Not everyone saw that side of Welch. Some rank-and-file employees, for example, grumbled about the unrelenting pressure on them to perform. «No matter how many records are broken in productivity or profits, it’s always ‘What have you done for me lately?» ’ said Stephen Tormey, who negotiated the United Electrical Workers contract. «The workers are considered lemons, and they are squeezed really dry.»
Other critics have questioned whether the pressure Welch imposed led some employees to cut corners, possibly contributing to the defense-contracting scandals that have plagued GE or the humiliating Kidder, Peabody bond-trading scheme of the early 1990s that generated bogus profits.
Stick and Carrot
Few would dispute that Welch was seen as a demanding executive who aroused a mixture of awe and fear. Aware of the daunting effect he can have on people, Welch worked hard to counter that image. Not long ago, recalled human relations chief William J. Conaty, one manager who had to make a presentation before Welch was so apprehensive he was shaking. It was the first time he had met Welch, who was passing through St. Louis. «I’m so nervous,» the manager confessed to Welch. «And my wife has told me she’ll throw me out of the house if I can’t get through this presentation.»
At day’s end, when Welch was back on the corporate plane, he immediately arranged for a dozen roses and a bottle of Dom Perignon to be delivered to the man’s home. He then wrote a note to the wife: «Your husband did a fantastic job today. We’re sorry we put him and you through this for a couple of weeks.»
Welch set precise performance targets and monitored them throughout the year. And each of Welch’s direct reports received from Welch handwritten, two-page job evaluation at the end of every year. Attached to the detailed notes were his jottings from a year earlier, with new comments written in red pencil: «Nice job.» «Still needs work.»
Every bonus, and every stock-option grant to Welch’s 20 or so direct reports came with a candid talk about performance. «There are carrots and sticks here, and he is extraordinarily good at applying both,» said a senior VP. «When he hands you a bonus or a stock option, he lets you know exactly what he wants in the coming year.»
Welch skillfully used rewards to drive behavior. Welch demanded that the rewards a leader disbursed to people be highly differentiated. Although GE set an overall 4% salary increase as a target in 1998, base salaries could rise by as much as 25% in a year without a promotion. Cash bonuses could increase as much as 150% in a year. Stock options, once reserved for the most senior officers at GE, have been broadly expanded under Welch. Now, some 27,000 employees get them, nearly a third of GE’s professional employees. Unlike many companies that hand out options as automatic annual grants, Welch did not want GE’s program to be perceived as a «dental plan.» So everyone who received options didn’t get them every year.
Welch has been a major beneficiary of stock options. Yet few things energized Welch as much as reviewing a list of GE employees who cash in their rewards. Combing through the names, Welch could hardly contain his enthusiasm – for the wealth he has put into the hands of people whose names were unfamiliar to him. In the first quarter of 1998 alone, some 3,900 employees exercised 8.7 million options with a net value of $520 million. «It means that everyone is getting the rewards, not just a few of us,» he said. «That’s a big deal. We’re changing their game and their lives».
While analysts on Wall Street or GE’s own investors viewed Welch’s likely legacy as creating the world’s most valuable company in stock market terms, Welch himself saw things quite differently. The man who spent more than 50% of his time on people issues considered his greatest achievement the care and feeding of talent. «This place runs by its great people,» said Welch. «The biggest accomplishment I’ve had is to find great people. An army of them. They are all better than most CEOs.»
While many companies profess to run as meritocracies, in reality, they are often conscious of class. At GE many of the company’s most successful executives were, like Welch, the first in their families to earn college degrees. When it came time to pick a new CFO, for instance, Welch passed over several candidates in line for the job in favor of then 38-year-old Dennis Dammerman two layers down in the ranks because he was impressed with how he had handled other tough assignments.
In every potential leader, Welch was looking for what he called «E to the fourth power.» That was his term for people who have enormous personal energy, the ability to motivate and energize others, «edge» – the GE code word for being instinctively competitive – and the skill to execute on those attributes.
* * *On September 7, 2001, Jack Welch said goodbye to GE, and its people. He appointed Jeff Immelt to succeed him and set in place a staff that he believes will support his successor. The next chapter in GE’s history began.
Source: Business Week (online), June 8, 1998, abridged
Essential Vocabulary
1. market value – рыночная ценность
2. shareholder value – ценность для акционеров
3. headhunter n – специалист по подбору кадров
4. turnaround n – благоприятный поворот (конъюнктуры, дел компании); вывод компании из кризиса
turn around v – выводить (компанию) из кризиса
5. double-digit a – двузначный
6. operating earnings – операционный доход
7. acquisition n – поглощение; приобретение
acquire v – поглощать; приобретать
8. emerging market – развивающийся рынок
9. asset n – актив
10. merchandise n – товары, торгуемые в розницу
11. chain of command – цепочка (иерархия) подчиненности
12. entrepreneur n – предприниматель
entrepreneurship n – предпринимательство
entrepreneurial a – предпринимательский
13.lever n – рычаг
14. agenda n – повестка дня
15. division n – подразделение, деление; разделение
16. creativity n – творчество
create v – создавать
creative a – творческий
17.borrowing n – заимствование
borrower n – заемщик
borrow v – заимствовать
borrowed a – заемный
18. gap n – разрыв
19. gain n – повышение, рост (курса акций, цены); прибыль, доход, выгода
gain v – зарабатывать, добывать, выгадывать, выигрывать; получать, приобретать, достигать, добиваться
gainful a – доходный, прибыльный, выгодный; оплачиваемый
20. implementation n – претворение в жизнь
implement v – претворять в жизнь
21. equipment n – оборудование
equip v – оборудовать
22. approval n – одобрение, утверждение
approve v – одобрять, утверждать
23. return on investment (ROI) – доходность инвестиций
24. facility n – (производственная) мощность, здание; кредитная линия, схема кредитования
25. report n – отчет, доклад; подотчетное лицо
report v – отчитываться, докладывать; быть подотчетным
26. average v – в среднем равняться
average a – средний
27. headquarters n – штаб-квартира
28. maintenance n – поддержание в рабочем состоянии, ремонт; эксплуатационные расходы
maintain v – поддерживать в рабочем состоянии, ремонтировать
29. revenue n – выручка
30. negotiation n – переговоры
negotiator n – переговорщик
negotiate v – вести переговоры
31. defense n – оборона; оборонная промышленность
32. bond n – зд. облигация
33. human relations (HR) – отношения с сотрудниками
34. job evaluation – оценка результатов работы сотрудника
35. stock option – опцион на акции
36. vice-president (VP) – вице-президент
37. base salary – базовая зарплата
38. exercise n – упражнение; осуществление, использование (права), исполнение опциона
exercise v – упражняться; осуществлять, использовать (право), исполнять опцион
39. stock market – фондовый рынок
40. Сhief Financial Officer (CFO) – главный финансовый директор
41. assignment n – задание; уступка; назначение; поручение
assign v – назначать; поручать; уступать
42. appointment n – назначение; должность; встреча, прием
appoint v – назначать, утверждать; договариваться (о встрече), назначать встречу; предназначать, отводить
43. staff n – штат, персонал
Jack Welch’s Leadership Principles
– Face reality as it is, not as it was or as you wish it were;
– Be candid with everyone;
– Don’t manage, lead;
– Change before you have to;
– If you do not have a competitive advantage, do not compete;
– Control your own destiny, or someone else will.
Exercise 1. Answer the following questions.
1. Why is Jack Welch considered the greatest corporate leader of the 20th century? 2. How did he achieve such a tremendous success in creating shareholder value? 3. What was he focused on? 4. How did he manage to combine a small-company environment with big-company resources? 5. Was Welch a firm believer in human creativity? 6. What is Six Sigma program and what benefits did it bring to GE? 7. How did Welch interact with his people? 8. How did he use rewards to drive performance? 9. How did Welch promote people?
Exercise 2. Describe a great manager that you know or that you’ve read about and identify features and characteristics that make him or her great.
Exercise 3*. Answer the following multiple-choice question.
What makes the following persons world-famous?
Henry Ford I
1. He invented and introduced an assembly line.
2. He began to pay his workers $5 per hour thus creating potential consumers of his cars.
3. He drastically improved productivity and cut costs in his enterprises.
4. He believed that the more you criticize your people the worse they work.
5. All of the above.
6. None of the above.
Pavel Tretiakov
1. He headed a highly profitable timber-processing factory.
2. He was a major sponsor of art.
3. He developed and commercialized nylon.
4. He acquired oil fields in Baku from the Nobel family.
Lee Iacocca
1. He is the pioneer of venture capitalism in the US.
2. He developed the U.S. anti-monopoly legislation.
3. He turned Chrysler around and saved it from bankruptcy.
4. He launched the first mini computer.
Steve Jobs
1. He founded Apple Computers.
2. He was the richest tycoon in the world.
3. He was CFO of General Motors.
4. He developed and promoted equity theory of motivation.
Vagit Alekperov
1. He is CEO of one of the biggest Russian oil companies.
2. He was at the helm of LUKOIL for two decades.
3. He was very successful in internationalizing LUKOIL’s business activities.
4. He is one of the most influential business leaders in Russia.
5. All of the above.
6. None of the above.
Exercise 4*. Fill in the blanks using terms given below.
Who is Jack Welch?
Jack Welch is the most admired……. in the world. His 20-year reign as the head of General Electric………. the company from the bureaucratic behemoth to dynamic and revered powerhouse. During his tenure, GE……… grew from $13 billion to $500 billion. In the process, Welch’s management………. have made him the most influential business leader of his era.
In April 1981, Welch assumed the helm of GE and it was here that his… would begin. First, he adopted a strategy that each…….. must be #1 or #2 in their markets – or in his memorable phrase, they would need to «fix it, sell it, or close it.» Within five years, one of every four people would leave the GE………, 118,000 people in all, including 37,000 employees in businesses that were sold. The……… and closures that resulted earned him the now well-known moniker, «Neutron Jack.»
While the media attacked his policies, Welch remained……… on the job at hand. After visiting a Japanese manufacturing plant in the mid-1970’s he found himself awed by their……. The awe gave way to fear that the Japanese would be a threat, as they tore apart the…… in industry after industry. It was the search for a business safe from the perceived Japanese threat that led Welch to…… RCA for $6.3 billion in 1985.
Welch made GE a people company where ideas flourished and boundaries disappeared. Welch pressed his theory of a «Boundryless» culture in which all levels of the company participated in innovation and………. Ironically, in growing this people culture, he adopted a way of……… his employees that could seem brutal. He ordered all 4,000 managers in the company to make……….. annually. Everyone was to identify the top 20% of…….. to be nurtured and strongly………..; the middle 70% were the strong workers who were the heart and soul of operations; and the remaining 10% were those that either needed to be improved or eliminated.
In his second decade, Welch focused on four basic initiatives: Globalization, Services, Six Sigma, and e-business. During globalization, Welch traveled the world…………. in such countries as China, in Japan, in India, and in Hungary. The services division, meanwhile, grew from $8 billion in 1995 to $19 billion in 2001 under Welch’s……….. The Six Sigma effort, a mathematically grounded program that improves processes, decreases variance, and creates more perfect products while………, was……….. in 1996. Finally, in e-business, Welch came to recognize the enormous impact this technology would have on the company as it allowed GE to expand its markets, find new…………, and make its…………. more global.
Terms:
leadership, customers, payroll, rewarded, CEO, closing deals, reducing costs, acquire, focused, job evaluations, innovations, division, layoffs, cost structure, problem solving, differentiating, launched, suppliers base, market value, staff, efficiency, transformed, legacy
Exercise 5. Translate into English (continued from lesson 3).
Ли Якокка эффективно возродил «Крайслер». В течение трех лет он сократил 33 из 35 вице-президентов. Ему пришлось уменьшить размеры компании, уволив множество рабочих, менеджеров и бо€льшую часть центрального аппарата, при этом устранив несколько уровней управления. Когда дела в компании шли особенно плохо, чтобы показать, что все находятся в одной лодке, Ли Якокка урезал свою зарплату до символического 1 доллара в год, до тех пор пока финансовое положение компании не улучшится.
Ли Якокка изменил принципы работы компании с дилерами, наладив сотрудничество между ними и сбытовиками «Крайслера». Он успешно использовал новаторский маркетинговый прием – продавал автомобили фирмам, сдающим машины напрокат, тем самым обеспечивая себе косвенную рекламу среди клиентов, которые брали их в аренду.