Sunday, November 8, 2009

4 E’s of Leadership by Jack Welch


About Jack Welch:
Ø      In his 20 years at the helm of GE, he increased the value of the company more than 30 times over
Ø      During his tenure at the helm, GE turned out more Fortune 500 CEOs than any other company in history
Ø      He sold off more than 100 businesses and fired more than 100,000 employees
Ø      Welch fired 1,18,000 people, including 37,000 people from businesses that were divested.
Ø      Under Welch, the company lost less than 1 percent of it’s A’s every year.
Ø      By the time Welch retired, more than 30,000 GE managers had received the stock options. He made millionaires out of hundreds of the managers he considered the company’s very best.
Ø      When Welch took over, GE had revenues of about $25 billion. When he stepped down, GE was a $ 130 billion company. The organic growth under Welch averaged under 10% per year. It was a torrid pace of acquisitions in the Welch era that helped fuel the GE growth engine. GE made an astounding 1,200 + acquisitions which accounted for about 40% of GE’s growth.


4 E leaders should have following characteristics
1. Energy: People who move 95 Miles/Hr in a 55 Miles an hour world. They embrace the change. Emotional energy – the kind of energy that a leader projects to help build the spirit or morale of an organization. It is an energy that reaches across people and binds together individual contribution into a purposeful whole. Emotional energy is the passion that gets the job done.

2. Energizes: They know how to spark others to perform. They are visionary. They know how to drive people towards a vision. They are selfless in giving credit when things go right and taking blame when things go wrong. They don’t engage in turf wars, operate in silos, or tolerate backbiting behavior. They instill confidence into the soul of organization. The new ideas are the lifeblood of the organization. Energizers aren’t necessarily the source of ideas; more likely, they encourage others to voice to voice their ideas. Further they ensure that these ideas are surfaced, celebrated and acted upon.

3. Edge:  They are competitive. They know how to make the really difficult decision.
Welch urged managers to go for the “quantum leap” rather than play it safe. Encourage your direct reports to do the same, and make sure that you don’t punish them for failure.
Leaders with edge know how to say yes or no and “avoid the maybes”


4. Executes: They are consistent performers. They know how to convert energy and edge into action and results. Further, people who execute effectively understand that activity and productivity are not the same thing.
Bossidy and Charan write that many failed corporate strategies failed mainly as a result of poor execution. An organization will execute consistently only if the right culture, practices, rewards, and  so on are deeply ingrained in the fabric of the company, and if the top management remains involved (execution can not be delegated). The authors also assert that managers who expend valuable company resources on other programs while ignoring execution are “building the houses with no foundations.”
Jeff Immelt got an edge over other competitors for CEO’s position for this quality.

Jack Welch’s categorization of leaders:
Type A - They live the values and make the numbers.
            They articulate the vision of the company throughout the organization, while they take care of the company’s business. These are the leaders whom Welch and his team worked hardest to retain.
Type B - They live the values but do not always make the numbers.
            Welch felt that these individuals should be given a chance to succeed either in their current job or in another assignment.
Type C – They do not live the values but they make the numbers.
            Welch concluded that the managers (even highly productive ones) who did not live the organization’s values should be terminated. In the long run, Welch argued, an organization can succeed only if the entire team is operating out of same playbook.

It is not worth trying to convert type B or type C leaders.

Under Welch, GE kept 99% of it’s “A” players and also did a thorough postmortem every time it lost one.

Jack Welch said -
1. His one of the famous statements is “the smartest people in the world hire the smartest people in the world,” but the truth is that he looked for far more than smarts.

2. “A primary task in taking company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and ultimately, for the truth to be heard.”

3. “You have no right to be a leader if you don’t have it in your soul to build others. Nothing is worse than a whirling dervish who bores everyone. You need fertilizer and water.”

4. “This boundaryless learning culture killed any view that assumed the GE way, or even the best way….And the operative compulsion is to find out who has the better idea, learn it and put it into the action-fast.”

5. “If you and I and the business leadership of this country can have the self confidence to let people go – to create an environment where each man and woman who works in our companies can see a clear connection between what he or she does every day, all day, and winning and losing in the real world – we can become productive beyond our wildest dreams.”

6. “If you want to get the benefit of everything employees have, you have got to free them, make everybody a participant. Everybody has to know everything, so they can make the right decisions by themselves.”

7. Ask yourself Drucker’s question: “If you were not already in the business or market, would you enter it today, knowing what you know?”

8. “If you put a little more runway in front of someone and encourage them to take off – at high speed, in new direction – good things happen. You stretch that person’s vision.”

9. “We have found that by reaching for what appears to be impossible, we often actually do the impossible; and even when we don’t quite make it, we inevitably wind up doing much better than we would have done.”

10. Think of the last time your organization experienced a serious defeat or setback. Face reality by identifying the possible causes: Was it because manager dropped the ball? Was it the result of a poorly conceived organizational structure that paralyzed decision making? Was it because everyone was too polite or dysfunctional to articulate the problem before it was too late? Whatever it was, purge the company of this and other productivity killing cancers.

Being practical:
Welch expected that 2 out of 3 who were in race to become successor can leave the organization and hence asked all of them to submit the successor plan for the business they were heading so that business should not get impacted with their move.

Others said -
“Leadership development is about helping people grow, and if I can get people as individuals growing, then I have got a company that grows.” – James McNerney, who was competing with Jeff Immelt for the position of CEO in GE and then became Chairman of board & CEO of 3M.

“I learned from the experience. Sometimes you have to fail to win.” – Robert Nardelli, who was competing with Jeff Immelt for the position of CEO in GE and then became Chairman of board & CEO of Home Depot.
“Being a leader often means making decisions that others call foolish or wrong. It takes edge to stick to your plan when critics hammer you everyday.” - Nardelli

“I get more satisfaction from seeing things get done than I do about philosophizing or building sand castles. Many people regard execution as detail work that’s beneath the dignity of a business leader. That’s wrong. It’s a leader’s most important job.” – Larry Bossidy, former CEO and Chairman of the board, Honeywell


It is worth reading this book as Welch has justified the each and every point. It has not only the GE Authentic Leadership Model consisted of 12 traits that best describe the Welch leader but also a questionnaire to judge yourself. A questionnaire to assess your “energy” quotient & other questionnaires are also enclosed in a book. First half of the book contains Welch’s leadership model. Whereas the second half describes how the leaders who used to report directly to Welch turned around the other organizations when they could not become CEO of GE. 
You will also find a chapter on Vivek Paul who was CEO of Wipro. Vivek used to report to Jeff Immelt in GE. When Vivek Paul took over as CEO of Wipro in 1999, it was US $150 Million. However, he set an ambitious target to become US $ 4 Billon company by 2004. Though it ended up becoming US $1.3 Billion company by 2004, the company grew by CAGR of 54% despite dot com bubble burst in 2001 and got recognition as one of the leading IT vendors from India.This book is full of learning.

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