Electronic Design

Building People And Killing Bureaucracy

They called him "Neutron Jack." They said he'd never tame the massive bureaucracy and turn GE into a world-class competitor. But they were wrong. Today, Jack Welch, the retired president and CEO of GE, is considered the CEO of CEOs. Now, under his 20 years of leadership, GE is a leading dynamic corporation.

Welch hates bureaucracy. Conversely, he loves top-notch people who take chances, build businesses, and make the bottom line sing. Starting in 1981, he turned GE from a stolid Fortune 500 corporation into a dynamic, market-driven, product-oriented competitive engine. You can read all about it in Welch's new autobiography, Jack: Straight From the Gut. It's worth the read.

Welch revamped GE, creating a flexible, competitive powerhouse. He did this by empowering individual contributors and managers. As he wanted to enable the best, he gave managers their heads and let them stretch to out-of-reach goals. His focus was simple: "If we are not number one or two, either fix, sell, or close the business." He aimed for winners, and his people delivered winners. To get there, Welch cut bureaucracy and red tape where he found it.

Unlike most CEOs, he spent at least half of his time on people, meeting and reviewing them. "Change happens because you put the right people in place to make it happen. It's people first, strategy and everything else second," he says.

Welch favored intense, person-to-person, no "BS" reviews. If you knew your onions and had a plan and the drive to carry it out, he was your champion. Conversely, if you weren't on top of the situation or tried to mislead, you found out why Time named Welch the "toughest manager in America."

Under Welch, GE's yearly reviews divided people into the 20% top performers (A's), 70% critical middle (B's), and 10% low performers (C's). You can guess what happened to the C's.

So what has this to do with us, with electronics? Well, for starters, Welch began remaking GE in the early 1980s, right into the teeth of a recession. He didn't just cut and milk the cash cows. Instead, he started to build a new competitive GE. His is an example of what can be done in bad, and in good, times. Some issues that he tackled, which we might use, include:

Innovation. He pushed "out of the box" thinking. Welch believed that given a challenge, such as a low-reliability CAT scanner, you could engineer a high-reliability solution using innovation and plain dedication.

Reality check. Facing reality was a primary management and engineering requirement. What is true today counts, not what was traditional or done yesterday.

Boundaryless. Welch crossed organizational boundaries to get the best in the breed. Primary targets for adoption were whoever, wherever, and whatever worked. Sources also included customers and outside companies.

E-business. Welch saw the Internet as a winner for established companies. We can use it to expand services and cut internal paperwork and overhead costs.

Six-sigma. He adapted six-sigma (3.4 defects per 1-M operations) techniques and methodologies to reduce costs and increase productivity. He applied six-sigma error reduction to all activities, not just manufacturing. Welch estimates that going from three- or four-sigma to six-sigma cut costs significantly, averaging on the order of 10% to 15% of sales revenue.

Jack Welch's competitive model is worth considering. After all, we are in a recession, as was Welch when he took on GE. This is our time to fish or cut bait, to either hunker down and wait for an uptick or build for a competitive future. The '80s recession didn't stop Welch. What about us?

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