When Jack Welch took over as CEO of GE in 1981, it was a large organization with almost monopolistic status in various businesses that it operated in.
The company had a soft culture that was dominated by a numbers approach.
Jack transformed the company with his 3-pronged approach:
- Be number 1 or 2 or exit
- Boundaryless behavior-make decision fast overcoming the bureaucracy
- Rank or Yank-eliminate 10% of the bottom performers every year
The focus was to squeeze out every bit of productivity from the available resources-people, plants etc., etc., to create a more profitable venture.
He laid off people, shut down businesses where he couldn’t be number 1 or 2 creating a large, highly successful organization in the bargain. GE’s market cap went from 12Bn USD to 410Bn USD during his tenure.
The downside was that he created a place where everyone was looking behind their back.
Fear of getting fired was high.
The workout consultants leading the boundary-less organization initiative became the secret police.
Manager of the Century
Dubbed the “manager of the Century”, he created a roster of Managers under him who went on the lead leading organisations like Home Depot and Boeing.
His proteges fanning across organisations tried to create the same culture to boost profits.
One prime example is what a series of Ex-GE executives did at Boeing.
While initially all the cost saving programs led to profitability going up from USD 23Bn to USD 54Bn within 7 years, eventually it unfolded.
When Airbus-320 was crushing Boeing 737, the ideal response was to create a competitive plane, another one of its “moonshots” that Boeing was known for, instead Jim McNerney went for re-imagining the 737 by creating 737 Max.
While it saved 17-18Bn USD in development cost, the resultant product was a disaster leading to series of crashes, loss of lives and eventual loss of reputation and money (150Bn USD).
Culture is a Vulture?
When outcome becomes the proof of success and failure in the short run, this is what happens.
You define objective, let’s say maximisation.
You can achieve this the hard way by creating products and services that people will buy, create a scale, and operate at it successfully.
Or you can focus on creating efficiencies by cutting down on people, processes, time and create a culture that hustles through everything.
The first way requires imagining moonshots, planning for it, creating, and executing it and having the patience to see it through.
2nd one creates unintended consequences.
Look at all the Just in time processes.
They worked till they contributed to the supply chain crisis of the pandemic.
Everyone was working at the edge of their resources when suddenly it all became too thin and the entire chain dependent on these processes stalled.
Now, don’t get me wrong, even the 1st way can fail, however at-least the attempt is more positive in nature. Its additive and not subtractive.
Patience, understanding, big picture
Whether it’s running a business, your own life or finances, the key is to have the right objectives and strategy that helps you achieve what you are gunning for.
Short-term success can make people believe that they are experts, and the delusion can las t so long that the impact of failure is larger than what anyone imagines or expects.
Watching paint dry is not for everyone, however, often, it’s the most important skill that might need to develop for your own good.
Thanks for reading
Irreverentinvestor.com 