have changed. The blue suit, white shirt, and red tie have given over to a need for expression and sense of accomplishment. People are looking for opportunities to find meaning in their work. Talk to Senior Executives and you will find that they are far more interested in a balanced approach to life than chasing a paycheck. The boomers are aging and they are questioning (again) the "old rules". Creating a great product, helping your customers achieve success, mentoring younger employees and watching them grow, WHILE making a great paycheck is what drives us. Doing these things well helps create and nuture passion which in turn helps make the business successful. If you don't....it will show in turnover stats that will eventually lead to the demise of the organization. What was ridiculed as "new age hocus pocus" is now a fact of life. This isn't your Father's company anymore! The rules never change, just the ability to make more money selling a book, as Mr Welch did. It doesn't take a brain surgeon to recognize that every decade, some high-profile people in the business world will write a book that tries to push the idea that there is only one way to run a successful business, and that way is to write a book and make lots of money. Even Chainsaw Al Dunlop came out with a book highlighting his management style, which of course was to lie and cheat and steal. Personally I don't think is a big differnce between his style and Jack Welch's, other than Chainsaw got nailed before he could leave with a ridiculous retirement package. Rules? There are no rules in business. Either you have what it takes to be successful or you don't. Don't kid yourself into believing there is some secret formula. Those that are successful adapt to thier enviroment, market, and have forward vision to see what is ahead. These skills can not be taught, you are born with them. If, as a kid, you had a lemon-aide stand or tried to sell those greeting cards from the Boys Magazine and failed, you should forget about managing a business. Many of the new rules, opposed to Jack's old rules, just don't make sense! 1) You CAN be Agile and Big - Jack Welch taught nothing if he didn't teach and demonstrate this with GE. 2) Who cares if you create a new niche, something new, if nobody wants it! GE Leads the world in new innovations BECAUSE it wants to be (or remain) #1. </li> <li> 3) What - the customer is king so screw the shareholder? Give me a break! 4) Looking ONLY out and NEVER in is just craziness. 5) If all you did was hire passionate losers, your shareholders and customers alike would revolt! 6) The CEO should be charismatic AND courageous. 7) Admire my might? I never heard Jack Welch utter any such sentiment. I bought a GE Microwave oven when I built my house. It's not worked for more than 3 months at any time. I bought a new GE Microwave to replace the old one thinking something better (under Welch) would have ensued. The GE Microwave is sitting broke in my kitchen. For all the GE BS I ain't buying anymore!! I was really amazed with the comments made about Darwinism in business being questioned. We all know by now that Darwin?s theory was discredited by the top scientists throughout the world and is only used as reference and a simplifying tool due to a lock of a better one. Leagues of grad students and scientists are chasing a True theory looking for fame. You are debating that it is possible that the same is now occurring in business/ management model? If such, I am wondering if anyone of you readers is participating to shy in this shifting paradigm. If the fittest does not lead who does? Is it like stock market ? randomness, luckiness, following a rule of a butterfly, meaning someone names an individual ?right?, presents it to someone with ?some say? and that spreads or does not. Then people follow and masses of individuals decide this is The person (the stock) since all people say he/she is. That would take us back to a very old theory commonly referred to as ?The Emperor has no cloths?. The CEO's of the 90's destroyed American companies because they had no vision or passion about the business- their focus was on immediate profits to secure that BIG bonus. Exploitation in the pursuit of immediate money was the name of that game. Whatever it took to make immediate profits, even if it meant selling and sacrificing the capital and people was done in the pursuit of the immediate cash goal. That stupid, short-term tactic hurt many hard-working Americans, and it hurt our nations' overall competitiveness in many areas. And, incidentally, europeans, and the EU Trade Commission rejected this tactic mainly because it is not in keeping with the long-term, strategic business AND social goals of their community. Wow, now Americans are beginning to realize that there's more linkage between business and social goals that Jack Welch ignored at the detriment to America's long-term strength. The question of our business leaders' capabilities should be 'Can they build a business empire like Henry Ford did, not how much money can they generate in two years?' That's the true test of a business leader! Each of Jack Welch's rules still hold true - as these are basic fundamentals of any business game.What has changed in today's scenario is the pace of the game and the complexity. However the basic rules remain the same - </li> <li> 1. Big Dogs own the street - still holds true...they have the ability to make accquistions, take risky projects and marketing power to introduce new products. The have the capacity to mitigate country or product specific losses without having a huge impact on bottom line. Nimble is critical...what Jack Welsh said about being lean and mean can be interpreted as being having the might but also being nimble 2.Being No.1 or No.2 - Unless the thrust is to excel and rule the market, the company will only be a follower ...the drive to be No.1 or No.2 will make the company play offensive rather than a defensive game 3.Shareholder's value - All sucess needs to be translated into the bottom line. It is the final aim to give the maximum return to the shareholder's dollar invested. The customer being the king is only a means to develop better products as per customer requirements to finally increase profit and improve shareholder;s value. The logic is simple...no company with want to meet customer needs at the cost of reducing shareholder value. 4. Being lean and mean - Being nimble as reworded today, ability to move in and out of new products , markets, and adapt to changing scenarios is critical to survival....nobody did this better than GE when the started moving production and services, R&amp;D to low cost countries before it came into fashion in the current decade 5. Rank your players go with the A's - To be No.1 or 2, to introduce the best products, to play offensive, one had to have the best guys on board...The poor performers would pull down productivity and morale ...so definitely a "must leave" category. This is even more important now when one has to be nimble and and increase customer value without increasing cost. 6. Hire a charismatic CEO - Well Jack Welsh was one of the most charismatic CEO's of his time who influenced a whole generation during his time...and his charisma was built on real performance and not on hollow quotes. Charisma is built on sucess, courage to tread the untrodden path and be path breaker not a follower and Jack Welsh did all that and more. 7. Well company's soul i...</li></ul>