The House that Jack Built

". . .whatever sacrifice might be entailed in ruling out a possibly brilliant idea is compensated for by the better-than-average results which can be expected from a policy that can be strongly defended against well-informed and sympathetic criticism. In short, General Motors is not the appropriate organization for purely intuitive executives, but it provides a favorable environment for capable and rational men…The group will not always make a better decision than any particular member; there is even the possibility of some averaging down. But in GM I think the record shows that we have averaged up." - Alfred P. Sloan, My Years with General Motors (1963) "Being a CEO is the nuts!. . .Over the top. Wild. Fun. Outrageous. Crazy. Passion. Perpetual motion. The give-and-take. Meetings into the night. Incredible friendships. Fine wine. Celebrations. Great golf courses. Big decisions in the real game. Crises and pressure. Lots of swings. A few home runs. The thrill of winning. The pain of losing." - Jack Welch with John Byrne, Jack: Straight from the Gut (2001)
By Warren Bennis

This article appeared in 2001

If you want to understand the culture and dynamics of Corporate America and how business organizations have been successfully managed and led over the past century, these two seminal books are required reading. The differences between the books and the men who wrote them are amazingly, almost absurdly, different. Typical of Sloan's chapter headings are "The 'Copper-cooled Engine," "Stabilization," "GMAC," "The Annual Model Change," and so forth, with illustrations that are equally colorful such as Drawing of 1897 Olds, Early Buick Plant and Diesel Electric Locomotive. Some of Welch's chapter headings read like headlines from his favorite newspaper, the New York Post: "Blowing the Roof Off," "The People Factory," "Boundaryless," and "A Short Reflection on Golf." The illustrations in JACK, aside from copies of his famous handwritten notes, are photographs ofWelch with heads of state, from Queen Elizabeth II, Gorbachev, and Jiang Zemin to the past four U.S. presidents, and all sorts of high-five pictures of Jack with those Rushmorean Fortune 100 types, Bill Gates, Warren Buffet, and Sam Walton.

met Mr. Sloan at M.I.T. in the mid-50s. He was proper, reserved, and formal, more brahmin than baron, concealing quite successfully one of the most creative business minds of the first half of this century. I can't imagine anyone calling Mr. Sloan "Al," and I can't imagine "Jack" "averaging" anything up, down, or sideways. Welch, as most anyone knows, is a brash and audacious guy, a guy's guy, whose signature phrase about someone he likes or admires is, "he's a gutsy guy." Can you possibly imagine Sloan, in his dark blue suit meeting Prime Minister Tony Blair for the first time, as Jack did last year when he was lobbying for his ill-fated Honeywell acquisition, saying "Tony, I'm in deep shit"? Welch has been the most iconicized, the most admired CEO for the last half of this century, with a slew of biographies and magazine cover stories from Fortune to Vanity Fair all rhapsodizing his accomplishments, topped only recently by a Fortune cover naming him the "manager of the century."

The deeper truth is that these two leaders, each the reverse image of the other, changed the face of Corporate America and the way these behemoths are led. There are some fascinating and surprising similarities as well. Both were organization men. Sloan was with GM for 45 years,Welch spent all 41 years of his work life at GE until he retired September 7. Sloan invented the concept of the modern corporation and Welch showed how to make it work. Both men were exemplary change agents who were able to morph obdurately hierarchical organizations into new forms, appropriate for their age, Sloan, through what he called, "federal de-centralization" and Welch through "integrated diversity." Both klunkily re-defined the language of business and also recognized that language and ideas were the basis of action and used their rhetoric and ideas to animate and align their vast and diverse constituencies.

And certainly Welch is one of America's corporate nabobs partly responsible for the amazing resurgence of the American economy over the past 15 years. I don't think it's hyperbole, given the report of GE's history, to say that he has also been the role model and anthem of the best and most esteemed business practices. And why not? Growing a company that was valued by the market at thirteen billion when he took it over in 1981 and is now worth over four hundred billion dollars when he retired is what's called "wealth creation." Big time. On September 21, GE announced that it was on track to deliver double digit earnings this year, with several of their key business units averaging over 20 percent, the same day the market dropped 14 percent, the worst single day since the Depression. So the question that kept me wondering as I turned over the pages of this well-written book - John Byrne really got Jack - was whether our "most admired" will continue to be the object of enchantment for future generations of leaders.

Joseph Campbell once said that, "In medieval times, as you approached the city, your eye was taken by the cathedral. Today, it's the towers of commerce. It's business, business, business." When I ask my undergraduate students to name their most admired leaders, after they cite their family members and high school coaches and some spiritual leaders and after I implore them to name public figures other than The Endorser Millionaires like Michael Jordan and Tiger Woods, lo and behold, some business leaders get a mention usually drawn from the Rushmorean business leaders mentioned earlier. Rarely, if ever, does any politician or public leader get a mention unless they are safely interred, e.g., Lincoln or JFK. Their responses reflect both Campbell's observation and one that I consider even more important: that over the past two decades, the most important and under-reported story is how the Market trumped Politics. To paraphrase Joseph Campbell, we've become a "bottom-line" society. Of course, all that may change as a result of September 11th, 2001, the Event that will define our nascent century. Our nation's eyes, once again, are turning toward public leadership for direction and meaning, just as my generation turned to FDR and Churchill.

As an aside, perhaps one positive outcome of the September 11th tragedy will be a long-needed reversal of emphasis, away from valorizing business leaders as the sole standard of exemplary leadership. This will necessitate a huge change in our national educational priorities. Attention must be paid (as well as dollars spent) on the recruiting and educating of our public, as well as our corporate leaders.


II

Jack Welch grew up in Salem, a working class city not too far from Boston. He was an only child and raised strictly by a father who worked his entire life as a conductor for the Boston and Maine railroad and a remarkable mother, Grace, "the most influential person in my life," Welch writes, who deserves a book ofher own. If you want to understand how Jack led GE and you could read only one chapter of the book, turn to the first chapter, the one about his childhood. His formidable mother's tough-love lessons were later re-incarnated by her son in the values and beliefs he drilled into GE's culture.

To take only two of many vivid examples: when Jack was playing hockey for the Salem High hockey team (he later was captain of the UMass/Amherst team) and lost to their ancient rivals in an overtime game, he "lost it" and furiously flung his hockey stick the entire length of the rink and stalked back into the locker room. Moments later, The Mom bursts open the locker room door, grabs Jack by the shoulders and, in front of his coach, his teammates, and, for all that, her God, screams, "You punk! If you don't know how to lose, you'll never know how to win! If you don't know this, you shouldn't be playing." In an even more telling exchange with his mother, an admonition that would guide Welch and GE for his entire tenure, she said, "Don't kid yourself. That's the way it is."When Welch against all advice was determined to change GE's focus away from building nuclear reactors to servicing them, he writes, "Facing reality sounds simple - but it isn't. I found it hard to get people to see a situation for what it is and now for what it was, or what they hoped it would be. 'Don't kid yourself. It is the way it is.' My mother's advice to me many years ago was just as important for GE."Years later he would say to his executives "Don't Walter Cronkite me!" Meaning, don't put your wet babies on my desk for me to diaper. Give me the solution, not the problem.


III

There are dozens of new ideas, catch phrases and neologisms popularized by Welch, steaming out of his feverishly active brain that, for better and sometime worse, dot the business lexicon and management books. A small but fairly representative sample include "work out," differentiation, A, B, and C players, "false kindness," (as in not firing someone - and quickly - who is incompetent) Six Sigma, Vitality Curves, Managing Loose, Managing Tight," Boundaryless, Employability, and Type I, II, III, IV managers. To avoid writing a glossary and spare you a syntactical nightmare, I'm going to try to illustrate Jack's cosmology based on his own catechisms, the Two Trinities of management according to Welch.

TRINITY I: Self-confidence, Simplicity, and Speed. One thing Welch understood early on, years before the 24/7, digital age hit us, is that speed in our hyper-turbulent society is King. As historian, Stephen Kern observed, "Human beings have never opted for slower." Especially now. To get speed, argues Welch, you need self-confident people, the mother's milk of Grace, who instilled that in him. She once attributed his awkward stammer to the number of great ideas he had, all trying to tumble out. So you hire self-confident people who don't need to give you reams of papers or fancy academic gobbledygook and make it simple, which gives you speed. "Who wants to be slow?" he once asked. "Can you imagine anyone in his right mind telling his staff, 'Let's be slow, forcrissakes!'"

TRINITY II: People, Dollars, Ideas. He spends at least 60 to 70 percent of his time on choosing and developing and firing people. He interviews every single top candidate for the top 500 positions. GE has always had a terrific executive development program, often excelling the elite business schools in quality, intensity, and relevance. Nowadays, GE's "People Factory" at Crotonville has no rival.Welch spends a lot of time there standing in the auditorium, which Welch calls the "pit," sleeves rolled up, no holds barred, encouraging tough questions, loving the percussive to-and-fro-ing he thrives in. A rough estimate of the dollars poured into training and development, and I am not privy to the actual figures, is about 3 percent of the payroll. That's huge!

Not everyone can thrive or should thrive in that confrontational, competitive, edgy culture. The 4 "E's" of GE's official template of executive excellence are Energy, Energize, Edge (capacity to take tough decisions), and Execute. So all GE managers are graded into A or B or C, the hallowed Vitality Curve. If you're an A, you "make the numbers and embody GE values." A B may either make the numbers or the values and GE will work to get you to point where you can maximize both. If you don't reach that Olympiad height, you're a C and you're "out of there." Quick. A's account for roughly 20 percent of staff, B's for 70 percent and C's for 10 percent. Recently, Welch appeared on the Charlie Rose Show and said that it was necessary for organizations to continually "let go" of the bottom 10 percent of the work force. The following day Welch was in a Fifth Ave. clothing store and the manager who had seen the show asked Welch whether he really had to fire 2 of his 20 person sales staff. Welch replied "You probably do if you want the best sales force on Fifth Avenue."

About dollars, it's less complex. It's simply resource allocation. With the right people in the right spot, you allocate what's needed and rely on your "A list" to spend it wisely. Some of his major business leaders are given up to $50 million for discretionary spending. No questions asked.

Welch frequently describes GE as an "Idea pyramid" and certainly rewards ideas and with a maniacal zeal, encourages the spreading of ideas. And he shamelessly steals ideas from anywhere, anybody, anytime. He spent over a week with the befabled Sam Walton to figure out how Wal-Mart prices products and manages to get them to market so quickly. He stole Six Sigma from Motorola and really made quality # 1.When he first visited Japan in the early '80s he realized that they could "kick our butts" by manufacturing stuff quicker and cheaper than GE could, so he got out of many of the appliance businesses and mutated away from manufacturing to servicing. GE was also one of the first global companies to appoint a Chief Knowledge and Learning officer, reporting directly to Welch.


IV

In June of 1993, when Jack was really hitting his stride and GE was breaking every conceivable financial record, I spent three hours interviewing him for a book I was researching. I interviewed him again in June of 2000. In those seven years, Jack didn't change but his office sure did. In '93, the only electronic equipment in his office was a telephone. Last year his office resembled nothing so much as the set of Star Trek. Jack Welch as Spock. There were consoles and computers and all manner of high-tech switching services and screens. He just got on email in April of 1999 because his second and 17 years younger wife cajoled him to "get it." He did. And needless to say GE "got it" too. Quickly. In fact, he soon initiated a "reverse mentoring" program where 500 of GE's junior staff members were assigned to coach the 4,000 or so in the top GE bench to "get it" with advanced technology. Jack be nimble. Jack be quick.

What I remember most about those two interviews had nothing to do with Welch's strategy and business savvy and catchwords, though they were clearly present. What stays with me was the personality of the man: his passion, his intensity, his energy, his need to engage. On both occasions, after the interview ended, I looked at his chair, expecting to see only cinders. He is General Electric. What's most interesting to me about Welch's leadership, anyone's leadership, is how basically difficult it is to describe and write about it. Basically, leadership is an art form, not a science, not a recipe, not the five or six rules or effective habits of this or that. "The only thing that matters in art," Braque wrote, "is the part that can't be explained."

Welch comes about as close as anyone to explain the thick culture of business leadership. It's close. . .but no cigar. [Welch] shamelessly steals ideas from anywhere, anybody, anytime.
What makes Welch an interesting and powerful leader goes way beyond his words. What sets him apart, most of all, is his preternatural passion, which, more than anything else, has animated and motivated hundreds of thousands of workers, across one of the most complex portfolios of businesses, and to engage them in constructive activity. He is the classic "single agenda" leader, with one big interest to make GE a profitable and idea-generated firm that will provide services to all of GE's clogged cartography of stakeholders.

The passion, the single mindedness, the stubborn and skewed vision of reality that informs his genius are the qualities that make Welch a larger-than-life exemplary leader who has successfully brought not only "good things to life" but made lots of people happy millionaires.

Two other things that stay with me from those interviews which Welch, not being overly introspective, doesn't put to words, but shows rather than tells. I doubt that Welch ever read anything of Henry James, let alone read him, but it was said about James that he let "nothing go unnoticed." Welch, like James, is a first class noticer of every trend, every inflection point, every potential threat and/or opportunity that comes across and gets refracted through his GE prism. And finally, and perhaps most crucially, the man has an uncanny capacity to adapt to changing conditions, long before the symptoms become intractable and long before it's necessary to change. To see things as they really are AND have the guts to act on his occasional "lunatic" impulses are admirable qualities.


V

Now I want to return to the question I raised earlier on, whether or not the 20th Centurys "most admired" Jack Welch will be the model for future generations of leaders. The quick answer is "yes and no."What I'm certain will remain as Jack's legacy, and emulated for a good long time, are some of those qualities I just mentioned: his passion and resilience, his concern with developing leaders, his ability to quickly track every important inflection point that will affect GE's businesses, and most of all, his remarkable adaptive capacity. We should all be so gifted.

What I'm equally certain will be either dismissed or questioned by many of the young leaders that I've been interviewing over the past two years, are a set of issues really don't seem to concern Welch. I suppose it's partly generational and partly connected to Welch's character. First of all, young leaders are simply not going to "buy into" the driving intensity and eflulgent passion that had more than a little to do with the dissolution of Jack's first marriage. Yes, there was good wine, golf, meetings with heads of state, fun, learning, and excitement and all that but Welch's life was totally limned by and focused on GE. Among today's young leaders, balance is a huge issue. People are searching for some reasonable balance between work and quality of life and family. It is also admirably high on Labor Secretary's Chao's agenda. Most young leaders I know are unwilling to sacrifice an important career for their spouse's career. When Jack re-married, his wife Jane, a gifted lawyer with a brilliant future, had to give up her profession and become the "executive wife."He genuflected a little at first, meaning that he went to an opera or two, but in short order she took up golf, apparently became damned good at it, and truncated her career.

Then there are two of Welch's famous "failures," the PCB's in the Hudson and the aborted Honeywell acquisition. Welch's critics have jumped on both of those with good reason. What make both of these events sad, and in some ways tragic, is that Welch's point of view is perfectly rational and, in the case of the dredging of the Hudson for PCB's, he may even be right. As far as the Honeywell acquisition is concerned, I'm not sure any American corporation could have persuaded Mario Monti, the high commissioner for the European Union on anti-trust cases, to agree to that deal.. Perhaps, with hindsight as a guide, Welch should have known that his legendary charm wouldn't persuade Monti who isn't a "gutsy guy" and who kept refusing to call Jack Jack until the deal was done. Personally, I think acquiring Honeywell was smart and Welch made a good, but expensive try. But in both cases, I think future leaders would not characterize government as "extremists," the way Welch does, and be a lot more sensitive to the concerns of environmentalists and surrounding communities. The trouble with being "right" in the PCB case will cost GE far more than complying with what may be a wrong-headed decision by the government.

Given the turbulence, uncertainty and moral ambiguity in this Age of Vulnerability, future leaders will be called on to create cultures where questions and doubt can be legitimized and where the hubris of being stubbornly right is a folly that must be resisted. John Keats wrote a letter to his brothers in 1817 about why he admired Shakespeare. He said that one of Shakespeare's most important abilities was "negative capability," "that is, when man is capable of being in uncertainties, mysteries, doubt without any irritable reaching after fact and reason."

Jack Welch's Jack: Straight from the Gut has the power to astound with so many positive capabilities. I think the next generation of leaders will find enormous help from them, especially when augmented by Keats' advice to his younger brothers.

©Warren Bennis 2001

Jack: Straight from the Gut, by Jack Welch with John A. Byrne (Warner Business Books, 2001,) $29.95, 479pp. This review will also appear in the Los Angeles Times. Warren Bennis currently serves as visiting scholar at the Center for Public Leadership and Thomas S. Murphy Distinguished Research Fellow at the Harvard Business School. He is one of the world's leading authorities on leadership in the private, public and nonprofit sectors.