by Jack Welch
This new requirement needs a re-look with a big dose of common sense.
There is nothing wrong with directors having skin in the game. For the shareholders’ sake, directors should really care about how the company is doing. But the notion that independent directors are better for the company is having the unintended consequence, in some cases, of removing good judgment and experience from where it is needed most.
Take the case of Sam Nunn, the distinguished former U.S. senator from Georgia. Or Roger Penske, the automobile industry entrepreneur. Both were required to leave key GE board committees. Why? After leaving the Senate, Sam joined King & Spalding, a law firm that GE had done business with for decades. In Roger’s case, he had a minority interest in a small GE truck-leasing joint venture. Or take the case of Warren Buffett. Activists wanted him off the audit committee at Coca-Cola because of his large ownership stake.
Who would represent the share owners better on key committees than these three people? A professor? An accounting expert? The head of a charitable foundation? Why would share owners ever want company executives answering to people who might need a director’s salary to make ends meet? Those kinds of directors are less likely to challenge anything—they’re more likely to duck tough issues in the hope they get reappointed.
Let’s not forget that boards exist to support and guide, as well as challenge, management. It would be unfortunate indeed if Sarbanes-Oxley ends up making boards primarily adversarial in their approach. Board members can never forget their main job is to make the company work better, not to get into an us-versus-them dynamic with the very people they are supposed to help.
In the final analysis, the best directors share four very simple traits: good character, common sense, sound judgment—particularly about people—and the courage to speak up.
Laws are all well and good. But it is people, culture, processes, controls—and strong directors—that ultimately put compliance in a company’s blood.
This question came at a breakfast meeting in Copenhagen with about thirty European managers doing business for their global companies in Scandinavia:
I’m about to be transferred to run our operations in West Africa, and I’ve been told to expect that 40 percent of my workforce have AIDS or a family member suffering with the disease. Any suggestions for dealing with this problem?
No question ever floored me like this one.
And as if it wasn’t disturbing enough on its own, another person at the breakfast, an executive from a consumer goods company, spoke up right afterward. “I’m just back from our operations in Africa,” he said. “Try closer to 60 percent.”
What can a leader do in such a dire situation? What can a company do?
It is in confronting a societal problem that the results of a winning company and a good culture really come together to make a difference. At the outset of this book, I tried to make the case that winning is great because it inspires people to be happy, creative, and generous.
That was me talking from 20,000 feet. This question brings you right into the trenches.
The manager who asked this question worked for a highly profitable oil company, and I could feel that he really wanted to do something. He’ll be able to because his company is winning. He can launch programs to educate the workforce about AIDS. He can provide medical facilities and subsidize the expensive drugs the disease requires. He can really improve the lives of hundreds of people. I’ll bet he does.
Winning companies help all the time.
There are more than fifty thousand active volunteers among GE’s employees, involved in four thousand projects a year, from mentoring in schools around the world to participating in countless other programs for the disadvantaged. Because of the efforts of GE volunteers, there have been amazing community projects in Hungarian towns, Jakarta slums, and inner-city schools in Cincinnati. Not only were these projects great for the people who were helped, they were equally beneficial for the people doing the helping. Their volunteering in the streets gave their work at the office more meaning and vitality.
In Slovakia, Chris Navetta showed up in 2002 to manage U.S. Steel’s newly acquired sixteen-thousand-employee plant in Kosice, a city with 23 percent unemployment in the impoverished eastern region of the country. Chris and his team took a real relic of Communism—a money-losing state-owned enterprise—and with a $600 million investment, turned it into a highly profitable operation. While they were doing that, they poured time and money into Kosice. The list of their contributions is too long to print here, but it includes building an oncology wing at the local children’s hospital, remodeling primary school classrooms and providing them with computers, and refurbishing several orphanages and a facility for the blind.
Consider also the outpouring of support from businesses around the world after the tragic Christmas tsunami of 2004. In a matter of days, healthy companies and their people donated billions of dollars in cash and supplies to help people in ravaged communities. It was generosity of the highest order.
I’m not talking here about motherhood and apple pie, or trying to sound like the typical annual report. This is how good business really works. Winning companies give back and everyone wins.
This question came from the reporter who moderated my Q & A session at a management conference for about three thousand people in London:
Do you plan to enter politics?
In a word—never.
It’s not that I don’t appreciate government. We’re all grateful to the public servants who have made national security and the eradication of terrorism their lifework. On top of that, government provides other services that are vital to a thriving society—schools, hospitals, and police, to name just three.
But government, for all the good it does, is filled with all the problems that business has, but nobody seems to have the latitude to fix them.
Basically, government is riddled with bureaucracy, waste, and inefficiency. In a company, you can clean those up, and you have to. In government, they’re forever.
Why? For one, because it’s difficult to move people up or out based on merit. Most government agencies have no differentiation to speak of. You can work for forty years, never excel or make a dent in results, and still get an annual raise. For another, you just cannot speak or act candidly in government without getting nailed. It is a world filled with compromise, patronage, and quid pro quo.
Yes, all these behaviors exist in business, but managers can rally against them on their own, or join a company that does so as a matter of course.
Finally, governments can afford to be bureaucratic because they don’t compete. During the last election season, the governor of Indiana created a big hoopla around the fact that he was going to withdraw the state from an outsourcing project that one of its departments had started in India. There was much cheering him on as a role model of patriotism. It had to make you laugh. It was easy for the governor to withdraw from India—in the public sector you don’t have to provide the highest value products or find the lowest cost solutions in order to create revenue. You can just keep raising taxes to pay for everything.
So, as important as government is, it’s just not for me. This book makes the point that it is always better to do something you love.
I’ve taken my own advice on this one.
I’ve received this question everywhere:
How’s your golf game?
Wow, do people love golf! Everywhere I go, perhaps because I stuck a chapter on golf in my last book, people ask about my handicap and whether it’s improved since I retired.
The answer is, I don’t play anymore.
And, believe it or not, I don’t miss it all that much.
My obsession with golf lasted almost sixty years, from my first days playing and caddying at age ten until my first back operation in 2002. I’ve had two more back operations since then, and thankfully, my back is better now. But I’m sure not inclined to test that proposition with a golf swing. If you’ve had back
problems, you probably understand where I’m coming from.
But in the absence of golf, a whole world of new interests has opened up to me. You can’t believe how much time is available when you’re not on the golf course all the time! I’ve loved consulting with several companies and their CEOs. I’ve also found I’m crazy about modern art, and I’m getting to live out my lifelong devotion to the Red Sox by attending as many home games as I can. I’ve been able to travel around the world with my wife and four stepchildren and enjoy the sights beyond conference rooms and factories, and been able to meet the many interesting people whose questions grew into this book.
I have always loved new stuff. Looking forward, learning, and growing have always felt good to me. Golf was wonderful. It gave me great friends that I’ve enjoyed for decades and always will, and all the fun of competing.
But when you can’t play, you can’t play—and amazingly, the world doesn’t even end.
And finally, this question was posed by an audience member at a management conference in Frankfurt attended by about twenty-five hundred people:
Do you think you will go to heaven?
After a few seconds of stunned silence, my first answer to this one was, “Well, I sure hope that’s long-range planning!”
But after the audience stopped laughing—they were as surprised by the question as I was—the man who asked this question made it clear that he wanted to understand what I considered my legacy.
First off, I hate the word legacy. It just sounds so arrogant. Presidents and prime ministers have legacies. I ran a company and wrote a book or two.
But here we are at the end of this book, and the question did get asked, so I’ll attempt an answer.
If there is anything I would like to be remembered for it is that I helped people understand that leadership is helping other people grow and succeed. To repeat myself, leadership is not just about you. It’s about them.
I would also like to be remembered as a huge advocate of candor and meritocracy, and believing everyone deserves a chance. And I’d like to be remembered for trying to make the case that you can never let yourself be a victim.
Now, it is no secret that I’ve made plenty of mistakes in my career. I’ve made some bad acquisitions, hired some wrong people, and moved too slowly on some opportunities. And that is just a fraction of the list.
As for my personal life, I have four great children and nine terrific grandchildren. My love and admiration for them cannot be expressed with words, and their happy, fulfilling lives today give me no end of pleasure. I had two marriages, however, that did not work out. Life goes on and usually for the better, but no one lives through two divorces and feels proud that they happened.
So, as for heaven, who knows? I’m sure not perfect, but if there are any points given out for caring about people with every fiber of your being and giving life all you’ve got every day, then I suppose I have a shot.
Given the choice, of course, I’d rather not find out anytime soon!
There’s so much more to do.
Acknowledgments
* * *
BUSINESS IS ABOUT PEOPLE. In fact, life is only people—family, friends, colleagues, bosses, teachers, coaches, neighbors. At the end of the day, it is only people that matter.
People made this book. First, there were the thousands of men and women around the world who, as my dedication says, cared about business enough to raise their hands and ask the questions that fill these pages. I thank them for candidly sharing their stories, talking openly about the ever-changing challenges of work, and for helping me codify my thinking about how to get it right.
I am also deeply grateful to the people who took an hour or two (and often more) to talk with me about their experiences so that the ideas in this book could be filled with life: Bill Harrison and Jamie Dimon of JPMorgan Chase; Steve Klimkowski of Northwestern Memorial HealthCare; George Tamke, a partner at Clayton, Dubilier & Rice; David Novak, who runs Yum! Brands; Bob Nardelli of The Home Depot; Robert Bagby of A.G. Edwards; Perry Ruddick, the retired vice-chairman of Smith Barney; Maxine McKew of the Australian Broadcasting Company; Kevin Sharer of Amgen; Jimmy Dunne of Sandler O’Neill & Partners; my old friend Paolo Fresco, former vice-chairman of GE and retired CEO of Fiat; Gerry Roche of Heidrick & Struggles; Joel Klein, chancellor of the New York City public schools; Jim McNerney of 3M; Paolo Monferino of Case New Holland; Dara Khosrowshahi of Expedia; and Chris Navetta of U.S. Steel; and from GE, Bill Conaty, Gary Reiner, Susan Peters, Dennis Dammerman, Mark Little, John Krenicki, and Charlene Begley. Bob Nelson, my financial analyst at GE for many years, was a helpful reader along the way.
Several people don’t appear by name in this book, but their ideas were critical in shaping its content. Linda Gosden Robinson, president of Robinson Lerer & Montgomery, shared her considerable experience with us for the chapter on crisis management. For the chapter on work-life balance, I am indebted to Professor Stew Friedman of the Wharton School, and Claudio Fernández-Aráoz, of the executive search firm Egon Zehnder. The chapter on mergers and acquisitions was helped by a long, insightful conversation with M & A expert David Fubini of McKinsey & Company. And my (tiny) newfound knowledge of philosophy is totally thanks to the insights of Nancy Bauer, a professor at Tufts University.
This book started with two pages of scribbled notes about what it could be. The finished product in your hands is thanks to a stellar group of people, most notably the 4Es-and-a-P people at HarperCollins: our wonderful editor, Leah Spiro, whose probing mind and passion for this book never ebbed; Jane Friedman, a fervent believer and unflagging advocate from the get-go; and Marion Maneker, whose deep wisdom guided us all the way. We are also grateful to the terrific team that marketed this book; Joe Tessitore, whose savvy, energy, and decisiveness brought this book home, as well as Brian Murray, Stephen Hanselman, Paul Olsewski, Keith Pfeffer, and Larry Hughes; the book’s designer, Leah Carlson-Stanisic; its copy editor, Anne Greenberg; and Knox Huston, its editorial assistant. Our agent, Helen Rees, was a dear friend and enthusiastic supporter, and Megan LaMothe did tenacious duty as our fact checker.
My assistant, Rosanne Badowski, read every draft of this book, challenged the content, picked apart phrases, and made every chapter better. Her caring and attention were remarkable, and I thank her for the endless hours she gave this project.
Finally, there aren’t enough words to thank my wife, Suzy, for the job she did on this book. Her relentless questioning pulled out of me every idea I ever had about business, and her ability to organize and rephrase my (in many cases) random observations made this book so much better than I ever dreamed it could be. I always tell people that Suzy is just about the smartest person I have ever met, and during the last year of writing this book, she has proved it and then some. For every chapter you read in this book, Suzy wrote and rewrote countless drafts, and yet she never took a break from being an amazing mother to her four great kids. Every day, she astonishes me.
For the last year, we have had the greatest time day and night, debating and discussing all the material that went into this book. The conversation never stopped! As I traveled the world, meeting people, answering questions, and asking plenty of my own, Suzy was by my side, listening, analyzing, and opening my mind to what I knew and what more I could know.
It was hard work—and pure joy. Suzy, you made it happen.
Jack Welch
Boston
February 2005
INDEX
ABC
accountability
mission and
victimhood vs.
accounting fraud
mission-values disconnect and
prevention of
Sarbanes-Oxley Act and
acquisitions. See mergers and acquisitions
Africa
African American Forum (GE)
A.G. Edwards
Ahold
AIDS
AIG
Ailes, Roger
Airbus
&
nbsp; Albertsons
AlliedSignal
Amazon
American Standard
Ames, Chuck
Amgen
AOL-Time Warner merger
Arthur Andersen
Artigas, Ric
Asian financial crisis
authenticity
career management and
in job choice
in job search
leadership and
autonomy
Bagby, Robert
Bank of America-Fleet Bank merger
Bank One
Bauer, Nancy
Begley, Charlene
Belichick, Bill
Ben & Jerry’s
best practices
as competitive advantage
continual improvement of
seeking out and improving
sharing of
three warhorses of
values and
work-life balance and
big aha, the
biotechnology
Blair, Jayson
Boeing
Bonsignore, Mike
bonuses
budgeting and
motivation and
See also compensation
Borg Warner
bosses
boss’s top priority
confrontation and
enduring difficult
going over boss’s head
political capital and
self-assessment and
trade-offs and
work-life balance and