Leadership
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4/26/2012 @ 2:35下午 |2,889 views
Jack Welch: GE & The Corporate Practice Of Public Hangings
“At GE, the only things that move the culture are ones that show up in our income statement. It’s just the way we were raised.”
Jeff Immelt, “The Process of Growth”, HBR 2006
In my article yesterday, David Brooks: Competitiveness vs Creativity: GE vs Apple,
I discussed how GE’s culture of competitiveness is proving to be much
less successful than Apple’s [AAPL] culture of creativity aimed at
continuously adding new value for customers.Thus GE’s CEO Jeff Immelt indicated in 2006 that GE’s approach of running the company by what affects the bottom line is a permanent part of the GE culture: “It’s just the way we were raised.”
And how were the managers of GE raised? Some light was shed on this issue on March 29, 2012, when Jack Welch, who was CEO of GE from 1981 to 2001, appeared on CNBC’s Squawkbox.
Goldman Sachs & Greg Smith: hold a public hanging
The conversation began with a discussion as to what Goldman Sachs [GS] should do in the light of the Op.Ed. piece written by Greg Smith about the culture at Goldman where clients were said to be treated like “muppets”.Welch said: “This isn’t about Greg Smith. It’s about Greg Smith’s manager and that manager’s manager. You go in and you look at how Greg Smith was appraised. Was Greg Smith told of his shortcomings? Or was he getting check-marked, ‘Fully satisfactory’? And then you get on with the business of making them accountable.”
In other words, find one or two managers to blame and hold a public hanging.
Welch went on:
“If you don’t have public hangings for bad
culture in a company, if you don’t take people out and let them say,
they went home to spend more time with the family. It’s crazy.”
“Public hangings are teaching moments.
Every company has to do it. A teaching moment is worth a thousand CEO
speeches. CEOs can talk and blab each day about culture, but the
employees all know who the jerks are. They could name the jerks for you.
It’s just cultural. People just don’t want to do it.
“If you lay out, ‘This is why Mary left.
Mary left because she was not gender-blind. She wouldn’t globalize the
company. She’s a good person, but she didn’t fit our values.’ Whenever
someone goes, there’s got to be a reason why they go. If you want to
build a culture, culture really counts. “Culture drives great results.
You talk about it all the time. You measure your people and you take
action on those that don’t measure up. There are people who did bad
things there. Greg Smith didn’t make it up. So some people got away with
doing bad things. So you go in and you hang those people. They have to
be hanged publicly. Public hanging is an awful expression, but it is
what leadership is all about. It teaches others what you will tolerate
and what you won’t tolerate. There’s no other way around that. You have
three or four people who are horse’s asses and you get them out of the
place and the game changes. I’ll guarantee it.”
Strengthening the culture by public hangings
Welch waxed lyrical about the importance of corporate culture.“Everybody in America,” Welch said, “not just Goldman Sachs, has got to pay attention to the culture as much as the numbers. Great cultures deliver great numbers. Great numbers don’t deliver great cultures. So when you’re measuring people, you’ve got to have a set of behaviors, whether they be, like, treat people like the way you’d like to be treated yourself, treat customers the way you would want to be treated, whether it be speed, whether it be trying your best to promote them. You measure performance against that, against your performance in numbers. You put people on quadrants.
- One quadrant is great culture/great numbers. Onward and upward for these people.
- Another quadrant is bad numbers/bad culture. Bad news. Easy. Get them out.
- The third quadrant is good culture/tough numbers. Give them another chance. They buy into what you’re doing. They might have a family problem. Give them a shot.
- The one the kills companies is the fourth quadrant—the horse’s ass, the one who has cultural problems and good numbers. The CEO says, given them one more quarter and the problem will be fixed.”
In other words, the good culture/bad culture part of Welch’s quadrants somehow got lost. The message that got through and that stuck was the overriding focus on “making the numbers.”
The case of Robert Nardelli at Home Depot
The stars and the survivors at GE were those who had good numbers. This became obvious when one of the GE’s top managers, Robert Nardelli, who was the runner-up to Immelt to be CEO at GE, became the CEO of Home Depot [HD]. Nardelli’s blunt, autocratic command-and-control management style turned off employees and the public alike. Nardelli cut back on experienced full-time employees and replaced them with inexperienced part-time help. In the short run, this move helped Nardelli make his numbers by reducing costs, but undermined customer service at the very time when competitors were making inroads into Home Depot’s business nationwide. In due course, Nardelli was forced out of Home Depot: he became the CEO of Chrysler until its bankruptcy.The practice of routine public hangings
The focus on ‘making the numbers’ is also reinforced by GE’s widely emulated practice of culling the bottom 15 percent of its staff on a systematic basis. Regardless of absolute merit in these firms, if you are at the bottom of your cohort, you are on your way out.The impact of such practices at Microsoft [MSFT] has been described thus:
“Manager favoritism runs rampant in the
company, it can have a direct impact on how well you do regardless of
metrics. HR has covered themselves with a clause in the rating system,
“In relation to your peers.” Let’s say that you have a team of rock
stars, not uncommon at Microsoft, of a pool of 50 people approximately
3-4 people will need to be placed into the lowest rating which means
they will be on a program that will be difficult to get out of and
likely asked to leave the company… If you are reporting to a manager
that you don’t get along with, your days will potentially be numbered.”
NFL and the practice of public hangings
One might contrast the practice of routine public hangings practice at GE and Microsoft with the more selective approach of the National Football League (NFL).In 1962 some NFL players were found to be involved betting small sums of money on the outcome of football games. In that season, Paul Hornung, the Green Bay Packers halfback and the league’s most valuable player (MVP), and Alex Karras, a star defensive tackle for the Detroit Lions, were accused of betting on NFL games, including games in which they played. Pete Rozelle, the NFL Commissioner, responded swiftly. Hornung and Karras were suspended for a season. As a result, the NFL has remained quite separate from gambling. The coaches and players spend all of their time trying to win games, not gaming the games.
A similar approach was adopted by the NFL when it discovered recently the practice of paying players bounties for injuring other players. The NFL suspended one of the most successful and widely admired coaches for a year without pay, sending a clear signal that such practices would not be tolerated.
The NFL’s punishments are highly focused on specific offenses and aimed at rooting out those practices permanently. Imagine how ineffective the NFL’s actions would be if they routinely punished “the bottom 15 percent of coaches” for no particular reason. The punishments would create a climate of fear, and distract from the playing of the game.
Similarly at Apple [AAPL], there were public hangings but they were in response to the specific offense of being unresponsive to customers. The following incident, reported in a recent article by Adam Lashinsky in Fortune captures the essence:
Shortly after the launch event, he
summoned the MobileMe team, gathering them in the Town Hall auditorium
in Building 4 of Apple’s campus, the venue the company uses for intimate
product unveilings for journalists. According to a participant in the
meeting, Jobs walked in, clad in his trademark black mock turtleneck and
blue jeans, clasped his hands together, and asked a simple question:
“Can anyone tell me what MobileMe is
supposed to do?” Having received a satisfactory answer, he continued,
“So why the f*ck doesn’t it do that?” …
On the spot, Jobs named a new executive to run the group.
It wasn’t that Steve Jobs was kind and gentle with his employees. He
wasn’t. What he brought to Apple was a fierce commitment to see the
world honestly through the eyes of the customer and to do whatever was
necessary to delight them.Creativity is incompatible with climate of fear
The problem with Jack Welch’s practice of public hangings is not that they occurred, but rather that they occurred routinely, and so create a culture of competitiveness that undermines the openness needed for innovation. It encourages a workplace where people are focused on ‘making the numbers’, cultivating their boss and staying out of trouble.The practice of routine public hangings sounds tough, but is in fact weak. As David Brooks’ column suggests, it celebrates competitiveness over creativity. It ignores W. Edwards Deming’s dictum to drive fear out of the workplace. By doing the opposite and instilling fear throughout the workforce, it eliminates the possibility of a culture of continuous improvement.
In the 20th Century, big organizations could get by with such practices. But times have changed. Continuous improvement, which was once an option, is now a necessity. The antiquated 20th Century management practices at GE and Microsoft need to be replaced with a radically different workplace, focused on delighting customers, where managers become enablers rather than controllers, where the work is coordinated by dynamic linking rather than bureaucratic practices like routine public hangings, where the values of continuous improvement and transparent and communications are horizontal rather than top-down commands.
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