Jack - Straight From the Gut by Jack Welch

A great read from the rise of Jack Welch, CEO of GE, to his retirement of one of America’s most admired companies of all time. There are more management principles in this book than you can shake an MBA stick at. Warren Buffet called this guy “the Tiger Woods of management”. I got this book to learn about his management ideas, so the best parts of this book for me were Sections II and IV. The rest of sections are an autobiography of his rise and endeavours as CEO.

Chapter 8: The Vision Thing

Good businesses needed to be separated from the bad, so there was the No.1 and No.2 concept – only businesses that were in market leaders (or No.2) were to be concentrated on, whereas the rest were to be fixed, closed or sold. The rationale behind this is if a business doesn’t have a long-range competitive solution, it’s just a matter of time before it’s over.

Chapter 11: The People Factory

Passion in an organisation is characterised by the 4 E’s:

• high Energy levels
• ability to Energise others
• having the Edge to make decisions
• ability to Execute promises

Employee passion is the graded on a scale of A, B and C

A’s should get increments 2 to 3 times more than B’s. B’s would get standard increments. C’s get nothing. Losing an A is a sin.

Bottom 10% elimination – 10% of the bottom performers have to go, no matter how highly they are regarded.

Chapter 13: Boundaryless: Taking Ideas to the Bottom Line

GE linked their lighting business with Wal Mart’s cash register system so that they know when they are selling out and prepare their orders before it sells out. Jack also learnt from Wal Mart that regional managers would fly in to visit the stores under them on Mondays and spend the next 4 days going through the inventory as well as visiting the competitor’s stores. They would fly back on Thursday nights and deliver their field reports on Fridays. Problems such as shortage in inventory can be sorted out on the spot.

Redefining markets so that you represent less than 10% of the total market share is a way to expand your mind on your room for growth. Take for example the 63% GE Power systems had on servicing GE products. If you broadened the market to include fuel, power, inventory, asset management, and financial services, that now shrinks into less than 1% but you now view a bigger potential for creating opportunities. It’s all in the mindset whether you perceive your market as saturated, thus do nothing about it; or a huge untapped market with vast opportunities.

Chapter 20: Growing Services

After sales service i.e. the supply of spare parts, servicing and repairing was overlooked in the high tech big equipment business. Putting emphasis in services meant that customers can justify their investment on a longer lifespan, while creating a steady income stream from the existing customer base. Today GE is spending as much time ensuring their installed “sockets” are increasingly productive, as they are on finding new “sockets”,

Chapter 21: Six Sigma and Beyond

Good example to illustrate Variation – the main concept of Six Sigma, is shown in this chapter. You can have a 50% reduction in AVERAGE delivery times and management would think you have done a fantastic job, but if the variation for this data is spread out widely, the customer does not take note of your “fantastic” improvement. The thing the customer notices is whether or not you deliver on the date you promised. Six Sigma is about consistency – delivering on your promises.

Differentiation

Jack discussed differentiation in various parts of the book, starting with Chapter 2, “Getting out of the Pile”. Everyone and everything has to have their point of differentiation or edge to stand out in life. In Chapter 2, Jack showed that even as a technician, he went the extra mile into making comparisons with other products even when not asked to do so. This is how he stood out from the rest and “got out of the pile.” The Six Sigma qualification is another way to stand out from the crowd.

Differentiation as a company was illustrated in Chapter 14, “Deep Dives” when GE wanted to break into the Japanese market. The point of differentiation he used was positioning the company to the “employer of choice for women” in an environment where women were not the preferred hires.

Chapter 24: What this CEO Thing is About

Some points of interest Jack wanted to talk about:

• Integrity – establish it and never waver from it
• The Corporation and the Community – CEO’s role is to assure the financial success of the company. Only a healthy, winning company has the resources and capability to do the right thing
• Setting a Tone – the personal intensity of business leaders determines the organisation’s intensity
• Maximising on Organisation’s Intellect – Take the best ideas and transfer them to others
• People First, Strategy, Second – Getting he right people in the right jobs is a lot more important than developing a strategy
• Informality – Creating an informal atmosphere is a competitive advantage. Passion, chemistry and idea flow from any level at any place are what matters. Everybody’s welcome and expected to go at it
• Self Confidence – courage to be open, welcome change and new ideas regardless of their source
• Passion – intensity covers a lot of sins. If there’s one characteristic all winners share, it’s that they care more than anyone else
• Stretch Targets – rather than get people responsible to deliver the numbers to provide a target (realistic or not), have the team come in with operational plans and discuss what tools they require to improve their performance and how far they can go with these new tools. This will stimulate discussion around new directions and growth.
• Celebrations – make the job fun
• Aligning Rewards with Measurements – make sure what you reward based on correct / proper KPIs.
• Differentiation Develops Great Organisations – chop off the bottom 10% performers on a regular basis
• Owning the People – Give the people their best opportunities to grow within the organisation
• Appraisals All the Time – give it
• Culture Counts – set it from day 1 and resisters have to go
• Strategy – Ask yourself the following:
• What is the detailed global position of your business and that of your competitor: market shares, strengths by product line and by region today?
• What actions have your competitors taken in the past 2 years that have changed the competitive landscape?
• What have you done in the last 2 years to alter that landscape?
• What are you most afraid your competitors might do in the next 2 years to change that landscape?
• What are you going to do in the next 2 years to leapfrog and of their moves?
• Competitors – 2 things to keep in mind:
• If the competitors are seem crazy and are practically giving their product away, it just means they have a better cost position or a strategic rationale for what it did – look into yourself and ask yourself what is wrong with you, not them.
• When you come up with an idea to blow the competition away, don’t assume they will be sitting on their hands doing nothing. They will strike back and maybe harder than you think.
• The Field – Headquarters doesn’t make anything or sell anything. Banging around the field is the best shot at getting some ideas about what was really going on.
• Markets vs. Mind-sets – Change your perspective on market share and you will open your minds to growth opportunities. (Example in Chapter 13)
• Initiatives vs. Tactics – Keep in mind your initiatives (i.e. company strategy), but keep coming up with fresh short term tactics
• The Communicator – There can never be too much repetition over important ideas you want to get through the company
• Employee Surveys – Make it meaningful. The one that GE found a breakthrough were fundamental issues around the theme: “Is the company you read about in the annual report, the company you work for?”
• Upgrading a Function – Whenever a department is not performing up to par, get all the best minds into energizing it.
• The Advertising Manager – Image matters
• Managing Loose, Managing Tight – Know when to meddle, when to let loose. There’s no form of measurement, just gut feeling and instinct.
• Chart Maker – Charts clarify thinking
• Investor Relations – Marketing people sold better stories of GE
• Wallowing – A discussion of people involved in the job regardless of job titles. Focus is on getting the job done better and diving into deeper issues
• Your Back Room is Somebody Else’s Front Room – If one department is not achieving its full potential, consider having it outsourced. The outsourcing company might do a better job and give its best
• Speed – Swift and quick decisions often prevail over regrets over delaying a decision
• Forget the Zeros – Breaking projects into smaller pieces can get greater focus and the entrepreneurial benefits of being small i.e. – agility, speed, and ease of communication