I wonder if anybody has any good book / article references on alternatives to what Jack Welch did with GE. For years what he did was touted as genius and efficient etc. But it seems that these strategies all sort of make sense if your goal is to maximize executive pay, dividends, and share price, while cutting jobs, R&D spending (to a certain extent outside of known profit centers like plastic manufacturing in the case of GE), and in general optimizing for financial engineering rather than hard engineering improvements. Basically I think plenty of people would say that he promoted a bunch of ideas that were successful for a while but now that we have some hindsight I wonder what would be some good alternative ideas to modernize GE in a better way.
The key phrase was you can’t save your way to prosperity. As soon as your company switches focus to profitability (%) from profit (gross number) they are out of ideas
There’s an idea in some business circles about businesses where the savings _is_ the prosperity, “scaled shared prosperity” is usually the term thrown around.
Examples are companies like Amazon, Costco, or Walmart where the business model revolves around deepening the value proposition for customers through amortizing costs among greater customer numbers or aggregate buying power.
Insurance would be another example of this business model.
Not quite what you're looking for, but this book is an intriguing description of the struggles of Jeff Immelt and later GE execs to keep up GE's success after Welch's departure. In particular, trying to manage GE Finance: https://www.amazon.com/Lights-Out-Delusion-General-Electric/...
Rather, he liquidated an American icon for short term profits.
Need a business version of strongtowns, although I suppose that’s a mix of orgs supporting b corps and employee owned enterprises.
I envy engineers and construction workers who build structures that last for decades, or centuries even, some physical permanence. Perhaps there is such a model to build and protect businesses instead of boom, exit, bust, regret, repeat.
He popularized Rank & Yank, Stack Ranking, or any of the other names the practice has been called. It was one of the most pernicious trends ever promulgated in corporate America. The practice promoted one of the most toxic work environments that I experienced in 40+ years of managing. When the practice was finally scrapped, productivity and employee job satisfaction both surged.
> As the Corner Office columnist for The New York Times, I've spent the last several years speaking with hundreds of top CEOs about their careers, their mentors, and their approaches to management. Over the course of these conversations, it's become clear that the best leaders share a common set of attributes — characteristics like emotional intelligence, the ability to think long term, and a commitment to serve multiple stakeholders at once.
> In my new book, I explain what he got wrong.
It seems odd to accuse Welch of poor long-term results. The guy was CEO of GE for 20 years. To put this in context, that's longer than Google's entire post-IPO history. And during these 20 years, he grew GE by 30x, and outperformed the index 3.3x, despite GE already being a large blue-chip corporation when he took over. How many of the people interviewed by this author have a more successful long-term track record?
If you're judging Welch by metrics such as "compassion" and "empathy" and "humanity", you can argue that he got a ton wrong. By that same lens, you can also argue that people like Steve Jobs, Elon Musk, and Alex Ferguson were absolute failures. But if you're judging Welch as a businessmen, using the same metrics that most businessmen aspire to attain, it's downright silly to condescend to him.
That's one way of looking at it. Alternative view: he burned up a cash cow for short term gains and it ended up being a shell of the company at its peak.
You can get a lot of mileage from a loom if you burn it, so much heat! What will you even do with all that heat? And then you need to make more fabric. Too bad you burned your loom.
> He did it by embracing financialization. GE was an industrial company when he took over — making most of its money selling appliances, light bulbs, power turbines and jet engines. By the time he retired, the company derived much of its profit from GE Capital, which was essentially a giant unregulated bank. Welch called it 'the blob' — it was an amorphous, ever-changing collection of financial assets, capable of delivering whatever adjustments were most advantageous to the parent company in a moment’s notice.
The finance division became GE's center of gravity, ultimately accounting for 40 percent of its revenue and 60 percent of its profit. With so much money coursing through the finance division, Welch used it to his advantage, shifting zeros throughout a sprawling international web of subsidiaries, and extracting whatever he needed to meet or beat analysts’ estimates for nearly 80 quarters in a row, an unprecedented run. It was what one influential analyst called 'earnings on demand.'
"There was very little transparency," said Beth Comstock, a longtime GE marketing executive. "GE had a financial army that was able to close the quarter the way we’d said we would."
And Welch pursued his quest to inflate GE's valuation with a gusher of share buybacks and dividends that fundamentally altered expectations about who is entitled to the riches of this land. After decades when corporations proudly talked about how much they were spending on payrolls, research and development, and even taxes, Welch made it clear that if companies wanted to succeed on Wall Street, they ought to put investors first.
The article explains this apparent contradiction. His sole objective was to increase share price at any cost, including derailing GE's core business and practicing all sorts of financial tricks. And the company collapsed after his exit, it is now worth less than before Welch took over. This is not what success looks like to me, even purely as a businessman.
It turns out that programmers are artisans and dreamers of new methods previously thought impossible.
It is not possible to manage them in the same way as worker bees on a factory line.
Caveat being, if you have a programmer who is clearly not interested in dreaming or being an artisan, fire their fucking ass. That's like having a dj who doesnt want to pump up a crowd.
Jack Welch had only one metric that mattered: shareholder value and gains.
The institutional investors and funds managers profited massively. So much so that companies, such as IBM copied his playbook. It's strictly about making the 1% even richer and trampling over the 99%.
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[ 5.4 ms ] story [ 48.3 ms ] threadExamples are companies like Amazon, Costco, or Walmart where the business model revolves around deepening the value proposition for customers through amortizing costs among greater customer numbers or aggregate buying power.
Insurance would be another example of this business model.
This is the legacy that Jack Welch built.
Rather, he liquidated an American icon for short term profits.
Need a business version of strongtowns, although I suppose that’s a mix of orgs supporting b corps and employee owned enterprises.
I envy engineers and construction workers who build structures that last for decades, or centuries even, some physical permanence. Perhaps there is such a model to build and protect businesses instead of boom, exit, bust, regret, repeat.
Quality, value, longevity --- as opposed to maximum profit by any available means.
> In my new book, I explain what he got wrong.
It seems odd to accuse Welch of poor long-term results. The guy was CEO of GE for 20 years. To put this in context, that's longer than Google's entire post-IPO history. And during these 20 years, he grew GE by 30x, and outperformed the index 3.3x, despite GE already being a large blue-chip corporation when he took over. How many of the people interviewed by this author have a more successful long-term track record?
If you're judging Welch by metrics such as "compassion" and "empathy" and "humanity", you can argue that he got a ton wrong. By that same lens, you can also argue that people like Steve Jobs, Elon Musk, and Alex Ferguson were absolute failures. But if you're judging Welch as a businessmen, using the same metrics that most businessmen aspire to attain, it's downright silly to condescend to him.
You can get a lot of mileage from a loom if you burn it, so much heat! What will you even do with all that heat? And then you need to make more fabric. Too bad you burned your loom.
The finance division became GE's center of gravity, ultimately accounting for 40 percent of its revenue and 60 percent of its profit. With so much money coursing through the finance division, Welch used it to his advantage, shifting zeros throughout a sprawling international web of subsidiaries, and extracting whatever he needed to meet or beat analysts’ estimates for nearly 80 quarters in a row, an unprecedented run. It was what one influential analyst called 'earnings on demand.'
"There was very little transparency," said Beth Comstock, a longtime GE marketing executive. "GE had a financial army that was able to close the quarter the way we’d said we would."
And Welch pursued his quest to inflate GE's valuation with a gusher of share buybacks and dividends that fundamentally altered expectations about who is entitled to the riches of this land. After decades when corporations proudly talked about how much they were spending on payrolls, research and development, and even taxes, Welch made it clear that if companies wanted to succeed on Wall Street, they ought to put investors first.
The article explains this apparent contradiction. His sole objective was to increase share price at any cost, including derailing GE's core business and practicing all sorts of financial tricks. And the company collapsed after his exit, it is now worth less than before Welch took over. This is not what success looks like to me, even purely as a businessman.
It is not possible to manage them in the same way as worker bees on a factory line.
Caveat being, if you have a programmer who is clearly not interested in dreaming or being an artisan, fire their fucking ass. That's like having a dj who doesnt want to pump up a crowd.
The institutional investors and funds managers profited massively. So much so that companies, such as IBM copied his playbook. It's strictly about making the 1% even richer and trampling over the 99%.
This is the American contribution to organizational dynamics.
Glad I became a "corporate America dropout" over 25 years ago.